• Filing Date: 2018-05-15
  • Form Type: 10-Q
  • Description: Quarterly report
v3.8.0.1
DERIVATIVE INSTRUMENTS
3 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS

The Company utilizes derivative instruments to manage its exposure to fluctuations in the underlying commodity prices of its inventory. The Company's management sets and implements hedging policies, including volumes, types of instruments and counterparties, to support oil prices at targeted levels and manage its exposure to fluctuating prices.

The Company’s derivative instruments consist of swap and futures arrangements for oil. In a commodity swap agreement, if the agreed-upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For futures arrangements, the Company receives the difference positive or negative between an agreed-upon strike price and the market price.

The mark-to-market effects of these contracts as of March 31, 2018, are summarized in the following table. The Company held no open contracts at December 31, 2017. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of the crude oil swap agreements is based on the difference between the strike price and the New York Mercantile Exchange futures price for the applicable trading months.

Contract Type
Contract Period
Weighted Average Strike Price (Barrels)
Remaining Volume (Barrels)
Fair Value
 
 
 
 
 
Swap
Jan. 2018- June 2018
$
55.37

80,000

$
(23,200
)
Swap
Jan. 2018- June 2018
$
81.59

80,000

$
(35,448
)
Futures
Jan. 2018- June 2018
$
81.10

110,000

$
(408,180
)


The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of March 31, 2018 are presented in the table below.

Balance Sheet Classification
Contract Type
2018
 
 
 
Current liabilities
Crude oil swaps
$
(58,648
)
 
Crude oil futures
(408,180
)
 
 
 
Total derivatives
 
$
(466,828
)