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, 2017, the Company had outstanding natural gas derivative contracts as set forth in the table below. The volumes reflected below represent an aggregation of multiple derivative contracts having similar remaining durations expected to be realized ratably over the indicated 2018 period. At December 31, 2017 the Company had no outstanding crude oil derivative contracts.



Period and Type of Contract	MMBtus	Swaps Weighted Average Price
January 2018 - March 2018
Swaps - Henry Hub	6,300,000	$	3.28

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, if any, 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	2017			2016			2015
Cash received (paid) on derivatives:
Natural gas fixed price swaps	$	40,095		$	88,823		$	39,670
Natural gas collars	(10,539		)	—			29,883
Cash received on derivatives, net	29,556			88,823			69,553
Non-cash gain (loss) on derivatives:
Crude oil written call options	—			38			4,715
Natural gas fixed price swaps	18,960			(120,784		)	41,828
Natural gas collars	43,131			(39,936		)	(25,011		)
Non-cash gain (loss) on derivatives, net	62,091			(160,682		)	21,532
Gain (loss) on crude oil and natural gas derivatives, net	$	91,647		$	(71,859	)	$	91,085

Diesel fuel derivatives

The Company previously entered into diesel fuel swap derivative contracts, all of which matured on or before December 31, 2017, to economically hedge against the variability in cash flows associated with future purchases of diesel fuel for use in drilling activities. With respect to the diesel fuel swap contracts, the counterparty was required to make a payment to the Company if the settlement price for any settlement period was greater than the swap price, and the Company was required to make a payment to the counterparty if the settlement price for any settlement period was less than the swap price. The diesel fuel swap contracts were settled based upon reported NYMEX settlement prices for New York Harbor ultra-low sulfur diesel fuel.

The Company recognized its diesel fuel derivative instruments on the balance sheet as either assets or liabilities measured at fair value. The estimated fair value was based upon various factors, including commodity exchange prices, over-the-counter quotations, the risk-free interest rate, and time to expiration. The Company did not designate its diesel fuel derivative instruments as hedges for accounting purposes and, as a result, marked the derivative instruments to fair value and recognized 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.”

Cash receipts in the following table reflect gains on diesel fuel derivatives 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 diesel fuel derivatives held at period end, if any, 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	2017			2016
Cash received on diesel fuel derivatives	$	2,845		$	699
Non-cash gain (loss) on diesel fuel derivatives	(4,060		)	4,060
Gain (loss) on diesel fuel derivatives, net	$	(1,215	)	$	4,759

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”, as applicable. 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, as applicable, 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	2017		2016
Commodity derivative assets:
Gross amounts of recognized assets	$	2,603	$	4,061
Gross amounts offset on balance sheet	—		—
Net amounts of assets on balance sheet	2,603		4,061
Commodity derivative liabilities:
Gross amounts of recognized liabilities	—		(59,489		)
Gross amounts offset on balance sheet	—		—
Net amounts of liabilities on balance sheet	$	—	$	(59,489	)

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	2017		2016
Derivative assets	$	2,603	$	4,061
Noncurrent derivative assets	—		—
Net amounts of assets on balance sheet	2,603		4,061
Derivative liabilities	—		(59,489		)
Noncurrent derivative liabilities	—		—
Net amounts of liabilities on balance sheet	—		(59,489		)
Total derivative assets (liabilities), net	$	2,603	$	(55,428	)