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Derivatives
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Derivatives

Commodity Derivatives 

The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. The Company seeks to manage this risk through the use of commodity derivative contracts, which allow the Company to limit its exposure to commodity price volatility on a portion of its forecasted oil and natural gas sales. None of the Company’s commodity derivative contracts may be terminated prior to contractual maturity solely as a result of a downgrade in the credit rating of a party to the contract. Cash settlements and valuation gains and losses on commodity derivative contracts are included in gain on derivative contracts in the unaudited condensed consolidated statements of operations. Commodity derivative contracts are settled on a monthly or quarterly basis. At March 31, 2017, the Company’s commodity derivative contracts consisted of fixed price swaps under which the Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume.

The Company recorded gains on commodity derivative contracts of $34.2 million and $2.8 million for the three-month periods ended March 31, 2017 and 2016, respectively, which include net cash payments (receipts) upon settlement of $0.6 million and $(25.5) million, respectively.

Master Netting Agreements and the Right of Offset. The Company has master netting agreements with all of its commodity derivative counterparties and has presented its derivative assets and liabilities with the same counterparty on a net basis in the consolidated balance sheets. As a result of the netting provisions, the Company's maximum amount of loss under commodity derivative transactions due to credit risk is limited to the net amounts due from its counterparties. As of March 31, 2017, the counterparties to the Company’s open commodity derivative contracts consisted of six financial institutions, all of which are also lenders under the Company’s Credit Facility. The Company is not required to post additional collateral under its commodity derivative contracts as all of the counterparties to the Company’s commodity derivative contracts share in the collateral supporting the Company’s Credit Facility. The following tables summarize (i) the Company's commodity derivative contracts on a gross basis, (ii) the effects of netting assets and liabilities for which the right of offset exists based on master netting arrangements and (iii) for the Company’s net derivative liability positions, the applicable portion of shared collateral under the Credit Facility as of March 31, 2017 and the First Lien Exit Facility as of December 31, 2016 (in thousands):

March 31, 2017
 
 
Gross Amounts
 
Gross Amounts Offset
 
Amounts Net of Offset
 
Financial Collateral
 
Net Amount
Assets
 
 
 
 
 
 
 
 
 
 
Derivative contracts - current
 
$
4,392

 
$
(3,180
)
 
$
1,212

 
$
—

 
$
1,212

Derivative contracts - noncurrent
 
5,441

 
—

 
5,441

 
—

 
5,441

Total
 
$
9,833

 
$
(3,180
)
 
$
6,653

 
$
—

 
$
6,653

Liabilities
 
 
 
 
 
 
 
 
 
 
Derivative contracts - current
 
$
4,725

 
$
(3,180
)
 
$
1,545

 
$
(1,545
)
 
$
—

Total
 
$
4,725

 
$
(3,180
)
 
$
1,545

 
$
(1,545
)
 
$
—


December 31, 2016
 
 
Gross Amounts
 
Gross Amounts Offset
 
Amounts Net of Offset
 
Financial Collateral
 
Net Amount
Liabilities
 
 
 
 
 
 
 
 
 
 
Derivative contracts - current
 
$
27,538

 
$
—

 
$
27,538

 
$
(27,538
)
 
$
—

Derivative contracts - noncurrent
 
2,176

 
—

 
2,176

 
(2,176
)
 
—

Total
 
$
29,714

 
$
—

 
$
29,714

 
$
(29,714
)
 
$
—



At March 31, 2017, the Company’s open commodity derivative contracts consisted of the following:

Oil Price Swaps 
 
Notional (MBbls)
 
Weighted Average
Fixed Price
April 2017 - December 2017
2,475

 
$
52.24

January 2018 - December 2018
1,825

 
$
55.34


Natural Gas Price Swaps
 
Notional (MMcf)
 
Weighted Average
Fixed Price
April 2017 - December 2017
24,750

 
$
3.20

January 2018 - December 2018
5,450

 
$
3.24



Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts as of March 31, 2017 and December 31, 2016 on a gross basis without regard to same-counterparty netting (in thousands):
Type of Contract
 
Balance Sheet Classification
 
March 31,
2017
 
December 31,
2016
Derivative assets
 
 
 
 
 
 
Oil price swaps
 
Derivative contracts-current
 
$
4,392

 
$
—

Oil price swaps
 
Derivative contracts-noncurrent
 
4,792

 
—

Natural gas price swaps
 
Derivative contracts-noncurrent
 
649

 
—

Derivative liabilities
 
 
 
 
 
 
Oil price swaps
 
Derivative contracts-current
 
(1,613
)
 
(13,395
)
Natural gas price swaps
 
Derivative contracts-current
 
(3,112
)
 
(14,143
)
Oil price swaps
 
Derivative contracts-noncurrent
 
—

 
(2,105
)
Natural gas price swaps
 
Derivative contracts-noncurrent
 
—

 
(71
)
Total net derivative contracts
 
$
5,108

 
$
(29,714
)


See Note 3 for additional discussion of the fair value measurement of the Company’s derivative contracts.