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DERIVATIVES AND RISK MANAGEMENT
3 Months Ended
Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES AND RISK MANAGEMENT DERIVATIVES AND RISK MANAGEMENT
The Company is exposed to volatility in market prices and basis differentials for natural gas, oil and NGLs which impacts the predictability of its cash flows related to the sale of those commodities.  These risks are managed by the Company’s use of certain derivative financial instruments.  As of March 31, 2022, the Company’s derivative financial instruments consisted of fixed price swaps, two-way costless collars, three-way costless collars, basis swaps, call options, swaptions and interest rate swaps.  A description of the Company’s derivative financial instruments is provided below:
Fixed price swapsIf the Company sells a fixed price swap, the Company receives a fixed price for the contract, and pays a floating market price to the counterparty.  If the Company purchases a fixed price swap, the Company receives a floating market price for the contract, and pays a fixed price to the counterparty.
 
Two-way costless collarsArrangements that contain a fixed floor price (“purchased put option”) and a fixed ceiling price (“sold call option”) based on an index price which, in aggregate, have no net cost.  At the contract settlement date, (1) if the index price is higher than the ceiling price, the Company pays the counterparty the difference between the index price and ceiling price, (2) if the index price is between the floor and ceiling prices, no payments are due from either party, and (3) if the index price is below the floor price, the Company will receive the difference between the floor price and the index price.
 
Three-way costless collarsArrangements that contain a purchased put option, a sold call option and a sold put option based on an index price that, in aggregate, have no net cost.  At the contract settlement date, (1) if the index price is higher than the sold call strike price, the Company pays the counterparty the difference between the index price and sold call strike price, (2) if the index price is between the purchased put strike price and the sold call strike price, no payments are due from either party, (3) if the index price is between the sold put strike price and the purchased put strike price, the Company will receive the difference between the purchased put strike price and the index price, and (4) if the index price is below the sold put strike price, the Company will receive the difference between the purchased put strike price and the sold put strike price.
 
Basis swapsArrangements that guarantee a price differential for natural gas from a specified delivery point.  If the Company sells a basis swap, the Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract, and pays the counterparty if the price differential is less than the stated terms of the contract.  If the Company purchases a basis swap, the Company pays the counterparty if the price differential is greater than the stated terms of the contract, and receives a payment from the counterparty if the price differential is less than the stated terms of the contract.
 
Options (Calls and Puts)The Company purchases and sells options in exchange for premiums.  If the Company purchases a call option, the Company receives from the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is below the call’s strike price, no payment is due from either party.  If the Company sells a call option, the Company pays the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is below the call’s strike price, no payment is due from either party. If the Company purchases a put option, the Company receives from the counterparty the excess (if any) of the strike price over the market price of the put option at the time of settlement, but if the market price is above the put’s strike price, no payment is due from either party. If the Company sells a put option, the Company pays the counterparty the excess (if any) of the strike price over the market price of the put option at the time of settlement, but if the market price is above the put’s strike price, no payment is due from either party.
Index swapsNatural gas index swaps are used to manage the Company’s exposure to volatility in daily cash market pricing. When the Company sells an index swap, the Company pays an amount equal to the average of the daily index price for a given month at a specified location, and receives a first of month index price based on the same location.
SwaptionsInstruments that refer to an option to enter into a fixed price swap. In exchange for an option premium, the purchaser gains the right but not the obligation to enter a specified swap agreement with the issuer for specified future dates. If the Company sells a swaption, the counterparty has the right to enter into a fixed price swap wherein the Company receives a fixed price for the contract and pays a floating market price to the counterparty. If the Company purchases a swaption, the Company has the right to enter into a fixed price swap wherein the Company receives a floating market price for the contract and pays a fixed price to the counterparty.
 
