Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities that were accounted for at fair value on a recurring basis

The following table sets forth by level within the fair value hierarchy Legacy’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2015:

	Fair Value Measurements at June 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs			Total Carrying Value as of
Description	(Level 1)		(Level 2)			(Level 3)			June 30, 2015
	(In thousands)
LTIP liability (a)	$	—	$	(28	)	$	—		$	(28	)
Oil and natural gas derivatives	—		87,367			(4,811		)	82,556
Interest rate swaps	—		(985		)	—			(985		)
Total	$	—	$	86,354		$	(4,811	)	$	81,543

(a) See Note 10 for further discussion on unit-based compensation expenses and the related Long-Term Incentive Plan ("LTIP") liability for certain grants accounted for under the liability method.

Reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:

	Significant Unobservable Inputs
	(Level 3)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
	(In thousands)
Beginning balance	$	(2,485	)	$	14,552		$	555		$	20,615
Transfers(a)	—			(14,552		)	—			(14,552		)
Total losses	(3,275		)	—			(6,632		)	(6,740		)
Settlements, net	949			—			1,266			677
Ending balance	$	(4,811	)	$	—		$	(4,811	)	$	—
Losses included in earnings relating to derivatives still held as of June 30, 2015 and 2014	$	(3,492	)	$	—		$	(4,811	)	$	—

(a) As part of a routine review of accounting policies and practices, Legacy reviewed the assumptions and inputs used to value its derivative instruments and determined the material inputs (such as quoted market prices and oil and natural gas volatility) for its commodity derivatives more accurately correlate to the description of Level 2 instruments. As such, all instruments, with the exception of Midland-Cushing crude oil differential swaps, previously classified as Level 3 (oil and natural gas collars, swaptions and natural gas swaps for those derivatives indexed to the West Texas Waha, ANR-Oklahoma and CIG Indices) were transfered to Level 2 instruments during the period ended March 31, 2014.

Schedule of fair value measurements of proved oil and natural gas properties

Assets measured at fair value during the six-month period ended June 30, 2015 include:

	Fair Value Measurements During the Six Months Ended June 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Assets:
Impairment (a)	$	—	$	—	$	198,095
Acquisitions (b)	$	—	$	—	$	1,923

(a) Legacy reviews oil and natural gas properties for impairment when facts and circumstances indicate that their carrying value may not be recoverable. Legacy compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management’s expectations of future oil and natural gas prices. These future price scenarios reflect Legacy’s estimation of future price volatility. During the six-month period ended June 30, 2015, Legacy incurred impairment charges of $209.4 million as oil and natural gas properties with a net cost basis of $407.5 million were written down to their fair value of $198.1 million. In order to determine fair value, Legacy compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management’s expectations of future oil and natural gas prices. These future price scenarios reflect Legacy’s estimation of future price volatility. If the net capitalized cost exceeds the undiscounted future net cash flows, Legacy writes the net cost basis down to the discounted future net cash flows, which is management's estimate of fair value. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the Company's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that Legacy's management believes will impact realizable prices. The inputs used by management for the fair value measurements utilized in this review include significant unobservable inputs, and therefore, the fair value measurements employed are classified as Level 3 for these types of assets.

(b) Assets and liabilities acquired in a business combination are recorded at fair value. During the six-month period ended June 30, 2015, Legacy acquired oil and natural gas properties, inclusive of unproved acreage acquisitions, with a fair value of $1.9 million in multiple individually immaterial transactions. Properties acquired are recorded at fair value, which correlates to the discounted future net cash flow. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the Company's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that Legacy's management believes will impact realizable prices. For acquired unproved properties, the market-based weighted average cost of capital rate is subjected to additional project specific risking factors. The inputs used by management for the fair value measurements of these acquired oil and natural gas properties include significant unobservable inputs, and therefore, the fair value measurements employed are classified as Level 3 for these types of assets.