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Derivative Instruments
 9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Note 7—Derivative Instruments
The Company is exposed to certain risks relating to its ongoing business operations and may use derivative instruments to manage its exposure to commodity price risk from time to time.
Commodity Derivative Contracts
Historically, prices received for crude oil and natural gas production have been volatile because of supply and demand factors, worldwide political factors, general economic conditions and seasonal weather patterns. The Company may periodically use derivative instruments, such as swaps, costless collars and basis swaps, to mitigate its exposure to declines in commodity prices and to the corresponding negative impacts such declines can have on its cash flows from operations, returns on capital and other financial results. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. The Company does not enter into derivative contracts for speculative or trading purposes.
Commodity Swap and Collar Contracts. The Company may use commodity derivative instruments known as fixed price swaps to realize a known price for a specific volume of production, basis swaps to hedge the difference between the index price and a local or future index price, or costless collars to establish fixed price floors and ceilings. All transactions are settled in cash with one party paying the other for the resulting difference in price multiplied by the contract volume.
The following table summarizes the approximate volumes and average contract prices of derivative contracts the Company had in place as of September 30, 2021:
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Crude Price
($/Bbl)(1)
Crude oil swaps
NYMEX WTI
October 2021 - December 2021828,000 9,000 $49.82
January 2022 - March 20221,080,000 12,000 65.03
April 2022 - June 20221,092,000 12,000 65.28
July 2022 - September 2022690,000 7,500 63.99
October 2022 - December 2022598,000 6,500 64.11
ICE Brent
October 2021 - December 2021322,000 3,500 $58.10
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Collar Price Ranges
($/Bbl)(2)
Crude oil collars
NYMEX WTI
October 2021 - December 202192,000 1,000 $42.00-$50.10
January 2022 - March 2022225,000 2,500 63.60-74.30
April 2022 - June 2022227,500 2,500 63.20-72.41
ICE Brent
October 2021 - December 2021138,000 1,500 $66.67-$74.80

PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Differential
($/Bbl)(3)
Crude oil basis differential swaps
October 2021 - December 2021644,000 7,000 $0.26
January 2022 - March 2022360,000 4,000 0.18
April 2022 - June 2022364,000 4,000 0.18
July 2022 - September 2022368,000 4,000 0.18
October 2022 - December 2022368,000 4,000 0.18

PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Differential
($/Bbl)(4)
Crude oil roll differential swaps
January 2022 - March 2022450,000 5,000 $0.60
April 2022 - June 2022455,000 5,000 0.60
July 2022 - September 2022460,000 5,000 0.60
October 2022 - December 2022460,000 5,000 0.60
(1)    These crude oil swap transactions are settled based on either the NYMEX WTI or ICE Brent index price, as applicable, on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
(2)    These crude oil collars are settled based on the NYMEX WTI or ICE Brent index price, as applicable, on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
(3)    These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices, during each applicable monthly settlement period.
(4)    These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price.

PeriodVolume (MMBtu)Volume (MMBtu/d)
Wtd. Avg. Gas Price
($/MMBtu)(1)
Natural gas swaps
October 2021 - December 20213,680,000 40,000 $2.95
January 2022 - March 20222,700,000 30,000 3.00
April 2022 - June 20222,730,000 30,000 3.24
July 2022 - September 20222,760,000 30,000 3.24
October 2022 - December 20221,540,000 16,739 3.15

PeriodVolume (MMBtu)Volume (MMBtu/d)
Wtd. Avg. Differential
($/MMBtu)(2)
Natural gas basis differential swaps
October 2021 - December 20214,290,000 46,630 $(0.24)
January 2022 - March 20222,700,000 30,000 (0.18)
PeriodVolume (MMBtu)Volume
(MMBtu/d)
Wtd. Avg. Collar Price Ranges
($/MMBtu)(3)
Natural gas collars
October 2021 - December 20211,220,000 13,261 $3.15-$4.65
January 2022 - March 20221,800,00020,000 3.15-4.65
April 2022 - June 2022910,00010,000 3.00-3.68
July 2022 - September 2022920,00010,000 3.00-3.68
October 2022 - December 2022310,0003,370 3.00-3.68
(1)    These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
(2)    These natural gas basis swap contracts are settled based on the difference between the Inside FERC’s West Texas WAHA price and the NYMEX price of natural gas, during each applicable monthly settlement period.
(3)    These natural gas collars are settled based on the Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
Derivative Instrument Reporting. The Company’s oil and natural gas derivative instruments have not been designated as hedges for accounting purposes. Therefore, all gains and losses are recognized in the Company’s consolidated statements of operations. All derivative instruments are recorded at fair value in the consolidated balance sheets, other than derivative instruments that meet the “normal purchase normal sale” exclusion, and any fair value gains and losses are recognized in current period earnings.
The following table presents the impact of the Company’s derivative instruments in its consolidated statements of operations for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)
2021202020212020
Net gain (loss) on derivative instruments
$(44,527)$(1,968)$(150,685)$(40,330)
Offsetting of Derivative Assets and Liabilities. The Company’s commodity derivatives are included in the accompanying consolidated balance sheets as derivative assets and liabilities. The Company nets its financial derivative instrument fair value amounts executed with the same counterparty pursuant to ISDA master netting agreements, which provide for net settlement over the term of the contract and in the event of default or termination of the contract. The tables below summarize the fair value amounts and the classification in the consolidated balance sheets of the Company’s derivative contracts outstanding at the respective balance dates, as well as the gross recognized derivative assets, liabilities and offset amounts:
Balance Sheet ClassificationGross Fair Value Asset/Liability Amounts
Gross Amounts Offset(1)
Net Recognized Fair Value Assets/Liabilities
(in thousands)
September 30, 2021
Derivative Assets
Commodity contracts
Prepaid and other current assets$3,387 $(3,387)$— 
Other noncurrent assets49 (49)— 
Derivative Liabilities
Commodity contracts
Other current liabilities79,759 (3,387)76,372 
Other noncurrent liabilities3,377 (49)3,328 
December 31, 2020
Derivative Assets
Commodity contracts
Prepaid and other current assets$6,131 $(6,131)$— 
Other noncurrent assets152$(100)52
Derivative Liabilities
Commodity contracts
Other current liabilities$24,392 $(6,131)$18,261 
Other noncurrent liabilities$100 $(100)$— 
(1)     The Company has agreements in place with each of its counterparties that allow for the financial right of offset for derivative assets against derivative liabilities at settlement or in the event of a default under the agreements or contract termination.
Contingent Features in Financial Derivative Instruments. None of the Company’s derivative instruments contain credit-risk-related contingent features. Counterparties to the Company’s financial derivative contracts are high credit-quality financial institutions that are lenders under CRP’s credit agreement. The Company uses only credit agreement participants to hedge with, since these institutions are secured equally with the holders of any CRP bank debt, which eliminates the potential need to post collateral when Centennial is in a derivative liability position. As a result, the Company is not required to post letters of credit or corporate guarantees for its derivative counterparties in order to secure contract performance obligations.
In addition, the Company is exposed to credit risk associated with its derivative contracts from non-performance by its counterparties. The Company mitigates its exposure to any single counterparty by contracting with a number of financial institutions, each of which has a high credit rating and is a member under CRP’s credit facility as referenced above.