Derivative Financial Instruments

6 Months Ended

Jun. 30, 2017

Derivative Instruments Not Designated as Hedging Instruments [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

COMMODITY 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, natural gas, and propane, which is an element of our NGLs, we enter into commodity derivative contracts to protect against price declines in future periods. While we structure these commodity derivatives to reduce our exposure to decreases in commodity prices, they also limit the benefit we might otherwise receive from price increases.

We believe our commodity derivative instruments continue to be effective in achieving the risk management objectives for which they were intended. As of June 30, 2017, we had derivative instruments, which were comprised of collars, fixed-price swaps, and basis protection swaps, in place for a portion of our anticipated 2017 and 2018 production for a total of 12,896 MBbls of crude oil, 82,030 BBtu of natural gas, and 643 MBbls of propane. Our commodity derivative contracts have been entered into at no cost to us as we hedge our anticipated production at the then-prevailing commodity market prices, without adjustment for premium or discount.

We have not elected to designate any of our derivative instruments as cash flow hedges, and therefore these instruments do not qualify for hedge accounting. Accordingly, changes in the fair value of our derivative instruments are recorded in the condensed consolidated statements of operations.

The following table presents the balance sheet location and fair value amounts of our derivative instruments on the condensed consolidated balance sheets:

			Fair Value
Derivative instruments:		Condensed consolidated balance sheet line item	June 30, 2017		December 31, 2016
			(in thousands)
Derivative assets:	Current
	Commodity derivative contracts	Fair value of derivatives	$	49,540	$	8,490
	Basis protection derivative contracts	Fair value of derivatives	2,565		301
			52,105		8,791
	Non-current
	Commodity derivative contracts	Fair value of derivatives	15,051		1,123
	Basis protection derivative contracts	Fair value of derivatives	1,346		1,263
			16,397		2,386
Total derivative assets			$	68,502	$	11,177
Derivative liabilities:	Current
	Commodity derivative contracts	Fair value of derivatives	$	9,943	$	53,565
	Basis protection derivative contracts	Fair value of derivatives	195		30
			10,138		53,595
	Non-current
	Commodity derivative contracts	Fair value of derivatives	2,311		27,595
			2,311		27,595
Total derivative liabilities			$	12,449	$	81,190

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

	Three Months Ended June 30,					Six Months Ended June 30,
Condensed consolidated statement of operations line item	2017		2016			2017		2016
	(in thousands)
Commodity price risk management gain, net
Net settlements	$	12,015	$	53,301		$	12,566	$	120,132
Net change in fair value of unsettled derivatives	45,917		(146,102		)	126,070		(201,877		)
Total commodity price risk management gain, net	$	57,932	$	(92,801	)	$	138,636	$	(81,745	)

Net settlements of commodity derivatives decreased for the three and six months ended June 30, 2017 as compared to the three and six months ended June 30, 2016.  We entered into agreements for the derivative instruments that settled throughout 2016 prior to commodity prices becoming depressed in late 2014.  Substantially all of these higher-value agreements settled by the end of 2016.  Net settlements for the three and six months ended June 30, 2017 reflect derivative instruments entered into since 2015, which more closely approximate recent realized prices.  Based upon the forward strip pricing at June 30, 2017, we expect that settlements will continue to be substantially lower in 2017 on a relative basis as compared to those in 2016.

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. 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 June 30, 2017	Derivative 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	$	68,502	$	(10,974	)	$	57,528
Liability derivatives:
Derivative instruments, at fair value	$	12,449	$	(10,974	)	$	1,475

As of December 31, 2016	Derivative 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	$	11,177	$	(10,930	)	$	247
Liability derivatives:
Derivative instruments, at fair value	$	81,190	$	(10,930	)	$	70,260