Derivative Contracts

3 Months Ended

Mar. 31, 2018

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, 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 Intercontinental Exchange, Inc. (ICE) Brent oil prices as the reference price. Gas price derivative instruments are typically structured as fixed-price swaps or 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 March 31, 2018:

Year	Index	Total Volumes	Average Swap Price per Unit
		(in millions)
Oil sales		(bbls)	($/bbl)
2018 (April through December)	NYMEX WTI	12.7	$	52.48
2019	NYMEX WTI	9.5	$	52.66
Gas sales		(MMBtu)	($/MMBtu)
2018 (April through December)	NYMEX HH	82.5	$	2.99
2018 (July through December)	NYMEX HH	1.8	$	3.01
2019	NYMEX HH	43.8	$	2.86

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 March 31, 2018:

Year	Index Less Differential	Index	Total Volumes	Weighted-Average Differential
			(in millions)
Oil sales			(bbls)	($/bbl)
2018 (April through December)	NYMEX WTI	Argus WTI Midland	5.5	$	(1.06	)
2018 (July through December)	NYMEX WTI	Argus WTI Midland	0.9	$	(0.71	)
2019	NYMEX WTI	Argus WTI Midland	4.7	$	(0.77	)
Gas sales			(MMBtu)	($/MMBtu)
2018 (April through December)	NYMEX HH	IFNPCR	5.5	$	(0.16	)

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 on 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, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Current:		(in millions)
Commodity	Fair value of derivative contracts	$	16.3	$	20.6	$	130.0	$	120.8
Long-term:
Commodity	Fair value of derivative contracts	8.1		2.3		36.4		34.0
Total derivative instruments		$	24.4	$	22.9	$	166.4	$	154.8

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 contracts not designated as cash flow hedges	March 31,
	2018			2017
Realized gains (losses) on commodity derivative contracts	(in millions)
Production
Oil derivative contracts	$	(44.3	)	$	(2.0	)
Gas derivative contracts	0.9			(14.2		)
Gas Storage
Gas derivative contracts	0.2			(0.2		)
Realized gains (losses) on commodity derivative contracts	(43.2		)	(16.4		)
Unrealized gains (losses) on commodity derivative contracts
Production
Oil derivative contracts	(6.9		)	104.3
Gas derivative contracts	(2.8		)	71.1
Gas Storage
Gas derivative contracts	(0.3		)	1.9
Unrealized gains (losses) on commodity derivative contracts	(10.0		)	177.3
Total realized and unrealized gains (losses) on commodity derivative contracts	$	(53.2	)	$	160.9