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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2019
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Note 11 - Fair Value Measurements The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs:
• | Level 1 – quoted prices in active markets for identical assets or liabilities
• | Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable
• | Level 3 – significant inputs to the valuation model are unobservable
The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of September 30, 2019:
| Level 1 |  | Level 2 |  | Level 3
| (in thousands)
Assets: |  |  |  |  |
Derivatives (1) | $ | — |  |  | $ | 181,713 |  |  | $ | — |
Liabilities: |  |  |  |  |
Derivatives (1) | $ | — |  |  | $ | 43,812 |  |  | $ | — |
__________________________________________
(1) | This represents a financial asset or liability that is measured at fair value on a recurring basis.
The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they were classified within the fair value hierarchy as of December 31, 2018:
| Level 1 |  | Level 2 |  | Level 3
| (in thousands)
Assets: |  |  |  |  |
Derivatives (1) | $ | — |  |  | $ | 233,629 |  |  | $ | — |
Liabilities: |  |  |  |  |
Derivatives (1) | $ | — |  |  | $ | 75,349 |  |  | $ | — |
____________________________________________
(1) | This represents a financial asset or liability that is measured at fair value on a recurring basis.
Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy. Derivatives The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivatives. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. Please refer to Note 10 - Derivative Financial Instruments and to Note 11 - Fair Value Measurements in the 2018 Form 10-K for more information regarding the Company’s derivative instruments. Proved and Unproved Oil and Gas Properties and Other Property and Equipment Proved oil and gas properties. Proved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication that associated carrying costs may not be recoverable. The Company uses Level 3 inputs and the income valuation technique to measure the fair value of proved properties through the application of discount rates and price forecasts representative of the current operating environment, as selected by the Company’s management. Unproved oil and gas properties. Unproved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. To measure the fair value of unproved properties, the Company uses a market approach, which takes into account the following significant assumptions: remaining lease terms, future development plans, risk-weighted potential resource recovery, estimated reserve values, and estimated acreage value based on price(s) received for similar, recent acreage transactions by the Company or other market participants. The Company recorded abandonment and impairment of unproved properties expense of $6.3 million and $25.1 million during the three and nine months ended September 30, 2019, respectively, and $9.1 million and $26.6 million during three and nine months ended September 30, 2018, respectively. These expenses related to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks. Properties held for sale. Properties classified as held for sale, including any corresponding asset retirement obligation liability, are valued using a market approach, based on an estimated net selling price, as evidenced by the most current bid prices received from third parties, if available. If an estimated selling price is not available, the Company utilizes the various valuation techniques discussed above. Any initial write-down and subsequent changes to the fair value less estimated cost to sell is included within the net gain on divestiture activity line item in the accompanying statements of operations. Please refer to Note 1 - Summary of Significant Accounting Policies and Note 11 - Fair Value Measurements in the 2018 Form 10-K for more information regarding the Company’s approach in determining fair value of its properties. Long-Term Debt The following table reflects the fair value of the Company’s unsecured senior note obligations measured using Level 1 inputs based on quoted secondary market trading prices. These notes were not presented at fair value on the accompanying balance sheets as of September 30, 2019, or December 31, 2018, as they were recorded at carrying value, net of any unamortized discounts and deferred financing costs. Please refer to Note 5 - Long-Term Debt for additional discussion.
| As of September 30, 2019 |  | As of December 31, 2018
| Principal Amount |  | Fair Value |  | Principal Amount |  | Fair Value
| (in thousands)
6.125% Senior Notes due 2022 | $ | 476,796 |  |  | $ | 459,321 |  |  | $ | 476,796 |  |  | $ | 452,336 |
5.0% Senior Notes due 2024 | $ | 500,000 |  |  | $ | 448,950 |  |  | $ | 500,000 |  |  | $ | 439,265 |
5.625% Senior Notes due 2025 | $ | 500,000 |  |  | $ | 431,335 |  |  | $ | 500,000 |  |  | $ | 436,460 |
6.75% Senior Notes due 2026 | $ | 500,000 |  |  | $ | 440,000 |  |  | $ | 500,000 |  |  | $ | 448,305 |
6.625% Senior Notes due 2027 | $ | 500,000 |  |  | $ | 432,500 |  |  | $ | 500,000 |  |  | $ | 442,500 |
1.50% Senior Convertible Notes due 2021 | $ | 172,500 |  |  | $ | 156,706 |  |  | $ | 172,500 |  |  | $ | 158,614 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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