Risk Management and Derivative Instruments

12 Months Ended

Dec. 31, 2016

Risk Management and Derivative Instruments

Risk Management and Derivative Instruments

6. Risk Management and Derivative Instruments

        The Company's production is exposed to fluctuations in crude oil, NGLs and natural gas prices. The Company believes it is prudent to manage the variability in cash flows by, at times, entering into derivative financial instruments to economically hedge a portion of its crude oil, NGLs and natural gas production. The Company has historically utilized various types of derivative financial instruments, including swaps and collars, to manage fluctuations in cash flows resulting from changes in commodity prices. These derivative contracts are placed with major financial institutions that the Company believes are minimal credit risks. The oil, NGLs and gas reference prices, upon which the commodity derivative contracts are based, reflect various market indices that management believes have a high degree of historical correlation with actual prices received by the Company for its oil, NGLs and natural gas production. Although the Company has entered into derivative financial instruments in the past, the Company had no derivatives in place at December 31, 2016.

        Subsequent to December 31, 2016, the Company entered into various oil and natural gas derivative contracts that extend through March 2018, summarized as follows:

	Quarter Ended March 31, 2017		Quarter Ended June 30, 2017		Quarter Ended September 30, 2017		Quarter Ended December 31, 2017		Quarter Ended March 31, 2018
NYMEX WTI
Fixed swaps
Hedge position (Bbls)		105,500		227,500		207,000		207,000		—
Weighted average strike price	$	55.17	$	55.12	$	55.29	$	55.29	$	—
Collars
Hedge position (Bbls)		74,500		136,500		46,000		46,000		—
Weighted average ceiling price	$	59.68	$	59.73	$	60.00	$	60.00	$	—
Weighted average floor price	$	50.00	$	50.00	$	50.00	$	50.00	$	—
Three way collars
Hedge position (Bbls)		—		—		115,000		115,000		135,000
Weighted average ceiling price	$	—	$	—	$	62.80	$	62.80	$	63.50
Weighted average floor price	$	—	$	—	$	50.00	$	50.00	$	50.00
Weighted average sub-floor price	$	—	$	—	$	40.00	$	40.00	$	40.00
NYMEX HENRY HUB
Fixed swaps
Hedge position (MMBtu)		—		2,912,000		2,944,000		992,000		—
Weighted average strike price	$	—	$	3.38	$	3.38	$	3.38	$	—
Collars
Hedge position (MMBtu)		1,298,000		—		—		—		—
Weighted average ceiling price	$	3.70	$	—	$	—	$	—	$	—
Weighted average floor price	$	3.10	$	—	$	—	$	—	$	—
Three way collars
Hedge position (MMBtu)		—		—		—		610,000		900,000
Weighted average ceiling price	$	—	$	—	$	—	$	4.30	$	4.30
Weighted average floor price	$	—	$	—	$	—	$	3.25	$	3.25
Weighted average sub-floor price	$	—	$	—	$	—	$	2.50	$	2.50

Commodity Derivative Contracts

        As of December 31, 2016 and 2015, the Company did not have any open commodity derivative contract positions.

Gains/Losses on Commodity Derivative Contracts

        The Company does not designate its commodity derivative contracts as hedging instruments for financial reporting purposes. Accordingly, commodity derivative contracts were marked-to-market each quarter with the change in fair value during the periodic reporting period recognized currently as a gain or loss in "Gains (losses) on commodity derivative contracts—net" within revenues in the consolidated statements of operations.

        The following table presents net cash received (paid) for commodity derivative contracts and unrealized net gains (losses) recorded by the Company related to the change in fair value of the derivative instruments in "Gains (losses) on commodity derivative contracts—net" for the periods presented (in thousands):

	Successor		Predecessor
	For the Period October 21, 2016 through December 31, 2016				For the Years Ended December 31,
			For the Period January 1, 2016 through October 20, 2016
					2015			2014
Net cash received (paid) for commodity derivative contracts	$	—	$	—	$	167,669		$	(18,332	)
Unrealized net gains (losses)		—		—		(126,709	)		157,521
Gains on commodity derivative contracts—net	$	—	$	—	$	40,960		$	139,189

        Cash settlements, as presented in the table above, represent realized gains related to the Company's derivative instruments. In addition to cash settlements, the Company also recognizes fair value changes on its derivative instruments in each reporting period. The changes in fair value result from new positions and settlements that may occur during each reporting period, as well as the relationships between contract prices and the associated forward curves.