FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2017

Fair Value Measurements

FAIR VALUE MEASUREMENTS

4.FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  The FASB has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  This hierarchy consists of three broad levels.  Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities.  Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  Level 3 are unobservable inputs for an asset or liability.

The following table provides fair value measurement information for certain assets and liabilities as of March 31, 2017 and December 31, 2016:

	March 31, 2017				December 31, 2016
	Book		Fair		Book		Fair
(in thousands)	Value		Value		Value		Value
Financial Assets (Liabilities):
5.875% Notes due 2022	$	(750,000)	$	(774,270)	$	(750,000)	$	(782,835)
4.375% Notes due 2024	$	(750,000)	$	(781,950)	$	(750,000)	$	(779,453)
Derivative instruments — assets	$	8,819	$	8,819	$	—	$	—
Derivative instruments — liabilities	$	(10,838)	$	(10,838)	$	(51,940)	$	(51,940)

Assessing the significance of a particular input to the fair value measurement requires judgment, including the consideration of factors specific to the asset or liability.  The fair value (Level 1) of our 4.375% and 5.875% fixed rate notes was based on their last traded value before period end.  The fair value of our derivative instruments (Level 2) was estimated using option pricing models.  These models use certain variables including forward price and volatility curves and the strike prices for the instruments.  The fair value estimates are adjusted relative to non-performance risk as appropriate.  See Note 3 for further information on the fair value of our derivative instruments.

Other Financial Instruments

The carrying amounts of our cash, cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities.  Included in “Accrued liabilities — other” at March 31, 2017 are: (i) liabilities of approximately $26.9 million representing the amount by which checks issued, but not yet presented to our banks, exceeded balances in applicable bank accounts; (ii) accrued operating expenses of approximately $54.5 million; and (iii) accrued interest of approximately $29.8 million, primarily related to our senior unsecured notes.  Included in “Accrued liabilities — other” at December 31, 2016 are: (i) liabilities of approximately $19.3 million representing the amount by which checks issued, but not yet presented to our banks, exceeded balances in applicable bank accounts; (ii) accrued operating expenses of approximately $53.9 million; and (iii) accrued payroll-related costs of approximately $43.5 million.

Most of our accounts receivable balances are uncollateralized and result from transactions with other companies in the oil and gas industry.  Concentration of customers may impact our overall credit risk because our customers may be similarly affected by changes in economic or other conditions within the industry.

We routinely assess the recoverability of all material accounts receivable to determine their collectability.  We accrue a reserve to the allowance for doubtful accounts when it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated.  At March 31, 2017 and December 31, 2016, the allowance for doubtful accounts was $1.8 million and $1.6 million, respectively.