Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Through March 31, 2014, the Company elected to designate its commodity derivatives as cash flow hedges for accounting purposes. Effective April 1, 2014, the Company discontinued hedge accounting for its commodity derivatives on a prospective basis. As a result of discontinuing hedge accounting, the unrealized loss included in accumulated other comprehensive income (loss) as of April 1, 2014 of $73.4 million ($44.2 million net of tax) was frozen and reclassified into natural gas and crude oil and condensate revenues in the Statement of Operations throughout 2014 as the underlying hedged transactions occurred. As of December 31, 2014, there are no gains or losses deferred in accumulated other comprehensive income (loss) associated with the Company’s commodity derivatives.

As of December 31, 2016, the Company had the following outstanding commodity derivatives instruments:

				Collars
				Floor			Ceiling			Swaps		Basis Swaps
Type of Contract	Volume		Contract Period	Range	Weighted-Average		Range	Weighted- Average		Weighted- Average		Weighted- Average
Natural gas	35.5	Bcf	Jan. 2017 - Dec. 2017							$	3.12
Natural gas	16.2	Bcf	Feb. 2017 - Dec. 2017							$	3.46
Natural gas	35.5	Bcf	Jan. 2017 - Dec. 2017	$—	$	3.09	$3.42-$3.45	$	3.43
Natural gas	21.3	Bcf	Jan. 2018 - Dec. 2019									$	0.42
Crude oil	1.8	Mmbbl	Jan. 2017 - Dec. 2017	$—	$	50.00	$56.25-$56.50	$	56.39

In the table above, natural gas prices are stated per Mcf and crude oil prices are stated per barrel.

Effect of Derivative Instruments on the Consolidated Balance Sheet

		Fair Values of Derivative Instruments
		Derivative Assets				Derivative Liabilities
		December 31,				December 31,
(In thousands)	Balance Sheet Location	2016		2015		2016		2015
Commodity contracts	Other assets (non-current)	$	2,991	$	—	$	—	$	—
Commodity contracts	Derivative instruments (current)	—		—		40,259		—
		$	2,991	$	—	$	40,259	$	—

Offsetting of Derivative Assets and Liabilities in the Consolidated Balance Sheet

	December 31,
(In thousands)	2016		2015
Derivative assets
Gross amounts of recognized assets	$	2,991	$	—
Gross amounts offset in the statement of financial position	—		—
Net amounts of assets presented in the statement of financial position	2,991		—
Gross amounts of financial instruments not offset in the statement of financial position	—		—
Net amount	$	2,991	$	—
Derivative liabilities
Gross amounts of recognized liabilities	$	40,259	$	—
Gross amounts offset in the statement of financial position	—		—
Net amounts of liabilities presented in the statement of financial position	40,259		—
Gross amounts of financial instruments not offset in the statement of financial position	757		—
Net amount	$	41,016	$	—

Effect of Derivative Instruments on Accumulated Other Comprehensive Income (Loss)

The effective portion of gain (loss) recognized in accumulated other comprehensive income (loss) on derivatives is as follows:

	Year Ended December 31,
(In thousands)	2016		2015		2014
Commodity contracts	$	—	$	—	$	(133,310	)

The effective portion of gain (loss) reclassified from accumulated other comprehensive income (loss) into income is as follows:

	Year Ended December 31,
(In thousands)	2016		2015		2014(1)
Natural gas revenues	$	—	$	—	$	(143,577	)
Crude oil and condensate revenues	—		—		(626		)
	$	—	$	—	$	(144,203	)

(1)The Company ceased hedge accounting effective April 1, 2014. As a result, a loss of approximately $73.4 million related to amounts previously frozen in accumulated other comprehensive income (loss) was reclassified into income during 2014.

Effect of Derivative Instruments on the Consolidated Statement of Operations

	Year Ended December 31,
(In thousands)	2016			2015			2014
Derivatives Designated as Hedges
Cash received (paid) on settlement of derivative instruments
Natural gas	$	—		$	—		$	(70,557	)
Crude oil and condensate	—			—			(218		)
	$	—		$	—		$	(70,775	)
Derivatives Not Designated as Hedges
Cash received (paid) on settlement of derivative instruments
Natural gas(1)	$	—		$	—		$	(73,020	)
Crude oil and condensate(1)	—			—			(408		)
Gain (loss) on derivative instruments	(1,682		)	194,289			81,716
Non-cash gain (loss) on derivative instruments
Gain (loss) on derivative instruments	(37,268		)	(137,603		)	137,603
	$	(38,950	)	$	56,686		$	145,891
	$	(38,950	)	$	56,686		$	75,116

(1) Relates entirely to the reclassification from accumulated other comprehensive income (loss) of previously frozen losses associated with derivatives that were de-designated as cash flow hedges on April 1, 2014.

There was no ineffectiveness recorded in the Company’s Consolidated Statement of Operations related to its derivative instruments designated as cash flow hedges for the year ended December 31, 2014.

Additional Disclosures about Derivative Instruments and Hedging Activities

The use of derivative instruments involves the risk that the counterparties will be unable to meet their obligations under the agreements. The Company's counterparties are primarily commercial banks and financial service institutions that management believes present minimal credit risk and its derivative contracts are with multiple counterparties to minimize its exposure to any individual counterparty. The Company performs both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable.

Certain counterparties to the Company's derivative instruments are also lenders under its revolving credit facility. The Company's revolving credit facility and derivative instruments contain certain cross default and acceleration provisions that may require immediate payment of its derivative liabilities in certain situations. The Company also has netting arrangements with each of its counterparties that allow it to offset assets and liabilities from separate derivative contracts with that counterparty.