DERIVATIVE ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Volumes Hedged and Average Hedge Prices

The following table sets forth our derivative volumes by year as of September 30, 2012.

Period	Contract Type	Volume Hedged	Weighted Average Hedge Price
Natural Gas
2012	Collars	279,641 Mmbtu/day	$ 4.76–$ 5.22
2013	Collars	240,000 Mmbtu/day	$ 4.73–$ 5.20
2014	Collars	325,000 Mmbtu/day	$ 3.75–$ 4.47
2012	Swaps	270,000 Mmbtu/day	$3.77
2013	Swaps	177,521 Mmbtu/day	$3.57
Crude Oil
2012	Collars	2,000 bbls/day	$ 70.00–$ 80.00
2013	Collars	3,000 bbls/day	$ 90.60–$ 100.00
2014	Collars	2,000 bbls/day	$ 85.55–$ 100.00
2012	Call Options	4,700 bbls/day	$85.00
2012	Put Options	2,500 bbls/day	$80.00
2013	Swaps	5,081 bbls/day	$96.59
2014	Swaps	4,000 bbls/day	$94.56
NGLs (Natural Gasoline)
2012	Sold Swaps	12,000 bbls/day	$96.28
2013	Sold Swaps	8,000 bbls/day	$89.64
2012	Purchased Swaps	5,500 bbls/day	$82.37
2013	Purchased Swaps	1,500 bbls/day	$76.30
NGLs (Propane)
2012	Swaps	6,000 bbls/day	$38.67
2013	Swaps	5,000 bbls/day	$35.55

Derivative Fair Value Income

The following table presents information about the components of derivative fair value (loss) income for the three months and the nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Change in fair value of derivatives that do not qualify for hedge accounting (a)	$	(53,646	)	$	58,990		$	30,075		$	67,093
Realized gain (loss) on settlement – natural gas (a) (b)		—			5,334			—			8,424
Realized gain (loss) on settlement – oil (a) (b)		1,955			285			(1,899	)		(7,727	)
Realized gain (loss) on settlement – NGLs (a) (b)		14,682			3,087			20,442			3,087
Hedge ineffectiveness – realized		988			2,036			3,451			4,558
– unrealized		(4,707	)		(3,971	)		(5,061	)		2,531
Derivative fair value (loss) income	$	(40,728	)	$	65,761		$	47,008		$	77,966

^(a) Derivatives that do not qualify for hedge accounting.

^(b)  These amounts represent the realized gains and losses on settled derivatives that do not qualify for hedge accounting, which before settlement are included in the category in this same table referred to as change in fair value of derivatives that do not qualify for hedge accounting.

Combined Fair Value of Derivatives, by Consolidated Balance Sheets

The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements.

	September 30, 2012			December 31, 2011
Derivative assets:
Natural gas – swaps	$	(2,922	)	$	54,162
– collars		116,531			228,228
Crude oil – swaps		9,848			(263	)
– collars		(1,441	)		(16,607	)
– call options		(3,733	)		(29,348	)
– put options		46			—
NGLs – C5 swaps		33,864			15,328
– C3 swaps		296			—
	$	152,489		$	251,500
Derivative liabilities:
Natural gas – swaps	$	(2,764	)	$	—
– collars		(5,603	)		—
Crude oil – collars		141			—
– put options		31			—
NGLs – C5 swaps		2,378			(173	)
– C3 swaps		(7,416	)		—
	$	(13,233	)	$	(173	)

Fair Value of Derivative Contracts by Consolidated Balance Sheets

The table below provides data about the fair value of our derivative contracts (in thousands). Derivative assets and liabilities shown below are presented as gross assets and liabilities, without regard to master netting arrangements, which are considered in the presentation of derivative assets and liabilities in the accompanying consolidated balance sheets.

