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Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Note 10 - Derivative Financial Instruments

Summary of Oil, Gas, and NGL Derivative Contracts in Place
    
The Company has entered into various commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows. All contracts are entered into for other-than-trading purposes. The Company’s derivative contracts include swap and collar arrangements for oil, gas, and NGLs.
    
As of June 30, 2015, the Company had commodity derivative contracts outstanding through the second quarter of 2020 for a total of 9.7 million Bbls of oil production, 167.0 million MMBtu of gas production, and 9.5 million Bbls of NGL production.

In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the agreed upon swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference.  For collar agreements, the Company receives the difference between an index price and the floor price if the index price is below the floor price.  The Company pays the difference between the ceiling price and the index price if the index price is above the ceiling price.  No amounts are paid or received if the index price is between the floor and ceiling prices.

The following tables summarize the approximate volumes and average contract prices of contracts the Company had in place as of June 30, 2015:

Oil Contracts

Oil Swaps


Contract Period
 
NYMEX WTI Volumes
 
Weighted-Average
 Contract Price
 
 
(Bbls)
 
(per Bbl)
Third quarter 2015
 
1,254,000

 
$
90.78

Fourth quarter 2015
 
1,137,000

 
$
90.15

2016
 
5,570,000

 
$
88.01

All oil swaps
 
7,961,000

 
 

Oil Collars
Contract Period
 
NYMEX WTI
 Volumes
 
Weighted-
Average Floor
 Price
 
Weighted-
Average Ceiling
 Price
 
 
(Bbls)
 
(per Bbl)
 
(per Bbl)
Third quarter 2015
 
906,000

 
$
85.00

 
$
91.25

Fourth quarter 2015
 
869,000

 
$
85.00

 
$
92.19

All oil collars
 
1,775,000

 
 
 
 

Gas Contracts

Gas Swaps
Contract Period
 
Volumes
 
Weighted-Average
 Contract Price
 
 
(MMBtu)
 
(per MMBtu)
Third quarter 2015
 
12,835,000

 
$
4.03

Fourth quarter 2015
 
12,499,000

 
$
4.01

2016
 
45,172,000

 
$
4.13

2017
 
34,335,000

 
$
4.19

2018
 
30,606,000

 
$
4.27

2019
 
24,415,000

 
$
4.34

All gas swaps*
 
159,862,000

 
 

*Gas swaps are comprised of IF El Paso Permian (3%), IF HSC (93%), IF NGPL TXOK (1%), and IF NNG Ventura (3%).

Gas Collars
Contract Period
 
Volumes
 
Weighted-
Average Floor
Price
 
Weighted-
Average Ceiling
Price
 
 
(MMBtu)
 
(per MMBtu)
 
(per MMBtu)
Third quarter 2015
 
2,005,000

 
$
4.00

 
$
4.30

Fourth quarter 2015
 
5,157,000

 
$
3.99

 
$
4.29

All gas collars*
 
7,162,000

 
 
 
 

*Gas collars are comprised of IF El Paso Permian (5%), IF HSC (88%), and IF NNG Ventura (7%).
NGL Contracts

NGL Swaps
Contract Period
 
Volumes
 
Weighted-Average
 Contract Price
 
 
(Bbls)
 
(per Bbl)
Third quarter 2015
 
1,739,000

 
$
21.61

Fourth quarter 2015
 
1,539,000

 
$
21.73

2016
 
2,017,000

 
$
17.70

2017
 
792,000

 
$
9.98

2018
 
1,671,000

 
$
10.65

2019
 
1,200,000

 
$
10.92

2020
 
539,000

 
$
11.13

All NGL swaps*
 
9,497,000

 
 

*NGL swaps are comprised of Oil Price Information System (“OPIS”) Ethane Purity Mont Belvieu (52%), OPIS Propane Mont Belvieu Non-TET (29%), OPIS Normal Butane Mont Belvieu Non-TET (10%), and OPIS Isobutane Mont Belvieu Non-TET (9%).

