Derivative Contracts

12 Months Ended

Dec. 31, 2017

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, 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 contracts for speculative purposes.

QEP uses commodity derivative instruments known as fixed-price swaps or costless 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 oil or gas 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. Oil price derivative instruments are typically structured as NYMEX fixed-price swaps based at Cushing, Oklahoma or oil price swaps that use ICE Brent oil prices as the reference price. Gas price derivative instruments are typically structured as fixed-price swaps or costless collars at NYMEX Henry Hub or regional price indices. QEP also enters into oil and 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. QEP's commodity derivative contract counterparties are typically 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, actively monitoring counterparties public credit ratings and avoiding the concentration of credit exposure by transacting with multiple counterparties. The Company has master-netting agreements with some counterparties that allow the offsetting of receivables and payables in a default situation.

Derivative Contracts – Production

The following table presents QEP's volumes and average prices for its commodity derivative swap contracts as of December 31, 2017:

Year	Index	Total Volumes	Average Swap Price per Unit
		(in millions)
Oil sales		(bbls)	($/bbl)
2018	NYMEX WTI	16.8	$	52.48
2019	NYMEX WTI	8.0	$	51.78
Gas sales		(MMBtu)	($/MMBtu)
2018 (Full Year)	NYMEX HH	109.5	$	2.99
2018 (July through December)	NYMEX HH	1.8	$	3.01
2019	NYMEX HH	36.5	$	2.88

QEP uses oil and gas basis swaps, combined with NYMEX WTI and NYMEX HH fixed price swaps, to achieve fixed price swaps for the location at which it sells its physical production. The following table presents details of QEP's oil and gas basis swaps as of December 31, 2017:

Year	Index Less Differential	Index	Total Volumes	Weighted-Average Differential
			(in millions)
Oil sales			(bbls)	($/bbl)
2018 (Full Year)	NYMEX WTI	Argus WTI Midland	7.3	$	(1.06	)
2018 (July through December)	NYMEX WTI	Argus WTI Midland	0.9	$	(0.71	)
2019	NYMEX WTI	Argus WTI Midland	4.0	$	(0.80	)
Gas sales			(MMBtu)	($/MMBtu)
2018	NYMEX HH	IFNPCR	7.3	$	(0.16	)

Derivative Contracts – Gas Storage

QEP enters into commodity derivative transactions to lock in a margin on gas volumes placed into storage. The following table presents QEP's volumes and average prices for its gas storage commodity derivative swap contracts as of December 31, 2017:

Year	Type of Contract	Index	Total Volumes	Average Swap Price per Unit
			(in millions)
Gas sales			(MMBtu)	($/MMBtu)
2018	SWAP	IFNPCR	0.6	$	3.06

QEP Derivative Financial Statement Presentation

The following table identifies the Consolidated Balance Sheets location of QEP's outstanding derivative contracts on a gross contract basis as opposed to the net contract basis presentation on 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	2017		2016		2017		2016
Current:		(in millions)
Commodity	Fair value of derivative contracts	$	20.6	$	—	$	120.8	$	169.8
Long-term:
Commodity	Fair value of derivative contracts	2.3		—		34.0		32.0
Total derivative instruments		$	22.9	$	—	$	154.8	$	201.8

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 Consolidated Statements of Operations are summarized in the following table:

Derivative contracts not designated as cash flow hedges	Year Ended December 31,
	2017			2016			2015
Realized gains (losses) on commodity derivative contracts	(in millions)
Production
Oil derivative contracts	$	6.8		$	86.3		$	353.7
Gas derivative contracts	(22.3		)	44.8			103.4
Gas Storage
Gas derivative contracts	—			2.9			3.8
Realized gains (losses) on commodity derivative contracts	(15.5		)	134.0			460.9
Unrealized gains (losses) on commodity derivative contracts
Production
Oil derivative contracts	(66.2		)	(217.2		)	(244.9		)
Gas derivative contracts	133.6			(145.4		)	62.0
Gas Storage
Gas derivative contracts	2.5			(4.4		)	(0.8		)
Unrealized gains (losses) on commodity derivative contracts	69.9			(367.0		)	(183.7		)
Total realized and unrealized gains (losses) on commodity derivative contracts related to production and storage contracts	$	54.4		$	(233.0	)	$	277.2
Derivatives associated with the Pinedale Divestiture(1)
Unrealized gains (losses) on commodity derivative contracts
Production
Oil derivative contracts	$	(1.3	)	$	—		$	—
Gas derivative contracts	(23.5		)	—			—
NGL derivative contracts	(5.1		)	—			—
Unrealized gains (losses) on commodity derivative contracts related to the Pinedale Divestiture	$	(29.9	)	$	—		$	—
Total realized and unrealized gains (losses) on commodity derivative contracts	$	24.5		$	(233.0	)	$	277.2

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⁽¹⁾  The unrealized gains (losses) on commodity derivative contracts related to the Pinedale Divestiture are comprised of derivatives entered into in conjunction with the execution of the Pinedale purchase and sale agreement, which were subsequently novated to the buyer upon the closing of the sale in September 2017. Refer to Note 2 – Acquisitions and Divestitures for more information. The unrealized gains (losses) on commodity derivatives associated with the Pinedale Divestiture are offset by an equal amount recorded within "Net gain (loss) from asset sales" on the Consolidated Statements of Operations.