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Fair Value Measurements (Notes)
 12 Months Ended
Dec. 31, 2016
Fair Value Measurements [Abstract]  
Fair Value Measurements
Fair Value Measurements

The fair values of financial instruments are estimated based upon current market conditions and quoted market prices for the same or similar instruments. Management estimates that the carrying value approximates fair value for all of our assets and liabilities that fall under the scope of ASC 825.

We apply the provisions of ASC 820, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. ASC 820 applies to our interest rate and commodity derivatives that are measured at fair value on a recurring basis. The standard also requires that we assess the impact of nonperformance risk on our derivatives. Nonperformance risk is not considered material as of December 31, 2016.

ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.

Over the counter ("OTC") commodity swaps and interest rate swaps and caps are generally valued using industry-standard models that consider various assumptions, including quoted forward prices, spot prices, interest rates, time value, volatility factors and contractual prices for the underlying instruments, as well as other relevant economic measures. The degree to which these inputs are observable in the forward markets determines the classification as Level 2 or 3. Our contracts are valued based on exchange pricing and/or price index developers such as Platts or Argus and are, therefore, classified as Level 2.

The fair value hierarchy for our financial assets accounted for at fair value on a recurring basis at December 31, 2016 and 2015 was as follows: (in thousands):

 
 
As of December 31, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
     OTC commodity swaps
 
$
—

 
$
9

 
$
—

 
$
9

          Total assets
 
—

 
9

 
—

 
9

Liabilities
 
 
 
 
 
 
 
 
     OTC commodity swaps
 
—

 
(82
)
 
—

 
(82
)
Net liabilities
 
$
—

 
$
(73
)
 
$
—

 
$
(73
)
 
 
As of December 31, 2015
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
     OTC commodity swaps
 
$
—

 
$
171

 
$
—

 
$
171

     Total assets
 
—

 
171

 
—

 
171

Liabilities
 
 
 
 
 
 
 
 
     OTC commodity swaps
 
—

 
(45
)
 
—

 
(45
)
Net assets
 
$
—

 
$
126

 
$
—

 
$
126



The derivative values above are based on analysis of each contract as the fundamental unit of account as required by ASC 820. Derivative assets and liabilities with the same counterparty are not netted where the legal right of offset exists. This differs from the presentation in the financial statements, which reflects our policy under the guidance of ASC 815-10-45, wherein we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty where the legal right of offset exists.

As of December 31, 2016, we had a cash deficit of $0.6 million netted with the net derivative positions of one of our counterparties. As of December 31, 2015, $0.8 million of cash collateral was held by counterparty brokerage firms.