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Derivatives
 12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Note 10Derivatives
The Company has three types of derivative instruments as of December 31, 2020: (i) commodity derivatives, (ii) a debt interest rate derivative and (iii) a contingent consideration derivative. See Notes (i) 2.e for the Company's significant accounting policies for derivatives and presentation in the consolidated financial statements, (ii) 11.a for fair value measurement of derivatives on a recurring basis and (iii) 19.b for derivatives subsequent events.
The following table summarizes the Company's gain on derivatives, net by type of derivative instrument for the periods presented:
Years ended December 31,
(in thousands)202020192018
Commodity$73,662 $80,351 $42,984 
Interest rate(343)— — 
Contingent consideration6,795 (1,200)— 
Gain on derivatives, net$80,114 $79,151 $42,984 
a.Commodity
Due to the inherent volatility in oil, NGL and natural gas prices and differences in the prices of oil, NGL and natural gas between where the Company produces and where the Company sells such commodities, the Company engages in commodity derivative transactions, such as puts, swaps, collars and basis swaps to hedge price risk associated with a portion of the Company's anticipated sales volumes. By removing a portion of the price volatility associated with future sales volumes, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations.
Each put transaction has an established floor price. The Company pays its counterparty a premium, which can be paid at inception or deferred until settlement, to enter into the put transaction. When the settlement price is below the floor price, the counterparty pays the Company an amount equal to the difference between the settlement price and the floor price multiplied by the hedged contract volume. When the settlement price is at or above the floor price in an individual month in the contract period, the put option expires with no settlement for that particular month, except with regard to the deferred premium, if any.
Each swap transaction has an established fixed price. When the settlement price is below the fixed price, the counterparty pays the Company an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume. When the settlement price is above the fixed price, the Company pays its counterparty an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume.
Each collar transaction has an established price floor and ceiling. Depending on the terms, the Company may pay its counterparty a premium, which can be paid at inception or deferred until settlement. When the settlement price is below the price floor established by these collars, the counterparty pays the Company an amount equal to the difference between the settlement price and the price floor multiplied by the hedged contract volume. When the settlement price is above the price ceiling established by these collars, the Company pays its counterparty an amount equal to the difference between the settlement price and the price ceiling multiplied by the hedged contract volume. When the settlement price is at or between the price floor and price ceiling established by these collars in an individual month in the contract period, the collar expires with no settlement paid by either the Company or the counterparty for that particular month, except with regard to the deferred premium, if any.
Each basis swap transaction has an established fixed basis differential corresponding to two floating index prices. When the settlement basis differential is below the fixed basis differential, the counterparty pays the Company an amount equal to the difference between the fixed basis differential and the settlement basis differential multiplied by the hedged contract volume. When the settlement basis differential is above the fixed basis differential, the Company pays the counterparty an amount
equal to the difference between the settlement basis differential and the fixed basis differential multiplied by the hedged contract volume.
During the year ended December 31, 2020, the Company’s derivatives were settled based on reported prices on commodity exchanges, with (i) oil derivatives settled based on WTI NYMEX pricing and Brent ICE pricing, (ii) NGL derivatives settled based on Mont Belvieu OPIS pricing and (iii) natural gas derivatives settled based on Henry Hub NYMEX and Waha Inside FERC pricing.
