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Derivative Contracts
 12 Months Ended
Dec. 31, 2019
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. QEP typically enters into commodity derivative transactions covering a substantial, but varying, portion of its anticipated oil and gas production for the next 12 to 24 months. In addition, QEP has historically 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 costless collars at NYMEX HH 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, 2019:

Year
 
Index
 
Total Volumes
 
Average Swap Price per Unit
 
 
 
 
(in millions)
 
 
Oil sales
 
 
 
(bbls)

 
($/bbl)

2020
 
NYMEX WTI
 
14.1

 
$
57.83

2020
 
Argus WTI Houston
 
1.0

 
$
60.06

2020
 
Argus WTI Midland
 
1.5

 
$
57.30

2021
 
NYMEX WTI
 
0.9

 
$
55.06


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 December 31, 2019:
Year
 
Index
 
Basis
 
Total Volumes
 
Weighted-Average Differential
 
 
 
 
 
 
(in millions)
 
 
Oil sales
 
 
 
 
 
(bbls)

 
($/bbl)

2020
 
NYMEX WTI
 
Argus WTI Midland
 
6.8

 
$
0.18

2020
 
NYMEX WTI
 
Argus WTI Houston
 
0.4

 
$
3.75

2021
 
NYMEX WTI
 
Argus WTI Midland
 
3.7

 
$
0.98


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
 
2019
 
2018
 
2019
 
2018
Current:
 
 
(in millions)
Commodity
Fair value of derivative contracts
 
$
1.5

 
$
88.2

 
$
18.7

 
$
0.4

Long-term:
 
 
 
 
 
 
 
 


Commodity
Fair value of derivative contracts
 
0.2

 
35.4

 
0.5

 
0.7

Total derivative instruments(1)
 
$
1.7

 
$
123.6

 
$
19.2

 
$
1.1


_______________________
(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 Consolidated Balance Sheets related to the Haynesville Divestiture.


Derivative contracts
Year Ended December 31,
2019
 
2018
 
2017
Realized gains (losses) on commodity derivative contracts
(in millions)
Production
 
 
 
 
 
Oil derivative contracts
$
(32.2
)
 
$
(153.4
)
 
$
6.8

Gas derivative contracts
(2.9
)
 
(5.0
)
 
(22.3
)
Gas Storage
 
 
 
 
 
Gas derivative contracts
—

 
0.3

 
—

Realized gains (losses) on commodity derivative contracts
(35.1
)
 
(158.1
)
 
(15.5
)
Unrealized gains (losses) on commodity derivative contracts
 
 
 
 
 
Production
 
 
 
 
 
Oil derivative contracts
(139.8
)
 
277.0

 
(66.2
)
Gas derivative contracts
(0.3
)
 
(22.3
)
 
133.6

Gas Storage
 
 
 
 
 
Gas derivative contracts
—

 
(0.3
)
 
2.5

Unrealized gains (losses) on commodity derivative contracts
(140.1
)
 
254.4

 
69.9

Total realized and unrealized gains (losses) on commodity derivative contracts related to production and storage contracts
$
(175.2
)
 
$
96.3

 
$
54.4

 
 
 
 
 
 
Derivatives associated with divestitures
 
 
 
 
 
Unrealized gains (losses) on commodity derivative contracts
 
 
 
 
 
Production
 
 
 
 
 
Oil derivative contracts
$
—

 
$
(2.7
)
 
$
(1.3
)
Gas derivative contracts
1.8

 
—

 
(23.5
)
NGL derivative contracts
—

 
(3.2
)
 
(5.1
)
Unrealized gains (losses) on commodity derivative contracts related to divestitures(1)(2)(3)
$
1.8

 
$
(5.9
)
 
$
(29.9
)
 
 
 
 
 
 
Total realized and unrealized gains (losses) on commodity derivative contracts
$
(173.4
)
 
$
90.4

 
$
24.5

_______________________
(1) 
During the year ended December 31, 2019 , the unrealized gains (losses) on commodity derivative contracts related to the Haynesville Divestiture are 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 Consolidated Statements of Operations.
(2) 
During the year ended December 31, 2018, the unrealized gains (losses) on commodity derivative contracts related to the Uinta Basin Divestiture are comprised of derivatives entered into in conjunction with the execution of the Uinta Basin purchase and sale agreement, which were subsequently novated to the buyer upon the closing of the sale in September 2018. Refer to Note 3 – Acquisitions and Divestitures for more information. The unrealized gains (losses) on commodity derivatives associated with the Uinta Basin Divestiture are offset by an equal amount recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the Consolidated Statements of Operations.
(3) 
During the year ended December 31, 2017, 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 3 – 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, inclusive of restructuring costs" on the Consolidated Statements of Operations.