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Derivative Instruments
 12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments
The Company recognizes all derivative instruments on the balance sheet as either assets or liabilities measured at fair value. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the changes in fair value in the consolidated statements of income under the caption “Gain (loss) on derivative instruments, net.”
The Company has utilized swap and collar derivative contracts to economically hedge against the variability in cash flows associated with the forecasted sale of future crude oil and natural gas production. While the use of these derivative instruments limits the downside risk of adverse price movements, their use also limits future revenues from upward price movements.
With respect to a fixed price swap contract, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the swap price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap price. For a collar contract, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price, the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price, and neither party is required to make a payment to the other party if the settlement price for any settlement period is between the floor price and the ceiling price.
The Company's derivative contracts are settled based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on NYMEX West Texas Intermediate ("WTI") pricing or Inter-Continental Exchange ("ICE") pricing for Brent crude oil and natural gas derivative settlements based on NYMEX Henry Hub pricing. The estimated fair value of derivative contracts is based upon various factors, including commodity exchange prices, over-the-counter quotations, and, in the case of collars, volatility, the risk-free interest rate, and the time to expiration. The calculation of the fair value of collars requires the use of an option-pricing model. See Note 6. Fair Value Measurements.
At December 31, 2013, the Company had outstanding derivative contracts with respect to future production as set forth in the tables below.  
Crude Oil–NYMEX WTI
 
 
 
Swaps Weighted Average Price
Period and Type of Contract
 
Bbls
January 2014 - December 2014
 
 
 
 
Swaps - WTI
 
10,851,250

 
$
96.50


 

 
 
 
Swaps
Weighted
Average
Price
 
Collars
Crude Oil–ICE Brent
 
Bbls
 
Floors
 
Ceilings
Period and Type of Contract
 
Range
 
Weighted
Average
Price
 
Range
 
Weighted
Average
Price
January 2014 - December 2014
 
 
 
 
 
 
 
 
 
 
 
 
Swaps - ICE Brent
 
17,028,000

 
$
103.17

 
 
 
 
 
 
 
 
Collars - ICE Brent
 
2,190,000

 
 
 
$90.00 - $95.00

 
$
90.83

 
$104.70 - $108.85

 
$
107.13

January 2015 - December 2015
 
 
 
 
 
 
 
 
 
 
 
 
Swaps - ICE Brent
 
2,737,500

 
$
99.15

 
 
 
 
 
 
 
 
Collars - ICE Brent
 
730,000

 


 
$
95.00

 
$
95.00

 
$
107.40

 
$
107.40


Natural Gas–NYMEX Henry Hub
 
MMBtus
 
Swaps
Weighted
Average
Price
 
 
Period and Type of Contract
 
January 2014 - December 2014
 
 
 
 
Swaps - Henry Hub
 
64,250,000

 
$
4.19

January 2015 - March 2015
 
 
 
 
Swaps - Henry Hub
 
1,800,000

 
$
4.27


Derivative gains and losses
The following table presents cash settlements on matured derivative instruments and non-cash gains and losses on open derivative instruments for the periods presented. Cash receipts and payments below reflect the gain or loss on derivative contracts which matured during the period, calculated as the difference between the contract price and the market settlement price of matured contracts. Non-cash gains and losses below represent the change in fair value of derivative instruments which continue to be held at period end and the reversal of previously recognized non-cash gains or losses on derivative contracts that matured during the period.
 
 
Year ended December 31,
In thousands
 
2013

2012

2011
Cash received (paid) on derivatives:
 
 
 
 
 
 
Crude oil fixed price swaps
 
$
(54,289
)
 
$
(40,238
)
 
$
(14,900
)
Crude oil collars
 
(16,867
)
 
(15,341
)
 
(56,511
)
Natural gas fixed price swaps
 
9,601

 
9,858

 
37,305

Cash paid on derivatives, net
 
$
(61,555
)
 
$
(45,721
)
 
$
(34,106
)
Non-cash gain (loss) on derivatives:
 
 
 
 
 
 
Crude oil fixed price swaps
 
$
(117,580
)
 
$
142,567

 
$
(23,486
)
Crude oil collars
 
(8,587
)
 
59,911

 
42,239

Natural gas fixed price swaps
 
(4,029
)
 
(2,741
)
 
(14,696
)
Non-cash gain (loss) on derivatives, net
 
$
(130,196
)
 
$
199,737

 
$
4,057

Gain (loss) on derivative instruments, net
 
$
(191,751
)
 
$
154,016

 
$
(30,049
)


Balance sheet offsetting of derivative assets and liabilities
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210)-Disclosures about Offsetting Assets and Liabilities, which requires an entity to disclose information about offsetting arrangements to enable financial statement users to understand the effect of netting arrangements on an entity's financial position. The Company adopted the provisions of the new standard on January 1, 2013 as required and has provided the applicable disclosures below with respect to its derivative instruments.
All of the Company’s derivative contracts are carried at their fair value in the consolidated balance sheets under the captions “Derivative assets”, “Noncurrent derivative assets”, “Derivative liabilities”, and “Noncurrent derivative liabilities”. Derivative assets and liabilities with the same counterparty that are subject to contractual terms which provide for net settlement are reported on a net basis in the consolidated balance sheets.
The following tables present the gross amounts of recognized derivative assets and liabilities, the amounts offset under netting arrangements with counterparties, and the resulting net amounts presented in the consolidated balance sheets for the periods presented, all at fair value.
 
 
December 31, 2013
 
December 31, 2012
In thousands
 
Gross
amounts of
recognized
assets
 
Gross amounts
offset on
balance sheet
 
Net amounts of
assets on
balance sheet
 
Gross
amounts of
recognized
assets
 
Gross amounts
offset on
balance sheet
 
Net amounts of
assets on
balance sheet
Commodity derivative assets
 
$
4,213

 
$
(597
)
 
$
3,616

 
$
86,506

 
$
(35,886
)
 
$
50,620

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
December 31, 2012
In thousands
 
Gross
amounts of
recognized
liabilities
 
Gross amounts
offset on
balance sheet         
 
Net amounts of
liabilities on
balance sheet          
 
Gross
amounts of
recognized
liabilities
 
Gross amounts
offset on
balance sheet        
 
Net amounts of
liabilities on
balance sheet          
Commodity derivative liabilities
 
$
(125,709
)
 
$
27,345

 
$
(98,364
)
 
$
(16,241
)
 
$
1,069

 
$
(15,172
)

The following table reconciles the net amounts disclosed above to the individual financial statement line items in the consolidated balance sheets. 
In thousands
 
December 31, 2013
 
December 31, 2012
Derivative assets
 
$
3,616

 
$
18,389

Noncurrent derivative assets
 
—

 
32,231

Net amounts of assets on balance sheet
 
3,616

 
50,620

Derivative liabilities
 
(90,535
)
 
(12,999
)
Noncurrent derivative liabilities
 
(7,829
)
 
(2,173
)
Net amounts of liabilities on balance sheet
 
(98,364
)
 
(15,172
)
Total derivative assets (liabilities), net
 
$
(94,748
)
 
$
35,448