Derivative Instruments And Price Risk Management Activities

12 Months Ended

Dec. 31, 2011

Derivative Instruments And Price Risk Management Activities [Abstract]

Derivative Instruments And Price Risk Management Activities

Note 13 — Derivative Instruments and Price Risk Management Activities

At December 31, 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
2012	Swaps		3,408,250		95.87		(20,115	)		—
2013	Swaps		90,000		90.40		—			(522	)
2012	Prepaid Swaps (2)		476,950		—		(48,424	)		—
Total							(68,539	)		(522	)
Natural Gas (MMBtu)
North Sea
2012	Swaps		1,646,000		8.48		(213	)		—
Gulf of Mexico
2012	Calls (3)		3,660,000		5.35		(64	)		—
2012	Fixed-price physicals		1,365,000		4.64		2,194			—
Total							1,917			—
Total asset							2,194			—
Total liability							(68,816	)		(522	)
Total							(66,622	)		(522	)

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

(2) In order to manage our exposure to oil price volatility and provide a current source of financing, in the second half of 2011, we entered into certain off-market oil swap derivative contracts which provide us with $87.9 million of cash advances from the counterparty and obligate us to pay market prices at the time of settlement.

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

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 is designated as a hedge 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.

There was no other comprehensive income related to hedges during 2011 or 2010. The following AOCI table shows where gains, net of taxes, on cash flow hedge derivatives were reported in the year ended December 31, 2009 (in thousands):

AOCI for cash flow hedges – December 31, 2008	$	(2,877	)
Derivative gains		3,736
Gains reclassified from AOCI to oil and gas revenues		(859	)
AOCI for cash flow hedges – December 31, 2009	$	—

During the year ended December 31, 2011, we paid net cash settlements of $13.0 million related to our derivatives. Additional information about derivatives is presented in Note 15 "Fair Value Measurements". Our derivative income (expense) is based entirely on nondesignated derivatives and consists of the following (in thousands):

	Year Ended December 31,
	2011			2010			2009
Realized gains (losses) from:
Settlements of contracts	$	(23,317	)	$	(2,686	)	$	18,335
Early terminations of contracts		10,700			—			19,226
Unrealized gains (losses) on open contracts		37,808			(19,733	)		(38,273	)
Derivative income (expense)	$	25,191		$	(22,419	)	$	(712	)