Derivatives

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company has two types of derivative instruments as of September 30, 2022: (i) commodity derivatives and (ii) a contingent consideration derivative. In previous periods, the Company also engaged in an interest rate swap derivative, which concluded during the quarterly period ended June 30, 2022. See (i) Note 2 in the 2021 Annual Report for discussion of the Company's significant accounting policies for derivatives and presentation and (ii) Note 9 for discussion of fair value measurement of derivatives on a recurring basis. The Company's derivatives were not designated as hedges for accounting purposes, and the Company does not enter into such instruments for speculative trading purposes. Accordingly, the changes in fair value are recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the unaudited consolidated statements of operations.

The following table summarizes components of the Company's gain (loss) on derivatives, net by type of derivative instrument for the periods presented:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2022		2021		2022		2021
Commodity	$	110,356	$	(101,394)	$	(285,715)	$	(472,296)
Interest rate	—		(17)		14		(43)
Contingent consideration	(9,608)		5,171		(5,294)		4,792
Gain (loss) on derivatives, net	$	100,748	$	(96,240)	$	(290,995)	$	(467,547)

Commodity

Due to the inherent volatility in oil, NGL and natural gas prices and the sometimes wide pricing differentials 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. See Note 10 in the 2021 Annual Report for discussion of transaction types and settlement indexes. During the nine months ended September 30, 2022, the Company’s derivatives were settled based on reported prices on commodity exchanges, with (i) oil derivatives settled based on WTI NYMEX 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.

The following table summarizes open commodity derivative positions as of September 30, 2022, for commodity derivatives that were entered into through September 30, 2022, for the settlement periods presented:


	Remaining Year 2022		Year 2023
Oil:





WTI NYMEX - Swaps:
Volume (Bbl)	92,000		—
Weighted-average price ($/Bbl)	$	64.40	$	—
WTI NYMEX - Collars:
Volume (Bbl)	1,407,600		4,362,000
Weighted-average floor price ($/Bbl)	$	72.65	$	67.93
Weighted-average ceiling price ($/Bbl)	$	86.54	$	82.89









Brent ICE - Swaps:
Volume (Bbl)	1,039,600		—
Weighted-average price ($/Bbl)	$	48.34	$	—
Brent ICE - Collars:
Volume (Bbl)	391,000		—
Weighted-average floor price ($/Bbl)	$	56.65	$	—
Weighted-average ceiling price ($/Bbl)	$	65.44	$	—














































NGL:

Purity Ethane - Swaps:
Volume (Bbl)	386,400		—
Weighted-average price ($/Bbl)	$	11.42	$	—
Non-TET Propane - Swaps:
Volume (Bbl)	294,400		—
Weighted-average price ($/Bbl)	$	35.91	$	—
Non-TET Normal Butane - Swaps:
Volume (Bbl)	92,000		—
Weighted-average price ($/Bbl)	$	41.58	$	—
Non-TET Isobutane - Swaps:
Volume (Bbl)	27,600		—
Weighted-average price ($/Bbl)	$	42.00	$	—
Non-TET Natural Gasoline - Swaps:
Volume (Bbl)	92,000		—
Weighted-average price ($/Bbl)	$	60.65	$	—

Natural gas:



Henry Hub NYMEX - Swaps:
Volume (MMBtu)	920,000		—
Weighted-average price ($/MMBtu)	$	2.73	$	—
Henry Hub NYMEX - Collars:
Volume (MMBtu)	7,360,000		25,550,000
Weighted-average floor price ($/MMBtu)	$	3.09	$	4.14
Weighted-average ceiling price ($/MMBtu)	$	3.84	$	8.43





Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:
Volume (MMBtu)	7,314,000		25,550,000
Weighted-average differential ($/MMBtu)	$	(0.36)	$	(1.65)

Contingent consideration

The Sixth Street PSA provides for potential contingent payments to be paid to the Company if certain cash flow targets are met related to divested oil and natural gas property operations. The Sixth Street Contingent Consideration provides the Company with the right to receive up to a maximum of $93.7 million in additional cash consideration, comprised of potential quarterly payments through June 2027 totaling up to $38.7 million and a potential balloon payment of $55.0 million in June 2027. As of September 30, 2022, the maximum remaining additional cash consideration of the contingent consideration was $90.1 million. The fair value of the Sixth Street Contingent Consideration was $35.9 million as of December 31, 2021 and $28.7 million as of September 30, 2022. See Note 3 for further discussion of the Working Interest Sale associated with the Sixth Street Contingent Consideration.

At each quarterly reporting period, the Company remeasures contingent consideration with the change in fair value recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the unaudited consolidated statements of operations.