6.	Derivative Financial Instruments

Our market risk exposure relates primarily to commodity prices and, from time to time, we use various derivative instruments to manage our exposure to this commodity price risk from sales of our crude oil and natural gas. All of the present derivative counterparties are also lenders or affiliates of lenders participating in our Credit Agreement. We are exposed to credit loss in the event of nonperformance by the derivative counterparties; however, we currently anticipate that each of our derivative counterparties will be able to fulfill their contractual obligations. We are

not

required to provide additional collateral to the derivative counterparties and we do

not

require collateral from our derivative counterparties.

We have elected

not

to designate our commodity derivative contracts as hedging instruments; therefore, all changes in the fair value of derivative contracts were recognized currently in earnings during the periods presented. The cash flows of all of our commodity derivative contracts are included in

Net cash provided by operating activities

on the Condensed Consolidated Statements of Cash Flows.

During

2018,

we entered into commodity contracts for crude oil and natural gas which related to a portion of our expected future production. The crude oil contracts are based on West Texas Intermediate (“WTI”) crude oil prices as quoted off the New York Mercantile Exchange (“NYMEX”). The natural gas contracts were based on Henry Hub natural gas prices as quoted off the NYMEX and expired during the

second

quarter of

2019.

The open contracts as of

September

30,

2019

are presented in the following tables:

Crude Oil: Swap, Priced off WTI (NYMEX)
Termination Period	Notional Quantity (Bbls/day) (1)	Notional Quantity (Bbls) (1)	Strike Price
May 2020	1,500	366,000	$	60.80
May 2020	5,000	1,220,000		61.00
May 2020	3,500	854,000		60.85

(

)

Bbls = Barrels

Crude Oil: Calls - Bought, Priced off WTI (NYMEX)
Termination Period	Notional Quantity (Bbls/day) (1)	Notional Quantity (Bbls) (1)	Strike Price
May 2020	10,000	2,440,000	$	61.00

(

)

Bbls = Barrels

The following amounts were recorded in the Condensed Consolidated Balance Sheets in the categories presented and include the fair value of open contracts, and closed contracts which had

not

yet settled (in thousands):

	September 30,		December 31,
	2019		2018
Prepaid expenses and other assets	$	23,150	$	60,687
Other assets (non-current)		—		21,275

The amounts recorded on the Condensed Consolidated Balance Sheets are on a gross basis. If these were recorded on a net settlement basis, it would

not

have resulted in any differences in reported amounts.

Changes in the fair value and settlements of our commodity derivative contracts were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019		2018
Derivative (gain) loss	$	(5,853	)	$	(288	)	$	41,228	$	5,931

Cash receipts on commodity derivative contract settlements, net, are included within

Net cash provided by operating activities

on the Condensed Consolidated Statements of Cash Flows and were as follows (in thousands):

	Nine Months Ended September 30,
	2019		2018
Cash receipts (payments) on derivative settlements, net	$	17,583	$	(3,091	)