Derivative Contracts

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Contracts

QEP has established policies and procedures for managing commodity price volatility through the use of derivative instruments. In the normal course of business, QEP uses commodity price derivative instruments to reduce the impact of potential downward movements in commodity prices on cash flow, returns on capital investment, and other financial results. However, these instruments typically limit gains from favorable price movements. The volume of production subject to commodity derivative instruments and the mix of the instruments are frequently evaluated and adjusted by management in response to changing market conditions. QEP may enter into commodity derivative contracts for up to 100% of forecasted production from proved reserves. In addition, QEP may enter into commodity derivative contracts on a portion of its extracted NGL volumes in its midstream business and a portion of its gas sales and purchases for marketing transactions. QEP does not enter into commodity derivative instruments for speculative purposes.

QEP uses commodity derivative instruments known as fixed-price swaps to realize a known price for a specific volume of production delivered into a regional sales point. QEP's commodity derivative instruments do not require the physical delivery of gas, oil, or NGL between the parties at settlement. Swap transactions are settled in cash with one party paying the other for the net difference in prices, multiplied by the contract volume, for the settlement period. Gas price derivative instruments are typically structured as fixed-price swaps at regional price indices. Oil price derivative instruments are typically structured as NYMEX fixed-price swaps based at Cushing, Oklahoma. QEP also has oil price derivative swaps that use Intercontinental Exchange, Inc. (ICE), Brent oil prices as the reference price. NGL price derivative instruments are typically structured as Mont Belvieu, Texas fixed-price swaps.

QEP enters into commodity derivative transactions that do not have margin requirements or collateral provisions that would require payments prior to the scheduled settlement dates. Commodity derivative contract counterparties are normally financial institutions and energy trading firms with investment-grade credit ratings. QEP routinely monitors and manages its exposure to counterparty risk by requiring specific minimum credit standards for all counterparties and avoids concentration of credit exposure by transacting with multiple counterparties.

Effective January 1, 2012, QEP elected to de-designate all of its gas, oil and NGL derivative contracts that were previously designated as cash flow hedges and discontinue hedge accounting prospectively. As a result of discontinuing hedge accounting, the mark-to-market values at December 31, 2011, were fixed in AOCI as of the de-designation date and reclassified into the Consolidated Statement of Operations as the transactions settled and affected earnings. During the year ended December 31, 2013, the remaining portion of unrealized gains fixed in AOCI of $77.6 million, net of tax, were settled and reclassified to the Consolidated Statements of Operations. All realized and unrealized gains and losses from derivative instruments incurred after January 1, 2012, are presented in the Consolidated Statements of Operations in "Realized and unrealized gains on derivative contracts" below operating income.

QEP also uses interest rate swaps to mitigate a portion of its exposure to interest rate volatility risk. During the second quarter of 2012, QEP entered into variable-to-fixed interest rate swap agreements having a combined notional principal amount of $300.0 million to minimize the interest rate volatility risk associated with its $300.0 million term loan. QEP locked in a fixed interest rate of 1.07% in exchange for a variable interest rate indexed to the one-month LIBOR rate. The interest rate swaps settle monthly and will mature in March of 2017.

QEP Energy's Derivative Contracts

The following table sets forth QEP Energy's quantities and average prices for its commodity derivative contracts as of December 31, 2013:

				Swaps
Year	Type of Contract	Index	Total Volumes	Average price per unit
			(in millions)
Gas sales			(MMBtu)
2014	Swap	IFNPCR	58.4	$	3.98
2014	Swap	NYMEX	25.6	$	4.19
2015	Swap	NYMEX	3.7	$	4.16
Oil sales			(Bbls)
2014	Swap	NYMEX WTI	12.1	$	93.68
2015	Swap	NYMEX WTI	0.7	$	88.60

The following table sets forth QEP Energy's oil basis swaps as of December 31, 2013:

Year	Index	Index Less Differential	Bbls Per Day	Weighted Average Differential
Oil basis swaps
2014	NYMEX WTI	ICE Brent	2,000.0	$	13.78

QEP Marketing Derivative Contracts

QEP Marketing enters into commodity derivative transactions to lock in a margin on gas volumes placed into storage and for marketing transactions in which QEP Marketing sells gas volumes at a fixed price. The following table sets forth QEP Marketing's volumes and swap prices for its commodity derivative contracts as of December 31, 2013:

