XML 29 R18.htm IDEA: XBRL DOCUMENT v3.21.2
Derivative Activities
 9 Months Ended
Sep. 30, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Activities

(11) DERIVATIVE ACTIVITIES

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We utilize commodity swaps, calls, collars, three-way collars or swaptions to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (NYMEX) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net loss of $776.1 million at September 30, 2021. These contracts expire monthly through December 2023. The following table sets forth our commodity-based derivative volumes by year as of September 30, 2021, excluding our basis and freight swaps and divestiture contingent consideration which are discussed separately below:

 

 

Period

 

Contract Type

 

Volume Hedged

 

Weighted Average Hedge Price

 

 

 

 

 

 

Swap

 

Sold Put

 

Floor

 

Ceiling

Natural Gas (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Swaps

 

583,152 Mmbtu/day

 

$

2.84

 

 

 

 

 

 

 

 

2021

 

Collars

 

227,391 Mmbtu/day

 

 

 

 

 

 

$

2.87

 

$

3.42

2021

 

Three-way Collars

 

339,457 Mmbtu/day

 

 

 

$

2.26

 

$

2.62

 

$

3.04

2022

 

Swaps

 

382,329 Mmbtu/day

 

$

3.11

 

 

 

 

 

 

 

 

2022

 

Collars

 

213,438 Mmbtu/day

 

 

 

 

 

 

$

3.26

 

$

3.70

2022

 

Three-way Collars

 

251,781 Mmbtu/day

 

 

 

$

2.37

 

$

3.03

 

$

3.77

January - March 2022

 

Calls

 

80,000 Mmbtu/day

 

 

 

 

 

 

 

 

 

$

6.02

2023

 

Swaps

 

60,000 Mmbtu/day

 

$

3.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Swaps

 

7,500 bbls/day

 

$

56.92

 

 

 

 

 

 

 

 

2022

 

Swaps

 

5,811 bbls/day

 

$

59.59

 

 

 

 

 

 

 

 

2023

 

Swaps

 

500 bbls/day

 

$

63.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NGLs (C3-Propane)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Swaps

 

6,000 bbls/day

 

$

1.17/gallon

 

 

 

 

 

 

 

 

2021

 

Collars

 

4,000 bbls/day

 

 

 

 

 

 

$

1.00/gallon

 

$

$1.20/gallon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NGLs (NC4-Normal Butane)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Swaps

 

2,663 bbls/day

 

$

1.17/gallon

 

 

 

 

 

 

 

 

2021

 

Collars

 

2,000 bbls/day

 

 

 

 

 

 

$

1.00/gallon

 

$

1.20/gallon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NGLs (C5-Natural Gasoline)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Swaps

 

2,000 bbls/day

 

$

1.41/gallon

 

 

 

 

 

 

 

 

2021

 

Collars

 

3,000 bbls/day

 

 

 

 

 

 

$

1.35/gallon

 

$

1.55/gallon

January - March 2022

 

Swaps

 

2,656 bbls/day

 

$

1.59/gallon

 

 

 

 

 

 

 

 

January - March 2022

 

Collars

 

2,000 bbls/day

 

 

 

 

 

 

$

1.45/gallon

 

$

1.60/gallon

 

(1)

We also sold natural gas call swaptions of 80,000 Mmbtu/day for 2022 at a weighted average price of $2.80 and 70,000 Mmbtu/day for 2023 at a weighted average price of $3.04.

 

Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur.

Basis Swap Contracts

In addition to the swaps, collars and swaptions described above, at September 30, 2021, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through December 2024 and include a total volume of 204,967,500 Mmbtu. The fair value of these contracts was a gain of $8.5 million at September 30, 2021.

At September 30, 2021, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly through 2022. The fair value of these contracts was a gain of $394,000 at September 30, 2021.

