Derivative Contracts

12 Months Ended

Dec. 31, 2014

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 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 or collars to realize a known price or price range 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 or oil price swaps that use Intercontinental Exchange, Inc. (ICE) Brent oil prices as the reference price. QEP also enters into crude oil basis swaps to achieve a fixed price swap for a portion of its oil it sells at prices that reference ICE Brent and Light Louisiana Sweet (LLS).

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. QEP fully reclassified all unrealized gains in AOCI into earnings during 2012 and 2013. 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 (losses) on derivative contracts" below operating income.

QEP also used interest rate swaps to mitigate a portion of its exposure to interest rate volatility risk associated with QEP's former $600.0 million term loan. For the $300.0 million term loan issued during 2012, QEP locked in a fixed interest rate of 1.07% in exchange for a variable interest rate indexed to the one-month LIBOR. For the incremental $300.0 million borrowed under the term loan during 2014, QEP locked in a fixed interest rate of 0.86%. The average effective interest rate on the $600.0 million term loan when combined with the fixed interest rate swaps for the year ended December 31, 2014, was 3.24%. These interest rate swaps were terminated in December 2014 along with the extinguishment of QEP's term loan.

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, 2014:

				Swaps
Year	Type of Contract	Index	Total Volumes	Average price per unit
			(in millions)
Gas sales			(MMBtu)
2015	Swap	NYMEX HH	29.2	$	4.11
2015	Swap	IFNPCR	40.2	$	3.70
Oil sales			(Bbls)
2015	Swap	NYMEX WTI	7.7	$	90.04
2015	Swap	ICE Brent	0.4	$	104.95
2016	Swap	NYMEX WTI	0.4	$	90.00

The following table sets forth QEP Energy's crude oil sales costless collars as of December 31, 2014:

		Total Volume	Average Price		Average Price
Year	Index	Bbls	Floor		Ceiling
		(in millions)
2015	NYMEX WTI	0.5	$	50.00	$	63.34

The following table sets forth QEP Energy's oil basis swaps as of December 31, 2014:

Year	Index	Index Less Differential	Total Volumes Bbls	Weighted Average Differential
Oil basis swaps			(in millions)
2015	NYMEX WTI	LLS	0.1	$	4.03

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, 2014:

Year	Type of Contract	Index	Total Volumes	Average Swap price per MMBtu
			(in millions)
Gas sales			(MMBtu)
2015	Swap	IFNPCR	2.8	$	4.03
2016	Swap	IFNPCR	0.9	$	3.58
Gas purchases			(MMBtu)
2015	Swap	IFNPCR	0.9	$	3.06

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	2014		2013		2014		2013
		(in millions)				(in millions)
Current:
Commodity	Fair value of derivative contracts	$	339.3	$	5.5	$	0.3	$	29.4
Interest rate swaps	Fair value of derivative contracts	—		—		—		2.6
Long-term:
Commodity	Fair value of derivative contracts	9.9		0.4		—		—
Interest rate swaps	Fair value of derivative contracts	—		0.6		—		—
Total derivative instruments		$	349.2	$	6.5	$	0.3	$	32.0

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,
	2014			2013			2012
Realized gains (losses) on commodity derivative contracts	(in millions)
QEP Energy
Gas derivative contracts	$	(16.7	)	$	152.0		$	341.9
Oil derivative contracts	15.7			(2.2		)	14.4
NGL derivative contracts	—			—			10.2
QEP Marketing
Gas derivative contracts	(2.5		)	0.5			5.1
Total realized gains (losses) on commodity derivative contracts	(3.5		)	150.3			371.6
Unrealized gains (losses) on commodity derivative contracts
QEP Energy
Gas derivative contracts	68.4			(42.6		)	37.8
Oil derivative contracts	299.8			(48.1		)	29.0
NGL derivative contracts	—			—			1.6
QEP Marketing
Gas derivative contracts	4.2			(2.1		)	0.9
Total unrealized gains (losses) on commodity derivative contracts	372.4			(92.8		)	69.3
Total realized and unrealized gains (losses) on commodity derivative contracts	$	368.9		$	57.5		$	440.9
Realized gains (losses) on interest rate swaps
Realized losses on interest rate swaps	$	(7.6	)	$	(2.7	)	$	(1.3	)
Unrealized gains (losses) on interest rate swaps
Unrealized gains (losses) on interest rate swaps	2.0			4.1			(6.1		)
Total realized and unrealized gains (losses) on interest rate swaps	(5.6		)	1.4			(7.4		)
Total net realized gains (losses) on derivative contracts	(11.1		)	147.6			370.3
Total net unrealized gains (losses) on derivative contracts	374.4			(88.7		)	63.2
Grand Total	$	363.3		$	58.9		$	433.5