Interest rate swapsInterest rate swaps are used to fix or float interest rates on existing or anticipated indebtedness.  The purpose of these instruments is to manage the Company’s existing or anticipated exposure to unfavorable interest rate changes.
The Company contracts with counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into, and the Company actively monitors the credit ratings and credit default swap rates of these counterparties where applicable.  However, there can be no assurance that a counterparty will be able to meet its obligations to the Company. The Company presents its derivatives position on a gross basis and does not net the asset and liability positions.
The following tables provide information about the Company’s financial instruments that are sensitive to changes in commodity prices and that are used to protect the Company’s exposure. None of the financial instruments below are designated for hedge accounting treatment.  The tables present the notional amount, the weighted average contract prices and the fair value by expected maturity dates as of March 31, 2022:
Financial Protection on Production
 Weighted Average Price per MMBtu 
Volume (Bcf)
SwapsSold PutsPurchased PutsSold CallsBasis Differential
Fair Value at
March 31, 2022
(in millions)
Natural Gas       
2022       
Fixed price swaps627 $3.04 $— $— $— $— $(1,672)
Two-way costless collars78 — — 2.53 2.92 — (216)
Three-way costless collars277 — 2.03 2.48 2.88 — (784)
Total982 $(2,672)
2023
Fixed price swaps504 $3.08 $— $— $— $— $(675)
Two-way costless collars219 — — 3.03 3.55 — (217)
Three-way costless collars215 — 2.09 2.54 3.00 — (355)
Total938 $(1,247)
2024
Fixed price swaps224 $2.96 $— $— $— $— $(174)
Two-way costless collars44 — — 3.07 3.53 — (19)
Three-way costless collars11 — 2.25 2.80 3.54 — (12)
Total279 $(205)
Basis Swaps
2022277 $— $— $— $— $(0.53)$72 
2023250 — — — — (0.47)20 
202446 — — — — (0.71)
2025— — — — (0.64)
Total582 $104 
Volume
(MBbls)
Weighted Average Strike Price per Bbl
Fair Value at
March 31, 2022
(in millions)
SwapsSold PutsPurchased PutsSold Calls
Oil
2022
Fixed price swaps2,376 $53.32 $— $— $— $(94)
Three-way costless collars1,037 — 39.83 50.17 57.01 (38)
Total3,413 $(132)
2023
Fixed price swaps846 $55.98 $— $— $— $(23)
Three-way costless collars1,268 — 33.97 45.51 56.12 (36)
Total2,114 $(59)
2024
Fixed price swaps603 $68.68 $— $— $— $(5)
Ethane
2022
Fixed price swaps4,142 $11.27 $— $— $— $(26)
2023
Fixed price swaps1,308 $11.91 $— $— $— $(3)
Propane   
2022   
Fixed price swaps4,643 $31.09 $— $— $— $(118)
Three-way costless collars230 — 16.80 21.00 31.92 (6)
Total4,873 $(124)
2023
Fixed price swaps1,066 $37.15 $— $— $— $(8)
Normal Butane
2022
Fixed price swaps1,388 $36.22 $— $— $— $(43)
2023
Fixed price swaps329 $40.64 $— $— $— $(3)
Natural Gasoline
2022
Fixed price swaps1,497 $55.78 $— $— $— $(57)
2023
Fixed price swaps359 $66.00 $— $— $— $(5)
Other Derivative Contracts
Volume
(Bcf)
Weighted Average Strike Price per MMBtu
Fair Value at
March 31, 2022
(in millions)
Call Options – Natural Gas (Net)
202263 $3.01 $(171)
202346 2.94 (74)
20243.00 (13)
Total118 $(258)
Volume
(Bcf)
Weighted Average Strike Price per MMBtu
Fair Value at
March 31, 2022
(in millions)
SwapsBasis Differential
Storage (1)
    
