Commodity Derivative Contracts

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 12. Commodity Derivative Contracts

We do not apply hedge accounting treatment to our oil and natural gas derivative contracts; therefore, the changes in the fair values of these instruments are recognized in income in the period of change. These fair value changes, along with the settlements of expired contracts, are shown under “Commodity derivatives expense (income)” in our Consolidated Statements of Operations.

Historically, we have entered into various oil and natural gas derivative contracts to provide an economic hedge of our exposure to commodity price risk associated with anticipated future oil and natural gas production and to provide more certainty to our future cash flows. We do not hold or issue derivative financial instruments for trading purposes. Generally, these contracts have consisted of various combinations of price floors, collars, three-way collars, fixed-price swaps, fixed-price swaps enhanced with a sold put, and basis swaps. The production that we hedge has varied from year to year depending on our levels of debt, financial strength and expectation of future commodity prices. Under the terms of our Successor Bank Credit Agreement, by December 31, 2020, we were required to have hedges in place covering a minimum of 65% of our anticipated crude oil production for the twelve calendar months between August 1, 2020 through July 31, 2021 and 35% of our anticipated crude oil production for the second twelve calendar months between August 1, 2021 through July 31, 2022. As of December 31, 2020, we were in compliance with the hedging requirements of our Successor Bank Credit Agreement.

We manage and control market and counterparty credit risk through established internal control procedures that are reviewed on an ongoing basis. We attempt to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures and diversification, and all of our commodity derivative contracts are with parties that are lenders under our Successor Bank Credit Agreement (or affiliates of such lenders). As of December 31, 2020, all of our outstanding derivative contracts were subject to enforceable master netting arrangements whereby payables on those contracts can be offset

against receivables from separate derivative contracts with the same counterparty. It is our policy to classify derivative assets and liabilities on a gross basis on our balance sheets, even if the contracts are subject to enforceable master netting arrangements.

The following table summarizes our commodity derivative contracts as of December 31, 2020, none of which are classified as hedging instruments in accordance with the FASC Derivatives and Hedging topic:


Months	Index Price	Volume (Barrels per day)	Contract Prices ($/Bbl)
			Range(1)				Weighted Average Price
							Swap		Sold Put		Floor		Ceiling
Oil Contracts:
2021 Fixed-Price Swaps
Jan – Dec	NYMEX	26,000	$	38.68	–	47.69	$	42.54	$	—	$	—	$	—
2021 Collars
Jan – Dec	NYMEX	3,000	$	45.00	–	51.30	$	—	$	—	$	45.00	$	50.95
2022 Fixed-Price Swaps
Jan – June	NYMEX	8,500	$	42.65	–	45.50	$	43.55	$	—	$	—	$	—

(1)Ranges presented for fixed-price swaps represent the lowest and highest fixed prices of all open contracts for the period presented. For collars, ranges represent the lowest floor price and the highest ceiling price for all open contracts for the period presented.