Derivative Instruments

6 Months Ended

Jun. 30, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Note 6—Derivative Instruments

Commodity Derivatives

The Company is exposed to market risk from changes in energy commodity prices within its operations. The Company utilizes derivatives to manage exposure to the variability in expected future cash flows from forecasted sales of natural gas and oil. The Company currently uses a mix of over-the-counter fixed price swaps, basis swaps and put options spreads and collars to manage its exposure to commodity price fluctuations. All of the Company’s derivative instruments are used for risk management purposes and none are held for trading or speculative purposes.

The Company is exposed to credit risk in the event of non-performance by counterparties. To mitigate this risk, the Company enters into derivative contracts only with counterparties that are rated “A” or higher by S&P or Moody’s. The creditworthiness of counterparties is subject to periodic review. As of June 30, 2018, the Company’s derivative instruments were with Bank of Montreal, Citibank, Goldman Sachs, Morgan Stanley, Capital One N.A., BP Energy Company and KeyBank N.A. The Company has not experienced any issues of non-performance by derivative counterparties. Below is a summary of the Company’s derivative instrument positions, as of June 30, 2018, for future production periods:

Natural Gas Derivatives

Description	Volume (MMBtu/d)		Production Period	Weighted Average Price ($/MMBtu)
Natural Gas Swaps:
		30,000	July 2018 – March 2019	$	2.90
		20,000	July 2018 – December 2018	$	2.80
		20,000	July 2018 – September 2018	$	2.81
		40,000	October 2018 – December 2019	$	2.80
		50,000	January 2019 – December 2019	$	2.87
Natural Gas Three-way Collars:
Floor purchase price (put)		30,000	July 2018 – March 2019	$	3.00
Ceiling sold price (call)		30,000	July 2018 – March 2019	$	3.40
Floor sold price (put)		30,000	July 2018 – March 2019	$	2.50
Floor purchase price (put)		40,000	July 2018 – December 2018	$	3.11
Floor purchase price (put)		60,000	July 2018 – December 2018	$	2.80
Ceiling sold price (call)		100,000	July 2018 – December 2018	$	3.36
Floor sold price (put)		100,000	July 2018 – December 2018	$	2.50
Floor purchase price (put)		20,000	October 2018 – December 2019	$	2.75
Ceiling sold price (call)		20,000	October 2018 – December 2019	$	3.10
Floor sold price (put)		20,000	October 2018 – December 2019	$	2.30
Floor purchase price (put)		57,500	January 2019 – December 2019	$	2.72
Ceiling sold price (call)		57,500	January 2019 – December 2019	$	3.02
Floor sold price (put)		57,500	January 2019 – December 2019	$	2.30
Natural Gas Call/Put Options:
Call sold		40,000	July 2018 – December 2018	$	3.75
Call sold		30,000	January 2019 – March 2019	$	3.50
Call sold		30,000	April 2019 – December 2019	$	3.00
Call sold		10,000	January 2019 – December 2019	$	4.75
Basis Swaps:
Appalachia - Dominion		12,500	April 2019 – October 2019	$	(0.52	)
Appalachia - Dominion		12,500	April 2020 – October 2020	$	(0.52	)
Appalachia - Dominion		20,000	January 2020 – December 2020	$	(0.59	)

Oil Derivatives

Description	Volume (Bbls/d)		Production Period	Weighted Average Price ($/Bbl)
Oil Swaps:
		1,000	July 2018 – March 2019	$	61.00
Oil Three-way Collars:
Floor purchase price (put)		4,000	July 2018 – December 2018	$	45.00
Ceiling sold price (call)		4,000	July 2018 – December 2018	$	53.47
Floor sold price (put)		4,000	July 2018 – December 2018	$	35.00
Floor purchase price (put)		2,000	January 2019 – December 2019	$	50.00
Ceiling sold price (call)		2,000	January 2019 – December 2019	$	60.56
Floor sold price (put)		2,000	January 2019 – December 2019	$	40.00

Fair Values and Gains (Losses)

The following table summarizes the fair value of the Company’s derivative instruments on a gross basis and on a net basis as presented in the condensed consolidated balance sheets (in thousands). None of the derivative instruments are designated as hedges for accounting purposes.

As of June 30, 2018	Gross Amount			Netting Adjustments(a)			Net Amount Presented in Balance Sheets			Balance Sheet Location
Assets
Commodity derivatives - current	$	6,573		$	(3,089	)	$	3,484		Other current assets
Commodity derivatives - noncurrent		1,619			(7	)		1,612		Other assets
Total assets	$	8,192		$	(3,096	)	$	5,096

Liabilities
Commodity derivatives - current	$	(26,345	)	$	3,089		$	(23,256	)	Accrued liabilities
Commodity derivatives - noncurrent		(2,932	)		7			(2,925	)	Other liabilities
Total liabilities	$	(29,277	)	$	3,096		$	(26,181	)

As of December 31, 2017	Gross Amount			Netting Adjustments(a)			Net Amount Presented in Balance Sheets			Balance Sheet Location
Assets
Commodity derivatives - current	$	15,971		$	(6,380	)	$	9,591		Other current assets
Commodity derivatives - noncurrent		469			(176	)		293		Other assets
Total assets	$	16,440		$	(6,556	)	$	9,884

Liabilities
Commodity derivatives - current	$	(21,256	)	$	6,380		$	(14,876	)	Accrued liabilities
Commodity derivatives - noncurrent		(252	)		176			(76	)	Other liabilities
Total liabilities	$	(21,508	)	$	6,556		$	(14,952	)

(a)	The Company has agreements in place that allow for the financial right to offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

The following table presents the Company’s reported gains and losses on derivative instruments and where such values are recorded in the condensed consolidated statements of operations for the periods presented (in thousands):

		Amount of Gain (Loss) Recognized in Income
Derivatives not designated as hedging instruments under ASC 815	Location of Gain (Loss) Recognized in Income	Three Months Ended June 30,					Six Months Ended June 30,
		2018			2017		2018			2017
Commodity derivatives	Gain (loss) on derivative instruments	$	(16,577	)	$	18,177	$	(20,792	)	$	43,274