Year	Type of Contract	Index	Total Volumes	Average Swap price per MMBtu
			(in millions)
Gas sales			(MMBtu)
2014	Swap	IFNPCR	4.7	$	3.77
Gas purchases			(MMBtu)
2014	Swap	IFNPCR	1.0	$	3.78

QEP's Derivative Contracts

The following table sets forth QEP's notional amounts and interest rates for its interest rate swaps outstanding as of December 31, 2013:

Notional amount	Type of Contract	Maturity	Fixed Rate Paid	Variable Rate Received
(in millions)
$300.0	Swap	March 2017	1.07%	One month LIBOR

QEP Derivative Financial Statement Presentation

The following table presents the balance sheet location of QEP's outstanding derivative contracts on a gross contract basis as opposed to the net contract basis presentation in the Consolidated Balance Sheets and the related fair values at the balance sheet dates:

		Gross asset derivative instruments fair value				Gross liability derivative instruments fair value
		December 31,
	Balance Sheet line item	2013		2012		2013		2012
		(in millions)				(in millions)
Current:
Commodity	Fair value of derivative contracts	$	5.5	$	189.7	$	29.4	$	1.0
Interest rate swaps	Fair value of derivative contracts	—		—		2.6		2.6
Long-term:
Commodity	Fair value of derivative contracts	0.4		4.2		—		0.1
Interest rate swaps	Fair value of derivative contracts	0.6		—		—		3.6
Total derivative instruments		$	6.5	$	193.9	$	32.0	$	7.3

The effects of the change in fair value and settlement of QEP's derivative contracts recorded in "Realized and Unrealized gains on derivatives" on the Consolidated Statements of Operations are summarized in the following tables:

Derivative instruments not designated as cash flow hedges	Year Ended December 31,
	2013			2012			2011
Realized gains (losses) on commodity derivative contracts	(in millions)
QEP Energy
Gas derivative contracts	$	152.0		$	341.9		$	(117.7	)
Oil derivative contracts	(2.2		)	14.4			—
NGL derivative contracts	—			10.2			—
QEP Field Services
NGL derivative contracts	—			8.4			—
QEP Marketing
Gas derivative contracts	0.5			5.1			—
Total realized gains (losses) on commodity derivative contracts	150.3			380.0			(117.7		)
Unrealized gains (losses) on commodity derivative contracts
QEP Energy
Gas derivative contracts	(42.6		)	37.8			117.7
Oil derivative contracts	(48.1		)	29.0			—
NGL derivative contracts	—			1.6			—
QEP Field Services
NGL derivative contracts	—			—			—
QEP Marketing
Gas derivative contracts	(2.1		)	0.9			—
Total unrealized (losses) gains on commodity derivative contracts	(92.8		)	69.3			117.7
Total realized and unrealized gains on commodity derivative contracts	$	57.5		$	449.3		$	—
Realized gains (losses) on interest rate swaps
Realized losses on interest rate swaps	$	(2.7	)	$	(1.3	)	$	—
Unrealized gains (losses) on interest rate swaps
Unrealized gains (losses) on interest rate swaps	4.1			(6.1		)	—
Total realized and unrealized gains (losses) on interest rate swaps	$	1.4		$	(7.4	)	$	—
Total net realized gains (losses) on derivative contracts	$	147.6		$	378.7		$	(117.7	)
Total net unrealized (losses) gains on derivative contracts	$	(88.7	)	$	63.2		$	117.7
Grand Total	$	58.9		$	441.9		$	—

The following table presents the change in the fair value and settlement of QEP's derivative contracts that were designated as cash flow hedges in 2011:

Derivative instruments classified as cash flow hedges	Location of gain (loss) recognized in earnings	Year Ended December 31,
		2013		2012		2011
Commodity derivatives
Gain on derivative instruments for the effective portion of hedge recognized in AOCI	Accumulated other comprehensive income	$	—	$	—	$	350.8
Gain reclassified from AOCI into income for effective portion of hedge	Gas sales	—		—		305.5
Gain reclassified from AOCI into income for effective portion of hedge	Oil sales	—		—		1.6
Gain reclassified from AOCI into income for effective portion of hedge	NGL sales	—		—		(0.2		)
Gain reclassified from AOCI into income for effective portion of hedge	Marketing purchases	—		—		4.3
Gain recognized in income for the ineffective portion of hedges	Interest and other income	—		—		0.1