XML 79 R11.htm IDEA: XBRL DOCUMENT v2.4.1.9
Derivative Instruments
 12 Months Ended
Dec. 31, 2014
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 comprehensive income under the caption “Gain (loss) on derivative instruments, net.”
The Company may utilize 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 and written call options, volatility, the risk-free interest rate, and the time to expiration. The calculation of the fair value of collars and written call options requires the use of an option-pricing model. See Note 6. Fair Value Measurements.
In the fourth quarter of 2014, substantially all of the Company's outstanding crude oil derivative contracts were settled prior to the expiration of their contractual maturities scheduled through December 2016, resulting in the receipt of cash proceeds and recognition of gains totaling approximately $433 million which are included in the caption “Gain (loss) on derivative instruments, net" in the consolidated statements of comprehensive income for the year ended December 31, 2014. No natural gas derivative contracts in place were liquidated in the fourth quarter of 2014.
At December 31, 2014, the Company had outstanding derivative contracts with respect to future production as set forth in the tables below.  
Crude Oil - NYMEX WTI
 
 
 
Ceilings
 
 
 
 
 
 
Weighted Average
Price
Period and Type of Contract
 
Bbls
 
Range
 
July 2015 - December 2015
 
 
 
 
 
 
Written call options - WTI (1)
 
2,208,000
 
$95.85 - $103.75
 
$
98.36


Crude Oil - ICE Brent
 
 
 
Ceilings
 
 
 
 
 
 
Weighted Average
Price
Period and Type of Contract
 
Bbls
 
Range
 
July 2015 - December 2015
 
 
 
 
 
 
Written call options - ICE Brent (1)
 
368,000
 
$
107.40

 
$
107.40

January 2016 - December 2016
 
 
 
 
 
 
Written call options - ICE Brent (1)
 
1,464,000
 
$
107.70

 
$
107.70


Natural Gas - Henry Hub
 
 
 
Swaps Weighted Average Price
 
Floors
 
Ceilings
 
 
 
 
 
 
 
Weighted Average Price
 
 
 
Weighted Average Price
Period and Type of Contract
 
MMBtus
 
 
Range
 
 
Range
 
January 2015 - December 2015
 
 
 
 
 
 
 
 
 
 
 
 
Swaps - Henry Hub
 
24,500,000

 
$
4.27

 
 
 
 
 
 
 
 
Collars - Henry Hub
 
29,200,000

 
 
 
$3.50 - $3.75
 
$
3.69

 
$4.89 - $5.48
 
$
5.04

January 2016 - December 2016
 
 
 
 
 
 
 
 
 
 
 
 
Swaps - Henry Hub
 
63,110,000

 
$
3.98

 
 
 
 
 
 
 
 


(1)
Written call options represent the ceiling positions remaining from the Company's previous crude oil collar contracts. The floor positions of the collars were liquidated in the 2014 fourth quarter. For these written call options, the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price.
Derivative gains and losses
The following table presents cash settlements on matured or liquidated derivative instruments and non-cash gains and losses on open derivative instruments for the periods presented. Cash receipts and payments below reflect proceeds received upon early liquidation of derivative positions and gains or losses 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 or were liquidated during the period.
 
 
Year ended December 31,
In thousands
 
2014
 
2013
 
2012
Cash received (paid) on derivatives:
 
 
 
 
 
 
Crude oil fixed price swaps (1)
 
$
331,591

 
$
(54,289
)
 
$
(40,238
)
Crude oil collars (1)
 
65,310

 
(16,867
)
 
(15,341
)
Natural gas fixed price swaps
 
(11,551
)
 
9,601

 
9,858

Cash received (paid) on derivatives, net
 
385,350

 
(61,555
)
 
(45,721
)
Non-cash gain (loss) on derivatives:
 
 
 
 
 
 
Crude oil fixed price swaps
 
84,792

 
(117,580
)
 
142,567

Crude oil collars
 
1,121

 
(8,587
)
 
59,911

Crude oil written call options
 
3,981

 
—

 
—

Natural gas fixed price swaps
 
62,699

 
(4,029
)
 
(2,741
)
Natural gas collars
 
21,816

 
—

 
—

Non-cash gain (loss) on derivatives, net
 
174,409

 
(130,196
)
 
199,737

Gain (loss) on derivative instruments, net
 
$
559,759

 
$
(191,751
)
 
$
154,016


(1)
Net cash receipts for crude oil swaps and collars for the year ended December 31, 2014 include $433 million of proceeds received from crude oil derivative contracts that were settled in the fourth quarter of 2014 prior to their contractual maturities. The proceeds include $85 million for contracts with original maturities in November and December of 2014, $337 million for contracts with original maturities in 2015, and $11 million for contracts with original maturities in 2016. Of the proceeds, $373 million relates to crude oil swap liquidations and $60 million relates to crude oil collar liquidations.

Balance sheet offsetting of derivative assets and liabilities
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,
In thousands
 
2014
 
2013
Commodity derivative assets:
 
 
 
 
Gross amounts of recognized assets
 
$
84,415

 
$
4,213

Gross amounts offset on balance sheet
 
—

 
(597
)
Net amounts of assets on balance sheet
 
84,415

 
3,616

Commodity derivative liabilities:
 
 
 
 
Gross amounts of recognized liabilities
 
(4,770
)
 
(125,709
)
Gross amounts offset on balance sheet
 
16

 
27,345

Net amounts of liabilities on balance sheet
 
$
(4,754
)
 
$
(98,364
)

The following table reconciles the net amounts disclosed above to the individual financial statement line items in the consolidated balance sheets. 
 
 
December 31,
In thousands
 
2014
 
2013
Derivative assets
 
$
52,423

 
$
3,616

Noncurrent derivative assets
 
31,992

 
—

Net amounts of assets on balance sheet
 
84,415

 
3,616

Derivative liabilities
 
(1,645
)
 
(90,535
)
Noncurrent derivative liabilities
 
(3,109
)
 
(7,829
)
Net amounts of liabilities on balance sheet
 
(4,754
)
 
(98,364
)
Total derivative assets (liabilities), net
 
$
79,661

 
$
(94,748
)