Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

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Fair Value Measurements
 3 Months Ended
Mar. 31, 2012
Fair Value Measurements [Abstract]  
Fair Value Measurements

7. Fair Value Measurements

We measure the fair value of our derivative financial instruments by applying the income approach, using models with inputs that are classified within Level 2 of the valuation hierarchy. The inputs used for the fair value measurement of our derivative financial instruments are the exercise price, the expiration date, the settlement date, notional quantities, the implied volatility, the discount curve with spreads and published commodity futures prices. The fair value of our 8.50% Senior Notes is based on quoted prices and the market is not an active market; therefore, the fair value is classified within Level 2. The carrying amount of debt under our revolving bank credit facility approximates fair value because the interest rates are variable and reflective of market rates.

The following table presents the fair value of our derivative financial instruments, 8.50% Senior Notes and revolving bank credit facility for the periods indicated (in thousands).

 

            March 31, 2012      December 31, 2011  
     Hierarchy      Assets      Liabilities      Assets      Liabilities  

Derivatives

      Level 2       $ —         $ 36,946       $ 4,087       $ 7,199   

8.50% Senior Notes

      Level 2         —           633,000         —           612,000   

Revolving bank credit facility

      Level 2         —           84,000         —           117,000   

As described in Note 5, our derivative financial instruments are reported in the balance sheet at fair value and changes in fair value are recognized currently in earnings. The 8.50% Senior Notes and revolving bank credit facility are reported in the balance sheet at their carrying value as described in Note 6.