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Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
The Company periodically enters into commodity derivatives to manage its exposure to price fluctuations on natural gas and crude oil production. The Company’s credit agreement restricts the ability of the Company to enter into commodity derivatives other than to hedge or mitigate risks to which the Company has actual or projected exposure or as permitted under the Company’s risk management policies and where such derivatives do not subject the Company to material speculative risks. All of the Company’s derivatives are used for risk management purposes and are not held for trading purposes.
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 elected to discontinue 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, 2014, the Company had the following outstanding commodity derivatives instruments:
 
 
 

 
 
 
 
Collars
 
Swaps
 
 
 

 
 
 
 
Floor
 
Ceiling
 
 
Type of Contract
 
Volume
 
Contract Period
 
Range
 
Weighted-
Average
 
Range
 
Weighted-
Average
 
Weighted-
Average
Natural gas
 
70.9

Bcf
 
Jan. 2015 - Dec. 2015
 
$3.86 - $3.91
 
$
3.87

 
$4.27 - $4.43
 
$
4.35

 
 

Natural gas
 
70.9

Bcf
 
Jan. 2015 - Dec. 2015
 
 
 
 

 
 
 
 

 
$
3.92

Natural gas
 
5.2

Bcf
 
Jan. 2015 - Mar. 2015
 
 
 
 
 
 
 
 
 
$
4.62

Natural gas
 
10.4

Bcf
 
Apr. 2015 - Oct. 2015
 
 
 
 
 
 
 
 
 
$
3.86


In the above table, natural gas prices are stated per Mcf.
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
 
2014
 
2013
 
2014
 
2013
Derivatives Designated as Hedges
 
 
 
 
 
 
 
 
Commodity contracts
Derivative instruments (current assets)
 
$
—

 
$
3,019

 
$
—

 
$
—

Commodity contracts
Derivative instruments (current liabilities)
 
—

 
—

 
—

 
13,912

Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
 
Commodity contracts
Derivative instruments (current assets)
 
137,603

 
—

 
—

 
—

 
 
 
$
137,603

 
$
3,019

 
$
—

 
$
13,912


Offsetting of Derivative Assets and Liabilities in the Consolidated Balance Sheet
 
December 31,
(In thousands)
2014
 
2013
Derivative Assets
 

 
 

Gross amounts of recognized assets
$
137,603

 
$
13,792

Gross amounts offset in the statement of financial position
—

 
(10,773
)
Net amounts of assets presented in the statement of financial position
137,603

 
3,019

Gross amounts of financial instruments not offset in the statement of financial position
2,338

 
373

Net amount
$
139,941

 
$
3,392

 
 
 
 
Derivative Liabilities
 
 
 
Gross amounts of recognized liabilities
$
—

 
$
24,685

Gross amounts offset in the statement of financial position
—

 
(10,773
)
Net amounts of liabilities presented in the statement of financial position
—

 
13,912

Gross amounts of financial instruments not offset in the statement of financial position
—

 
—

Net amount
$
—

 
$
13,912


Effect of Derivative Instruments on Accumulated Other Comprehensive Income (Loss)
The amount of gain (loss) recognized in accumulated other comprehensive income (loss) on derivatives (effective portion) is as follows:
 
Year Ended December 31,
(In thousands)
2014
 
2013
 
2012
Commodity contracts
$
(133,310
)
 
$
(4,523
)
 
$
88,705


The amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (effective portion) is as follows:
 
Year Ended December 31,
(In thousands)
2014(1)
 
2013
 
2012
Natural gas revenues
$
(143,577
)
 
$
52,733

 
$
225,108

Crude oil and condensate revenues
(626
)
 
4,269

 
11,218

 
$
(144,203
)
 
$
57,002

 
$
236,326

 
(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) were reclassified into income during 2014.
Effect of Derivative Instruments on the Consolidated Statement of Operations
The amount of gain (loss) recognized in the Consolidated Statement of Operations on derivative instruments is as follows:
 
 
Year Ended December 31,
(In thousands)
 
2014
 
2013
 
2012
Derivatives Designated as Hedges
 
 
 
 
 
 
Realized
 
 
 
 
 
 
Natural gas
 
$
(70,557
)
 
$
52,733

 
$
225,108

Crude oil and condensate
 
(218
)
 
4,269

 
11,218

 
 
$
(70,775
)
 
$
57,002

 
$
236,326

Derivatives Not Designated as Hedges
 
 
 
 
 
 
Realized
 
 
 
 
 
 
Natural gas(1)
 
$
(73,020
)
 
$
—

 
$
—

Crude oil and condensate(1)
 
(408
)
 
—

 
—

Gain (loss) on derivative instruments
 
81,716

 
—

 
—

Unrealized
 
 
 
 
 
 
Gain (loss) on derivative instruments
 
137,603

 
—

 
(494
)
 
 
$
145,891

 
$
—

 
$
(494
)
 
 
$
75,116

 
$
57,002

 
$
235,832


 
(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.
For the years ended December 31, 2014, 2013 and 2012, respectively, there was no ineffectiveness recorded in the Company’s Consolidated Statement of Operations related to its derivative instruments designated as cash flow hedges.
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 our derivative contracts are with multiple counterparties to minimize our 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. The Company has not incurred any losses related to non-performance risk of its counterparties and does not anticipate any material impact on its financial results due to non-performance by third parties.
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.