Derivative Contracts

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

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, but generally, QEP intends to enter into commodity derivative contracts for approximately 50% to 75% of its forecasted annual production by the end of the first quarter of each fiscal year. In addition, QEP may enter into commodity derivative contracts on a portion of its storage and 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 or oil between the parties at settlement. All 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 or collars 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 and natural gas basis swaps to achieve a fixed-price swap for a portion of its oil and gas that it sells at prices that reference specific index prices.

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.

During 2014, QEP also used interest rate swaps to mitigate a portion of its exposure to interest rate volatility associated with its $600.0 million term loan. These interest rate swaps were terminated and settled in December 2014 in conjunction with the extinguishment of QEP's term loan.

QEP Energy Derivative Contracts

The following table sets forth QEP Energy’s quantities and average prices for its commodity derivative swap contracts as of September 30, 2015: 

Year	Index	Total Volumes	Average Swap price per unit
		(in millions)
Gas sales		(MMBtu)	($/MMBtu)
2015	NYMEX HH	17.5	$	3.48
2015	IFNPCR	12.0	$	3.55
2016	NYMEX HH	22.0	$	3.19
2016	IFNPCR	32.9	$	2.92
2017	NYMEX HH	7.3	$	3.21
Oil sales		(bbls)	($/bbl)
2015	NYMEX WTI	2.6	$	82.09
2015	ICE Brent	0.1	$	104.95
2016	NYMEX WTI	3.3	$	65.43

The following table sets forth details of QEP Energy's gas collars as of September 30, 2015:

		Total Volume	Average Price		Average Price
Year	Index		Floor		Ceiling
		(in millions)
		(MMBtu)	($/MMBtu)		($/MMBtu)
2016	NYMEX HH	7.3	$	2.75	$	3.89

QEP uses gas basis swaps, combined with NYMEX HH fixed price swaps, to achieve fixed price swaps at the location at which it sells its physical production.

The following table sets forth details of QEP Energy's gas basis swaps as of September 30, 2015:

Year	Index Less Differential	Index	Total Volumes	Weighted Average Differential
			(in millions)
			(MMBtu)	($/MMBtu)
2015	NYMEX HH	IFNPCR	11.0	$	(0.28	)
2016	NYMEX HH	IFNPCR	7.3	$	(0.20	)

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 September 30, 2015:

Year	Type of Contract	Index	Total Volumes	Average Swap price per MMBtu
			(in millions)
Gas sales			(MMBtu)
2015	SWAP	IFNPCR	2.4	$	3.25
2016	SWAP	IFNPCR	2.9	$	3.06
Gas purchases			(MMBtu)
2015	SWAP	IFNPCR	1.2	$	2.75

QEP Derivative Financial Statement Presentation

The following table identifies the condensed consolidated balance sheet location of QEP’s outstanding derivative contracts on a gross contract basis as opposed to the net contract basis presentation in the Condensed 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
	Balance Sheet line item	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
		(in millions)
Current:
Commodity	Fair value of derivative contracts	$	186.4	$	339.3	$	2.5	$	0.3
Long-term:
Commodity	Fair value of derivative contracts	17.0		9.9		—		—
Total derivative instruments		$	203.4	$	349.2	$	2.5	$	0.3

The effects of the change in fair value and settlement of QEP's derivative contracts recorded in "Realized and unrealized gains (losses) on derivative contracts" on the Condensed Consolidated Statements of Operations are summarized in the following table:

	Three Months Ended						Nine Months Ended
Derivative instruments not designated as cash flow hedges	September 30,						September 30,
	2015			2014			2015			2014
Realized gains (losses) on commodity derivative contracts	(in millions)
QEP Energy
Gas derivative contracts	$	23.1		$	5.5		$	69.1		$	(23.3	)
Oil derivative contracts	96.8			(12.2		)	245.3			(50.2		)
QEP Marketing
Gas derivative contracts	(0.1		)	(0.4		)	2.1			(2.4		)
Total realized gains (losses) on commodity derivative contracts	119.8			(7.1		)	316.5			(75.9		)
Unrealized gains (losses) on commodity derivative contracts
QEP Energy
Gas derivative contracts	3.6			27.6			(19.5		)	9.5
Oil derivative contracts	28.8			133.2			(128.0		)	54.3
QEP Marketing
Gas derivative contracts	1.4			0.7			(0.5		)	1.0
Total unrealized gains (losses) on commodity derivative contracts	33.8			161.5			(148.0		)	64.8
Total realized and unrealized gains (losses) on commodity derivative contracts	$	153.6		$	154.4		$	168.5		$	(11.1	)
Realized gains (losses) on interest rate swaps
Realized gains (losses) on interest rate swaps	$	—		$	(1.3	)	$	—		$	(3.2	)
Unrealized gains (losses) on interest rate swaps
Unrealized gains (losses) on interest rate swaps	—			2.6			—			1.1
Total realized gains (losses) on interest rate swaps	$	—		$	1.3		$	—		$	(2.1	)
Total net realized gains (losses) on derivative contracts	$	119.8		$	(8.4	)	$	316.5		$	(79.1	)
Total net unrealized gains (losses) on derivative contracts	33.8			164.1			(148.0		)	65.9
Grand Total	$	153.6		$	155.7		$	168.5		$	(13.2	)