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Commodity Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Commodity Derivative Financial Instruments
COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS
The Partnership’s ongoing operations expose it to changes in the market price for oil and natural gas. To mitigate the inherent commodity price risk associated with its operations, the Partnership uses oil and natural gas commodity derivative financial instruments. From time to time, such instruments may include variable–to-fixed-price swaps, costless collars, fixed-price contracts, and other contractual arrangements. The Partnership enters into oil and natural gas derivative contracts that contain netting arrangements with each counterparty. The Partnership does not enter into derivative instruments for speculative purposes.
As of December 31, 2017, the Partnership's open derivatives contracts consisted of only fixed-price-swap contracts. A fixed-price-swap contract between the Partnership and the counterparty specifies a fixed commodity price and a future settlement date. The Partnership has not designated any of its contracts as fair value or cash flow hedges. Accordingly, the changes in fair value of the contracts are included in the consolidated statement of operations in the period of the change. All derivative gains and losses from the Partnership's derivative contracts have been recognized in revenue in the Partnership's accompanying consolidated statements of operations. Derivative instruments that have not yet been settled in cash are reflected as either derivative assets or liabilities in the Partnership’s accompanying consolidated balance sheets as of December 31, 2017 and 2016. See Note 6 – Fair Value Measurements for further discussion.
The Partnership's derivative contracts expose it to credit risk in the event of nonperformance by counterparties. While the Partnership does not require its derivative contract counterparties to post collateral, the Partnership does evaluate the credit standing of such counterparties as deemed appropriate. This evaluation includes reviewing a counterparty’s credit rating and latest financial information. As of December 31, 2017, the Partnership had nine counterparties, all of which are rated Baa1 or better by Moody’s. Seven of the Partnership's counterparties are lenders under the Partnership's Credit Facility. The Partnership would have been at risk of losing a fair value amount of $12.1 million had the Partnership's counterparties as a group been unable to fulfill their obligations as of December 31, 2017. 
The tables below summarize the fair value and classification of the Partnership’s derivative instruments, as well as the gross recognized derivative assets, liabilities and amounts offset in the consolidated balance sheets at December 31, 2017 and 2016: 
 
 
 
 
As of December 31, 2017
Classification
 
Balance Sheet Location
 
Gross Fair
Value
 
Effect of
Counterparty Netting
 
Net Carrying
Value on
Balance Sheet
 
 
 
 
(in thousands)
Assets:
 
 
 
 

 
 

 
 

Current asset
 
Commodity derivative assets
 
$
10,713

 
$
(10,619
)
 
$
94

Long-term asset
 
Deferred charges and other long-term assets
 
1,392

 
(1,029
)
 
363

Total assets
 
 
 
$
12,105

 
$
(11,648
)
 
$
457

Liabilities:
 
 
 
 

 
 

 
 

Current liability
 
Commodity derivative liabilities
 
$
14,841

 
$
(10,619
)
 
$
4,222

Long-term liability
 
Commodity derivative liabilities
 
2,292

 
(1,029
)
 
1,263

Total liabilities
 
 
 
$
17,133

 
$
(11,648
)
 
$
5,485

  
 
 
 
 
As of December 31, 2016
Classification
 
Balance Sheet Location
 
Gross Fair
Value
 
Effect of
Counterparty
Netting
 
Net Carrying
Value on
Balance Sheet
 
 
 
 
(in thousands)
Assets:
 
 
 
 

 
 

 
 

Current asset
 
Commodity derivative assets
 
$
3,879

 
$
(3,879
)
 
$
—

Long-term asset
 
Deferred charges and other long-term assets
 
—

 
—

 
—

Total assets
 
 
 
$
3,879

 
$
(3,879
)
 
$
—

Liabilities:
 
 
 
 

 
 

 
 

Current liability
 
Commodity derivative liabilities
 
$
20,116

 
$
(3,879
)
 
$
16,237

Long-term liability
 
Commodity derivative liabilities
 
482

 
—

 
482

Total liabilities
 
 
 
$
20,598

 
$
(3,879
)
 
$
16,719


 
Changes in the fair values of the Partnership’s derivative instruments (both assets and liabilities) are presented on a net basis in the accompanying consolidated statements of operations and consisted of the following for the periods presented:
 
 
For the year ended December 31,
Derivatives not designated as hedging instruments
 
2017
 
2016
 
2015
 
 
(in thousands)
Beginning fair value of commodity derivative instruments
 
$
(16,719
)
 
$
64,534

 
$
37,471

Gain (loss) on oil derivative instruments
 
(5,091
)
 
(15,998
)
 
57,681

Gain (loss) on natural gas derivative instruments
 
31,993

 
(20,466
)
 
32,607

Net cash received on settlements of oil derivative instruments
 
(10,901
)
 
(27,450
)
 
(41,786
)
Net cash received on settlements of natural gas derivative instruments
 
(4,310
)
 
(17,339
)
 
(21,439
)
Net change in fair value of commodity derivative instruments
 
11,691

 
(81,253
)
 
27,063

Ending fair value of commodity derivative instruments
 
$
(5,028
)
 
$
(16,719
)
 
$
64,534



The Partnership had the following open derivative contracts for oil as of December 31, 2017:
 
 
Volume (Bbl)
 
Weighted Average Price (per Bbl)
 
Range (per Bbl)
Period and Type of Contract
 
 
 
Low
 
High
Oil Swap Contracts:
 
 

 
 

 
 

 
 

2018
 
 

 
 

 
 

 
 

First quarter
 
729,000

 
$
54.36

 
$
52.09

 
$
57.15

Second quarter
 
736,000

 
54.33

 
52.09

 
56.75

Third quarter
 
744,000

 
54.35

 
51.85

 
55.87

Fourth quarter
 
749,000

 
54.24

 
51.85

 
55.87

2019
 
 
 
 
 
 
 
 
First quarter
 
165,000

 
$
53.58

 
$
52.82

 
$
54.02

Second quarter
 
165,000

 
53.58

 
52.82

 
54.02

Third quarter
 
165,000

 
53.58

 
52.82

 
54.02

Fourth quarter
 
165,000

 
53.58

 
52.82

 
54.02


The Partnership had the following open derivative contracts for natural gas as of December 31, 2017:
 
 
Volume (MMBtu)
 
Weighted Average Price (per MMBtu)
 
Range (per MMBtu)
Period and Type of Contract
 
 
 
Low
 
High
Natural Gas Swap Contracts:
 
 

 
 

 
 

 
 

2018
 
 
 
 
 
 
 
 
First quarter
 
13,590,000

 
$
3.06

 
$
2.96

 
$
3.45

Second quarter
 
13,660,000

 
3.02

 
2.86

 
3.23

Third quarter
 
13,600,000

 
3.01

 
2.90

 
3.23

Fourth quarter
 
13,630,000

 
3.01

 
2.90

 
3.23

2019
 
 
 
 
 
 
 
 
First quarter
 
3,600,000

 
2.91

 
2.90

 
2.93

Second quarter
 
3,600,000

 
2.91

 
2.90

 
2.93

Third quarter
 
3,600,000

 
2.91

 
2.90

 
2.93

Fourth quarter
 
3,600,000

 
2.91

 
2.90

 
2.93

 
Subsequent to December 31, 2017, the Partnership entered into oil derivative contracts for 35,000 barrels per month beginning February 2018 through December 2018 and 60,000 barrels per month in 2019 at weighted average prices of $61.85 and $57.58, respectively.