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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2013
Derivative Instruments Not Designated as Hedging Instruments [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
DERIVATIVE FINANCIAL INSTRUMENTS

Our results of operations and operating cash flows are affected by changes in market prices for crude oil, natural gas and NGLs. To manage a portion of our exposure to price volatility from producing crude oil and natural gas, we utilize the following economic hedging strategies for each of our business segments.

•
For crude oil and natural gas sales, we enter into derivative contracts to protect against price declines in future periods. While we structure these derivatives to reduce our exposure to changes in price associated with the derivative commodity, they also limit the benefit we might otherwise have received from price increases in the physical market.
 
•
For natural gas marketing, we enter into fixed-price physical purchase and sale agreements that qualify as derivative contracts. In order to offset the fixed-price physical derivatives in our natural gas marketing, we enter into financial derivative instruments that have the effect of locking in the prices we will receive or pay for the same volumes and period, offsetting the physical derivative.

We believe our derivative instruments continue to be effective in achieving the risk management objectives for which they were intended. As of September 30, 2013, we had derivative instruments, which were comprised of commodity floors, collars and swaps, basis protection swaps and physical sales and purchases, in place for a portion of our anticipated production through 2017 for a total of 51,305 BBtu of natural gas and 7,735 MBbls of crude oil. The majority of our derivative contracts are entered into at no cost to us as we hedge our anticipated production at the then-prevailing commodity market prices.

We have elected not to designate any of our derivative instruments as hedges and therefore do not qualify for use of hedge accounting. Accordingly, changes in the fair value of our derivative instruments are recorded in the statements of operations, with the exception of changes in fair value related to those derivatives we designated to our affiliated partnerships. Changes in the fair value of derivative instruments related to our Oil and Gas Exploration and Production segment are recorded in commodity price risk management, net. Changes in the fair value of derivative instruments related to our Gas Marketing segment are recorded in sales from and cost of natural gas marketing. Changes in the fair value of the derivative instruments designated to our affiliated partnerships are recorded on the condensed consolidated balance sheets in accounts payable affiliates and accounts receivable affiliates. As positions designated to our affiliated partnerships settle, the realized gains and losses are netted for distribution. Net realized gains are paid to the partnerships and net realized losses are deducted from the partnerships’ cash distributions from production. The affiliated partnerships bear their designated share of counterparty risk. As of September 30, 2013, our affiliated partnerships had no outstanding derivative instruments.


The following table presents the location and fair value amounts of our derivative instruments on the condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012:
 
 
 
 
 
Fair Value
Derivatives instruments:
 
Balance sheet line item
 
September 30, 2013
 
December 31, 2012
 
 
 
 
 
(in thousands)
Derivative assets:
Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
$
9,067

 
$
47,016

 
Related to affiliated partnerships (1)
 
Fair value of derivatives
 
—

 
4,707

 
Related to natural gas marketing
 
Fair value of derivatives
 
444

 
302

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
133

 
—

 
Related to natural gas marketing
 
Fair value of derivatives
 
16

 
17

 
 
 
 
 
9,660

 
52,042

 
Non Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
5,792

 
6,671

 
Related to natural gas marketing
 
Fair value of derivatives
 
85

 
203

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
44

 
—

 
Related to natural gas marketing
 
Fair value of derivatives
 
1

 
9

 
 
 
 
 
5,922

 
6,883

Total derivative assets
 
 
 
 
$
15,582

 
$
58,925

 
 
 
 
 
 
 
 
Derivative liabilities:
Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
$
12,880

 
$
1,744

 
Related to natural gas marketing
 
Fair value of derivatives
 
310

 
226

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
1,433

 
14,329

 
Related to affiliated partnerships (2)
 
Fair value of derivatives
 
—

 
2,140

 
 
 
 
 
14,623

 
18,439

 
Non Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
6,403

 
9,969

 
Related to natural gas marketing
 
Fair value of derivatives
 
40

 
168

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
130

 
—

 
 
 
 
 
6,573

 
10,137

Total derivative liabilities
 
 
 
