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8. Derivatives
 12 Months Ended
Mar. 31, 2015
Derivatives  
Derivatives

8. Derivatives

 

All derivative financial instruments are recorded at fair value. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the realized and unrealized changes in fair value in the consolidated statements of operations under the caption “Gain (loss) on derivative instruments.”

  

The Company uses price swap contracts to reduce price volatility associated with certain of its oil sales. With respect to the Company’s fixed price swap contracts, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the swap price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap price. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate (“NYMEX WTI”) pricing. The counterparty to the Company’s derivative contract is Merrill Lynch Commodities, Inc., which the Company believes is an acceptable credit risk.

  

The fair value of swaps is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity.

 

As of March 31, 2015 the Company does not have any open crude oil derivative positions with respect to future production.

  

The net fair value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows for the years ended March 31:

  

   2015  2014
Current assets: Derivative instruments  $—     $—   
Noncurrent assets: Derivative instruments   —     $—   
Total assets  $—     $—   
Current liabilities: Derivative instruments  $—     $44,981 
Noncurrent liabilities: Derivative instruments   —     $—   
Total liabilities  $—     $44,981 

 

None of the Company’s derivatives have been designated as hedges. As such, all changes in fair value are immediately recognized in earnings. The following summarizes the loss on derivative instruments included in the consolidated statements of operations for the year ended March 31, 2015 and 2014:

 

   2015  2014
Unrealized loss on open non-hedge derivative instruments  $—     $(44,981)
Gain (loss) on settlement of non-hedge derivative instruments   102,069    (54,281)
Total gain (loss) on derivative instruments  $102,069   $(99,262)