risk. We do not currently designate any of our derivative instruments as hedges for accounting purposes and record all derivative instruments on our balance sheet at fair value. Changes in the fair value of our derivative instruments are recognized in earnings. Accordingly, our earnings may fluctuate significantly as a result of changes in the fair value of our derivative instruments. Derivative arrangements also expose us to the risk of financial loss in some circumstances, including when: • production is less than the volume covered by the derivative instruments; • the counter-party to the derivative instrument defaults on its contract obligations; or • there is an increase in the differential between the underlying price and actual prices received in the derivative instrument. In addition, these types of derivative arrangements may limit the benefit we could receive from increases in the prices for oil and natural gas or beneficial interest rate fluctuations and may expose us to cash margin requirements. Our commercial debt facility, revolving credit facility and indenture governing the Senior Notes contain certain covenants that may inhibit our ability to make certain investments, incur additional indebtedness and engage in certain other transactions, which could adversely affect our ability to meet our future goals. Our commercial debt facility, revolving credit facility and indenture governing the Senior Notes include certain covenants that, among other things, restrict: • our investments, loans and advances and certain of our subsidiaries’ payment of dividends and other restricted payments; • our incurrence of additional indebtedness; • the granting of liens, other than liens created pursuant to the commercial debt facility, revolving credit facility or the indenture governing the Senior Notes and certain permitted liens; • mergers, consolidations and sales of all or a substantial part of our business or licenses; • the hedging, forward sale or swap of our production of crude oil or natural gas or other commodities; • the sale of assets (other than production sold in the ordinary course of business); and • in the case of the commercial debt facility and the revolving credit facility, our capital expenditures that we can fund with the proceeds of our commercial debt facility, and revolving credit facility. Our commercial debt facility, revolving credit facility and letter of credit facility require us to maintain certain financial ratios, such as debt service coverage ratios and cash flow coverage ratios. All of these restrictive covenants may limit our ability to expand or pursue our business strategies. Our ability to comply with these and other provisions of our commercial debt facility, revolving credit facility and indenture governing the Senior Notes may be impacted by changes in economic or business conditions, our results of operations or events beyond our control. The breach of any of these covenants could result in a default under our commercial debt facility, revolving credit facility and indenture governing the Senior Notes, in which case, depending on the actions taken by the lenders thereunder or their successors or assignees, such lenders could elect to declare all amounts borrowed under our commercial debt facility, revolving credit facility and indenture governing the Senior Notes, together with accrued interest, to be due and payable and, in the case of the letter of credit facility, the breach of any of the applicable covenants could result in a default, in which case the cash collateral we are required to maintain under the letter of credit facility would increase from 75% to 100% of all 61