Derivative Financial Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

3.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. As of September 30, 2020, Devon did not have any open interest rate swap 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. As of September 30, 2020, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties.

Commodity Derivatives

As of September 30, 2020, 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 2020		88,000	$	36.28		39,500	$	50.93	$	60.93
Q1-Q4 2021		23,810	$	35.79		19,367	$	40.66	$	50.66
Q1 2022		500	$	45.00		6,750	$	37.93	$	47.93

	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q4 2020	Argus MEH		50,000	$	0.47
Q4 2020	Midland Sweet		32,000	$	(1.23	)
Q4 2020	NYMEX Roll		54,000	$	0.38
Q1-Q4 2021	Midland Sweet		7,000	$	1.27

As of September 30, 2020, 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 2020		69,000	$	2.69		141,000	$	2.35	$	2.85
Q1-Q4 2021		32,699	$	2.76		142,055	$	2.38	$	2.88
Q1 2022		14,000	$	2.85		36,000	$	2.60	$	3.10

	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2020	Panhandle Eastern Pipe Line		30,000	$	(0.47	)
Q4 2020	El Paso Natural Gas		65,000	$	(0.78	)
Q4 2020	Houston Ship Channel		30,000	$	(0.02	)
Q1-Q4 2021	El Paso Natural Gas		35,000	$	(0.92	)

As of September 30, 2020, 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 2020	Natural Gasoline		1,000	$	44.84
Q4 2020	Normal Butane		1,500	$	23.56
Q4 2020	Propane		4,500	$	25.18

Financial Statement Presentation

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

	September 30, 2020		December 31, 2019
Commodity derivative assets:
Other current assets	$	27	$	49
Other long-term assets		1		1
Total derivative assets	$	28	$	50
Commodity derivative liabilities:
Other current liabilities	$	70	$	30
Other long-term liabilities		10		1
Total derivative liabilities	$	80	$	31