ATPG » Topics » Note 12 - Fair Value Measurements

This excerpt taken from the ATPG 10-Q filed May 11, 2009.

Note 13 — Fair Value Measurements

The fair value of our derivative contracts is classified as Level 3 based on the significant unobservable inputs into our expected present value model. The following table sets forth a reconciliation of changes in the fair value of these financial assets (liabilities) during the first quarter of 2009 (in thousands):

 

     Gas Fixed-
Price
Physical
U.S.
    Gas Price
Collar
U.S.
    Oil Put
U.S.
    Financial
Gas Swap
U.K.
    Gas Price
Collar
U.K.
    Total  

Balance at beginning of period

   $ 15,366     $ —       $ —       $ (8,361 )   $ —       $ 7,005  

Total gain included in other comprehensive income

     —         —         —         5,500       —         5,500  

Derivative income (expense)

     14,202       (803 )     (1,232 )     6,232       (2,209 )     16,190  

Settlements, terminations and purchases

     (10,073 )     —         1,740       (3,331 )     —         (11,664 )
                                                

Balance at end of period

   $ 19,495     $ (803 )   $ 508     $ 40     $ (2,209 )   $ 17,031  
                                                

Changes in unrealized income (loss) included in derivative income relating to derivatives still held at March 31, 2009

   $ 11,618     $ (803 )   $ (1,232 )   $ —       $ (2,209 )   $ 7,374  
                                                

 

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Table of Contents

ATP OIL & GAS CORPORATION AND SUBSIDIARIES

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
These excerpts taken from the ATPG 10-K filed Mar 13, 2009.

Note 14 — Fair Value Measurements

We adopted SFAS No. 157, “Fair Value Measurements,” effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. SFAS No. 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. Fair value 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 (exit price). SFAS No. 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1:   Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

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Table of Contents
Index to Financial Statements

ATP OIL & GAS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Level 2:   Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3:   Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). Our option pricing models are industry-standard and consider various inputs including forward commodity price estimates, volatility and time value of money.

Financial assets and liabilities are classified based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and determines the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The fair value of the gas swap-U.K. and gas fixed-price physical contracts is classified as Level 3 based on the significant unobservable inputs into our expected present value model. The following table sets forth a reconciliation of changes in the fair value of these financial assets (liabilities) during 2008 (in thousands):

 

     Financial
Gas Swap
U.K.
    Gas Fixed-
Price Physical
U.S.
   Gas Fixed-
Price Physical
U.K.
    Total  

Balance at beginning of year

   $ (24,577 )   $ —      $ —       $ (24,577 )

Total loss included in other comprehensive income

     (1,058 )     —        —         (1,058 )

Derivative income (expense)

     5,078       15,366      (947 )     19,497  

Settlements

     12,196       —        —         12,196  
                               

Balance at December 31, 2008

   $ (8,361 )   $ 15,366    $ (947 )   $ 6,058  
                               

Changes in unrealized income (loss) included in earnings relating to derivatives still held at December 31, 2008

   $ 6,953     $ 15,366    $ (947 )   $ 21,372  
                               

Note 14 — Fair Value Measurements

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We adopted SFAS No. 157, “Fair Value Measurements,” effective January 1, 2008 for financial assets and liabilities measured on
a recurring basis. SFAS No. 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. Fair value 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 (exit price). SFAS No. 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires
fair value measurements be classified and disclosed in one of the following categories:

 












Level 1: Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 


F-28







Table of Contents


Index to Financial Statements



ATP OIL & GAS CORPORATION AND SUBSIDIARIES

STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 




















Level 2: Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This
category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable
data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little
or no market activity). Our option pricing models are industry-standard and consider various inputs including forward commodity price estimates, volatility and time value of money.

Financial assets and liabilities are classified based on the lowest level input that is
significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and determines the valuation of the fair value of assets and liabilities and their placement within
the fair value hierarchy levels.

The fair value of the gas swap-U.K. and gas fixed-price physical contracts is classified as Level 3 based
on the significant unobservable inputs into our expected present value model. The following table sets forth a reconciliation of changes in the fair value of these financial assets (liabilities) during 2008 (in thousands):

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 

































































































































































































   Financial
Gas Swap
U.K.
  Gas Fixed-
Price Physical
U.S.
  Gas Fixed-
Price Physical
U.K.
  Total 

Balance at beginning of year

  $(24,577) $—    $—    $(24,577)

Total loss included in other comprehensive income

   (1,058)  —     —     (1,058)

Derivative income (expense)

   5,078   15,366   (947)  19,497 

Settlements

   12,196   —     —     12,196 
                 

Balance at December 31, 2008

  $(8,361) $15,366  $(947) $6,058 
                 

Changes in unrealized income (loss) included in earnings relating to derivatives still held at December 31, 2008

  $6,953  $15,366  $(947) $21,372 
                 
This excerpt taken from the ATPG 10-Q filed Nov 10, 2008.

Note 12 — Fair Value Measurements

We adopted SFAS No. 157, “Fair Value Measurements,” effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. SFAS No. 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. In February 2008, the FASB issued FSP No. 157-2, which delayed the effective date of SFAS No. 157 by one year for nonfinancial assets and liabilities, except those measured on a recurring basis. We will adopt SFAS No. 157 with respect to asset retirement obligations and non-recurring impairments of oil and gas properties in the first quarter of 2009. Fair value 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 (exit price). SFAS No. 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1:    Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:    Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3:    Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). Our option pricing models are industry-standard and consider various inputs including forward commodity price estimates, volatility and time value of money.

Financial assets and liabilities are classified based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and determines the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The following table summarizes, according to their inputs, financial assets and liabilities that are being measured on a fair value basis at September 30, 2008 (in thousands):

 

15


Table of Contents

ATP OIL & GAS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Description

   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
 

Assets (liabilities) – net:

     

Gas swap contracts – U.K.

   $ —      $ (44,125 )

Oil and gas swap contracts – U.S.

     16      —    

Oil put contracts

     —        1,105  
               

Total

   $ 16    $ (43,020 )
               

The following table sets forth a reconciliation of changes in the fair value of financial assets (liabilities) valued using inputs classified as Level 3 at September 30, 2008 (in thousands):

 

     Gas Swap
Contracts –
U.K.
    Oil Put
Contracts
   Total  

Balance at beginning of year

   $ (24,577 )   $ 747    $ (23,830 )

Total loss included in other comprehensive income

     (21,724 )     —        (21,724 )

Derivatives expense

     (9,034 )     358      (8,676 )

Settlements

     11,210       —        11,210  
                       

Balance at end of period

   $ (44,125 )   $ 1,105    $ (43,020 )
                       

Changes in unrealized income (loss) included in earnings relating to derivatives still held at September 30, 2008

   $ (7,159 )   $ 372    $ (6,787 )
                       
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