2022
Purchased fixed price swaps— $2.14 $— $
(1)The Company has entered into certain derivatives to protect the value of volumes of natural gas injected into a storage facility that will be withdrawn and sold at a later date.
At March 31, 2022, the net fair value of the Company’s financial instruments was a $4,734 million liability, which included net reduction of the liability of $8 million related to non-performance risk. See Note 10 for additional details regarding the Company’s fair value measurements of its derivatives position.
As of March 31, 2022, the Company had no positions designated for hedge accounting treatment. Gains and losses on derivatives that are not designated for hedge accounting treatment, or do not meet hedge accounting requirements, are recorded as a component of gain (loss) on derivatives on the consolidated statements of operations. Accordingly, the gain (loss) on derivatives component of the statement of operations reflects the gains and losses on both settled and unsettled derivatives. Only the settled gains and losses are included in the Company’s realized commodity price calculations.
The balance sheet classification of the assets and liabilities related to derivative financial instruments are summarized below as of March 31, 2022 and December 31, 2021:

Derivative Assets    
Fair Value
(in millions)Balance Sheet ClassificationMarch 31, 2022 December 31, 2021
Derivatives not designated as hedging instruments: 
Fixed price swaps – natural gasDerivative assets$ $79 
Fixed price swaps – ethaneDerivative assets 
Fixed price swaps – propaneDerivative assets 
Fixed price swaps – normal butaneDerivative assets 
Two-way costless collars – natural gasDerivative assets10 
Three-way costless collars – natural gasDerivative assets9 12 
Three-way costless collars – oilDerivative assets1 
Basis swaps – natural gasDerivative assets82 77 
Purchased fixed price swaps – natural gas storageDerivative assets1 — 
Fixed price swaps – natural gasOther long-term assets 64 
Two-way costless collars – natural gasOther long-term assets44 100 
Three-way costless collars – natural gasOther long-term assets12 37 
Three-way costless collars – oilOther long-term assets1 
Basis swaps – natural gasOther long-term assets70 22 
Interest rate swapsOther long-term assets 
Total derivative assets $230 $411 
Derivative Liabilities   
Fair Value
(in millions)Balance Sheet ClassificationMarch 31, 2022December 31, 2021
Derivatives not designated as hedging instruments: 
Fixed price swaps – natural gas storageDerivative liabilities$ $
Fixed price swaps – natural gasDerivative liabilities1,999 565 
Fixed price swaps – oilDerivative liabilities101 60 
Fixed price swaps – ethaneDerivative liabilities28 10 
Fixed price swaps – propaneDerivative liabilities122 78 
Fixed price swaps – normal butaneDerivative liabilities44 27 
Fixed price swaps – natural gasolineDerivative liabilities59 33 
Two-way costless collars – natural gasDerivative liabilities316 104 
Two-way costless collars – ethaneDerivative liabilities 
Three-way costless collars – natural gasDerivative liabilities977 298 
Three-way costless collars – oilDerivative liabilities49 24 
Three-way costless collars – propaneDerivative liabilities6 
Basis swaps – natural gasDerivative liabilities43 
Call options – natural gasDerivative liabilities201 67 
Fixed price swaps – natural gasLong-term derivative liabilities522 246 
Fixed price swaps – oilLong-term derivative liabilities21 
Fixed price swaps – ethaneLong-term derivative liabilities1 — 
Fixed price swaps – propaneLong-term derivative liabilities4 
Fixed price swaps – normal butaneLong-term derivative liabilities2 — 
Fixed price swaps – natural gasolineLong-term derivative liabilities3 
Two-way costless collars – natural gasLong-term derivative liabilities190 115 
Three-way costless collars – natural gasLong-term derivative liabilities195 178 
Three-way costless collars – oilLong-term derivative liabilities27 21 
Basis swap – natural gasLong-term derivative liabilities5 22 
