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Derivative Financial Instruments and Hedging Activities
0208 - Disclosure - Derivative Financial Instruments and Hedging Activities
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Derivative Financial Instruments and Hedging Activities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The energy markets historically have been very volatile, and Mariner expects oil and gas
prices will be subject to wide fluctuations in the future. In an effort to reduce the effects of
the volatility of the price of oil and natural gas on the Company’s operations, management has
elected to hedge oil and natural gas prices from time to time through the use of commodity price
swap agreements and costless collars. While the use of these hedging arrangements limits the
downside risk of adverse price movements, it also limits future gains from favorable movements. In
addition, forward price curves and estimates of future volatility are used to assess and measure
the ineffectiveness of the Company’s open contracts at the end of each period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     For derivative contracts that are designated and qualify as cash flow hedges pursuant to
accounting for derivatives and hedging under GAAP, the portion of the gain or loss on the
derivative instrument that is effective in offsetting the variable cash flows associated with the
hedged forecasted transaction is reported as a component of other comprehensive income and
reclassified into earnings in the same line item associated with the forecasted transaction in the
same period or periods during which the hedged transaction affects earnings (e.g., in “revenues”
when the hedged transactions are commodity sales). The remaining gain or loss on the derivative
contract in excess of the cumulative change in the present value of future cash flows of the hedged
item, if any (i.e., the ineffective portion) is recognized in earnings during the current period.
The Company currently does not exclude any component of the derivative contracts’ gain or loss from
the assessment of hedge effectiveness.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 29, 2009, the Company liquidated crude oil fixed price swaps that previously had
been designated as cash flow hedges for accounting purposes in respect of 977,000 barrels of crude
oil in exchange for a cash payment to Mariner of $10.0 million and installment payments of $13.5
million to be paid monthly to Mariner through 2009. On April 16, 2009, the Company received a $10.5
million cash settlement on the hedges that were settled in monthly installments at January 29,
2009. Since, at the time of liquidation, the forecasted sales of crude oil volumes were still
expected to occur, the accumulated losses through January 29, 2009 on the related derivative
contracts remained in accumulated other comprehensive income. These accumulated losses were
reclassified to oil revenues throughout 2009 as the physical transactions occurred. Additionally,
all changes in the value of these derivative contracts subsequent to January 29, 2009 were also
reclassified monthly from accumulated other comprehensive income to current period oil revenues.
The table below reflects these reclassifications for the three months and six months ended June 30,
2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Derivative gains and losses are recorded by commodity type in oil and gas revenues in the
Condensed Consolidated Statements of Operations. The effects on the Company’s oil and gas revenues
from its hedging activities were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(In thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash Gain on Settlements (1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">13,798</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">63,547</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,913</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">121,004</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reclassification of Liquidated Swaps (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,677</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,200</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">(Loss) Gain on Hedge Ineffectiveness (3)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(838</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">176</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,620</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">12,960</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">70,400</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">13,533</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">134,201</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Designated as cash flow hedges pursuant to accounting for derivatives and hedging under GAAP.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>Net gain realized in 2009 on liquidated crude oil fixed price swaps that do not qualify for
hedge accounting.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(3)</td>
<td> </td>
<td>Unrealized (loss) gain recognized in natural gas revenue related to the ineffective portion
of open contracts designated as cash flow hedges that are not eligible for deferral under GAAP
due primarily to the basis differentials between the contract price and the indexed price at
the point of sale.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">     As of June 30, 2010, the Company had the following hedge contracts outstanding:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Fixed Price Swaps</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Quantity</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fixed Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Asset/(Liability)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(In thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Natural Gas (MMbtus)</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">July 1 — December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">20,600,274</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.56</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,297</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">29,389,843</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.79</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,430</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2012
</div></td>
<td> </td>
<td> </td>
<td align="right">22,338,802</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,267</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2013
</div></td>
<td> </td>
<td> </td>
<td align="right">5,840,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.76</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,795</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Crude Oil (Bbls)</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">July 1 — December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">1,595,280</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">73.64</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,179</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">1,978,364</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">79.33</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(275</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2012
</div></td>
<td> </td>
<td> </td>
<td align="right">494,100</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">80.76</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(199</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">January 1 — December 31, 2013
</div></td>
<td> </td>
<td> </td>
<td align="right">408,800</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">82.81</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">204</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">37,340</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has reviewed the financial strength of its counterparties and believes the credit
risk associated with these swaps to be minimal. Hedges with counterparties that are lenders under
the Company’s bank credit facility are secured under the bank credit facility.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     For derivative instruments that are not designated as a hedge for accounting purposes, all
realized and unrealized gains and losses are recognized in the consolidated statement of operations
during the current period. This will result in non-cash gains or losses being reported in Mariner’s
operating results.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     As of June 30, 2010, the Company expects to realize within the next 12 months a net gain of
approximately $18.2 million resulting from hedging activities that are currently recorded in
accumulated other comprehensive income. The net hedging gain is expected to be realized as a
decrease of $8.0 million to oil revenues and an increase of $26.2 million to natural gas revenues.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Additional Disclosures about Derivative Instruments and Hedging Activities</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     At June 30, 2010 and December 31, 2009, the Company had derivative financial instruments under
GAAP recorded in its consolidated balance sheets as set forth below (in thousands). The fair values
are recorded by netting asset and liability positions where counterparty master netting
arrangements contain provisions for net settlement. See Note 12, “Fair Value Measurement” for
information regarding the methods and assumptions used to estimate the fair values of the Company’s
derivative financial instruments.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="15%"> </td>
<td width="2%"> </td>
<td width="30%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="30%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value of Derivative Contracts</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Asset Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>June 30, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>December 31, 2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance sheet</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair value</b></td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td colspan="13" valign="top" align="left"><b>Derivatives designated as cash
flow hedging contracts</b></td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Current Assets: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">25,792</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Current Assets: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">2,239</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Long-Term Assets: Derivative Financial Instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">19,154</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Long-Term Assets: Derivative Financial Instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">902</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="right" valign="top">Total:
