Derivative Instruments

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Crude oil and natural gas derivatives

The Company may utilize crude oil and natural gas swap and collar derivative contracts to economically hedge against the variability in cash flows associated with future sales of 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.

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 crude oil and natural gas derivative instruments as hedges for accounting purposes and, as a result, marks such derivative instruments to fair value and recognizes the changes in fair value in the consolidated statements of comprehensive income (loss) under the caption “Gain (loss) on crude oil and natural gas derivatives, net.”

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.

With respect to a crude oil or natural gas 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 crude oil or natural gas 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 and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price. 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.

At December 31, 2016, the Company had outstanding natural gas derivative contracts with respect to future production as set forth in the table below. The hedged volumes reflected below represent an aggregation of multiple derivative contracts primarily having calendar year 2017 durations that are generally expected to be realized ratably over the year. The Company's natural gas derivative contracts are settled based upon reported NYMEX Henry Hub settlement prices. At December 31, 2016 the Company had no outstanding crude oil derivative contracts.

		Swaps Weighted Average Price		Floors			Ceilings
					Weighted Average Price			Weighted Average Price
Period and Type of Contract	MMBtus			Range			Range
January 2017 - December 2017
Swaps - Henry Hub	72,690,000	$	3.41
Collars - Henry Hub	65,700,000			$2.40 - $3.00	$	2.47	$2.92 - $3.88	$	3.08

Crude oil and natural gas derivative gains and losses

Cash receipts and payments in the following table 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	2016			2015			2014
Cash received (paid) on derivatives:
Crude oil fixed price swaps (1)	$	—		$	—		$	331,591
Crude oil collars (1)	—			—			65,310
Natural gas fixed price swaps	88,823			39,670			(11,551		)
Natural gas collars	—			29,883			—
Cash received on derivatives, net	88,823			69,553			385,350
Non-cash gain (loss) on derivatives:
Crude oil fixed price swaps	—			—			84,792
Crude oil collars	—			—			1,121
Crude oil written call options	38			4,715			3,981
Natural gas fixed price swaps	(120,784		)	41,828			62,699
Natural gas collars	(39,936		)	(25,011		)	21,816
Non-cash gain (loss) on derivatives, net	(160,682		)	21,532			174,409
Gain (loss) on crude oil and natural gas derivatives, net	$	(71,859	)	$	91,085		$	559,759

(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. Of the proceeds, $373 million related to crude oil swap liquidations and $60 million related to crude oil collar liquidations.

Diesel fuel derivatives

In March 2016, the Company entered into diesel fuel swap derivative contracts to economically hedge against the variability in cash flows associated with future purchases of diesel fuel for use in drilling activities. The Company has hedged approximately12 million gallons of diesel fuel over the period from January 2017 to December 2017 at a weighted average price of $1.43per gallon. With respect to these diesel fuel swap contracts, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is greater 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 less than the swap price. The diesel fuel swap contracts are settled based upon reported NYMEX settlement prices for New York Harbor ultra-low sulfur diesel fuel.

The Company recognizes its diesel fuel derivative instruments on the balance sheet as either assets or liabilities measured at fair value. The estimated fair value is based upon various factors, including commodity exchange prices, over-the-counter quotations, the risk-free interest rate, and time to expiration. The Company has not designated its diesel fuel derivative instruments as hedges for accounting purposes and, as a result, marks the derivative instruments to fair value and recognizes the changes in fair value in the consolidated statements of comprehensive income (loss) under the caption “Operating costs and expenses—Net gain on sale of assets and other.” For the year ended December 31, 2016, the Company recognized cash gains totaling $0.7 million on diesel fuel derivatives that matured during the period and non-cash gains totaling $4.1 million on diesel fuel derivatives that continue to be held at year-end.

Balance sheet offsetting of derivative assets and liabilities

The Company’s derivative contracts are recorded at 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 table presents the gross amounts of recognized crude oil, natural gas, and diesel fuel 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	2016			2015
Commodity derivative assets:
Gross amounts of recognized assets	$	4,061		$	120,385
Gross amounts offset on balance sheet	—			(11,903		)
Net amounts of assets on balance sheet	4,061			108,482
Commodity derivative liabilities:
Gross amounts of recognized liabilities	(59,489		)	(19,192		)
Gross amounts offset on balance sheet	—			11,903
Net amounts of liabilities on balance sheet	$	(59,489	)	$	(7,289	)

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	2016			2015
Derivative assets	$	4,061		$	93,922
Noncurrent derivative assets	—			14,560
Net amounts of assets on balance sheet	4,061			108,482
Derivative liabilities	(59,489		)	(3,583		)
Noncurrent derivative liabilities	—			(3,706		)
Net amounts of liabilities on balance sheet	(59,489		)	(7,289		)
Total derivative assets (liabilities), net	$	(55,428	)	$	101,193