Derivative Instruments

6 Months Ended

Jun. 30, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 3 - DERIVATIVE INSTRUMENTS

The MGP, on behalf of the Partnership, uses a number of different derivative instruments, principally put contracts, in connection with the partnership’s commodity price risk management activities. The Partnership does not apply hedge accounting to any of its derivative instruments. As a result, gains and losses associated with derivative instruments are recognized in earnings.

The Partnership enters into commodity put contracts to achieve more predictable cash flows by hedging the Partnership’s exposure to changes in commodity prices. At any point in time, such contracts may include regulated New York Mercantile Stock Exchange (“NYMEX”) futures and options contracts and non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally settled with offsetting positions, but may be settled by the physical delivery of the commodity. These contracts have been recorded at their fair values.

The Partnership reflected net derivative assets on its condensed balance sheets of $14,500 and $45,000 at June 30, 2016 and December 31, 2015, respectively.

The following table summarizes the commodity derivative activity and presentation in the condensed statements of operations for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Gains reclassified from accumulated other comprehensive income into natural gas and oil revenues	$	(700)	$	4,800	$	(1,300)	$	10,100
(Loss) gain subsequent to hedge accounting recognized in gain on mark-to-market derivatives	$	(7,800)	$	(5,500)	$	(1,100)	$	400

At June 30, 2016, the Partnership had the following commodity derivatives:

Natural Gas Put Options

Production Period Ending December 31,	Volumes(3)		Average Fixed Price		Fair Value Asset (2)
	(MMBtu) (1)		(per MMBtu) (1)
2016		12,800		$4.15	$	14,500

(1) “MMBtu” represents million British Thermal Units.

(2) Fair value based on forward NYMEX natural gas prices, as applicable.

(3) The production volume for 2016 include the remaining six months of 2016 beginning July 1, 2016.

As the underlying prices and terms in the Partnership’s derivative contracts were consistent with the indices used to sell its natural gas and oil, there were no gains or losses recognized during the three and six months ended June 30, 2016 and 2015 for hedge ineffectiveness.