DERIVATIVES AND HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

DERIVATIVE AND HEDGING ACTIVITIES

The Company is exposed to certain risks arising from both its business operations and economic conditions, and it enters into certain derivative contracts to manage exposure to these risks. To minimize counterparty credit risk in derivative instruments, the Company enters into transactions with high credit-rating counterparties. The Company did not elect to apply hedge accounting to these derivative contracts and recorded the fair value of the derivatives on the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021.

Interest Rate Risk

The Company manages market risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s objectives in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.

In September 2019, BCP PHP, LLC (“BCP PHP”) entered into two interest rate swaps on 75% of the outstanding $513.0 million term loan. These instruments were effective September 30, 2019 and included a mandatory termination date on November 19, 2024. The notional amounts of these swaps floated monthly such that 75% of the total outstanding term loan was covered by the notional of the two swaps over the life of the associated term facility. In June 2022, these two interest rate swaps were terminated as BCP PHP’s outstanding term loan credit facility was extinguished on June 8, 2022. Refer to Note 8—Debt and Financing Costs in the Notes to our Consolidated Financial Statements for further information about the refinancing transactions.

In November 2022, the Company entered into an interest rate swap with a notional amount of $1.00 billion effective on May 1, 2023 and maturing on May 31, 2025. The Company pays a fixed rate of 4.46% for the respective notional amount.

The fair value or settlement value of the consolidated interest rate swaps outstanding are presented on a gross basis on the Consolidated Balance Sheets. Interest rate swap derivative assets were $2.7 million and nil as of December 31, 2022 and 2021, respectively. Interest rate swap derivative liabilities were $8.3 million and $2.7 million as of December 31, 2022 and 2021, respectively. The Company recorded cash settlements on interest rate swap derivatives of $10.9 million, $2.9 million, and $9.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, in “Interest Expense” of the Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of $7.9 million, $4.5 million and $18.9 million for the years ended December 31, 2022, 2021 and 2020, respectively, in “Interest Expense” of the Consolidated Statements of Operations.

Commodity Price Risk

The results of the Company’s operations may be affected by the market prices of oil, natural gas and NGLs. A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and condensate prices in the Permian Basin and the U.S. Gulf Coast. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. Management regularly reviews the Company’s potential exposure to commodity price risk and manages exposure of such risk through commodity hedge contracts.

During 2022, the Company entered into 11 commodity swap contracts based on the NGL-Mont Belvieu Purity Ethane-OPIS and Waha Basis index on various notional quantities of natural gas and NGLs. These index swaps are used to hedge against location price risk of the commodity resulting from supply and demand volatility and protect cash flows against price fluctuations. Table below presents detail information of commodity swaps outstanding as of December 31, 2022 (in thousands, except volumes):

		December 31, 2022
Commodity	Instruments	Unit	Volume	Net Fair Value
Natural Gas (short contracts)	Commodity Swap	MMBtus	5,895,000	$	4,737
NGL (short contracts)	Commodity Swap	Gallons	87,906,000	(3,308)
				$	1,429

Similarly, in 2021 and 2020 BCP Raptor, LLC (“BCP I”) and BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional amount that provided for a fixed price for crude in the Permian Basin and Waha basis hub hedges on various notional quantities of gas that either provided a fixed price differential of natural gas in the Permian Basin relative to the NYMEX natural gas contract or provided a fixed price for natural gas in the Permian Basin. These commodity swaps expired before December 31, 2021.

The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Consolidated Balance Sheet. Commodity swap derivative assets were $4.3 million and nil as of December 31, 2022 and 2021, respectively. Commodity swap derivative liabilities were $5.7 million and $0.2 million as of December 31, 2022 and 2021, respectively. The Company recorded cash settlements on commodity swap derivatives of $0.2 million, $16.5 million, and $1.4 million for the years ended December 31, 2022, 2021 and 2020, respectively, in “Product Revenue” of the Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of $1.4 million, $16.9 million and $1.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, in “Product Revenue” of the Consolidated Statements of Operations.