Fair Value Measurements

12 Months Ended

Dec. 31, 2017

Fair Value on a Recurring Basis. Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, bank borrowings, and senior notes. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the highly liquid or short-term nature of these instruments.

The carrying value of our revolving Credit Facility approximates fair value because the Company's current borrowing base rate does not materially differ from market rates for similar bank borrowings. The carrying value of our Second Lien Notes included in long-term debt approximates fair value because market conditions have not changed significantly since the Second Lien Notes were issued on December 15, 2017. These are considered Level 3 valuations (defined below).

The fair values of our derivatives are computed using commonly accepted industry-standard models and are periodically verified against quotes from brokers.

The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value (table below in millions):

Level 1 – Uses quoted prices in active markets for identical, unrestricted assets or liabilities. Instruments in this category have comparable fair values for identical instruments in active markets.

Level 2 – Uses quoted prices for similar assets or liabilities in active markets or observable inputs for assets or liabilities in non-active markets. Instruments in this category are periodically verified against quotes from brokers and include our commodity derivatives that we value using commonly accepted industry-standard models which contain inputs such as contract prices, risk-free rates, volatility measurements and other observable market data that are obtained from independent third-party sources.

Level 3 – Uses unobservable inputs for assets or liabilities that are in non-active markets.

The following table presents our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017 and 2016. For additional discussion related to the fair value of the Company's derivatives, refer to Note 5 of these consolidated financial statements.



	Fair Value Measurements at
(in millions)	Total		Quoted Prices in Active markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2017
Assets
Natural Gas Derivatives	$	7.2	$	—	$	7.2	$	—
Natural Gas Basis Derivatives	$	0.3	$	—	$	0.3	$	—
NGL Derivatives	$	0.1	$	—	$	0.1	$	—
Liabilities
Natural Gas Derivatives	$	1.3	$	—	$	1.3	$	—
Natural Gas Basis Derivatives	$	0.3	$	—	$	0.3	$	—
Oil Derivatives	$	5.2	$	—	$	5.2	$	—
Oil Basis Derivatives	$	0.1	$	—	$	0.1	$	—
NGL Derivatives	$	0.9	$	—	$	0.9	$	—

December 31, 2016
Assets
Natural Gas Basis Derivatives	$	0.4	$	—	$	0.4	$	—
Liabilities
Natural Gas Derivatives	$	13.7	$	—	$	13.7	$	—
Natural Gas Basis Derivatives	$	0.1	$	—	$	0.1	$	—
Oil Derivatives	$	3.0	$	—	$	3.0	$	—

Our current and long-term unsettled derivative assets and liabilities in the table above are measured at gross fair value and are shown on the accompanying consolidated balance sheets in “Other current assets”, "Other long-term assets", "Accounts payable and accrued liabilities" and "Other long-term liabilities", respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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