Derivative Commodity Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Commodity Instruments

DERIVATIVE COMMODITY INSTRUMENTS

We periodically enter into derivative commodity instruments to hedge our exposure to price fluctuations on oil, natural gas liquids and natural gas production. Such instruments may include over-the-counter (OTC) swaps and basis swaps typically executed with investment and commercial banks and energy-trading firms. Derivative transactions are pursuant to standing authorizations by the Board of Directors, which do not authorize speculative positions.

The following tables detail the offsetting of derivative assets and liabilities as well as the fair values of derivatives on the balance sheets:

(in thousands)	March 31, 2016
								Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Fair Value Presented in the Balance Sheets
Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	23,182	$	(4,372	)	$	18,810	$	—	$	—	$	18,810
Noncurrent derivative instruments	115		33			148		—		—		148
Total derivative assets	23,297		(4,339		)	18,958		—		—		18,958
Liabilities
Derivative instruments	9,840		(4,372		)	5,468		—		—		5,468
Noncurrent derivative instruments	240		33			273		—		—		273
Total derivative liabilities	10,080		(4,339		)	5,741		—		—		5,741
Total derivatives	$	13,217	$	—		$	13,217	$	—	$	—	$	13,217

(in thousands)	December 31, 2015
								Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Fair Value Presented in the Balance Sheets
Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	72,563	$	(15,600	)	$	56,963	$	—	$	—	$	56,963
Liabilities
Derivative instruments	16,059		(15,600		)	459		—		—		459
Total derivatives	$	56,504	$	—		$	56,504	$	—	$	—	$	56,504

*All derivative instruments were current at December 31, 2015.

Due to the volatility of commodity prices, the estimated fair value of our derivative instruments is subject to fluctuation from period to period, which could result in significant differences between the current estimated fair value and the ultimate settlement price. Additionally, Energen is at risk of economic loss based upon the creditworthiness of our counterparties. We were in a net gain position with six of our active counterparties and in a net loss position with the remaining four at March 31, 2016. The largest counterparty net gain positions at March 31, 2016, Morgan Stanley Capital Group Inc. and BP Corporation North America Inc., constituted approximately $11.3 million and $6.1 million, respectively, of Energen’s total gain on fair value of derivatives.

The following table details the effect of open and closed derivative commodity instruments not designated as hedging instruments on the income statement:

(in thousands)	Location on Statements of Income	Three months ended March 31, 2016		Three months ended March 31, 2015
Gain recognized in income on derivatives	Gain (loss) on derivative instruments, net	$	5,455	$	34,036

As of March 31, 2016, Energen had entered into the following transactions for the remainder of 2016 and subsequent years:

Production Period	Total Hedged Volumes		Average Contract Price	Description
Oil
2016	5,495 MBbl		$44.78 Bbl	NYMEX Swaps
2017	1,080 MBbl		$45.05 Bbl	NYMEX Swaps
Oil Basis Differential
2016	5,643	MBbl	$(1.92) Bbl	WTI/WTI Basis Swaps
2016	1,572	MBbl	$(1.64) Bbl	WTS/WTI Basis Swaps
Natural Gas
2016	5.4	Bcf	$2.30 Mcf	Basin Specific Swaps - Permian
WTI - West Texas Intermediate/Midland, WTI - West Texas Intermediate/Cushing
WTS - West Texas Sour/Midland, WTI - West Texas Intermediate/Cushing

As of March 31, 2016, the maximum term over which Energen has hedged exposures to the variability of cash flows is through December 31, 2017.