Cash Payments and Receipts
During the years ended December 31, 2011, 2010 and 2009 cash (payments) receipts for
derivatives were as follows (in thousands):
Year Ended December 31,
2011
2010
2009
Oil derivatives
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(60,392) $
(67,917) $ 141,297
Unwind of crude oil puts, swaps and collars . . . . . . . . . . . . . . .
(2,935)
-
1,074,361
Natural gas derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,915
37,996
308,146
$
(55,412) $
(29,921) $ 1,523,804
Credit Risk
We generally do not require collateral or other security to support derivative instruments subject to
credit risk. However, the agreements with each of the counterparties to our derivative instruments
contain netting provisions within the agreements. If a default occurs under the agreements, the
non-defaulting party can offset the amount payable to the defaulting party under the derivative
contracts with the amount due from the defaulting party under the derivative contracts. As a result of
the netting provisions under the agreements, our 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 maximum
amount of loss due to credit risk that we would have incurred if all the counterparties to our derivative
contracts failed to perform according to the terms of the derivative contracts at December 31, 2011
was $63.6 million.
Contingent Features
As of December 31, 2011, the counterparties to our commodity derivative contracts consisted of
eight financial institutions. Our counterparties or their affiliates are generally also lenders under our
senior revolving credit facility. As a result, the counterparties to our derivative agreements share in the
collateral supporting our senior revolving credit facility. Therefore, we are not generally required to post
additional collateral under our derivative agreements.
Certain of our derivative agreements contain cross default and acceleration provisions relative to
our material debt agreements. If we were to default on any of our material debt agreements, it would
be a violation of these provisions, and the counterparties to our derivative agreements could request
immediate payment on derivative instruments that are in a net liability position at that time. As of
December 31, 2011, we were in a net liability position with one of the counterparties to our derivative
instruments, totaling $3.5 million.
Subsequent Events
During the period from January 1, 2012 through February 22, 2012, we converted 5,000 of the
22,000 BOPD of Brent crude oil put option contracts in 2013 to three-way collars. These modified
three-way collars have a floor price of $90 per barrel with a limit of $70 per barrel and a weighted
average ceiling price of $126.08 and eliminates approximately $11 million of deferred premiums.
Additionally, we entered into the following Brent oil derivatives for 2013 and 2014:
• Brent crude oil put option spread contracts on 13,000 BPOD for 2013 with a floor price of $100
per barrel and a limit of $80 per barrel.
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