XML 52 R10.htm IDEA: XBRL DOCUMENT v2.4.1.9
Commodity Price Risk Management
 3 Months Ended
Mar. 31, 2015
Commodity Price Risk Management [Abstract]  
Commodity Price Risk Management
4)      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 held with a single 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 March 31, 2015 are summarized below:
        
      
Quantity
    
Settlement Period
Counterparty
Basis
 
(Bbls/day)
 
Strike Price
 
        
Crude Oil Put
       
02/01/15 - 04/30/15
 Wells Fargo
 WTI
  
500
 
Put:
 
$
46.00
 
            
Crude Oil Costless Collar
           
05/01/15 - 12/31/15
 Wells Fargo
 WTI
  
500
 
Put:
 
$
45.00
 
       
Call:
 
$
58.79
 
 
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 March 31, 2015
 
    
(In thousands)
 
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
 
$
287
  
$
(287
)
 
$
--
 
Crude oil derivative contract
Current liabilities
 
$
350
  
$
(287
)
 
$
63
 
 
The following table summarizes the unrealized and realized gains and losses presented in the accompanying statements of operations:
     
  
(In thousands)
 
  
Three months ended March 31,
 
  
2015
  
2014
 
Realized derivative (loss)
 
$
(114
)
 
$
(158
)
Unrealized derivative (loss)
 
$
(63
)
 
$
(173
)
Total realized and unrealized derivative (loss)
 
$
(177
)
 
$
(331
)