Derivative Activities

3 Months Ended

Mar. 31, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Activities

(11) DERIVATIVE ACTIVITIES

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives as we typically utilize commodity swaps or collars to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and oil or Mont Belvieu for NGLs, approximated a net unrealized pre-tax gain of $430.1 million at March 31, 2015. These contracts expire monthly through December 2017. The following table sets forth our commodity-based derivative volumes by year as of March 31, 2015, excluding our basis swaps which are discussed separately below:

Period	Contract Type	Volume Hedged	Weighted Average Hedge Price
Natural Gas
2015	Collars	145,000 Mmbtu/day	$ 4.07–$ 4.56
2015	Swaps	730,809 Mmbtu/day	$ 3.64
2016	Swaps	622,500 Mmbtu/day	$ 3.42
2017	Swaps	20,000 Mmbtu/day	$ 3.49
Crude Oil
2015	Swaps	10,671 bbls day	$ 87.26
2016	Swaps	2,000 bbls/day	$ 75.35
NGLs (C3-Propane)
2015	Swaps	13,331 bbls/day	$ 0.61/gallon
2016	Swaps	5,500 bbls/day	$ 0.60/gallon
NGLs (NC4-Normal Butane)
2015	Swaps	3,500 bbls/day	$ 0.72/gallon
2016	Swaps	2,500 bbls/day	$ 0.72/gallon
NGLs (C5-Natural Gasoline)
2015	Swaps	3,335 bbls/day	$ 1.15/gallon
2016	Swaps	2,000 bbls/day	$ 1.21/gallon

Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. If the derivative does not qualify as a hedge or is not designated as a hedge, changes in fair value of these non-hedge derivatives are recognized in earnings as derivative fair value income or loss.

Basis Swap Contracts

In addition to the collars and swaps above, at March 31, 2015, we had natural gas basis swap contracts that are not designated for hedge accounting, which lock in the differential between NYMEX and certain of our physical pricing indices primarily in Appalachia. These contracts settle monthly through March 2017 and the volumes are for 44,070,000 Mmbtu. The fair value of these contracts was a loss of $1.4 million on March 31, 2015.

Derivative Assets and Liabilities

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2015 and December 31, 2014 is summarized below. 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. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):

		March 31, 2015
		Gross  Amounts of Recognized  Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets  Presented in the Balance Sheet
Derivative assets:
Natural gas	–swaps	$	242,156	$	—		$	242,156
	–collars		51,439		—			51,439
	–basis swaps		1,211		(1,487	)		(276	)
Crude oil	–swaps		113,693		—			113,693
NGLs	–C3 swaps		15,883		(1,448	)		14,435
	–NC4 swaps		4,687		—			4,687
	–C5 swaps		3,721		—			3,721
		$	432,790	$	(2,935	)	$	429,855

		March 31, 2015
		Gross Amounts of Recognized  (Liabilities)			Gross  Amounts Offset in the Balance Sheet		Net Amounts of (Liabilities)  Presented in the Balance Sheet
Derivative (liabilities):
Natural gas	–basis swaps	$	(2,629	)	$	1,487	$	(1,142	)
NGLs	–C3 swaps		(1,448	)		1,448		—
		$	(4,077	)	$	2,935	$	(1,142	)

		December 31, 2014
		Gross Amounts of Recognized  Assets		Gross  Amounts Offset in the Balance Sheet			Net Amounts of Assets  Presented in the Balance Sheet
Derivative assets:
Natural gas	–swaps	$	198,740	$	—		$	198,740
	–collars		57,460		—			57,460
	–basis swaps		2,442		(755	)		1,687
Crude oil	–swaps		128,578		—			128,578
NGLs	–C3 swaps		14,727		—			14,727
	–C5 swaps		2,171		—			2,171
		$	404,118	$	(755	)	$	403,363

		December 31, 2014
		Gross Amounts of Recognized  (Liabilities)			Gross  Amounts Offset in the Balance Sheet		Net Amounts of (Liabilities)  Presented in the Balance Sheet
Derivative (liabilities):
Natural gas	–basis swaps	$	(755	)	$	755	$	—
		$	(755	)	$	755	$	—

For the three months ended March 31, 2014, the effects of our cash flow hedges (or those derivatives that previously qualified for hedge accounting) on AOCI is summarized below (in thousands):

	Realized Gain (Loss) Reclassified from OCI into Revenue (a)
Swaps	$	836
Collars		1,328
Income taxes		(924	)
	$	1,240

^(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 revenues.

The effects of our non-hedge derivatives (or those derivatives that do not qualify for hedge accounting) on our consolidated statements of income are summarized below (in thousands):

	Three Months Ended March 31,
	Gain (Loss) Recognized in Income (Non-hedge Derivatives)						Derivative Fair Value Income (Loss)
	2015			2014			2015			2014
Swaps	$	125,777		$	(44,073	)	$	125,777		$	(44,073	)
Collars		8,415			(39,148	)		8,415			(39,148	)
Basis swaps		(11,353	)		(63,629	)		(11,353	)		(63,629	)
Total	$	122,839		$	(146,850	)	$	122,839		$	(146,850	)