Note 4. Derivative Financial Instruments

Our risk management program is intended to reduce our exposure to commodity price volatility and to assist with stabilizing cash flows. Accordingly, we utilize commodity derivative contracts (swaps, calls, puts and collars) to manage a portion of our exposure to commodity prices and specific delivery points. We enter into commodity derivative contracts or modify our portfolio of existing commodity derivative contracts when we believe market conditions or other circumstances suggest that it is prudent to do so, or as required by our lenders. These contracts are presented as derivative financial instruments on our unaudited condensed consolidated financial statements. We account for our commodity derivative contracts at fair value. See Note 5 in this section for a description of our fair value measurements.

We do not designate derivatives as hedges for accounting purposes; therefore, the mark-to-market adjustment reflecting the change in the fair value of our commodity derivative contracts is recorded in current period earnings. When prices for oil are volatile, a significant portion of the effect of our hedging activities consists of non-cash gains or losses due to changes in the fair value of our commodity derivative contracts. In addition to mark-to-market adjustments, gains or losses arise from net payments made or received on monthly settlements, proceeds from or payments for termination of contracts prior to their expiration and premiums paid or received for new contracts. Any deferred premiums are recorded as a liability and recognized in earnings as the related contracts mature. Gains and losses on derivatives are included in cash flows from operating activities. Pursuant to the accounting standard that permits netting of assets and liabilities where the right of offset exists, we present the fair value of commodity derivative contracts on a net basis.

At June 30, 2017, our commodity derivative contracts were in a net asset position with a fair value of approximately $0.2 million and at December 31, 2016, a net liability position with a fair value of approximately $7.8 million. All of our commodity derivative contracts are with major financial institutions that are also lenders under our revolving credit facility. Should one of these financial counterparties not perform, we may not realize the benefit of some of our commodity derivative contracts under lower commodity prices and we could incur a loss. As of June 30, 2017, all of our counterparties have performed pursuant to the terms of their commodity derivative contracts.

The following tables summarize the gross fair value by the appropriate balance sheet classification, even when the derivative financial instruments are subject to netting arrangements and qualify for net presentation, in our unaudited condensed consolidated balance sheets at June 30, 2017, and December 31, 2016:

	Gross Amounts Recognized			Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets			Net Amounts Presented in the Unaudited Condensed Consolidated Balance Sheets
	(in thousands)
June 30, 2017:
Assets
Derivative financial instruments - current asset	$	2,516		$	(2,168	)	$	348
Derivative financial instruments - long-term asset		948			(490	)		458
Total		3,464			(2,658	)		806
Liabilities
Derivative financial instruments - current liability		(271	)		(309	)		(580	)
Derivative deferred premium - current liability		(2,477	)		2,477			—
Derivative financial instruments - long-term liability		(89	)		89			—
Derivative deferred premium - long-term liability		(401	)		401			—
Total		(3,238	)		2,658			(580	)
Net Asset	$	226		$	—		$	226

	Gross Amounts Recognized			Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets			Net Amounts Presented in the Unaudited Condensed Consolidated Balance Sheets
	(in thousands)
December 31, 2016:
Assets
Derivative financial instruments - current asset	$	1,570		$	(1,570	)	$	—
Derivative financial instruments - long-term asset		406			(406	)		—
Total		1,976			(1,976	)		—
Liabilities
Derivative financial instruments - current liability		(1,836	)		(3,478	)		(5,314	)
Derivative deferred premium - current liability		(5,048	)		5,048			—
Derivative financial instruments - long-term liability		(2,500	)		5			(2,495	)
Derivative deferred premium - long-term liability		(401	)		401			—
Total		(9,785	)		1,976			(7,809	)
Net Liability	$	(7,809	)	$	—		$	(7,809	)

The following table presents the impact of derivative financial instruments and their location within the unaudited condensed consolidated statements of operations:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017		2016			2017		2016
	(in thousands)
Net settlements on matured derivatives⁽¹⁾	$	357	$	6,191		$	201	$	17,285
Net change in fair value of derivatives		2,176		(16,279	)		5,464		(24,805	)
Total gain (loss) on derivatives, net	$	2,533	$	(10,088	)	$	5,665	$	(7,520	)

⁽¹⁾The settlement amount does not include premiums paid attributable to contracts that matured during the respective period_.

At June 30, 2017, and December 31, 2016, our commodity derivative contracts had maturities at various dates through December 2019 and were comprised of commodity price put and collar contracts. At June 30, 2017, we had the following oil derivatives net positions:

Period Covered	Weighted Average Floor Price		Weighted Average Ceiling Price		Total Bbls Hedged/day		NYMEX Index
Collars - 2017		45.00		51.78		652	WTI
Puts - 2017		50.00		—		1,875	WTI
Collars - 2018		44.38		55.52		1,315	WTI
Puts - 2018		45.00		—		164	WTI
Collars - 2019		50.00		60.52		427	WTI

At December 31, 2016, we had the following oil derivatives net positions:

Period Covered	Weighted Average Floor Price		Weighted Average Ceiling Price		Total Bbls Hedged/day		NYMEX Index
Collars - 2017	$	43.75	$	50.68		658	WTI
Puts - 2017	$	50.00	$	—		1,932	WTI
Collars - 2018	$	44.38	$	55.52		1,315	WTI
Puts - 2018	$	45.00	$	—		164	WTI
Collars - 2019	$	50.00	$	60.52		427	WTI