Fair Value Measurements of Financial Instruments

3 Months Ended

Mar. 31, 2018

Fair Value Measurements of Financial Instruments

Fair Value Measurements of Financial Instruments

4. Fair Value Measurements of Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Derivative Instruments

Commodity derivative contracts reflected in the unaudited condensed consolidated balance sheets are recorded at estimated fair value. At March 31, 2018, all of the Company’s commodity derivative contracts were with four bank counterparties and were classified as Level 2 in the fair value input hierarchy. The fair value of the Company’s commodity derivatives are determined using industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, implied volatility, time value, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.

Derivative instruments listed below are presented gross and include swaps and collars that are carried at fair value. The Company records the net change in the fair value of these positions in gains (losses) on commodity derivative contracts — net in the Company’s unaudited condensed consolidated statements of operations.

	Fair Value Measurements at March 31, 2018
			Significant Other			Significant
	Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)			Unobservable Inputs (Level 3)		Total
	(in thousands)
Derivative Assets:
Commodity derivative oil swaps	$	—	$	2		$	—	$	2
Commodity derivative gas swaps	$	—	$	74		$	—	$	74
Commodity derivative oil collars	$	—	$	4,764		$	—	$	4,764
Commodity derivative gas collars	$	—	$	1,415		$	—	$	1,415
Total assets	$	—	$	6,255		$	—	$	6,255
Derivative Liabilities:
Commodity derivative oil swaps	$	—	$	(4,293	)	$	—	$	(4,293	)
Commodity derivative gas swaps	$	—	$	(205	)	$	—	$	(205	)
Commodity derivative oil collars	$	—	$	(8,208	)	$	—	$	(8,208	)
Commodity derivative gas collars	$	—	$	(561	)	$	—	$	(561	)
Total liabilities	$	—	$	(13,267	)	$	—	$	(13,267	)

	Fair Value Measurements at December 31, 2017
			Significant Other			Significant
	Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)			Unobservable Inputs (Level 3)		Total
	(in thousands)
Derivative Assets:
Commodity derivative oil swaps	$	—	$	—		$	—	$	—
Commodity derivative gas swaps	$	—	$	821		$	—	$	821
Commodity derivative oil collars	$	—	$	952		$	—	$	952
Commodity derivative gas collars	$	—	$	2,611		$	—	$	2,611
Total assets	$	—	$	4,384		$	—	$	4,384
Derivative Liabilities:
Commodity derivative oil swaps	$	—	$	(3,679	)	$	—	$	(3,679	)
Commodity derivative gas swaps	$	—	$	—		$	—	$	—
Commodity derivative oil collars	$	—	$	(2,605	)	$	—	$	(2,605	)
Commodity derivative gas collars	$	—	$	(1,333	)	$	—	$	(1,333	)
Total liabilities	$	—	$	(7,617	)	$	—	$	(7,617	)