Derivatives

Commodity Derivatives

From time to time, we utilize commodity derivatives in the form of swap contracts to attempt to optimize the price received for our oil and gas production. Under swap contracts, we receive a fixed price for the respective commodity and pay a floating market price as defined in each contract, generally New York Mercantile Exchange (“NYMEX”) futures prices, resulting in a net amount due to or from the counterparty. Commodity derivatives are settled monthly as the contract production periods mature.

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to September 30, 2014. The settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps:



	Oil
	Bbls	Price
Production Period:
4th Quarter 2014	503,200	$	96.92
	503,200

We use a sensitivity analysis technique to evaluate the hypothetical effect that changes in the market value of oil may have on the fair value of our commodity derivatives. As of September 30, 2014, a $1 per barrel change in the price of oil would change the fair value of our commodity derivatives by approximately $0.5 million.

Accounting For Derivatives

We did not designate any of our currently open commodity derivatives as cash flow hedges; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, are recorded as other income (expense) in our consolidated statements of operations and comprehensive income (loss).

Effect of Derivative Instruments on the Consolidated Balance Sheets



	Fair Value of Derivative Instruments as of September 30, 2014
	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments:
Commodity derivatives	Fair value of derivatives:			Fair value of derivatives:
	Current	$	3,372	Current	$	—
	Non-current	—		Non-current	—
Total		$	3,372		$	—



	Fair Value of Derivative Instruments as of December 31, 2013
	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments:
Commodity derivatives	Fair value of derivatives:			Fair value of derivatives:
	Current	$	2,518	Current	$	208
	Non-current	—		Non-current	—
Total		$	2,518		$	208

Gross to Net Presentation Reconciliation of Derivative Assets and Liabilities



	September 30, 2014
	Assets		Liabilities
	(In thousands)
Fair value of derivatives — gross presentation	$	3,372	$	—
Effects of netting arrangements	—		—
Fair value of derivatives — net presentation	$	3,372	$	—



	December 31, 2013
	Assets			Liabilities
	(In thousands)
Fair value of derivatives — gross presentation	$	3,909		$	1,599
Effects of netting arrangements	(1,391		)	(1,391		)
Fair value of derivatives — net presentation	$	2,518		$	208

Our derivative contracts are with JPMorgan Chase Bank, N.A and Union Bank, N.A. We have elected to net the outstanding positions with these counterparties between current and noncurrent assets or liabilities since we have the right to settle these positions on a net basis.

Effect of Derivative Instruments Recognized in Earnings on the Consolidated Statements of Operations and Comprehensive Income (Loss)



	Amount of Gain or (Loss) Recognized in Earnings
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
Location of Gain or (Loss) Recognized in Earnings	2014		2013			2014			2013
	(In thousands)
Derivatives not designated as hedging instruments:
Commodity derivatives:
Other income (expense) -
Gain (loss) on derivatives	$	9,650	$	(8,278	)	$	(3,715	)	$	(9,919	)
Total	$	9,650	$	(8,278	)	$	(3,715	)	$	(9,919	)