Derivatives

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

    The Company uses an interest-rate-related derivative instrument to manage its variability of cash flows associated with changes in interest rates on its variable-rate debt.

On June 8, 2023, the Company entered into Amendment No. 1 (the “TL Amendment”) to the Term Loan Agreement (the "TL Agreement"), dated May 25, 2018, by and among the Company, as parent guarantor, Keane Group Holdings LLC, as lead borrower, certain other subsidiaries of the Company as additional borrowers and guarantor parties thereto, the lender parties thereto and Barclays Bank PLC, as administrative agent and collateral agent. The TL Agreement governs the 2018 Term Loan Facility as otherwise described herein. The TL Amendment to the TL Agreement provides, among other things, for replacement of LIBOR with the term SOFR (as defined in the TL Amendment), plus a credit spread adjustment of 11.48 basis points as the reference rate for purposes of calculating interest under the TL Agreement and updates certain other provisions of the TL Agreement to reflect the transition from LIBOR to term SOFR. The TL Agreement had an initial aggregate principal amount of $350.0 million and, as made effective by the TL Amendment, has a variable interest rate based on SOFR, subject to a 1.0% floor. In June 2023, the Company terminated its existing interest rate swap executed June 22, 2018, and executed a new interest rate swap effective through March 31, 2025, to hedge its expected variable cash flows indexed to SOFR. The new interest rate swap is indexed to 1-month SOFR subject to a 1% floor to match the amended TL Agreement. The termination of the pre-existing interest swap and execution of a new interest rate swap qualifies as a contract modification within the scope of ASC 848, Reference Rate Reform, as the updated terms exclusively pertain to the reference rate. The Company is applying the following optional expedients as provided by ASC 848: (i) option to not de-designate a hedging relationship due to a change in a critical term, and (ii) option to apply certain expedients for the application of subsequent assessment methods for cash flow hedges.

    The following tables present the fair value of the Company's derivative instrument on a gross and net basis as of the periods shown below:

	(Thousands of Dollars)
	Derivative designated as hedging instruments		Derivative not designated as hedging instruments		Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet(2)
As of June 30, 2023:
Other current asset	$	4,665	$	—	$	4,665	$	—	$	4,665
Other noncurrent asset	2,247		—		2,247		—		2,247
As of December 31, 2022:
Other current asset	3,870		—		3,870		—		3,870
Other noncurrent asset	$	2,816	$	—	$	2,816	$	—	$	2,816

(1) Agreements are in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

(2) There are no amounts subject to an enforceable master netting arrangement that are not netted in these amounts. There are no amounts of related financial collateral received or pledged.

The following table presents gains and losses for the Company's interest rate derivative designated as cash flow hedges (in thousands of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022		Location
Amount of gain (loss) recognized in total other comprehensive income on derivative	$	2,624	$	1,565	$	2,066	$	7,177	OCI
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings	$	827	$	(691)	$	1,485	$	(1,378)	Interest Expense

The gain (loss) recognized in other comprehensive income for the derivative instrument is presented within hedging activities in the Condensed Consolidated Statements of Operations and Comprehensive Income.

There were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness. Based on recorded values as of June 30, 2023, $4.0 million of net gains will be reclassified from accumulated other comprehensive income into earnings within the next 12 months.

See Note (8) Fair Value Measurements and Financial Information for discussion on fair value measurements related to the Company's derivative instrument.