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Commodity Price Risk Management
 6 Months Ended
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)