Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 15 — Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair values of our derivative contracts are classified as Level 3 based on the significant unobservable inputs into our expected present value models. The following table sets forth a reconciliation of changes in the fair value of these financial assets (liabilities) during the nine months ended September 30, 2011 (in thousands):

	U.S. Gas Fixed- Price Physicals			U.S. Gas Calls			U.S. Oil Swaps(1)			U.S. Oil Swaps(2)			U.S. Gas Price Collars			U.K. Gas Swaps			Total
Balance at beginning of period	$	289		$	—		$	(27,519	)	$	(12,027	)	$	658		$	(4,031	)	$	(42,630	)
Derivative gains (losses) included in earnings		3,663			1,767			60,012			8,391			170			(1,654	)		72,349
Sales		—			(2,133	)		(68,348	)		—			—			—			(70,481	)
Settlements and terminations		(2,090	)		—			14,643			3,655			(828	)		2,143			17,523
Balance at end of period	$	1,862		$	(366	)	$	(21,212	)	$	19		$	—		$	(3,542	)	$	(23,239	)
Changes in unrealized gain (loss) included in derivative income (expense) relating to derivatives still held at September 30, 2011	$	2,907		$	(366	)	$	(10,709	)	$	(684	)	$	—		$	(1,953	)	$	(10,805	)

(1) In the second and third quarters of 2011, we entered into certain off-market oil swap derivative contracts which provide us with $73.3 million of cash advances from the counterparty (of which $4.8 million will be received in subsequent periods) and obligate us to pay market prices at the time of settlement.

(2) During the three months ended September 30, 2011, we terminated these and other oil swaps but we retained the purchased-call options which had been matched to these oil swaps in order to allow us to reparticipate in price increases above certain levels.

The following table sets forth a reconciliation of changes in the fair value of these financial assets (liabilities) during the nine months ended September 30, 2010 (in thousands):

	Gas Fixed- Price Physicals			Gas Price Collars			Oil Swaps			Oil Swaps(1)			Oil Puts			Subtotal U.S.
U.S.
Balance at beginning of period	$	(778	)	$	(339	)	$	(7,837	)	$	(14,910	)	$	2		$	(23,862	)
Derivative gains (losses) included in earnings		9,668			3,794			(400	)		5,022			(2	)		18,082
Settlements and terminations		(4,909	)		(1,457	)		1,550			4,169						(647	)
Balance at end of period	$	3,981		$	1,998		$	(6,687	)	$	(5,719	)	$	—		$	(6,427	)
Changes in unrealized gain (loss) included in derivative income (expense) relating to derivatives still held at September 30, 2010	$	4,401		$	2,686		$	(34	)	$	(2,370	)	$	(2	)	$	4,681

(1) These swaps include those which were matched with call options to allow us to reparticipate in price increases above certain levels.

	Gas Fixed- Price Physicals			Financial Gas Swaps			Subtotal U.K.			Grand Total
U.K.
Balance at beginning of period	$	1,321		$	—		$	1,321		$	(22,541	)
Derivative gains (losses) included in earnings		(829	)		(2,454	)		(3,283	)		14,799
Settlements and terminations		(646	)		580			(66	)		(713	)
Balance at end of period	$	(154	)	$	(1,874	)	$	(2,028	)	$	(8,455	)
Changes in unrealized gain (loss) included in derivative income (expense) relating to derivatives still held at September 30, 2010	$	(120	)	$	(1,874	)	$	(1,994	)	$	2,687

Assets Measured at Fair Value on a Nonrecurring Basis

Oil and gas property is measured at fair value on a nonrecurring basis upon impairment and when acquired in a nonmonetary property exchange. During the nine months ended September 30, 2011 and 2010, we recorded impairment expense of $45.7 million and $15.1 million, respectively, related to proved and unproved Gulf of Mexico properties. The impairment charges reduce the oil and gas properties' carrying values to their estimated fair values and are classified as Level 3. Fair value is calculated as the estimated discounted future net cash flows attributable to the assets. In the nine months ended September 30, 2010, we recorded gain on nonmonetary property exchange of $12.0 million related to proved Gulf of Mexico properties. The gain on nonmonetary property exchange reflects the difference between the carrying value of the property surrendered and the estimated fair value of the property received, classified as Level 3, and is calculated based on the estimated discounted future net cash flows attributable to that asset.

The Company's primary assumptions in preparing the estimated discounted future net cash flows to be recovered from oil and gas properties are based on (i) proved reserves and risk-adjusted probable and possible reserves, (ii) commodity forward-curve prices and assumptions as to costs and expenses, and (iii) the estimated discount rate that would be used by market participants to determine the fair value of the assets.