Fair Value Measurements

6 Months Ended

Jun. 30, 2011

7. FAIR VALUE MEASUREMENTS:

As required by FASB ASC 820, the Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. Fair value measurements are classified and disclosed in one of the following categories:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter forwards and swaps.

Level 3: Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.

The valuation assumptions utilized to measure the fair value of the Company's commodity derivatives were observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).

The following table presents for each hierarchy level the Company's assets and liabilities, including both current and non-current portions, measured at fair value on a recurring basis, as of June 30, 2011. The Company has no derivative instruments which qualify for cash flow hedge accounting.

		Level 1		Level 2		Level 3		Total

Assets:
Current derivative asset	$	-	$	93,922	$	-	$	93,922
Non-current derivative asset	$	-	$	10,785	$	-	$	10,785

Liabilities:
Non-current derivative liability	$	-	$	1,583	$	-	$	1,583

In consideration of counterparty credit risk, the Company assessed the possibility of whether each counterparty to the derivative would default by failing to make any contractually required payments as scheduled in the derivative instrument in determining the fair value. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions.

Fair Value of Financial Instruments

The estimated fair value of financial instruments is the estimated amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable and current portion of long-term debt approximate fair value due to the immediate or short-term maturity of these financial instruments. The Company uses available market data and valuation methodologies to estimate the fair value of debt. This disclosure is presented in accordance with FASB ASC Topic 825, Financial Instruments, and does not impact the Company's financial position, results of operations or cash flows.

		June 30, 2011				December 31, 2010
		Carrying		Estimated		Carrying		Estimated
		Amount		Fair Value		Amount		Fair Value

Long-Term Debt:

5.45% Notes due 2015, issued 2008	$	100,000	$	112,501	$	100,000	$	108,572
7.31% Notes due 2016, issued 2009		62,000		75,205		62,000		72,153
4.98% Notes due 2017, issued 2010		116,000		127,011		116,000		119,385
5.92% Notes due 2018, issued 2008		200,000		227,391		200,000		212,660
7.77% Notes due 2019, issued 2009		173,000		216,729		173,000		203,051
5.50% Notes due 2020, issued 2010		207,000		224,180		207,000		206,233
4.51% Notes due 2020, issued 2010		315,000		313,221		315,000		284,207
5.60% Notes due 2022, issued 2010		87,000		92,417		87,000		84,818
4.66% Notes due 2022, issued 2010		35,000		34,140		35,000		30,989
5.85% Notes due 2025, issued 2010		90,000		96,180		90,000		87,211
4.91% Notes due 2025, issued 2010		175,000		169,343		175,000		152,064

	$	1,560,000	$	1,688,318	$	1,560,000	$	1,561,343

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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