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Commodity Risk Derivatives
 6 Months Ended
Jun. 30, 2018
Price Risk Derivatives [Abstract]  
Commodity Risk Derivatives

5. COMMODITY RISK DERIVATIVES

 

The Company’s wholly-owned subsidiary Energy One has entered into commodity price derivative contracts (“economic hedges”) with BP Energy, a third-party hedge counterparty. 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. The Company had a net liability from commodity risk derivatives of $0.02 million at June 30, 2018 and $0.2 million at December 31, 2017. Presented below is a summary of outstanding crude oil and natural gas swaps as of June 30, 2018.

 

    Begin   End   Quantity (bbls/d)     Price  
                         
Crude oil price swaps   7/1/18   12/31/18     100     $ 68.50  

 

    Begin   End   Quantity (mcf/d)     Price  
                         
Natural gas price swaps   7/1/18   12/31/18     500     $ 3.01  

 

Derivatives are recorded at fair value in the consolidated balance sheets. Changes in fair value are included in the “(loss) gain on commodity derivative contracts” in the consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2018 and 2017, the Company’s unrealized gains from derivatives amounted to $0.1 and $0.3 million, respectively. Derivative contract settlements are included in the “(loss) gain on commodity derivative contracts” in the consolidated statement of operations. For the six months ended June 30, 2018 and 2017, the Company’s realized (loss) gain from derivatives amounted to $(0.3) million and $0.1 million, respectively. All derivative positions are carried at their fair value on the condensed consolidated balance sheets and are included in “Commodity derivative contracts.” The following table summarizes the fair value of our open commodity derivatives as of June 30, 2018, and December 31, 2017 (in thousands). Please see Note 13 for further disclosure.

 

    June 30, 2018     December 31, 2017  
Fair Value of Oil and Natural Gas Derivatives (in thousands)   Gross Amount     Amount Offset     As Presented     Gross Amount     Amount Offset     As Presented  
Fair value of oil and natural gas derivatives – Current Assets   $ 25     $ (25 )   $ -     $ 168     $ (168 )   $ -  
                                                 
Fair value of oil and natural gas derivatives – Current Liabilities     (49 )     25       (24 )     (329 )     168       (161 )