 
$
21,196

 
$
28,576

__________
(1)
Represents derivative positions designated to our affiliated partnerships. Accordingly, our accompanying December 31, 2012 condensed consolidated balance sheet includes a corresponding payable to our affiliated partnerships representing their proportionate share of the derivative assets.
(2)
Represents derivative positions designated to our affiliated partnerships. Accordingly, our accompanying December 31, 2012 condensed consolidated balance sheet includes 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:

 
 
2013
 
2012
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 September 30,
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price risk management gain (loss), net
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
2,936

 
$
(4,461
)
 
$
(1,525
)
 
$
15,010

 
$
(1,915
)
 
$
13,095

Unrealized losses
 
(2,936
)
 
(19,177
)
 
(22,113
)
 
(15,010
)
 
(30,028
)
 
(45,038
)
Total commodity price risk management gain (loss), net
 
$
—

 
$
(23,638
)
 
$
(23,638
)
 
$
—

 
$
(31,943
)
 
$
(31,943
)
Sales from natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
249

 
$
(9
)
 
$
240

 
$
386

 
$
15

 
$
401

Unrealized losses
 
(249
)
 
(62
)
 
(311
)
 
(386
)
 
(404
)
 
(790
)
Total sales from natural gas marketing
 
$
—

 
$
(71
)
 
$
(71
)
 
$
—

 
$
(389
)
 
$
(389
)
Cost of natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
(196
)
 
$
8

 
$
(188
)
 
$
(364
)
 
$
(20
)
 
$
(384
)
Unrealized gains
 
196

 
82

 
278

 
364

 
467

 
831

Total cost of natural gas marketing
 
$
—

 
$
90

 
$
90

 
$
—

 
$
447

 
$
447

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price risk management gain (loss), net
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
25,273

 
$
(14,426
)
 
$
10,847

 
$
22,813

 
$
16,387

 
$
39,200

Unrealized gains (losses)
 
(25,273
)
 
(6,843
)
 
(32,116
)
 
(22,813
)
 
1,900

 
(20,913
)
Total commodity price risk management gain (loss), net
 
$
—

 
$
(21,269
)
 
$
(21,269
)
 
$
—

 
$
18,287

 
$
18,287

Sales from natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains
 
$
206

 
$
61

 
$
267

 
$
1,358

 
$
588

 
$
1,946

Unrealized gains (losses)
 
(206
)
 
546

 
340

 
(1,358
)
 
(428
)
 
(1,786
)
Total sales from natural gas marketing
 
$
—

 
$
607

 
$
607

 
$
—

 
$
160

 
$
160

Cost of natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
(133
)
 
$
8

 
$
(125
)
 
$
(1,195
)
 
$
(652
)
 
$
(1,847
)
Unrealized gains (losses)
 
133

 
(414
)
 
(281
)
 
1,195

 
587

 
1,782

Total cost of natural gas marketing
 
$
—

 
$
(406
)
 
$
(406
)
 
$
—

 
$
(65
)
 
$
(65
)
 
 
 
 
 
 
 
 
 
 
 
 
 

All of our financial derivative agreements contain master netting provisions that provide for the net settlement of all contracts through a single payment in the event of early termination. Our fixed-price physical purchase and sale agreements that qualify as derivative contracts are not subject to master netting provisions and are not significant. We have elected not to offset the fair value positions recorded on our condensed consolidated balance sheets.

The following table reflects the impact of netting agreements on gross derivative assets and liabilities as of September 30, 2013 and December 31, 2012:
As of September 30, 2013
 
Derivatives instruments, recorded in condensed consolidated balance sheet, gross
 
Effect of master netting agreements
 
Derivative instruments, net
 
 
(in thousands)
Asset derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
15,582

 
$
(11,739
)
 
$
3,843

 
 
 
 
 
 
 
Liability derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
21,196

 
$
(11,739
)
 
$
9,457

 
 
 
 
 
 
 

As of December 31, 2012
 
Derivatives instruments, recorded in condensed consolidated balance sheet, gross
 
Effect of master netting agreements
 
Derivative instruments, net
 
 
(in thousands)
Asset derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
58,925

 
$
(11,437
)
 
$
47,488

 
 
 
 
 
 
 
Liability derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
28,576

 
$
(11,437
)
 
$
17,139