Derivative Financial Instruments

9 Months Ended

Sep. 30, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

4.Derivative Financial Instruments

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility and foreign exchange forward contracts to manage its exposure to fluctuations in the U.S. and Canadian dollar exchange rates. As of September 30, 2018, Devon did not have any open foreign exchange contracts.

Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.

Counterparty Credit Risk

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels.

Commodity Derivatives

As of September 30, 2018, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.

	Price Swaps				Price Collars
Period	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)
Q4 2018		93,800	$	58.95		110,200	$	53.95	$	64.49
Q1-Q4 2019		57,130	$	59.73		79,904	$	54.23	$	64.23
Q1-Q4 2020		1,740	$	62.88		1,989	$	57.86	$	67.86

	Oil Basis Swaps						Oil Basis Collars
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)			Volume (Bbls/d)		Weighted Average Floor Differential to WTI ($/Bbl)			Weighted Average Ceiling Differential to WTI ($/Bbl)
Q4 2018	Midland Sweet		23,000	$	(1.02	)		—	$	—		$	—
Q4 2018	Argus LLS		12,000	$	3.95			—	$	—		$	—
Q4 2018	Argus MEH		16,000	$	2.84			—	$	—		$	—
Q4 2018	NYMEX Roll		27,000	$	0.58			—	$	—		$	—
Q4 2018	Western Canadian Select		62,109	$	(16.41	)		1,326	$	(15.50	)	$	(13.93	)
Q1-Q4 2019	Midland Sweet		28,000	$	(0.46	)		—	$	—		$	—
Q1-Q4 2019	Argus LLS		14,000	$	4.82			—	$	—		$	—
Q1-Q4 2019	Argus MEH		16,000	$	2.84			—	$	—		$	—
Q1-Q4 2019	NYMEX Roll		38,000	$	0.45			—	$	—		$	—
Q1-Q4 2019	Western Canadian Select		10,647	$	(23.39	)		—	$	—		$	—
Q1-Q4 2020	NYMEX Roll		38,000	$	0.31			—	$	—		$	—

As of September 30, 2018, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.

	Price Swaps				Price Collars
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q4 2018		304,000	$	2.92		267,000	$	2.76	$	3.09
Q1-Q4 2019		215,129	$	2.81		187,775	$	2.65	$	3.03
Q1-Q4 2020		6,589	$	2.81		7,086	$	2.65	$	2.95

	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2018	Panhandle Eastern Pipe Line		120,000	$	(0.51)
Q4 2018	El Paso Natural Gas		100,000	$	(1.25)
Q4 2018	Houston Ship Channel		110,000	$	0.01
Q4 2018	Transco Zone 4		30,000	$	(0.03)
Q1-Q4 2019	Panhandle Eastern Pipe Line		74,384	$	(0.75)
Q1-Q4 2019	El Paso Natural Gas		130,000	$	(1.46)
Q1-Q4 2019	Houston Ship Channel		122,637	$	—
Q1-Q4 2019	Transco Zone 4		7,397	$	(0.03)

As of September 30, 2018, Devon had the following open NGL derivative positions. Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.

		Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q4 2018	Ethane		6,000	$	11.73
Q4 2018	Natural Gasoline		6,500	$	56.13
Q4 2018	Normal Butane		7,000	$	38.69
Q4 2018	Propane		12,000	$	33.72
Q1-Q4 2019	Ethane		1,000	$	11.55
Q1-Q4 2019	Natural Gasoline		4,500	$	55.93
Q1-Q4 2019	Normal Butane		4,000	$	33.69
Q1-Q4 2019	Propane		8,500	$	30.01

Interest Rate Derivatives

As of September 30, 2018, Devon had the following open interest rate derivative position:

Notional		Rate Received	Rate Paid	Expiration
$	100	1.76%	Three Month LIBOR	January 2019

Financial Statement Presentation

The following table presents the net gains and losses by derivative financial instrument type followed by the corresponding individual consolidated comprehensive statements of earnings caption.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Commodity derivatives:
Upstream revenues	$	(276	)	$	(144	)	$	(814	)	$	214
Marketing revenues		—			—			(1	)		3
Interest rate derivatives:
Other expenses		—			(4	)		65			(19	)
Net gains (losses) recognized	$	(276	)	$	(148	)	$	(750	)	$	198

The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.

	September 30, 2018		December 31, 2017
Commodity derivative assets:
Other current assets	$	176	$	203
Other long-term assets		8		2
Interest rate derivative assets:
Other current assets		—		1
Total derivative assets	$	184	$	206
Commodity derivative liabilities:
Other current liabilities	$	763	$	259
Other long-term liabilities		105		27
Interest rate derivative liabilities:
Other current liabilities		1		64
Total derivative liabilities	$	869	$	350