Derivative Instruments And Risk Management Activities

9 Months Ended

Sep. 30, 2011

Derivative Instruments And Risk Management Activities [Abstract]

Derivative Instruments And Risk Management Activities

Note 12 — Derivative Instruments and Risk Management Activities

At September 30, 2011, we had the following derivative contracts in place:

						Net Fair Value Asset (Liability) (1)
Period	Type	Volumes		Price		Current			Noncurrent
				$/Unit		($000)			($000)
Oil (Bbl) – Gulf of Mexico
Remainder 2011	Swaps		552,000		84.91		7,777			—
2012	Swaps		2,218,750		89.06		13,179			3,510
2013	Swaps		90,000		90.40		—			666
Remainder 2011	Prepaid Swaps (4)		142,600		—		(14,292	)		—
2012	Prepaid Swaps (4)		354,950		—		(32,052	)		—
Remainder 2011	Calls (2)		184,000		110.00		19			—
Total							(25,369	)		4,176
Natural Gas (MMBtu)
North Sea
Remainder 2011	Swaps		460,000		9.27		(418	)		—
2012	Swaps		1,646,000		8.58		(2,653	)		(471	)
Gulf of Mexico
Remainder 2011	Calls (3)		920,000		5.10		(1	)		—
2012	Calls (3)		3,660,000		5.35		(194	)		(171	)
Remainder 2011	Fixed-price physicals		1,380,000		4.64		1,162			—
2012	Fixed-price physicals		1,365,000		4.64		700			—
Total							(1,404	)		(642	)
Total asset							1,880			4,176
Total liability							(28,653	)		(642	)
Total							(26,773	)		3,534

(1) None of the derivatives outstanding is designated as a hedge for accounting purposes.

(2) During the three months ended September 30, 2011, we terminated certain oil swaps and realized $10.7 million in gains. However, we retained the purchased-call options which had been matched to some of the oil swaps in order to allow us to reparticipate in price increases above the option strike price.

(3) During the first quarter of 2011, we sold U.S. gas call options and received premiums of $2.1 million.

(4) In order to manage our exposure to oil price volatility, in the third quarter of 2011, we entered into certain off-market oil swap derivative contracts which provide us with $62.3 million of cash advances from the counterparty and obligate us to pay market prices at the time of settlement.

At December 31, 2010, we had the following derivative contracts in place:

					Net Fair Value Asset (Liability) (2)
Period	Type	Volumes		Price	Current			Noncurrent
				$/Unit (1)	($000)			($000)
Oil (Bbl) – Gulf of Mexico
2011	Swaps		2,124,500	81.99		(23,084	)		—
2012	Swaps		1,120,750	89.37		—			(4,236	)
2013	Swaps		90,000	90.40		—			(199	)
2011	Swaps (3)		911,000	78.41		(12,027	)		—
Total						(35,111	)		(4,435	)
Natural Gas (MMBtu)
North Sea
2011	Swaps		1,641,000	7.21		(2,782	)		—
2012	Swaps		1,464,000	8.20		—			(1,249	)
Gulf of Mexico
2011	Fixed-price physicals		5,025,000	4.78		1,030			—
2012	Fixed-price physicals		1,365,000	4.64		—			(741	)
2011	Collars		1,350,000	4.75-7.95		658			—
Total						(1,094	)		(1,990	)
Derivative asset						1,688			—
Derivative liability						(37,893	)		(6,425	)
Total						(36,205	)		(6,425	)

(1) Unit price for collars reflects the floor and the ceiling prices, respectively.

(2) None of the derivatives outstanding are designated as hedges for accounting purposes.

(3) These swaps include call options to allow us to participate in per barrel price increases above $111.00.

During the first quarter of 2011, we sold certain natural gas call options in exchange for a premium from the counterparties. At settlement of a call option, if the market price exceeds the strike price of the call option, the Company pays the counterparty such excess. If the market price settles below the strike price of the call option, no payment is due from either party. Cash settlements of our derivative instruments are classified as operating cash flows unless the derivative contains a significant financing element at contract inception, in which case these cash settlements are classified as financing cash flows in the accompanying Consolidated Statements of Cash Flows.

During the nine months ended September 30, 2011, we paid net cash settlements of $15.1 million on our commodity derivatives. Our derivative income (expense) for the nine months ended September 30, 2011 and 2010 is based entirely on nondesignated derivatives and consists of the following (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Gains (losses) from:
Settlements of contracts	$	(1,206	)	$	1,888		$	(17,761	)	$	439
Early terminations of contracts		10,700			—			10,700			—
Unrealized gains (losses) on open contracts		77,199			(14,553	)		79,410			14,360
Derivative income (expense)	$	86,693		$	(12,665	)	$	72,349		$	14,799