Call options – natural gasLong-term derivative liabilities57 42 
Total derivative liabilities $4,972 $1,916 
Net Derivative Position
March 31, 2022December 31, 2021
(in millions)
Net current derivative liabilities$(3,842)$(1,098)
Net long-term derivative liabilities(900)(407)
Non-performance risk adjustment
Net total derivative liabilities$(4,734)$(1,502)
The following tables summarize the before-tax effect of the Company’s derivative instruments on the consolidated statements of operations for the three months ended March 31, 2022 and 2021:
Unsettled Gain (Loss) on Derivatives Recognized in Earnings
Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, UnsettledFor the three months ended March 31,
Derivative Instrument20222021
(in millions)
Fixed price swaps – natural gasGain (Loss) on Derivatives$(1,853)$(22)
Fixed price swaps – oilGain (Loss) on Derivatives(53)(40)
Fixed price swaps – ethaneGain (Loss) on Derivatives(21)(2)
Fixed price swaps – propaneGain (Loss) on Derivatives(49)(45)
Fixed price swaps – normal butaneGain (Loss) on Derivatives(20)(15)
Fixed price swaps – natural gasolineGain (Loss) on Derivatives(28)(20)
Two-way costless collars – natural gasGain (Loss) on Derivatives(342)(12)
Two-way costless collars – oilGain (Loss) on Derivatives (1)
Two-way costless collars – ethaneGain (Loss) on Derivatives1 — 
Three-way costless collars – natural gasGain (Loss) on Derivatives(724)— 
Three-way costless collars – oilGain (Loss) on Derivatives(33)(18)
Three-way costless collars – propaneGain (Loss) on Derivatives(2)(1)
Basis swaps – natural gasGain (Loss) on Derivatives36 
Call options – natural gasGain (Loss) on Derivatives(149)
Call options – oilGain (Loss) on Derivatives (1)
Swaptions – natural gasGain (Loss) on Derivatives 
Purchased fixed price swap – natural gas storageGain (Loss) on Derivatives1 — 
Fixed price swap – natural gas storageGain (Loss) on Derivatives1 — 
Interest rate swapsGain (Loss) on Derivatives(2)
Total loss on unsettled derivatives$(3,237)$(169)
Settled Gain (Loss) on Derivatives Recognized in Earnings (1)
Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, SettledFor the three months ended March 31,
Derivative Instrument20222021
(in millions)
Fixed price swaps – natural gasGain (Loss) on Derivatives$(297)$
Fixed price swaps – oilGain (Loss) on Derivatives(33)(17)
Fixed price swaps – ethaneGain (Loss) on Derivatives(8)(4)
Fixed price swaps – propaneGain (Loss) on Derivatives(41)(30)
Fixed price swaps – normal butaneGain (Loss) on Derivatives(14)(7)
Fixed price swaps – natural gasolineGain (Loss) on Derivatives(19)(9)
Two-way costless collars – natural gasGain (Loss) on Derivatives(104)
Two-way costless collars – oilGain (Loss) on Derivatives (1)
Two-way costless collars – ethaneGain (Loss) on Derivatives(1)— 
Three-way costless collars – natural gasGain (Loss) on Derivatives(121)
Three-way costless collars – oilGain (Loss) on Derivatives(13)(1)
Three-way costless collars – propaneGain (Loss) on Derivatives(2)— 
Basis swaps – natural gasGain (Loss) on Derivatives1 41 
Index swaps – natural gasGain (Loss) on Derivatives(1)— 
Call options – natural gasGain (Loss) on Derivatives(39)— 
Put options – natural gasGain (Loss) on Derivatives (2)
(2)
Fixed price swaps – natural gas storageGain (Loss) on Derivatives(3)— 
Total loss on settled derivatives$(695)$(22)
(1)The Company calculates gain (loss) on derivatives, settled, as the summation of gains and losses on positions that settled within the period.
(2)Includes $2 million in amortization of premiums paid related to certain natural gas put options for the three months ended March 31, 2021, which is included in gain (loss) on derivatives on the consolidated statements of operations.
Total Gain (Loss) on Derivatives Recognized in Earnings
For the three months ended March 31,
20222021
(in millions)
Total loss on unsettled derivatives$(3,237)$(169)
Total loss on settled derivatives(695)(22)
Non-performance risk adjustment5 — 
Total loss on derivatives$(3,927)$(191)