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Commodity Price Risk Management | 6 Months Ended
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Jun. 30, 2014
Commodity Price Risk Management [Abstract] |
Commodity Price Risk Management | 5) Commodity Price Risk Management Through our wholly-owned subsidiary Energy One, we have entered into commodity derivative contracts (“economic hedges”) with Wells Fargo, 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 manage our exposure to commodity price risk. The use of these derivative instruments limits the downside risk of adverse price movements. However, there is a risk that 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. The use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. The Company’s derivative contracts are currently with one counterparty. The Company has a netting arrangement with the counterparty that provides for the offset of payables against receivables from separate derivative arrangements with the counterparty in the event of contract termination. The derivative contracts may be terminated by a non-defaulting party in the event of default by one of the parties to the agreement. The Company’s commodity derivative instruments are measured at fair value and are included in the accompanying balance sheets as commodity price risk management assets and liabilities. Derivative instruments are recorded at fair value on the condensed consolidated balance sheet and changes in fair value are recognized in the unrealized gain (loss) on risk management activities line on the condensed consolidated statement of operations. Realized gains and losses resulting from the settlement of derivatives are recorded in the realized (loss) gain on risk management activities line on the condensed consolidated statement of income. Energy One's commodity derivative contracts as of June 30, 2014 are summarized below:
|  |  |  |  |  | Quantity |  |  |  |  |
Settlement Period |  | Counterparty |  | Basis |  | (Bbls/day) |  | Strike Price |
Crude Oil Costless Collar |  |  |  |  |  |  |  |  |  |  |
01/01/14 - 06/30/14 |  | Wells Fargo |  | WTI |  |  | 300 |  | Put: |  | $ | 90.00 |
|  |  |  |  |  |  |  |  | Call: |  | $ | 95.00 |
Crude Oil Costless Collar |  |  |  |  |  |  |  |  |  |  |  |  |
01/01/14 - 06/30/14 |  | Wells Fargo |  | WTI |  |  | 300 |  | Put: |  | $ | 90.00 |
|  |  |  |  |  |  |  |  | Call: |  | $ | 97.25 |
Crude Oil Costless Collar |  |  |  |  |  |  |  |  |  |  |  |  |
07/01/14 - 12/31/14 |  | Wells Fargo |  | WTI |  |  | 300 |  | Put: |  | $ | 90.00 |
|  |  |  |  |  |  |  |  | Call: |  | $ | 98.40 |
Crude Oil Costless Collar |  |  |  |  |  |  |  |  |  |  |  |  |
07/01/14 - 12/31/14 |  | Wells Fargo |  | WTI |  |  | 300 |  | Put: |  | $ | 90.00 |
|  |  |  |  |  |  |  |  | Call: |  | $ | 97.40 |
The following table details the fair value of the Company’s derivative instruments, including the gross amounts and adjustments made to net the derivative instruments for the presentation in the consolidated balance sheet (in thousands):
|  |  |  | As of June 30, 2014 |
Underlying Commodity |  | Location on Balance Sheet |  | Gross amounts of recognized assets and liabilities |  |  | Gross amounts offset in the condensed consolidated balance sheet |  |  | Net amounts of assets and liabilities presented in the condensed consolidated balance sheet |
Crude oil derivative contract |  | Current assets |  | $ | 33 |  |  | $ | (33 | ) |  | $ | -- |
Crude oil derivative contract |  | Current liabilities |  | $ | 710 |  |  | $ | (33 | ) |  | $ | 677 |
|  |  |  | As of December 31, 2013 |
Underlying Commodity |  | Location on Balance Sheet |  | Gross amounts of recognized assets and liabilities |  |  | Gross amounts offset in the condensed consolidated balance sheet |  |  | Net amounts of assets and liabilities presented in the condensed consolidated balance sheet |
Crude oil derivative contract |  | Current assets |  | $ | 345 |  |  | $ | (331 | ) |  | $ | 14 |
Crude oil derivative contract |  | Current liabilities |  | $ | 611 |  |  | $ | (331 | ) |  | $ | 280 |
The following table summarizes the unrealized and realized gains and losses presented in the accompanying statements of operations:
|  | (In thousands) |
|  | For the three months ended June 30, |  |  | For the six months ended June 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Realized derivative (loss) gain |  | $ | (374 | ) |  | $ | 19 |  |  | $ | (532 | ) |  | $ | 33 |
Unrealized derivative (loss) gain |  | $ | (238 | ) |  | $ | 328 |  |  | $ | (411 | ) |  | $ | (288 | )
Total realized and unrealized derivative (loss) gain |  | $ | (612 | ) |  | $ | 347 |  |  | $ | (943 | ) |  | $ | (255 | )

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 + Details
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