XML 31 R9.htm IDEA: XBRL DOCUMENT

Commodity Price Risk Derivatives

12 Months Ended

Dec. 31, 2017

3.	COMMODITY PRICE RISK DERIVATIVES

The Company’s wholly-owned subsidiary Energy One has entered into commodity price derivative contracts (“economic hedges”) with BP Energy. The derivative contracts are priced based on West Texas Intermediate (“WTI”) quoted prices for crude oil and Henry Hub quoted prices for natural gas. 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 the Company’s future oil production, achieve more predictable cash flows in an environment of volatile oil and gas prices and to manage the Company’s 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 the Company’s 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. Presented below is a summary of outstanding crude oil and natural gas swaps as of December 31, 2017.

Action

Begin

End

Quantity (bbls/d)

Price

Crude oil price swaps

Bought

1/1/18

6/30/18

150

52.20

Action

Begin

End

Quantity

(mcf/d)

Price

Natural gas price swaps

Bought

1/1/18

12/31/18

2,500

3.01

Natural gas price swaps

Sold

1/1/18

12/31/18

2,000

2.98

We recognized a realized gain on commodity price risk derivatives of $0.1 million for the year ended December 31, 2017 compared to a realized gain of $1.4 million for 2016. We recognized an unrealized loss on commodity price risk derivatives of $0.2 million for the year ended December 31, 2017 compared to an unrealized loss of $1.6 million for 2016. As of December 31, 2017, the Company had un unrealized loss on commodity derivative contracts of $0.16 million which consisted of an unrealized loss from oil price derivatives of $0.22 million which was offset by an unrealized gain from natural gas commodity derivatives of $0.06 million.