FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2015

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE H—FAIR VALUE OF FINANCIAL INSTRUMENTS

        The estimated fair values of financial instruments recognized in the Consolidated Balance Sheets or disclosed within these Notes to Consolidated Financial Statements have been determined using available market information, information from unrelated third party financial institutions and appropriate valuation methodologies, primarily discounted projected cash flows. However, considerable judgment is required when interpreting market information and other data to develop estimates of fair value.

        Short-term Assets and Liabilities.    The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

        U.S Treasury Bonds—Available-For-Sale Securities.    The fair values are based upon quoted market prices for those or similar investments and are reported on the Consolidated Balance Sheets at fair value.

        Collateral Security Agreement Account (included in other non-current assets).    The balance sheet carrying amount approximates fair value, as it earns a market rate.

        Fixed Rate Debentures.    Fair values of fixed rate convertible debentures were calculated using interest rates in effect as of year end for similar instruments with the other terms unchanged.

        Other Long-Term Liabilities.    The carrying amount approximates fair value due the current rates offered to the Company for long-term liabilities of the same remaining maturities.

        First Lien Credit Facility.    The carrying amount approximates fair value due to the current rate stipulated in the first lien credit facility agreement.

        Second Lien Credit Facility.    The carrying amount approximates fair value due to the current rate stipulated in the second lien credit facility agreement inclusive of capitalized interest paid in kind.

        Derivatives.    The fair values are based upon observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs) and are reported on the Consolidated Balance Sheets at fair value.

        9.000% Senior Notes.    The fair value is based upon quoted market prices for those or similar investments and are reported on the Consolidated Balance Sheets at face value, net of discount.

        Contingent Earn-Out.    The fair value is based on the present value of the amount discounted at the cost of capital.

	2015				2014
	Fair value		Carrying amount		Fair value		Carrying amount
	(in thousands)
Financial assets:
Collateral Security account	$	2,812	$	2,812	$	3,165	$	3,165
US Treasury Bonds		1,448		1,636		1,422		1,636
Derivatives		11,081		11,081		4,005		4,005
Financial liabilities:
Fixed rate debentures		3,057		1,636		3,035		1,636
Line of credit		—		—		134,749		134,749
First Lien Credit Facility		234,665		234,665		—		—
Second Lien Credit Facility		74,912		74,912		—		—
Senior Notes		25,090		165,368		195,000		296,053
Contingent Earn-Out		7,070		7,070		6,530		6,530

FAIR VALUE MEASUREMENTS:

        Fair value as defined by authoritative literature is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:

        Level 1:    Quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access at the measurement date.

        Level 2:    Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter forwards and swaps.

        Level 3:    Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.

        The valuation assumptions utilized to measure the fair value of the Company's commodity derivatives were observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).

        The following table presents for each hierarchy level our assets and liabilities, including both current and non-current portions, measured at fair value on a recurring basis.

December 31, 2015	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Restricted investments in US Treasury Bonds—available for sale, at fair value	$	1,448	$	—	$	—	$	1,448
Commodity derivatives	$	—	$	11,081	$	—	$	11,081

December 31, 2014	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Restricted investments in US Treasury Bonds—available for sale, at fair value	$	1,422	$	—	$	—	$	1,422
Commodity derivatives	$	—	$	4,005	$	—	$	4,005