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Derivative Instruments
 6 Months Ended
Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Note 5 – Derivative Instruments
We utilize derivative instruments, typically swaps, put options and call options which are placed with financial institutions that we believe are acceptable credit risks, to mitigate our financial exposure to commodity price volatility associated with anticipated sales of our future production and volatility in interest rates attributable to our variable rate debt instruments. Our derivative instruments are not formally designated as hedges for accounting purposes. While the use of derivative instruments limits the risk of adverse commodity price and interest rate movements, such use may also limit the beneficial impact of future product revenues and interest expense from favorable commodity price and interest rate movements. From time to time, we may enter into incremental derivative contracts in order to increase the notional volume of production we are hedging, restructure existing derivative contracts or enter into other derivative contracts resulting in modification to the terms of existing contracts. In accordance with our internal policies, we do not utilize derivative instruments for speculative purposes.
For our commodity derivatives, we typically combine swaps, purchased put options, purchased call options, sold put options and sold call options in order to achieve various hedging objectives. Certain of these objectives result in combinations that operate as collars which include purchased put options and sold call options, three-way collars, which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap, among others.
Commodity Derivatives 1
The following table sets forth our commodity derivative positions, presented on a net basis by period of maturity, as of June 30, 2022:
3Q20224Q20221Q20232Q20233Q20234Q20231Q20242Q2024
NYMEX WTI Crude Swaps
Average Volume Per Day (bbl)3,000 3,000 2,500 2,400 2,807 2,657 462 462 
Weighted Average Swap Price ($/bbl)$73.01 $69.20 $54.40 $54.26 $54.92 $54.93 $58.75 $58.75 
NYMEX WTI Crude Collars
Average Volume Per Day (bbl)15,625 12,636 7,917 6,181 4,891 2,446 
Weighted Average Purchased Put Price ($/bbl)$59.22 $58.06 $55.79 $50.67 $70.00 $65.00 
Weighted Average Sold Call Price ($/bbl)$84.70 $82.23 $74.85 $65.65 $92.37 $85.75 
NYMEX WTI Crude CMA Roll Basis Swaps
Average Volume Per Day (bbl)7,337 1,630 
Weighted Average Swap Price ($/bbl)$1.172 $1.020 
NYMEX HH Swaps
Average Volume Per Day (MMBtu)12,500 12,500 10,000 7,500 
Weighted Average Swap Price ($/MMBtu)$3.745 $3.793 $3.620 $3.690 
NYMEX HH Collars
Average Volume Per Day (MMBtu)15,679 14,511 6,417 11,538 11,413 11,413 11,538 11,538 
Weighted Average Purchased Put Price ($/MMBtu)$3.088 $2.854 $6.000 $2.500 $2.500 $2.500 $2.500 $2.328 
Weighted Average Sold Call Price ($/MMBtu)$4.141 $3.791 $10.000 $2.682 $2.682 $2.682 $3.650 $3.000 
OPIS Mt Belv Ethane Swaps
Average Volume per Day (gal)27,717 27,717 98,901 34,239 34,239 34,615 
Weighted Average Fixed Price ($/gal)$0.2500 $0.2500 $0.2288 $0.2275 $0.2275 $0.2275 
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1    NYMEX WTI refers to New York Mercantile Exchange West Texas Intermediate that serves as the benchmark for crude oil. NYMEX HH refers to NYMEX Henry Hub that serves as the benchmark for natural gas. OPIS Mt Belv refers to Oil Price Information Service Mt. Belvieu that serves as the benchmark for ethane which represents a commodity proxy for NGLs. As of June 30, 2022, we also had 50,000 bbls/month of incremental WTI Long Calls at $125/bbl in August and September 2022 as well as 25,000 bbls/month of incremental WTI Long Puts at $85/bbl in August and September 2022.

Interest Rate Derivatives
Through May 2022, we had a series of interest rate swap contracts (the “Interest Rate Swaps”) establishing fixed interest rates on a portion of our variable interest rate indebtedness. The notional amount of the Interest Rate Swaps totaled $300 million, with us paying a weighted average fixed rate of 1.36% on the notional amount, and the counterparties paying a variable rate equal to LIBOR. As of June 30, 2022, we did not have any interest rate derivatives.
Financial Statement Impact of Derivatives
The impact of our derivative activities on income is included within Derivatives on our condensed consolidated statements of operations. Derivative contracts that have expired at the end of a period, but for which cash had not been received or paid as of the balance sheet date, have been recognized as components of Accounts receivable (see Note 4) and Accounts payable and accrued liabilities (see Note 9) on the condensed consolidated balance sheets. The effects of derivative gains and (losses) and cash settlements are reported as adjustments to reconcile net income (loss) to net cash provided by operating activities. These items are recorded within the Derivative contracts section of our condensed consolidated statements of cash flows under Net losses and Cash settlements and premiums paid, net.
The following table summarizes the effects of our derivative activities for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Interest Rate Swap gains (losses) recognized in the condensed consolidated statements of operations$(19)$4 $64 $36 
Commodity losses recognized in the condensed consolidated statements of operations(44,923)(54,231)(212,893)(98,631)
$(44,942)$(54,227)$(212,829)$(98,595)
Interest rate cash settlements recognized in the condensed consolidated statements of cash flows$(477)$(956)$(1,415)$(1,878)
Commodity cash settlements and premiums paid recognized in the condensed consolidated statements of cash flows(74,037)(15,678)(102,507)(21,925)
$(74,514)$(16,634)$(103,922)$(23,803)
The following table summarizes the fair values of our derivative instruments, which we elect to present on a gross basis, as well as the locations of these instruments on our condensed consolidated balance sheets as of the dates presented:
Fair Values
  June 30, 2022December 31, 2021
  DerivativeDerivativeDerivativeDerivative
TypeBalance Sheet LocationAssetsLiabilitiesAssetsLiabilities
Interest rate contractsDerivative assets/liabilities – current$— $— $— $1,480 
Commodity contractsDerivative assets/liabilities – current15,006 144,541 11,478 48,892 
Interest rate contractsDerivative assets/liabilities – non-current— — — — 
Commodity contractsDerivative assets/liabilities – non-current5,597 28,604 2,092 23,815 
  $20,603 $173,145 $13,570 $74,187 
As of June 30, 2022, we reported net commodity derivative liabilities of $152.5 million. The contracts associated with these positions are with eight counterparties for commodity derivatives, all of which are investment grade financial institutions and are participants in our revolving credit facility (the “Credit Facility”). This concentration may impact our overall credit risk in that these counterparties may be similarly affected by changes in economic or other conditions. Non-performance risk is incorporated by utilizing discount rates adjusted for the credit risk of our counterparties if the derivative is in an asset position, and our own credit risk if the derivative is in a liability position.
The agreements underlying our derivative instruments include provisions for the netting of settlements with the counterparties for contracts of similar type. We have neither paid to, nor received from, our counterparties any cash collateral in connection with our derivative positions. Furthermore, our derivative contracts are not subject to margin calls or similar accelerations. No significant uncertainties exist related to the collectability of amounts that may be owed to us by these counterparties.
See Note 10 for information regarding the fair value of our derivative instruments.