Derivative Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments Not Designated as Hedging Instruments [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVE FINANCIAL INSTRUMENTS

As of June 30, 2012, we had derivative instruments in place for a portion of our anticipated production through 2016 totaling 81,215 BBtu of natural gas and 3,906 MBbls of crude oil.    

The following table presents the location and fair value amounts of our derivative instruments on the balance sheets. These derivative instruments were comprised of commodity floors, collars and swaps, basis protection swaps and physical sales and purchases:

			Fair Value
Derivatives instruments not designated as hedges (1):		Balance sheet line item	June 30, 2012			December 31, 2011
			(in thousands)
Derivative assets:	Current
	Commodity contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	$	62,626		$	51,220
	Related to affiliated partnerships (2)	Fair value of derivatives	7,770			8,018
	Related to natural gas marketing	Fair value of derivatives	792			1,528
	Basis protection contracts
	Related to natural gas marketing	Fair value of derivatives	29			43
			71,217			60,809
	Non-Current
	Commodity contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	32,405			34,938
	Related to affiliated partnerships (2)	Fair value of derivatives	3,284			6,134
	Related to natural gas marketing	Fair value of derivatives	214			103
	Basis protection contracts
	Related to natural gas marketing	Fair value of derivatives	17			—
			35,920			41,175
Total derivative assets			$	107,137		$	101,984
Derivative liabilities:	Current
	Commodity contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	$	(984	)	$	7,498
	Related to affiliated partnerships (3)	Fair value of derivatives	211			211
	Related to natural gas marketing	Fair value of derivatives	732			1,384
	Basis protection contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	15,202			15,762
	Related to affiliated partnerships (3)	Fair value of derivatives	2,992			3,116
	Related to natural gas marketing	Fair value of derivatives	2			3
			18,155			27,974
	Non-Current
	Commodity contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	5,021			4,357
	Related to affiliated partnerships (3)	Fair value of derivatives	73			113
	Related to natural gas marketing	Fair value of derivatives	170			93
	Basis protection contracts
	Related to natural gas and crude oil sales	Fair value of derivatives	6,947			13,820
	Related to affiliated partnerships (3)	Fair value of derivatives	1,364			2,723
			13,575			21,106
Total derivative liabilities			$	31,730		$	49,080

__________

(1) As of June 30, 2012 and December 31, 2011, none of our derivative instruments were designated as hedges.

(2) Represents derivative positions designated to our affiliated partnerships; accordingly, our accompanying balance sheets include a corresponding payable to our affiliated partnerships representing their proportionate share of the derivative assets.

(3) Represents derivative positions designated to our affiliated partnerships; accordingly, our accompanying balance sheets include a corresponding receivable from our affiliated partnerships representing their proportionate share of the derivative liabilities.

The following table presents the impact of our derivative instruments on our statements of operations:

	2012									2011
Statement of Operations Line Item	Reclassification of Realized Gains (Losses) Included in Prior Periods Unrealized			Realized and Unrealized Gains (Losses) For the Current Period			Total			Reclassification of Realized Gains (Losses) Included in Prior Periods Unrealized			Realized and Unrealized Gains (Losses) For the Current Period			Total
	(in thousands)
Three Months Ended June 30,
Commodity price risk management gain, net
Realized gains	$	13,503		$	2,676		$	16,179		$	763		$	1,040		$	1,803
Unrealized gains (losses)	(13,503		)	36,053			22,550			(763		)	19,497			18,734
Total commodity price risk management gain, net	$	—		$	38,729		$	38,729		$	—		$	20,537		$	20,537
Sales from natural gas marketing
Realized gains	$	749		$	3		$	752		$	473		$	19		$	492
Unrealized gains (losses)	(749		)	(322		)	(1,071		)	(473		)	456			(17		)
Total sales from natural gas marketing	$	—		$	(319	)	$	(319	)	$	—		$	475		$	475
Cost of natural gas marketing
Realized losses	$	(692	)	$	(26	)	$	(718	)	$	(370	)	$	(31	)	$	(401	)
Unrealized gains (losses)	692			375			1,067			370			(436		)	(66		)
Total cost of natural gas marketing	$	—		$	349		$	349		$	—		$	(467	)	$	(467	)
Six Months Ended June 30,
Commodity price risk management gain, net
Realized gains	$	16,046		$	10,060		$	26,106		$	6,612		$	(1,021	)	$	5,591
Unrealized gains (losses)	(16,046		)	40,170			24,124			(6,612		)	(2,324		)	(8,936		)
Total commodity price risk management gain (loss), net	$	—		$	50,230		$	50,230		$	—		$	(3,345	)	$	(3,345	)
Sales from natural gas marketing
Realized gains	$	1,110		$	435		$	1,545		$	1,373		$	261		$	1,634
Unrealized gains (losses)	(1,110		)	114			(996		)	(1,373		)	339			(1,034		)
Total sales from natural gas marketing	$	—		$	549		$	549		$	—		$	600		$	600
Cost of natural gas marketing
Realized losses	$	(970	)	$	(493	)	$	(1,463	)	$	(1,076	)	$	(285	)	$	(1,361	)
Unrealized gains (losses)	970			(19		)	951			1,076			(200		)	876
Total cost of natural gas marketing	$	—		$	(512	)	$	(512	)	$	—		$	(485	)	$	(485	)

Derivative Counterparties. Our derivative arrangements expose us to credit risk of nonperformance by our counterparties. We primarily use financial institutions who are also lenders under our credit facility as counterparties to our derivative contracts. To date, we have had no counterparty default losses. We have evaluated the credit risk of our derivative assets from our counterparties using relevant credit market default rates, giving consideration to amounts outstanding for each counterparty and the duration of each outstanding derivative position. Based on our evaluation, we have determined that the potential impact of nonperformance of our counterparties on the fair value of our derivative instruments was not significant.

The following table presents the counterparties that expose us to credit risk as of June 30, 2012, with regard to our derivative assets:

Counterparty Name	Fair Value of Derivative Assets As of June 30, 2012
	(in thousands)
JPMorgan Chase Bank, N.A. (1)	$	54,713
Wells Fargo Bank, N.A. (1)	14,511
Crèdit Agricole CIB (1)	11,453
Other lenders in our credit facility	25,117
Various (2)	1,343
Total	$	107,137

__________

(1)Major lender in our credit facility, see Note 7.

(2)Represents a total of 18 counterparties.