The Company's derivatives are accounted for as non-hedge derivatives and all changes in the fair values of its derivative contracts are recognized as gains or losses in the earnings of the periods in which they occur.

Oil production derivatives. The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are correlated with, NYMEX WTI oil prices. The Company also enters into (i) pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from its areas of production and (ii) purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil pricing to Gulf Coast refineries or international export markets at prices that are highly correlated to Brent oil prices. As a result, the Company uses a combination of Brent, MEH and WTI derivative contracts to manage future oil price volatility.

The Company recorded oil derivatives losses of $508 million in the consolidated statement of operations during the year ended December 31, 2021 associated with (i) the termination of certain of its 2022 oil commodity derivative positions and (ii) entering into equal and offsetting oil commodity derivative trades, which had the net effect of eliminating certain of its 2022 derivative positions.


	2022
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter






Midland/WTI basis swap contracts:
Volume per day (Bbl) (a)	26,000		26,000		26,000		26,000
Price differential per Bbl	$	0.50	$	0.50	$	0.50	$	0.50

The Company has also entered into derivative contracts for 3,000 Bbls per day of Brent basis swaps for January 2024 through December 2024 production. The basis swap contracts fix the basis differential between the WTI index price at which the Company sells a portion of its Permian Basin oil and the Brent index price at a weighted average of $4.33.

NGL production derivatives. All material physical sales contracts governing the Company's NGL production are tied directly or indirectly to Mont Belvieu, Texas NGL component product prices. The Company periodically uses derivative contracts to manage the volatility of NGL component product prices. As of December 31, 2021, the Company did not have any NGL derivative contracts outstanding.

Gas production derivatives. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to NYMEX HH gas prices or regional index prices (e.g. WAHA, SoCal and Houston Ship Channel) where the gas is sold. To diversify the gas prices it receives to international market prices, the Company sells a portion of its gas production at Dutch TTF prices. The Company uses derivative contracts to manage gas price volatility and basis swap contracts to reduce basis risk between HH prices and actual index prices at which the gas is sold.

The Company recorded derivatives losses of $13 million in the consolidated statement of operations during the year ended December 31, 2021 associated with (i) the termination of certain of its 2022 gas commodity derivative positions and (ii) entering into equal and offsetting gas commodity derivative trades, which had the net effect of eliminating certain of its 2022 derivative positions.


	2022
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter



Dutch TTF swap contracts:
Volume per day (MMBtu)	30,000		30,000		30,000		30,000
Price per MMBtu	$	12.14	$	7.80	$	7.80	$	7.80
WAHA swap contracts:
Volume per day (MMBtu)	20,000		—		—		—
Price per MMBtu	$	2.46	$	—	$	—	$	—
NYMEX collar contracts:
Volume per day (MMBtu)	7,000		—		—		—
Price per MMBtu:
Ceiling	$	3.45	$	—	$	—	$	—
Floor	$	2.75	$	—	$	—	$	—






WAHA/NYMEX basis swap contracts:
Volume per day (MMBtu) (a)	7,000		—		—		—
Price differential ($/MMBtu)	$	(0.39)	$	—	$	—	$	—

(a)The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells a portion of its Permian Basin gas and the NYMEX index price used in collar contracts.

Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019 whereby the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day at an oil terminal in Midland, Texas for a six-year term that began on January 1, 2021 and ends on December 31, 2026. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland oil price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the marketing contracts, the Company determined that the marketing contracts should be accounted for as derivative instruments.

Contingent consideration. The Company's right to receive contingent consideration in conjunction with the South Texas Divestiture was determined to be a derivative financial instrument that is not designated as a hedging instrument. Prior to its settlement in July 2020, the contingent consideration was revalued using an option pricing model each reporting period based on forecasted oil and NGL prices during each of the five years from 2020 to 2024. The Company recorded losses of $42 million and $45 million related to the revaluation of the contingent consideration to interest and other income (loss), net in the consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively. See Note 3, Note 4 and Note 15 for additional information.


As of December 31, 2021
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet
		(in millions)



Liabilities:
Commodity price derivatives	Derivatives - current	$	486	$	—	$	486
Marketing derivatives	Derivatives - current	$	52	$	—	$	52

Marketing derivatives	Derivatives - noncurrent	$	25	$	—	$	25


As of December 31, 2020
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet
		(in millions)
Assets:
Commodity price derivatives	Other - current	$	5	$	—	$	5
Commodity price derivatives	Other assets - noncurrent	$	3	$	—	$	3
Liabilities:
Commodity price derivatives	Derivatives - current	$	198	$	—	$	198
Marketing derivatives	Derivatives - current	$	36	$	—	$	36
Commodity price derivatives	Derivatives - noncurrent	$	11	$	—	$	11
Marketing derivatives	Derivatives - noncurrent	$	55	$	—	$	55

Fair value. Gains and losses recorded to derivative gain (loss), net in the consolidated statements of operations related to derivative financial instruments not designated as hedging instruments are as follows:


	Year Ended December 31,
	2021		2020		2019
	(in millions)
Commodity price derivatives:
Noncash derivative gain (loss), net	$	437	$	(213)	$	8
Cash receipts (payments/deferred obligations) on settled derivatives, net (a)	(2,595)		66		47
Total commodity derivative gain (loss), net	(2,158)		(147)		55

Marketing derivatives:
Noncash derivative gain (loss), net	14		(112)		—
Cash payments on settled derivatives, net	(39)		—		—
Total marketing derivative loss, net	(25)		(112)		—

Interest rate derivatives:
Cash payments on settled derivatives, net	—		(22)		—


Derivative gain (loss), net	$	(2,183)	$	(281)	$	55

(a)Includes $521 million of losses attributable to the early settlement of certain 2022 oil and gas commodity derivatives, of which the Company recognized $508 million of such in losses during the fourth quarter of 2021 related to (i) the termination of certain of its 2022 oil and gas commodity derivative positions and (ii) entering into equal and offsetting oil and gas commodity derivative trades, which had the net effect of eliminating certain of its 2022 derivative positions. The Company will make cash payments of $328 million during 2022 to settle the deferred obligations associated with the offsetting derivatives.

The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company's credit risk policies and procedures.

The Company enters into commodity price derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty. Net derivative liabilities associated with the Company's open derivatives by counterparty are as follows:


	As of December 31, 2021

	(in millions)
Citibank	$	122
Morgan Stanley Capital Group	121
Occidental Petroleum Corporation	77
Scotia Bank	54
J Aron & Company	40
JP Morgan Chase	40
PNC Bank	36
CIBC	24
Macquarie Bank	23
Merrill Lynch	13
Wells Fargo Bank	9
Nextera Energy Power Marketing	4

















	$	563