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Financial Instruments
 6 Months Ended
Jun. 30, 2012
Financial Instruments [Abstract]  
Financial Instruments

(11) Financial Instruments:

Fair Value measurements:

Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements. The Company follows a three-level hierarchy, prioritizing and defining the types of inputs used to measure fair value. The fair values of the Company’s natural gas and crude oil price collars and swaps are designated as Level 3. The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011:

 

                                 

June 30, 2012

(Thousands of dollars)

   Quoted Prices in
Active  Markets
For Identical
Assets (Level 1)		     Significant
Other
Observable
Inputs (Level 2)		     Significant
Unobservable
Inputs (Level 3)		     Balance as of
June 30,
2012		  

Assets

                                

Commodity derivative contracts

   $ —       $ —       $ 1,591     $ 1,591  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ —       $ —       $ 1,591     $ 1,591  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Liabilities

                                

Commodity derivative contracts

   $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total liability

   $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 

December 31, 2011

(Thousands of dollars)

   Quoted Prices in
Active  Markets
For Identical
Assets (Level 1)		     Significant
Other
Observable
Inputs (Level 2)		     Significant
Unobservable
Inputs (Level 3)		     Balance as of
December  31,
2011		  

Assets

                                

Commodity derivative contracts

   $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Liabilities

                                

Commodity derivative contracts

   $ —       $ —       $ (3,507 )    $ (3,507 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Total liability

   $ —       $ —       $ (3,507 )    $ (3,507 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2012.

 

         
(Thousands of dollars)      

Net liabilities – December 31, 2011

   $ (3,507 ) 

Total realized and unrealized gains or losses:

        

Unrealized gains included in earnings, net (a)

     5,439  

Realized gains from purchases, sales, issuances and settlements, net

     (341 ) 
   

 

 

  

Net assets – June 30, 2012

   $ 1,591  
   

 

 

  

 

(a) Derivative instruments are reported in revenues as realized gain/loss and on a separately reported line item captioned unrealized gain/loss on derivative instruments.

Derivative Instrument:

The Company is exposed to commodity price and interest rate risk, and management considers periodically the Company’s exposure to cash flow variability resulting from the commodity price changes and interest rate fluctuations. Futures, swaps and options are used to manage the Company’s exposure to commodity price risk inherent in the Company’s oil and gas production operations. The Company does not apply hedge accounting to any of its commodity based derivatives. Both realized and unrealized gains and losses associated with derivative instruments are recognized in earnings.

The following table sets forth the effect of derivative instruments on the condensed consolidated balance sheets as of June 30, 2012 and December 31, 2011:

 

                     
        Fair Value  
(Thousands of dollars)   Balance Sheet Location   June 30,
2012		     December 31,
2011		  

Asset Derivatives:

                    

Derivatives not designated as hedging instruments:

                    

Crude oil commodity contracts

   Other current assets   $ 355     $ —    

Crude oil commodity contracts

   Other assets     1,236       —    
       

 

 

    

 

 

  

Total

       $ 1,591     $ —    
       

 

 

    

 

 

  
       

Liability Derivatives:

                    

Derivatives not designated as hedging instruments:

                    

Crude oil commodity contracts

   Derivative liability short term   $ —       $ (2,046 ) 

Crude oil commodity contracts

   Derivative liability long term     —         (1,461 ) 
       

 

 

    

 

 

  

Total

       $ —       $ (3,507 ) 
       

 

 

    

 

 

  

Total derivative instruments

       $ 1,591     $ (3,507 ) 
       

 

 

    

 

 

  

The following table sets forth the effect of derivative instruments on the condensed consolidated statement of operations for the six-month periods ended June 30, 2012 and 2011:

 

                     
   

Location of gain/loss recognized

in income

   Amount of gain/loss
recognized in income		  
(Thousands of dollars)     2012     2011  

Derivatives not designated as cash-flow hedge instruments

                    

Natural gas commodity contracts

   Unrealized loss on derivative instruments, net   $ —       $ (998 ) 

Crude oil commodity contracts

   Unrealized gain (loss) on derivative instruments, net     5,098       (2,498 ) 

Natural gas commodity contracts

   Realized gain on derivative instruments, net     —         1,972  

Crude oil commodity contracts

   Realized gain (loss) on derivative instruments, net     341       (1,836 ) 
       

 

 

    

 

 

  
        $ 5,439     $ (3,360 )