Derivatives

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

Commodity Derivatives

We have entered into various types of derivative transactions covering some of our projected natural gas, NGLs, and oil production. These transactions are intended to reduce our exposure to market price volatility by setting the price(s) we will receive for that production. Our decisions on the price(s), type, and quantity of our production subject to a derivative contract are based, in part, on our view of current and future market conditions as well as certain requirements stipulated in the Exit credit agreement. For further details, see Note 9 – Long-Term Debt and Other Long-Term Liabilities. As of September 30, 2021, our derivative transactions consisted of the following types of hedges:

•Basis/Differential Swaps. We receive or pay the NYMEX settlement value plus or minus a fixed delivery point price for the commodity and pay or receive the published index price at the specified delivery point. We use basis/differential swaps to hedge the price risk between NYMEX and its physical delivery points.

•Swaps. We receive or pay a fixed price for the commodity and pay or receive a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

•Collars. A collar contains a fixed floor price (put) and a ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the call and the put strike price, no payments are due from either party.

We do not engage in derivative transactions for speculative purposes. All derivatives are recognized on the unaudited condensed consolidated balance sheets and measured at fair value. Any changes in our derivatives' fair value occurring before their maturity (i.e., temporary fluctuations in value) are reported in gain (loss) on derivatives in our unaudited condensed consolidated statements of operations.

As of September 30, 2021, these derivatives were outstanding:

Term	Commodity	Contracted Volume	Weighted Average  Fixed Price	Contracted Market
Oct'21 - Dec'21	Natural gas - basis swap	30,000 MMBtu/day	$(0.22)	NGPL TEXOK
Oct'21	Natural gas - swap	50,000 MMBtu/day	$2.82	IF - NYMEX (HH)
Nov'21 - Dec'21	Natural gas - swap	45,000 MMBtu/day	$2.90	IF - NYMEX (HH)
Jan'22 - Dec'22	Natural gas - swap	5,000 MMBtu/day	$2.61	IF - NYMEX (HH)
Jan'23 - Dec'23	Natural gas - swap	22,000 MMBtu/day	$2.46	IF - NYMEX (HH)
Jan'22 - Dec'22	Natural gas - collar	35,000 MMBtu/day	$2.50 - $2.68	IF - NYMEX (HH)
Oct'21 - Dec'21	Crude oil - swap	3,373 Bbl/day	$45.14	WTI - NYMEX
Jan'22 - Dec'22	Crude oil - swap	2,300 Bbl/day	$42.25	WTI - NYMEX
Jan'23 - Dec'23	Crude oil - swap	1,300 Bbl/day	$43.60	WTI - NYMEX

The following tables present the fair values and locations of the derivative transactions recorded on our unaudited condensed consolidated balance sheets:

		Derivative Liabilities
		Fair Value
	Classification on the unaudited condensed consolidated balance sheets	September 30, 2021		December 31, 2020
		(In thousands)
Commodity derivatives:
Current	Current derivative liability	$	59,962	$	1,047
Long-term	Non-current derivative liability	28,069		4,659
Total derivative liabilities		$	88,031	$	5,706

All our counterparties are subject to master netting arrangements. If we have a legal right of set-off, we net the value of the derivative transactions we have with the same counterparty in our unaudited condensed consolidated balance sheets.

Following is the effect of derivative instruments on the unaudited condensed consolidated statements of operations for the periods indicated:

	Successor		Successor		Predecessor		Successor		Predecessor
	Three Months Ended September 30, 2021		One Month Ended September 30, 2020		Two Months Ended August 31, 2020		Nine Months Ended September 30, 2021		Eight Months Ended August 31, 2020
	(In thousands)
Gain (loss) on derivatives:
Gain (loss) on derivatives, included are amounts settled during the period of $(12,940), $(1,418), $(3,552), $(22,647), and $(4,244), respectively	$	(39,742)	$	3,939	$	(4,250)	$	(104,973)	$	(10,704)
	$	(39,742)	$	3,939	$	(4,250)	$	(104,973)	$	(10,704)