Freight Swap Contracts

In connection with our international propane sales, we utilize propane swaps. To further hedge our propane price, at September 30, 2021, we had freight swap contracts on the Baltic Exchange which lock in the freight rate for a specific trade route. These contracts settle monthly and cover 12,000 metric tons for the remainder of 2021 and cover 7,000 metric tons for first quarter 2022. The fair value of these contracts equal to a loss of $26,000 at September 30, 2021.

Divestiture Contingent Consideration

In addition to the derivatives described above, our right to receive contingent consideration in conjunction with the sale of our North Louisiana assets was determined to be a derivative financial instrument that is not designated as a hedging instrument. The remaining contingent consideration of up to $75.0 million is based on future achievement of natural gas and oil prices based on published indexes and realized NGLs prices of the buyer for the years 2021, 2022 and 2023. All changes in the fair value are recognized as a gain or loss in earnings in the period they occur in derivative fair value income or loss in our consolidated statements of operations. For first nine months 2021, this fair value has increased $34.3 million for a fair value of $50.2 million as of September 30, 2021.

Derivative Assets and Liabilities

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of September 30, 2021 and December 31, 2020 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):

 

 

 

 

September 30, 2021

 

 

 

 

Gross
Amounts of
Recognized
Assets

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts
of Assets Presented
in the
Balance Sheet

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

5,574

 

 

$

(5,574

)

 

$

—

 

 

–collars

 

 

193

 

 

 

(193

)

 

 

—

 

 

–three-way collars

 

 

2

 

 

 

(2

)

 

 

—

 

 

–basis swaps

 

 

15,633

 

 

 

(12,187

)

 

 

3,446

 

Crude oil

–swaps

 

 

10

 

 

 

(10

)

 

 

—

 

NGLs

–C3 propane spread swaps

 

 

8,367

 

 

 

(8,367

)

 

 

—

 

 

−C5 natural gasoline swaps

 

 

17

 

 

 

(17

)

 

 

—

 

Freight

−swaps

 

 

27

 

 

 

(30

)

 

 

(3

)

Divestiture contingent consideration

 

 

50,220

 

 

 

—

 

 

 

50,220

 

 

 

 

$

80,043

 

 

$

(26,380

)

 

$

53,663

 

 

 

 

 

 

 

September 30, 2021

 

 

 

 

Gross
Amounts of
Recognized
(Liabilities)

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts
of (Liabilities) Presented
in the
Balance Sheet

 

Derivative (liabilities):

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

(359,243

)

 

$

5,574

 

 

$

(353,669

)

 

–swaptions

 

 

(60,132

)

 

 

—

 

 

 

(60,132

)

 

–collars

 

 

(93,418

)

 

 

193

 

 

 

(93,225

)

 

–three-way collars

 

 

(200,479

)

 

 

2

 

 

 

(200,477

)

 

–calls

 

 

(10,018

)

 

 

—

 

 

 

(10,018

)

 

–basis swaps

 

 

(7,160

)

 

 

12,187

 

 

 

5,027

 

Crude oil

–swaps

 

 

(34,274

)

 

 

10

 

 

 

(34,264

)

NGLs

–C3 propane spread swaps

 

 

(7,973

)

 

 

8,367

 

 

 

394

 

 

–C3 propane swaps

 

 

(6,140

)

 

 

—

 

 

 

(6,140

)

 

–C3 collars

 

 

(3,787

)

 

 

—

 

 

 

(3,787

)

 

–NC4 butane swaps

 

 

(3,991

)

 

 

—

 

 

 

(3,991

)

 

–NC4 butane collars

 

 

(2,797

)

 

 

—

 

 

 

(2,797

)

 

–C5 natural gasoline swaps

 

 

(3,908

)

 

 

17

 

 

 

(3,891

)

 

–C5 natural gasoline collars

 

 

(3,728

)

 

 

—

 

 

 

(3,728

)

Freight

–swaps

 

 

(53

)

 

 

30

 

 

 

(23

)

 

 

 

$

(797,101

)

 

$

26,380

 

 

$

(770,721

)

 

 

 

 

 