Derivative Assets and Liabilities Fair Value

The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities. The fair value of the commodity derivative contracts was a net asset of $391.4 million as of June 30, 2015, and net asset of $592.1 million as of December 31, 2014.

The following tables detail the fair value of derivatives recorded in the accompanying balance sheets, by category:

 
As of June 30, 2015
 
Derivative Assets
 
Derivative Liabilities
 
Balance Sheet
 Classification
 
Fair Value
 
Balance Sheet
 Classification
 
Fair Value
 
(in thousands)
Commodity contracts
Current assets
 
$
269,022

 
Current liabilities
 
$
8,107

Commodity contracts
Noncurrent assets
 
131,464

 
Noncurrent liabilities
 
1,026

Derivatives not designated as hedging instruments
 
 
$
400,486

 
 
 
$
9,133


 
As of December 31, 2014
 
Derivative Assets
 
Derivative Liabilities
 
Balance Sheet
 Classification
 
Fair Value
 
Balance Sheet
 Classification
 
Fair Value
 
(in thousands)
Commodity contracts
Current assets
 
$
402,668

 
Current liabilities
 
$
—

Commodity contracts
Noncurrent assets
 
189,540

 
Noncurrent liabilities
 
70

Derivatives not designated as hedging instruments
 
 
$
592,208

 
 
 
$
70



Offsetting of Derivative Assets and Liabilities

As of June 30, 2015, and December 31, 2014, all derivative instruments held by the Company were subject to master netting arrangements by various financial institutions. In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets.  
The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts:
 
 
Derivative Assets
 
Derivative Liabilities
 
 
As of
 
As of
Offsetting of Derivative Assets and Liabilities
 
June 30,
2015
 
December 31, 2014
 
June 30,
2015
 
December 31, 2014
 
 
(in thousands)
Gross amounts presented in the accompanying balance sheets
 
$
400,486

 
$
592,208

 
$
(9,133
)
 
$
(70
)
Amounts not offset in the accompanying balance sheets
 
(9,133
)
 
(70
)
 
9,133

 
70

Net amounts
 
$
391,353

 
$
592,138

 
$
—

 
$
—


    
The following table summarizes the components of the derivative (gain) loss presented in the accompanying statements of operations:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Derivative settlement (gain) loss:
 
 
 
 
 
 
 
Oil contracts
$
(73,915
)
 
$
20,160

 
$
(180,129
)
 
$
26,918

Gas contracts (1)
(38,880
)
 
13,472

 
(73,112
)
 
26,876

NGL contracts
—

 
48

 
(20,783
)
 
8,826

Total derivative settlement (gain) loss (2)
$
(112,795
)

$
33,680


$
(274,024
)

$
62,620

 
 
 
 
 
 
 
 
Total derivative (gain) loss:
 
 
 
 
 
 
 
Oil contracts
$
66,749

 
$
93,595

 
$
(7,111
)
 
$
125,545

Gas contracts
6,070

 
28,154

 
(76,269
)
 
87,615

NGL contracts
8,110

 
4,720

 
10,142

 
10,971

Total derivative (gain) loss (3)
$
80,929


$
126,469


$
(73,238
)

$
224,131

____________________________________________
(1)  
Natural gas derivative settlements for the three and six months ended June 30, 2015 include a $15.3 million gain on the early settlement of future contracts as a result of divesting of the Company’s Mid-Continent assets during the second quarter of 2015.
(2) 
Total derivative settlement (gain) loss is reported net of the change in accrued settlements between periods in the derivative cash settlements line item on the condensed consolidated statements of cash flows within net cash provided by operating activities.
(3) 
Total derivative (gain) loss is reported in the derivative (gain) loss line item on the condensed consolidated statements of cash flows within net cash provided by operating activities.

Credit Related Contingent Features

As of June 30, 2015, and through the filing date of this report, all of the Company’s derivative counterparties were members of the Company’s credit facility lender group. The Company’s obligations under its derivative contracts are secured by mortgages on assets having a value equal to at least 75 percent of the total value of the Company’s proved oil and gas properties.