During the year ended December 31, 2020, the Company completed hedge restructurings by (i) early terminating collars and entering into new swaps and (ii) early terminating swaps resulting in proceeds of $6.3 million. The following table details the commodity derivatives that were terminated:
Aggregate volumes (Bbl)Weighted-average floor price ($/Bbl)Weighted-average ceiling price ($/Bbl)Contract period
WTI NYMEX - Swaps389,180 $60.25 $60.25 September 2020 - December 2020
WTI NYMEX - Collars912,500 $45.00 $71.00 January 2021 - December 2021
During the year ended December 31, 2019, the Company completed hedge restructurings by early terminating puts and collars and entering into new swaps. The Company paid a net termination amount of $5.4 million that included the full settlement of the deferred premiums associated with a portion of these early-terminated puts and collars. The present value of these deferred premiums, classified under Level 3 of the fair value hierarchy, upon their early termination was $7.2 million. See Note 11 for information about the fair value hierarchy levels. The following table details the commodity derivatives that were terminated:
Aggregate volumes (Bbl)Weighted-average floor price ($/Bbl)Weighted-average ceiling price ($/Bbl)Contract period
WTI NYMEX - Puts5,087,500 $46.03 $— April 2019 - December 2019
WTI NYMEX - Put366,000 $45.00 $— January 2020 - December 2020
WTI NYMEX - Collars1,134,600 $45.00 $76.13 January 2020 - December 2020
The following table summarizes open commodity derivative positions as of December 31, 2020, for commodity derivatives that were entered into through December 31, 2020, for the settlement periods presented:
 Year 2021Year 2022
Oil:  
Brent ICE - Puts(1):
Volume (Bbl)2,463,750 — 
Weighted-average floor price ($/Bbl)$55.00 $— 
Brent ICE - Swaps:
Volume (Bbl)5,037,000 3,759,500 
Weighted-average price ($/Bbl)$49.43 $47.05 
Brent ICE - Collars:
Volume (Bbl)584,000 — 
Weighted-average floor price ($/Bbl)$45.00 $— 
Weighted-average ceiling price ($/Bbl)$59.50 $— 
Total Brent ICE:
Total volume with floor (Bbl)8,084,750 3,759,500 
Weighted-average floor price ($/Bbl)$50.80 $47.05 
Total volume with ceiling (Bbl)5,621,000 3,759,500 
Weighted-average ceiling price ($/Bbl)$50.47 $47.05 
NGL:
Mont Belvieu OPIS:
Purity Ethane - Swaps:
Volume (Bbl)912,500 — 
Weighted-average price ($/Bbl)$12.01 $— 
Non-TET Propane - Swaps:
Volume (Bbl)2,423,235 — 
Weighted-average price ($/Bbl)$22.90 $— 
Non-TET Normal Butane - Swaps:
Volume (Bbl)807,745 — 
Weighted-average price ($/Bbl)$25.87 $— 
Non-TET Isobutane - Swaps:
Volume (Bbl)220,460 — 
Weighted-average price ($/Bbl)$26.55 $— 
Non-TET Natural Gasoline - Swaps:
Volume (Bbl)881,110 — 
Weighted-average price ($/Bbl)$38.16 $— 
Total NGL volume (Bbl)5,245,050 — 
Natural gas:  
Henry Hub NYMEX - Swaps:
Volume (MMBtu)42,522,500 3,650,000 
Weighted-average price ($/MMBtu)$2.59 $2.73 
Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:
Volume (MMBtu)48,508,500 7,300,000 
Weighted-average differential ($/MMBtu)$(0.51)$(0.53)
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(1)    Associated with these open positions were $50.6 million of premiums, which were paid at the respective contracts' inception during the year ended December 31, 2020.
b.Interest rate
Due to the inherent volatility in interest rates, the Company has entered into an interest rate derivative swap to hedge interest rate risk associated with a portion of the Company's anticipated outstanding debt under the Senior Secured Credit Facility. The Company will pay a fixed rate over the contract term for that portion. By removing a portion of the interest rate volatility associated with anticipated outstanding debt, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations.
The following table presents the interest rate derivative that was entered into during the year ended December 31, 2020:
Notional amount
(in thousands)		Fixed rateContract period
LIBOR - Swap$100,000 0.345 %April 16, 2020 - April 18, 2022
c.Contingent consideration
The Company's acquisition of oil and natural gas properties that closed on April 30, 2020 provides for potential contingent payments to be paid by the Company if the arithmetic average of the monthly settlement WTI NYMEX prices exceed certain thresholds for the contingency period beginning on January 1, 2021 and ending on the earlier of December 31, 2022 or the date the counterparty has received the maximum consideration of $1.2 million.
The Company's acquisition of oil and natural gas properties that closed on December 12, 2019 provided for a potential contingent payment. If the arithmetic average of the monthly settlement WTI NYMEX prices exceeded a certain threshold for the contingency period beginning January 1, 2020 through December 31, 2020, the Company would have been required to pay to the counterparty an amount equal to $20 million. As the provisions for this contingent payment were not met, no payment by the Company was required.
See Notes 4.a and 4.c for further discussion of the Company's acquisitions associated with potential contingent consideration payments. At each quarterly reporting period, the Company remeasures contingent considerations with the change in fair values recognized in earnings.