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">44,946</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="right" valign="top">Total:
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">3,141</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="15%"> </td>
<td width="2%"> </td>
<td width="30%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="30%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value of Derivative Contracts</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Liability Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>June 30, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>December 31, 2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance sheet</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair value</b></td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td colspan="13" valign="top" align="left"><b>Derivatives designated as
cash flow hedging contracts</b></td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:99px; text-indent:-99px">Current Liabilities: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">7,606</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Current Liabilities: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">27,708</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:99px; text-indent:-99px">Long-Term Liabilities: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">—</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:88px; text-indent:-88px">Long-Term Liabilities: Derivative financial instruments
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">15,017</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="right" valign="top">Total:
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">7,606</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="right" valign="top">Total:
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">42,725</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">     For the three months ended June 30, 2010 and 2009, the effect on income (loss) of
derivative financial instruments under GAAP was as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="16%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="19%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="19%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of gain/(loss)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>gain/(loss)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>gain/(loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>reclassified from</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of gain/(loss)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>recognized in OCI</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>reclassified from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI into</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>recognized in income</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>designated as cash</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>on derivative</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Accumulated OCI</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>income (effective</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of gain/(loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>on derivative</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>flow hedging</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>(effective portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>into income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>recognized in income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>(ineffective portion)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>contracts under</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Second Quarter</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>(effective</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Second Quarter</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>on derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Second Quarter</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>GAAP</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>(ineffective portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">28,799</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">(23,589</td>
<td nowrap="nowrap" valign="top">)</td>
<td> </td>
<td align="left" valign="top">Revenues-Natural Gas
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">16,848</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">58,668</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Revenues-Natural Gas
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">(838</td>
<td nowrap="nowrap" valign="top">)</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">176</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">Revenues-Crude Oil
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">(3,050</td>
<td nowrap="nowrap" valign="top">)</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">4,879</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:75px; text-indent:-15px">Total
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">13,798</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">63,547</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="57%"> </td>
<td width="5%"> </td>
<td width="15%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5"><b>Amount of gain recognized</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of gain</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>in income on derivative</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives not designated as cash flow hedging contracts</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>recognized in income on</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Second Quarter</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Second Quarter</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>under GAAP</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td align="left" valign="top">Revenues-Crude Oil
</td>
<td> </td>
<td align="center" valign="top">$ —
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">6,677</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     For the six months ended June 30, 2010 and 2009, the effect on income (loss) of derivative
financial instruments under GAAP was as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="16%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="19%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="19%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of gain/(loss)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>gain/(loss)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>gain/(loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>reclassified from</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of gain/(loss)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>recognized in OCI</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>reclassified from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI into</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>recognized in income</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>designated as cash</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>on derivative</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Accumulated OCI</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>income (effective</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of gain/(loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>on derivative</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>flow hedging</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>(effective portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>into income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>recognized in income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>(ineffective portion)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>contracts under</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>(effective</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>on derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>GAAP</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>(ineffective portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">88,837</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">63,351</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Revenues-Natural Gas
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">20,357</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">101,813</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Revenues-Natural Gas
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">1,620</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">(3</td>
<td nowrap="nowrap" valign="top">)</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">Revenues-Crude Oil
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">(8,444</td>
<td nowrap="nowrap" valign="top">)</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top">19,191</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">
<div style="margin-left:75px; text-indent:-15px">Total
</div>
</td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">11,913</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">121,004</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" valign="top" style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="7%"> </td>
<td width="5%"> </td>
<td width="7%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5"><b>Amount of gain recognized</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of gain</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>in income on derivative</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives not designated as cash flow hedging contracts</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>recognized in income on</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Six Months Ended June 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Six Months Ended June 30,</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>under GAAP</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Fixed Price Swaps
</div></td>
<td> </td>
<td align="left" valign="top">Revenues-Crude Oil
</td>
<td> </td>
<td align="center" valign="top">$ —
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">13,200</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     See Note 11, “Comprehensive Income (Loss)” for more information related to the Company’s
derivative financial instruments.
</div>
</div>
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This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items.
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 45
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44
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