DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2015

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE I—DERIVATIVE FINANCIAL INSTRUMENTS

        To minimize the effect of a downturn in oil and gas prices and protect our profitability and the economics of our development plans, we enter into crude oil and natural gas hedge contracts. The terms of contracts depend on various factors, including management's view of future crude oil and natural gas prices. This price hedging program is designed to moderate the effects of a crude oil and natural gas price downturn while allowing us to participate in some commodity price increases. Management regularly monitors the crude oil and natural gas markets and our financial commitments to determine if, when, and at what level some form of crude oil and/or natural gas hedging and/or basis adjustments or other price protection is appropriate. Currently, our more commonly used derivatives are in the form of swaps. However, we may use a variety of derivative instruments in the future to hedge. The Company has not designated these derivatives as hedges.

        The following table summarizes the open financial derivative positions as of December 31, 2015 related to oil and gas production. The Company will receive prices as noted in the table below and will pay a counterparty market price based on the NYMEX (for natural gas production) or WTI (for oil production) index price, settled monthly.

Product	Type	Contract Period	Volume	Price per Mcf or Bbl
NYMEX Oil	Swap	01/01/16 - 03/31/16	250 Bbl/d	$62.92
NYMEX Oil	Collar	01/01/16 - 03/31/16	500 Bbl/d	$50.00 - 64.00
NYMEX Oil	Collar	04/01/16 - 06/30/16	250 Bbl/d	$55.00 - 69.97
NYMEX Oil	Collar	01/01/16 - 12/31/16	500 Bbl/d	$50.00 - 71.50
NYMEX Gas	Swap	01/01/16 - 03/31/16	5,000 MMBtu/d	$3.02
NYMEX Gas	Swap	01/01/16 - 10/31/16	15,000 MMBtu/d	$2.93
NYMEX Gas	Swap	01/01/16 - 12/31/16	15,000 MMBtu/d	$3.16
NYMEX Gas	Swap	01/01/16 - 03/31/16	15,000 MMBtu/d	$3.18
NYMEX Gas	Swap	03/01/16 - 10/31/16	10,000 MMBtu/d	$2.72

        The tables below summarize the amount of gains (losses) recognized in income from derivative instruments not designated as hedging instruments under authoritative guidance.

	For the Years Ended December 31,
Derivatives not designated as Hedging Instrument under authoritative guidance	2015		2014
	(in thousands)
Realized cash settlements on hedges	$	13,007	$	(34	)
Unrealized gain on hedges		7,076		7,479
Total	$	20,083	$	7,445

        The table below reflects the line item in our Consolidated Balance Sheet where the fair value of our net derivatives, are included.

	Derivative Assets
December 31, 2015	Balance Sheet Location	Fair Value
	(in thousands)
Commodity—Natural Gas	current	$	7,816
Commodity—Oil	current		3,265
Total derivatives not designated as hedging instruments		$	11,081

	Derivative Assets
December 31, 2014	Balance Sheet Location	Fair Value
	(in thousands)
Commodity—Natural Gas	current	$	3,611
Commodity—Oil	current		394
Total derivatives not designated as hedging instruments		$	4,005

Derivatives Credit risk

        The Company does not require collateral or other security from counterparties to support derivative instruments. However, the agreements with those counterparties typically contain netting provisions such that if a default occurs, the non-defaulting party can offset the amount payable to the defaulting party under the derivative contract with the amount due from the defaulting party. As a result of the netting provisions the Company's maximum amount of loss due to credit risk is limited to the net amounts due to and from the counterparties under the derivative contracts.

        The Company's derivative agreements contain provisions that require cross defaults and acceleration of those instruments to any material debt. If the Company were to default on any of its material debt agreements, it would be a violation of these provisions, and the counterparties to the derivative instruments could request immediate payment on derivative instruments that are in a net liability position at that time.