Annual report pursuant to Section 13 and 15(d)

Derivative Instruments and Hedging Activities (Tables)

v2.4.0.6
Derivative Instruments and Hedging Activities (Tables)
12 Months Ended
Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
The following table reflects the fair values of the Company's derivative instruments for the periods indicated:

 
 
Balance Sheet Presentation
 
Asset Fair Value
 
Liability Fair Value
 
Net Derivative Fair Value
Commodity
 
Classification
 
Line Description
 
12/31/12
 
12/31/11
 
12/31/12
 
12/31/11
 
12/31/12
 
12/31/11
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as Hedging Instruments under ASC 815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Natural gas
 
Current
 
Fair market value of derivatives
 
$

 
$

 
$
(125
)
 
$

 
$
(125
)
 
$

Natural gas
 
Non-current
 
Other long-term liabilities
 

 

 
(116
)
 

 
(116
)
 

Crude oil
 
Current
 
Fair market value of derivatives
 
1,674

 

 

 

 
1,674

 

Crude oil
 
Non-current
 
Other long-term assets
 
250

 

 

 

 
250

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotals
 
 
 
$
1,924

 
$

 
$
(241
)
 
$

 
$
1,683

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as Hedging Instruments under ASC 815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Natural gas
 
Current
 
Fair market value of derivatives
 
$

 
$

 
$

 
$

 
$

 
$

Natural gas
 
Non-current
 
Other long-term assets
 

 

 

 

 

 

Crude oil
 
Current
 
Fair market value of derivatives
 

 

 

 
2,499

 

 
2,499

Crude oil
 
Non-current
 
Other long-term liabilities
 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotals
 
 
 
$

 
$

 
$

 
$
2,499

 
$

 
$
2,499

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Totals
 
 
 
$
1,924

 
$

 
$
(241
)
 
$
2,499

 
$
1,683

 
$
2,499

Schedule of Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance
Derivatives not designated as hedging instruments under ASC 815

For the periods indicated, the Company recorded the following related to its derivative instruments that were not designated as accounting hedges and are recorded in the Statement of Operations as the gain or loss on derivative contracts:
 
 
For the year ended December 31,
 
 
2012
 
2011
 
2010
Natural gas derivatives
 
 
 
 
 
 
     Realized gain, net
 
$
34

 
$

 
$

     Unrealized loss, net
 
(241
)
 

 

          Subtotal loss, net
 
$
(207
)
 
$

 
$

 
 
 
 
 
 
 
Crude oil derivatives
 
 
 
 
 
 
     Realized gain, net
 
$

 
$

 
$

     Unrealized gain, net
 
1,924

 

 

          Subtotal gain, net
 
$
1,924

 
$

 
$

 
 
 
 
 
 
 
Total gain on derivative instruments, net
 
$
1,717

 
$

 
$

Schedule of Derivatives Designated as Hedging Instruments, Gain (Loss) in Statement of Financial Performance
Derivatives designated as hedging instruments under ASC 815

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations as an increase (decrease) to crude oil and natural gas sales:
 
For the year ended December 31,
 
2012
 
2011
 
2010
Amount of gain (loss) reclassified from OCI into income (effective portion)
$
1,420

 
$
(375
)
 
$
632

Amount of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing)

 

 

Schedule of Outstanding Oil and Natural Gas Derivative Contracts
Listed in the table below are the outstanding oil and natural gas derivative contracts as of December 31, 2012:
Product
Instrument
 
Average Volumes per Month
 
Quantity Type
 
Average Floor Price per Hedge
 
Average Ceiling Price per Hedge
 
Period
Crude oil (a) (b)
Collar
 
40
 
Bbls
 
$
90.00

 
$
116.00

 
Jan13 - Dec13
 
 
 
 
 
 
 
 
 
 
 
 
Product
Instrument
 
Average Volumes per Month
 
Quantity Type
 
Put/Call Price
 
Fixed-Price Swap
 
Period
Natural gas (c)
Swap
 
91
 
MMbtu
 
n/a

 
$
3.52

 
Jan13 - Dec13
Natural gas (c)
Put Option
 
91
 
MMbtu
 
$
3.00

 
n/a

 
Jan13 - Dec13
Natural gas (c)
Call Option
 
38
 
MMbtu
 
$
4.75

 
n/a

 
Jan14 - Dec14

(a)
See "Subsequent Event" discussion below regarding the replacement of this crude oil derivative contract in January 2013.

(b)
A collar is a combination of a sold call option (ceiling) and a purchased put option (floor).

(c)
The natural gas swap, put and call option were executed contemporaneously. The "above market" $3.52/MMbtu swap price the Company received was offset by the value of the two options sold by the Company. The short natural gas put option, when combined with the swap, creates the potential for a reduction in the effective swap price if NYMEX natural gas prices are below $3.00/MMbtu in 2013. The short natural gas call option, when combined with the Company's long production position, represents a "covered call," and creates a $4.75/MMbtu ceiling during the covered period.

Subsequent Event:

Derivative contracts executed subsequent to December 31, 2012 include the following:
Product
Instrument
 
Average Volumes per Month
 
Quantity Type
 
Put Price
 
Fixed-Price Swap
 
Period
Crude oil (a)
Swap
 
40
 
Bbls
 
n/a

 
$
101.30

 
Feb13 - Dec13
Crude oil
Swap
 
30
 
Bbls
 
n/a

 
$
93.35

 
Jan14 - Dec14
Crude oil (a)
Put
 
30
 
Bbls
 
$
70.00

 
n/a

 
Jan14 - Dec14

(a)
During January 2013, the Company monetized the remaining portion (Feb13-Dec13) of its 2013 crude oil collar positions of 40 Bbls per month reflected in previous table. The proceeds from this transaction, combined with the proceeds from the sale of the listed put for 30 Bbls per month, were used to finance the uplift in the crude oil swap for the period Feb13-Dec13.