Derivative Financial Instruments

12 Months Ended

Dec. 31, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 5. Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk. Derivative contracts are utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash flows associated with anticipated sales of future oil and natural gas production. The Company follows FASB ASC Topic 815, Derivatives and Hedging, to account for its derivative financial instruments. The Company does not enter into derivative contracts for speculative trading purposes. It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive. The Company did not post collateral under any of these contracts.

The Company’s crude oil and natural gas derivative positions consist of swaps. Swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for crude oil and natural gas. The Company has elected to not designate any of its derivative contracts for hedge accounting purposes. Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts, as well as all payments and receipts on settled derivative contracts, in (Loss) gain on derivative contracts, net on the Consolidated Statements of Operations. All derivative contracts are recorded at fair market value in the Consolidated Balance Sheets as assets or liabilities.

With an individual derivative counterparty, the Company may have multiple hedge positions that expire at various points in the future and result in fair value asset and liability positions. At the end of each reporting period, those positions are offset to a single fair value asset or liability for each commodity by counterparty, and the netted balance is reflected in the Consolidated Balance Sheets as an asset or a liability.

The Company nets its derivative instrument fair value amounts executed with each counterparty pursuant to an International Swap Dealers Association Master Agreement (“ISDA”), which provides for net settlement over the term of the contract. The ISDA is a standard contract that governs all derivative contracts entered into between the Company and the respective counterparty. The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date and in the same currency

The Company had the following open crude oil and natural gas derivative contracts as of December 31, 2016:    

	Price Swaps
Period	Commodity	Volume (Bbls / MMBtu)		Weighted Average Price ($/Bbl / $/MMBtu)
Q1 - Q4 2017	Crude Oil		600,000	$	50.38
Q1 - Q4 2018	Crude Oil		270,000	$	50.70
Q1 - Q4 2017	Natural Gas		1,740,000	$	2.997
Q1 - Q4 2018	Natural Gas		600,000	$	2.907

The following table summarizes the location and fair value amounts of all derivative instruments in the Consolidated Balance Sheets as well as the gross recognized derivative assets, liabilities, and amounts offset in the Consolidated Balance Sheets (in thousands): 

		December 31, 2016						December 31, 2015
Derivatives not designated as hedging contracts under ASC Topic 815	Balance Sheet Location	Gross Recognized Assets / Liabilities		Gross Amounts Offset		Net Recognized Assets / Liabilities		Gross Recognized Assets / Liabilities		Gross Amounts Offset		Net Recognized Assets / Liabilities
Commoditycontracts	Derivative asset	$	—	$	—	$	—	$	3,694	$	—	$	3,694
Commodity contracts	Derivative liability	$	4,595	$	—	$	4,595	$	—	$	—	$	—
Commodity contracts	Derivative liability	$	1,575	$	—	$	1,575	$	—	$	—	$	—

The follow table summarizes the location and amounts of the Company’s realized and unrealized gains and losses on derivatives instruments in the Company’s Consolidated Statements of Operations (in thousands):

		Years Ended December 31,
		2016			2015		2014
Derivatives not designated as hedging contracts under ASC Topic 815	Statement of Operations Location
Total (loss) gain on commodity contracts	(Loss) gain on derivative contracts, net	$	(9,863	)	$	125	$	3,614
Cash settlements on commodity contracts	(Loss) gain on derivative contracts, net		3,225			6,306		778
(Loss) gain on commodity contracts, net		$	(6,638	)	$	6,431	$	4,392