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COMMODITY PRICE RISK MANAGEMENT
 12 Months Ended
Dec. 31, 2011
COMMODITY PRICE RISK MANAGEMENT [Abstract]  
COMMODITY PRICE RISK MANAGEMENT
D.           COMMODITY PRICE RISK MANAGEMENT

Through our wholly-owned affiliate Energy One, we have entered into commodity derivative contracts (“economic hedges”) with BNP Paribas (“BNP”), as described below.  The derivative contracts are priced using West Texas Intermediate (“WTI”) quoted prices.  The Company is a guarantor of Energy One's obligations under the economic hedges.  The objective of utilizing the economic hedges is to reduce the effect of price changes on a portion of our future oil production, achieve more predictable cash flows in an environment of volatile oil and gas prices and to manage our exposure to commodity price risk. The use of these derivative instruments limits the downside risk of adverse price movements.  However, such use may limit our ability to benefit from favorable price movements. Energy One may, from time to time, add incremental derivatives to hedge additional production, restructure existing derivative contracts or enter into new transactions to modify the terms of current contracts in order to realize the current value of its existing positions. The Company does not engage in speculative derivative activities or derivative trading activities, nor does it use derivatives with leveraged features.

Energy One's commodity derivative contracts as of December 31, 2011 are summarized below:
 
       
Quantity
      
Settlement Period
Counterparty
Basis
 
(Bbl/d)
 
Strike Price
 
              
Crude Oil Costless Collar
            
10/01/11 - 09/30/12
 BNP Parabis
 WTI
  400 
Put:
 $80.00 
          
Call:
 $99.00 
                
Crude Oil Costless Collar
              
01/01/12 - 12/31/12
 BNP Parabis
 WTI
  200 
Put:
 $90.00 
          
Call:
 $106.50 
 
 
The following table reflects commodity derivative contracts entered into subsequent to December 31, 2011:
 
       
Quantity
       
Settlement Period
Counterparty
Basis
 
(Bbl/d)
 
Strike Price
 
                
Crude Oil Costless Collar
              
10/01/12 - 09/30/13
 BNP Parabis
 WTI
  200 
Put:
 $95.00 
          
Call:
 $116.60 
 
The following table details the fair value of the derivatives recorded in the applicable consolidated balance sheet, by category:
 
 
As of December 31, 2011
 
 
(in thousands)
 
 
Derivative Assets
 
Derivative Liabilities
 
 
Balance Sheet
 
Fair
 
Balance Sheet
 
Fair
 
 
Classification
 
Value
 
Classification
 
Value
 
            
Crude oil costless collars
Current Asset
 $3 
Current Liability
 $601 
              
              
 
As of December 31, 2010
 
 
(in thousands)
 
 
Balance Sheet
 
Fair
 
Balance Sheet
 
Fair
 
 
Classification
 
Value
 
Classification
 
Value
 
              
Crude oil costless collars
Current Asset
 $-- 
Current Liability
 $1,725 
              
 
Unrealized gains and losses resulting from derivatives are recorded at fair value on the consolidated balance sheet and changes in fair value are recognized in the unrealized gain (loss) on risk management activities line on the consolidated statement of operations.  Realized gains and losses resulting from the contract settlement of derivatives are recognized in the commodity price risk management activities line on the consolidated statement of operations.  During the year ended December 31, 2011 we had a recognized loss of $2.0 million from the contract settlements of derivatives and an unrealized gain of $1.1 million.