(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 do not utilize complex derivatives as we typically utilize commodity swap, swaptions or collar contracts 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. Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. Their fair value, which is represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price (generally NYMEX for natural gas and crude oil or Mont Belvieu for NGLs), approximated a net derivative asset of $13.6 million at December 31, 2017. These contracts expire monthly through December 2019. The following table sets forth the derivative volumes by year as of December 31, 2017, excluding our basis and freight swaps which are discussed separately below:

Period	Contract Type	Volume Hedged	Weighted Average Hedge Price
Natural Gas
2018	Swaps	794,822 Mmbtu/day	$ 3.13
2019	Swaps	12,329 Mmbtu/day	$ 3.01
January − March 2018	Collars	60,000 Mmbtu/day	$ 3.40-$ 3.76
April – December 2018	Swaptions	307,500 Mmbtu/day	$ 2.98 ⁽¹⁾
2019	Swaptions	85,000 Mmbtu/day	$ 2.97 ⁽¹⁾

Crude Oil
2018	Swaps	8,995 bbls/day	$ 53.30
2019	Swaps	4,746 bbls/day	$ 52.81

NGLs (C2-Ethane)
2018	Swaps	250 bbls/day	$ 0.29/gallon

NGLs (C3-Propane)
2018	Swaps	10,362 bbls/day	$ 0.68/gallon
2018	Collars	2,000 bbls/day	$ 0.90-$ 1.05/gallon

NGLs (NC4-Normal Butane)
2018	Swaps	4,621 bbls/day	$ 0.81/gallon

NGLs (C5-Natural Gasoline)
2018	Swaps	4,713 bbls/day	$ 1.19/gallon
2019	Swaps	1,000 bbls/day	$ 1.24/gallon

⁽¹⁾ Contains a combined derivative instrument consisting of a fixed price swap and a sold option to extend or double the volume. For April through December 2018, we have swaps in place for 147,500 Mmbtu per day on which the counterparty can elect to double the volume at a weighted average price of $2.89. We also have swaps in place for 160,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2019 at a weighted average price of $3.07. In 2019, if the counterparty elects to double the volume, we would have additional swaps covering 85,000 Mmbtu per day at a weighted average price of $2.97.

Basis Swap Contracts

In addition to the swaps, collars and swaptions above, at December 31, 2017, we had natural gas basis swap contracts which lock in the differential between NYMEX and certain of our physical pricing points in Appalachia. These contracts settle monthly through October 2019 and include a total volume of 120,892,500 Mmbtu. The fair value of these contracts was a net derivative liability of $7.8 million on December 31, 2017.

At December 31, 2017, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indexes. The contracts settle monthly through December 2018 and include a total volume of 1,362,000 barrels. The fair value of these contracts was a net derivative liability of $1.2 million on December 31, 2017.

Freight Swap Contracts

In connection with our international propane sales, we utilize propane swaps. To further hedge our propane price, at December 31, 2017, we had freight swap contracts which lock in the freight rate for a specific trade route on the Baltic Exchange. These contracts settle monthly through December 2018 and cover 5,000 metric tons per month with a fair value net derivative asset of $276,000 on December 31, 2017. These contracts use observable third-party pricing inputs that we consider to be Level 2 fair value classification.

Derivative assets and liabilities

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of December 31, 2017 and 2016 is summarized below (in thousands). As of December 31, 2017, we are conducting derivative activities with nineteen counterparties, of which all but five are secured lenders in our bank credit facility. We believe all of these counterparties are acceptable credit risks. At times, such risks may be concentrated with certain counterparties. The credit worthiness of our counterparties is subject to periodic review. 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.

		December 31, 2017
		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	$	87,794	$	(4,106	)	$	83,688
	–swaptions		18,817		(8,103	)		10,714
	–basis swaps		1,815		(6,673	)		(4,858	)
	–collars		3,039		(500	)		2,539
Crude oil	–swaps		2		(7,928	)		(7,926	)
NGLs	–C2 ethane swaps		57		—			57
	–C3 propane swaps		—		(12,556	)		(12,556	)
	–C3 propane collars		85		(85	)		—
	–C3 propane spread swaps		12,762		(12,762	)		—
	–NC4 butane swaps		—		(6,051	)		(6,051	)
	–C5 natural gasoline swaps		—		(6,727	)		(6,727	)
Freight	–swaps		276		(276	)		—
		$	124,647	$	(65,767	)	$	58,880

		December 31, 2017
		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	$	(216	)	$	4,106	$	3,890
	–swaptions		(12,283	)		8,103		(4,180	)
	–basis swaps		(9,580	)		6,673		(2,907	)
	–collars		—			500		500
Crude oil	–swaps		(24,726	)		7,928		(16,798	)
NGLs	–C3 propane swaps		(34,325	)		12,556		(21,769	)
	–C3 propane collars		—			85		85
	–C3 propane spread swaps		(13,983	)		12,762		(1,221	)
	–NC4 butane swaps		(11,188	)		6,051		(5,137	)
	–C5 natural gasoline swaps		(13,488	)		6,727		(6,761	)
Freight	–swaps		—			276		276
		$	(119,789	)	$	65,767	$	(54,022	)

		December 31, 2016
		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	$	13,213	$	(11,425	)	$	1,788
	–basis swaps		12,535		(9,437	)		3,098
	–collars		6,298		(6,298	)		—
	–puts		18,159		(15,429	)		2,730
Crude oil	–swaps		9,356		(3,489	)		5,867
NGLs	–C2 ethane swaps		53		(53	)		—
	–C3 propane spread swaps		17,396		(17,396	)		—
	–NC4 butane swaps		4		(4	)		—
Freight	–swaps		65		(65	)		—
		$	77,079	$	(63,596	)	$	13,483

		December 31, 2016
		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	$	(158,359	)	$	11,425	$	(146,934	)
	–basis swaps		(687	)		9,437		8,750
	–collars		(2,625	)		6,298		3,673
	–puts		—			15,429		15,429
	–calls		(1,041	)		—		(1,041	)
Crude oil	–swaps		(13,206	)		3,489		(9,717	)
NGLs	–C2 ethane swaps		(1,008	)		53		(955	)
	–C3 propane swaps		(32,437	)		—		(32,437	)
	–C3 propane spread swaps		(18,138	)		17,396		(742	)
	–NC4 butane swaps		(13,419	)		4		(13,415	)
	–C5 natural gasoline swaps		(12,176	)		—		(12,176	)
Freight	–swaps		—			65		65
		$	(253,096	)	$	63,596	$	(189,500	)

The effects of our derivatives on our consolidated statements of operations for the last three years are summarized below (in thousands).

	Year Ended December 31,
	Derivative Fair Value Income (Loss)
	2017			2016			2015
Commodity Swaps	$	181,095		$	(265,466	)	$	398,020
Swaptions		6,534			—			—
Re-purchased swaps		—			—			851
Collars		18,132			(6,926	)		16,539
Basis swaps		(4,647	)		29,154			954
Puts		10,929			(18,201	)		—
Calls		987			(18	)		—
Freight swaps		320			66			—
Total	$	213,350		$	(261,391	)	$	416,364