Financial Instruments

12 Months Ended

Dec. 31, 2011

Financial Instruments [Abstract]

Financial Instruments

15. Financial Instruments

Effective January 1, 2008, the Company adopted ASC 820-10  which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The implementation of ASC 820-10 did not cause a change in the method of calculating fair value of our assets or liabilities, with the exception of incorporating a measure of the Company's own non-performance risk or that of its counter-parties, as appropriate, which was not material. The primary impact from adoption was additional disclosures.

Fair Value Hierarchy-ASC 820-10 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

· Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company is further required to assess the creditworthiness of the counter-party to the derivative contract. The results of the assessment of non-performance risk, based on the counter-party's credit risk, could result in an adjustment of the carrying value of the derivative instrument. The following tables sets forth information about the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 and 2011, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

	Quoted Prices  in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Assets:
Investment in common stock	$	181	$	-	$	-	$	181
NYMEX Fixed Price Derivative contracts		-		15,615		-		15,615
Total Assets	$	181	$	15,615	$	-	$	15,796
Liabilities:
NYMEX Fixed Price Derivative contracts	$	-	$	18,066	$	-	$	18,066
Interest Rate Swaps		-		-		3,348		3,348
Total Liabilities	$	-	$	18,066	$	3,348	$	21,414

	Quoted Prices  in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Assets:
Investment in common stock	$	104	$	-	$	-	$	104
NYMEX Fixed Price Derivative contracts		-		17,828		-		17,828
Total Assets	$	104	$	17,828	$	-	$	17,932
Liabilities:
NYMEX Fixed Price Derivative contracts	$	-	$	14,401	$	-	$	14,401
Interest Rate Swaps		-		-		1,546		1,546
Total Liabilities	$	-	$	14,401	$	1,546	$	15,947

The Company has an investment in Insigna Energy Ltd, the surviving entity in the merger with a former subsidiary, consisting of shares of common stock. The stock is actively traded on the Toronto Stock Exchange. This investment is valued at its quoted price as of December 31, 2011 in US dollars. Accordingly, this investment is characterized as Level 1.

The Company's derivative contracts consist of NYMEX-based fixed price commodity swaps and interest rate swaps. The NYMEX-based fixed price derivative contracts are indexed to NYMEX futures contracts, which are actively traded, for the underlying commodity and are commonly used in the energy industry. A number of financial institutions and large energy companies act as counter-parties to these type of derivative contracts. As the fair value of these derivative contracts is based on a number of inputs, including contractual volumes and prices stated in each derivative contract, current and future NYMEX commodity prices, and quantitative models that are based upon readily observable market parameters that are actively quoted and can be validated through external sources, we have characterized these derivative contracts as Level 2.

In order to mitigate our interest rate exposure, we entered into an interest rate swap, effective August 12, 2008, to fix our floating LIBOR based debt. The two-year interest rate swap for $100 million at a fixed rate of 3.367% originally expired on August 12, 2010.  The interest rate swap was amended in February 2009 lowering our fixed rate to 2.95%.  The interest rate swap was further amended in November 2009 lowering our fixed rate to 2.55% and extending the term through August 12, 2012. As there is no actively traded market for this type of swap and no observable market parameters, these derivative contracts are classified as Level 3.

Additional information for the Company's recurring fair value measurements using significant unobservable inputs (Level 3) for the three years ended December 31, 2011 is as follows (in thousands):

	Derivative Assets (Liabilities) - net
Balance December 31, 2009	$	(2,256	)
Total realized and unrealized losses included in change in net liability		(3,402	)
Settlements during the period		2,310
Balance December 31, 2010		(3,348	)
Total realized and unrealized losses included in change in net liability		(565	)
Settlements during the period		2,367
Balance December 31, 2011	$	(1,546	)