Derivative Contracts

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

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 enters 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 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 sales at prices that reference specific regional index prices.

QEP does not currently have any commodity derivative transactions that 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.

Derivative Contracts – Production

The following table sets forth QEP’s quantities and average prices for its commodity derivative swap contracts as of March 31, 2016: 

Year	Index	Total Volumes	Average Swap Price per Unit
		(in millions)
Gas sales		(MMBtu)	($/MMBtu)
2016	NYMEX HH	42.2	$	2.80
2016	IFNPCR	55.0	$	2.53
2017	NYMEX HH	73.0	$	2.75
2017	IFNPCR	32.9	$	2.51
2018	NYMEX HH	7.3	$	2.80
Oil sales		(bbls)	($/bbl)
2016 (April through June)	NYMEX WTI	1.7	$	57.09
2016 (July through December)	NYMEX WTI	4.8	$	52.44
2017	NYMEX WTI	3.7	$	51.71

The following table sets forth details of QEP's gas collars as of March 31, 2016:

		Total Volume	Average Price		Average Price
Year	Index		Floor		Ceiling
		(in millions)
		(MMBtu)	($/MMBtu)		($/MMBtu)
2016	NYMEX HH	5.5	$	2.75	$	3.89

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

The following table sets forth details of QEP's gas basis swaps as of March 31, 2016:

Year	Index Less Differential	Index	Total Volumes	Weighted-Average Differential
			(in millions)
			(MMBtu)	($/MMBtu)
2016	NYMEX HH	IFNPCR	27.5	$	(0.16	)
2017	NYMEX HH	IFNPCR	51.1	$	(0.18	)

Derivative Contracts – Storage

QEP enters into commodity derivative transactions to lock in a margin on gas volumes placed into storage. The following table sets forth QEP’s volumes and swap prices for its storage commodity derivative contracts as of March 31, 2016:

Year	Type of Contract	Index	Total Volumes	Average Swap Price per MMBtu
			(in millions)
Gas sales			(MMBtu)	($/MMBtu)
2016	SWAP	IFNPCR	1.9	$	2.57
2017	SWAP	IFNPCR	0.2	$	2.69
Gas purchases
2016	SWAP	IFNPCR	0.7	$	1.73

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	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
		(in millions)
Current:
Commodity	Fair value of derivative contracts	$	134.5	$	147.8	$	0.1	$	1.8
Long-term:
Commodity	Fair value of derivative contracts	20.9		23.2		3.5		4.0
Total derivative instruments		$	155.4	$	171.0	$	3.6	$	5.8

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
Derivative instruments not designated as cash flow hedges	March 31,
	2016			2015
Realized gains (losses) on commodity derivative contracts	(in millions)
Production
Gas derivative contracts	$	21.5		$	17.9
Oil derivative contracts	40.8			84.0
Storage
Gas derivative contracts	2.1			2.5
Total realized gains (losses) on commodity derivative contracts	64.4			104.4
Unrealized gains (losses) on commodity derivative contracts
Production
Gas derivative contracts	15.4			11.4
Oil derivative contracts	(27.9		)	(33.1		)
Storage
Gas derivative contracts	(1.0		)	(1.8		)
Total unrealized gains (losses) on commodity derivative contracts	(13.5		)	(23.5		)
Total realized and unrealized gains (losses) on commodity derivative contracts	$	50.9		$	80.9