Derivatives

Commodity Derivatives

From time to time, we utilize commodity derivatives, consisting of swaps, floors and collars, to attempt to optimize the price received for our oil and gas production. When using swaps to hedge oil and natural gas production, 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. In floor transactions, we receive a fixed price (put strike price) if the market price falls below the put strike price for the respective commodity. If the market price is greater than the put strike price, no payments are due from either party. Costless collars are a combination of puts and calls, and contain a fixed floor price (put strike price) and ceiling price (call strike price). If the market price for the respective commodity exceeds the call strike price or falls below the put strike price, then we receive the fixed price and pay the market price. If the market price is between the call and the put strike prices, no payments are due from either party. Commodity derivatives are settled monthly as the contract production periods mature.

The following summarizes information concerning our net positions in open commodity derivatives, all of which were entered into in February 2015, applicable to periods subsequent to December 31, 2014. The settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps



	Oil
	MBbls	Price
Production Period:
2nd Quarter 2015	448	$	55.65
3rd Quarter 2015	697	$	55.65
4th Quarter 2015	592	$	55.65
	1,737

Accounting for Derivatives

We did not designate any of our 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, were 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 December 31, 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	$	—	Current	$	—
	Non-current	—		Non-current	—
Total		$	—		$	—



	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



	December 31, 2014
	Assets		Liabilities
	(In thousands)
Fair value of derivatives — gross presentation	$	—	$	—
Effects of netting arrangements	—		—
Fair value of derivatives — net presentation	$	—	$	—



	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 were with JPMorgan Chase Bank, N.A. and MUFG Union Bank, N.A. We had elected to net the outstanding positions with these counterparties between current and noncurrent assets or liabilities since we had 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
	Year Ended December 31,
Location of Gain or (Loss) Recognized in Earnings	2014		2013			2012
	(In thousands)
Derivatives not designated as hedging instruments:
Commodity derivatives:
Other income (expense) -
Gain (loss) on derivatives	$	4,789	$	(8,731	)	$	14,448
Total	$	4,789	$	(8,731	)	$	14,448