	September 30, 2012								December 31, 2011
	Assets		(Liabilities)						Assets		(Liabilities)
	Carrying Value		Carrying Value			Net Carrying Value			Carrying Value		Carrying Value			Net Carrying Value
Derivatives that qualify for cash flow hedge accounting :
Swaps (a)	$	24,344	$	(20,184	)	$	4,160		$	54,318	$	(419	)	$	53,899
Collars (a)		130,842		(18,816	)		112,026			228,228		(1,954	)		226,274
Put options (a)		77		—			77			—		—			—
	$	155,263	$	(39,000	)	$	116,263		$	282,546	$	(2,373	)	$	280,173
Derivatives that do not qualify for hedge accounting :
Sold swaps (a)	$	31,933	$	(7,594	)	$	24,339		$	17,949	$	(2,794	)	$	15,155
Purchased swaps (a)		5,571		(788	)		4,783			—		—			—
Collars (a)		—		(2,396	)		(2,396	)		—		(14,653	)		(14,653	)
Call options (a)		—		(3,733	)		(3,733	)		—		(29,348	)		(29,348	)
	$	37,504	$	(14,511	)	$	22,993		$	17,949	$	(46,795	)	$	(28,846	)

^(a)  Included in unrealized derivative gain or loss in the accompanying consolidated balance sheets.

Effects of Cash Flow Hedges and Other Hedges on Accumulated Other Comprehensive Income

The effects of our cash flow hedges (or those derivatives that qualify for hedge accounting) on accumulated other comprehensive income in the accompanying consolidated balance sheets is summarized below (in thousands):

	Three Months Ended September 30,												Nine Months Ended September 30,
	Change in Hedge Derivative Fair Value						Realized Gain (Loss) Reclassified from OCI into Revenue (a)						Change in Hedge Derivative Fair Value						Realized Gain (Loss) Reclassified from OCI into Revenue (a)
	2012			2011			2012			2011			2012			2011			2012			2011
Swaps	$	(33,311	)	$	15,739		$	18,204		$	—		$	22,525		$	17,854		$	69,851		$	—
Put options		(994	)		—			(682	)		—			(1,908	)		—			(998	)		—
Collars		(51,344	)		75,449			43,945			26,758			32,704			97,873			128,823			80,660
Collars – discontinued operations		—			—			—			—			—			412			—			8,607
Income taxes		33,403			(34,195	)		(23,972	)		(10,034	)		(21,780	)		(41,609	)		(76,805	)		(33,476	)
	$	(52,246	)	$	56,993		$	37,495		$	16,724		$	31,541		$	74,530		$	120,871		$	55,791

^(a)  For realized gains upon derivative contract settlement, the reduction in AOCI is offset by an increase in natural gas, NGLs and oil sales. For realized losses upon derivative contract settlement, the increase in AOCI is offset by a decrease in natural gas, NGLs and oil sales.

Effects of Non-Hedge Derivatives on Consolidated Statements of Operations

The effects of our non-hedge derivatives (or those derivatives that do not qualify for hedge accounting) and the ineffective portion of our hedge derivatives on our consolidated statements of operations is summarized below (in thousands):

	Three Months Ended September 30,
	Gain (Loss) Recognized in Income (Non-hedge Derivatives)					Gain (Loss) Recognized in Income (Ineffective Portion)						Derivative Fair Value Income (Loss)
	2012			2011		2012			2011			2012			2011
Swaps	$	(45,998	)	$	26,219	$	(1,556	)	$	—		$	(47,554	)	$	26,219
Purchased swaps		12,822			—		—			—			12,822			—
Collars		(1,714	)		15,828		(2,163	)		(1,935	)		(3,877	)		13,893
Call options		(2,119	)		25,649		—			—			(2,119	)		25,649
Total	$	(37,009	)	$	67,696	$	(3,719	)	$	(1,935	)	$	(40,728	)	$	65,761

	Nine Months Ended September 30,
	Gain (Loss) Recognized in Income (Non-hedge Derivatives)					Gain (Loss) Recognized in Income (Ineffective Portion)					Derivative Fair Value Income (Loss)
	2012		2011			2012			2011		2012		2011
Swaps	$	30,330	$	39,968		$	(890	)	$	—	$	29,440	$	39,968
Purchased swaps		4,078		—			—			—		4,078		—
Collars		3,381		14,693			(720	)		7,089		2,661		21,782
Call options		10,829		16,259			—			—		10,829		16,259
Basis swaps		—		(43	)		—			—		—		(43	)
Total	$	48,618	$	70,877		$	(1,610	)	$	7,089	$	47,008	$	77,966