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, during the time that QEP owned gas storage facilities or had contracts for gas storage capacity, QEP entered 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. 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 basis swaps to achieve a fixed-price swap for a portion of its oil sales at prices that reference specific regional index prices.

QEP does not currently have any commodity derivative instruments 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, 2019:



Year	Index	Total Volumes	Average Swap Price per Unit
		(in millions)
Oil sales		(bbls)	($/bbl)
2019	NYMEX WTI	9.5	$	54.93
2019	ICE Brent	1.1	$	66.54
2020	NYMEX WTI	5.1	$	60.01

QEP uses oil basis swaps, combined with NYMEX WTI 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 basis swaps as of March 31, 2019:



Year	Index	Basis	Total Volumes	Weighted-Average Differential
			(in millions)
Oil sales			(bbls)	($/bbl)
2019	NYMEX WTI	Argus WTI Midland	5.0	$	(2.22	)
2019	NYMEX WTI	Argus WTI Houston	0.6	$	3.75
2020	NYMEX WTI	Argus WTI Midland	2.6	$	(0.46	)

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, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Current:		(in millions)
Commodity⁽¹⁾	Fair value of derivative contracts	$	—	$	88.2	$	60.3	$	0.4
Long-term:
Commodity	Fair value of derivative contracts	6.7		35.4		1.5		0.7
Total derivative instruments		$	6.7	$	123.6	$	61.8	$	1.1

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⁽¹⁾	Includes fair value of derivative contracts classified as "Noncurrent assets held for sale" of $0.3 million as of December 31, 2018 on the Condensed Consolidated Balance Sheet related to the Haynesville Divestiture.

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	March 31,
	2019			2018
Realized gains (losses) on commodity derivative contracts	(in millions)
Production
Oil derivative contracts	$	(3.0	)	$	(44.3	)
Gas derivative contracts	(2.9		)	0.9
Gas Storage
Gas derivative contracts	—			0.2
Realized gains (losses) on commodity derivative contracts	(5.9		)	(43.2		)
Unrealized gains (losses) on commodity derivative contracts
Production
Oil derivative contracts	(177.3		)	(6.9		)
Gas derivative contracts	(0.3		)	(2.8		)
Gas Storage
Gas derivative contracts	—			(0.3		)
Unrealized gains (losses) on commodity derivative contracts	(177.6		)	(10.0		)
Total realized and unrealized gains (losses) on commodity derivative contracts related to production and storage	$	(183.5	)	$	(53.2	)

Derivatives associated with Haynesville Divestiture
Unrealized gains (losses) on commodity derivative contracts
Production
Gas derivative contracts	1.8			—
Unrealized gains (losses) on commodity derivative contracts related to divestitures⁽¹⁾	$	1.8		$	—

Total realized and unrealized gains (losses) on commodity derivative contracts	$	(181.7	)	$	(53.2	)

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⁽¹⁾

During the three months ended March 31, 2019, the unrealized gains (losses) on commodity derivative contracts related to the Haynesville Divestiture were comprised of derivatives included as part of the Haynesville/Cotton Valley purchase and sale agreement, which were subsequently novated to the buyer upon the closing of the sale in January 2019. Refer to Note 3 – Acquisitions and Divestitures for more information. The unrealized gains (losses) on commodity derivatives associated with the Haynesville Divestiture are offset by an equal amount recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the Condensed Consolidated Statements of Operations.