Derivative Commodity Instruments

6 Months Ended

Jun. 30, 2017

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. These derivative commodity instruments are accounted for as mark-to-market transactions with gains or losses recognized in the period of change in gain (loss) on derivative instruments, net. Such instruments may include over-the-counter (OTC) swaps, options 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)	June 30, 2017
								Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheets			Net Amounts 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	$	43,352	$	(4,289	)	$	39,063	$	—	$	—	$	39,063
Noncurrent derivative instruments	12,936		(3,402		)	9,534		—		—		9,534
Total derivative assets	56,288		(7,691		)	48,597		—		—		48,597
Liabilities
Derivative instruments	4,770		(4,289		)	481		—		—		481
Noncurrent derivative instruments	3,904		(3,402		)	502		—		—		502
Total derivative liabilities	8,674		(7,691		)	983		—		—		983
Total derivatives	$	47,614	$	—		$	47,614	$	—	$	—	$	47,614

(in thousands)	December 31, 2016
										Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value			Gross Amounts Offset in the Balance Sheets			Net Amounts 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	$	1,756		$	(1,706	)	$	50		$	—	$	—	$	50
Liabilities
Derivative instruments	67,173			(1,706		)	65,467			—		—		65,467
Noncurrent derivative instruments	3,006			—			3,006			—		—		3,006
Total derivative liabilities	70,179			(1,706		)	68,473			—		—		68,473
Total derivatives	$	(68,423	)	$	—		$	(68,423	)	$	—	$	—	$	(68,423	)

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 thirteen of our active counterparties and in a net loss position with the remaining one at June 30, 2017. The three largest counterparty net gain positions at June 30, 2017, PNC Bank, National Association, J.P. Morgan Ventures Energy Corporation and J Aron and Company, constituted approximately $6.4 million, $6.0 million and $5.1 million, respectively, of Energen’s total net 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 statements of operations:

(in thousands)	Location on Statements of Operations	Three months ended June 30, 2017		Three months ended June 30, 2016
Gain (loss) recognized in income on derivatives	Gain (loss) on derivative instruments, net	$	38,101	$	(65,872	)

(in thousands)	Location on Statements of Operations	Six months ended June 30, 2017		Six months ended June 30, 2016
Gain (loss) recognized in income on derivatives	Gain (loss)on derivative instruments, net	$	102,647	$	(60,417	)

As of June 30, 2017, Energen had entered into the following transactions for the remainder of 2017 and subsequent years:

Production Period	Description	Total Hedged Volumes		Weighted Average Contract Price
Oil
2017	NYMEX Swaps	4,020	MBbl	$50.68 Bbl
	NYMEX Three-Way Collars	2,400	MBbl
	Ceiling sold price (call)			$62.18 Bbl
	Floor purchased price (put)			$45.00 Bbl
	Floor sold price (put)			$35.00 Bbl
2018	NYMEX Three-Way Collars	12,060	MBbl
	Ceiling sold price (call)			$60.19 Bbl
	Floor purchased price (put)			$46.12 Bbl
	Floor sold price (put)			$36.12 Bbl
Oil Basis Differential
2017	WTI/WTI Basis Swaps	5,550	MBbl	$(0.66) Bbl
2018	WTI/WTI Basis Swaps	5,760	MBbl	$(1.12) Bbl
Natural Gas Liquids
2017	Liquids Swaps	41.6	MMGal	$0.57 Gal
2018	Liquids Swaps	105.8	MMGal	$0.59 Gal
Natural Gas
2017	Basin Specific Swaps - Permian	7.8	Bcf	$2.85 Mcf
2017	NYMEX Swaps	0.9	Bcf	$3.29 Mcf
2018	Basin Specific Swaps - Permian	3.6	Bcf	$2.56 Mcf
Natural Gas Basis Differential
2017	Permian Swaps	0.9	Bcf	$(0.29) Mcf
WTI - West Texas Intermediate/Midland, WTI - West Texas Intermediate/Cushing

As of June 30, 2017, the maximum term over which Energen has hedged exposures to the variability of cash flows is through December 31, 2018.