 

December 31, 2020

 

 

 

 

Gross
Amounts of
Recognized
Assets

 

 

Gross Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
Assets Presented in the
Balance Sheet

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

33,559

 

 

$

(16,821

)

 

$

16,738

 

 

–collars

 

 

7,016

 

 

 

(2,329

)

 

 

4,687

 

 

–three-way collars

 

 

535

 

 

 

(6,139

)

 

 

(5,604

)

 

–basis swaps

 

 

7,894

 

 

 

(3,502

)

 

 

4,392

 

Crude oil

–swaps

 

 

2,465

 

 

 

(829

)

 

 

1,636

 

NGLs

–C3 propane spread swaps

 

 

4,863

 

 

 

(4,863

)

 

 

—

 

 

–C3 propane collars

 

 

—

 

 

 

(107

)

 

 

(107

)

Freight

–swaps

 

 

2,310

 

 

 

—

 

 

 

2,310

 

Divestiture contingent consideration

 

 

15,960

 

 

 

—

 

 

 

15,960

 

 

 

 

$

74,602

 

 

$

(34,590

)

 

$

40,012

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

Gross
Amounts of
Recognized
(Liabilities)

 

 

Gross Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
(Liabilities)
Presented in the
Balance Sheet

 

Derivative (liabilities):

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

(10,120

)

 

$

16,821

 

 

$

6,701

 

 

–swaptions

 

 

(9,803

)

 

 

—

 

 

 

(9,803

)

 

–collars

 

 

—

 

 

 

2,329

 

 

 

2,329

 

 

–three-way collars

 

 

(18,353

)

 

 

6,139

 

 

 

(12,214

)

 

–basis swaps

 

 

(4,197

)

 

 

3,502

 

 

 

(695

)

Crude oil

–swaps

 

 

(5,471

)

 

 

829

 

 

 

(4,642

)

NGLs

–C3 propane spread swaps

 

 

(4,069

)

 

 

4,863

 

 

 

794

 

 

–C3 propane swaps

 

 

(8,243

)

 

 

—

 

 

 

(8,243

)

 

–C3 propane collars

 

 

(3,086

)

 

 

107

 

 

 

(2,979

)

 

–C5 natural gasoline swaps

 

 

(4,897

)

 

 

—

 

 

 

(4,897

)

 

–C5 natural gasoline calls

 

 

(546

)

 

 

—

 

 

 

(546

)

 

–NC4 butane swaps

 

 

(651

)

 

 

—

 

 

 

(651

)

 

–NC4 butane collars

 

 

(401

)

 

 

—

 

 

 

(401

)

Freight

–swaps

 

 

(1,206

)

 

 

—

 

 

 

(1,206

)

 

 

 

$

(71,043

)

 

$

34,590

 

 

$

(36,453

)

 

 

The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):

 

 

 

Derivative Fair Value (Loss) Income

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Commodity swaps

 

$

(332,855

)

 

$

(91,425

)

 

$

(558,186

)

 

$

142,413

 

Swaptions

 

 

(33,718

)

 

 

(14,166

)

 

 

(50,329

)

 

 

(15,520

)

Three-way collars

 

 

(173,344

)

 

 

(20,705

)

 

 

(226,176

)

 

 

(38,267

)

Collars

 

 

(106,340

)

 

 

(16,893

)

 

 

(158,562

)

 

 

(14,336

)

Calls

 

 

(10,018

)

 

 

(255

)

 

 

(10,793

)

 

 

(12

)

Basis swaps

 

 

(8,469

)

 

 

15,587

 

 

 

11,054

 

 

 

31,750

 

Freight swaps

 

 

(346

)

 

 

2,737

 

 

 

(1,050

)

 

 

(4,276

)

Divestiture contingent consideration

 

 

12,870

 

 

 

430

 

 

 

34,260

 

 

 

430

 

Total

 

$

(652,220

)

 

$

(124,690

)

 

$

(959,782

)

 

$

102,182