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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