XML 110 R22.htm IDEA: XBRL DOCUMENT v3.19.3
Derivatives
 9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
For further information regarding the fair value measurement of derivative instruments, see Note 15. All of our commodity derivatives are subject to enforceable master netting arrangements or similar agreements under which we report net amounts. The following tables present the gross fair values of derivative instruments and the reported net amounts along with where they appear on the consolidated balance sheets.
 
September 30, 2019
 
 
(In millions)
Asset
 
Liability
 
Net Asset (Liability)
 
Balance Sheet Location
Not Designated as Hedges
 
 
 
 
 
 
 
Commodity
$
58

 
$
5

 
$
53

 
Other current assets
Commodity
6

 
—

 
6

 
Other noncurrent assets
Commodity
—

 
1

 
(1
)
 
Deferred credits and other liabilities
Total Not Designated as Hedges
$
64

 
$
6

 
$
58

 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
Interest Rate
$
—

 
$
1

 
$
(1
)
 
Deferred credits and other liabilities
Total Designated Hedges
$
—

 
$
1

 
$
(1
)
 
 
Total
$
64

 
$
7

 
$
57

 
 
 
December 31, 2018
 
 
(In millions)
Asset
 
Liability
 
Net Asset (Liability)
 
Balance Sheet Location
Not Designated as Hedges
 
 
 
 
 
 
 
Commodity
$
131

 
$
—

 
$
131

 
Other current assets
Commodity
—

 
4

 
(4
)
 
Deferred credits and other liabilities
Total Not Designated as Hedges
$
131

 
$
4

 
$
127

 
 

Derivatives Not Designated as Hedges
We have entered into multiple crude oil derivatives indexed to the respective indices as noted in the table below, related to a portion of our forecasted United States sales through 2021. These derivatives consist of three-way collars, basis swaps and NYMEX roll basis swaps. Three-way collars consist of a sold call (ceiling), a purchased put (floor) and a sold put. The ceiling price is the maximum we will receive for the contract volumes; the floor is the minimum price we will receive, unless the market price falls below the sold put strike price. In this case, we receive the NYMEX WTI price plus the difference between the floor and the sold put price. These crude oil derivatives were not designated as hedges.
The following table sets forth outstanding derivative contracts as of September 30, 2019, and the weighted average prices for those contracts:
 
 
2019
 
2020
 
2021
Crude Oil
 
Fourth Quarter
 
Full Year
 
Full Year
NYMEX WTI Three-Way Collars
 
 
 
 
 
 
Volume (Bbls/day)
 
80,000

 
42,945

 
—

Weighted average price per Bbl:
 
 
 
 
 
 
Ceiling
 
$
74.19

 
$
65.58

 
$
—

Floor
 
$
56.75

 
$
55.00

 
$
—

Sold put
 
$
49.50

 
$
47.77

 
$
—

Basis Swaps - Argus WTI Midland (a)
 
 
 
 
 
 
Volume (Bbls/day)
 
15,000

 
15,000

 
—

Weighted average price per Bbl
 
$
(1.40
)
 
$
(0.94
)
 
$
—

Basis Swaps - Net Energy Clearbrook (b)
 
 
 
 
 
 
Volume (Bbls/day)
 
2,000

 
—

 
—

Weighted average price per Bbl
 
$
(3.33
)
 
$
—

 
$
—

Basis Swaps - NYMEX WTI / ICE Brent (c)
 
 
 
 
 
 
Volume (Bbls/day)
 
5,000

 
5,000

 
808

Weighted average price per Bbl
 
$
(7.24
)
 
$
(7.24
)
 
$
(7.24
)
Basis Swaps - Argus WTI Houston (d)
 
 
 
 
 
 
Volume (Bbls/day)
 
10,000

 
—

 
—

Weighted average price per Bbl
 
$
5.51

 
$
—

 
$
—

NYMEX Roll Basis Swaps
 
 
 
 
 
 
Volume (Bbls/day)
 
60,000

 
—

 
—

Weighted average price per Bbl
 
$
0.38

 
$
—

 
$
—


(a) 
The basis differential price is indexed against Argus WTI Midland.
(b) 
The basis differential price is indexed against Net Energy Canada Bakken SW at Clearbrook (“UHC”).
(c) 
The basis differential price is indexed against International Commodity Exchange (“ICE”) Brent and NYMEX WTI.
(d) 
The basis differential price is indexed against Argus WTI Houston.
Between October 1, 2019 and November 5, 2019, we entered into 100,000 MMBtu/day of three-way collars for January - March 2020 with a ceiling price of $3.32, a floor price of $2.75 and a sold put price of $2.25.
The mark-to-market impact and settlement of the commodity derivative instruments as of September 30, 2019 appears in the table below and is reflected in net gain (loss) on commodity derivatives in the consolidated statements of income.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2019
 
2018
 
2019
 
2018
Mark-to-market gain (loss)
$
33

 
$
19

 
$
(69
)
 
$
(69
)
Net settlements of commodity derivative instruments
$
14

 
$
(89
)
 
$
41

 
$
(255
)
Derivatives Designated as Cash Flow Hedges
In September 2019, we entered into forward starting interest rate swaps with a total notional amount of $160 million to hedge variations in cash flows related to the 1-month London Interbank Offered Rate (“LIBOR”) component of future lease payments of our future Houston office. These swaps will settle monthly on the same day the lease payment is made with the first swap settlement occurring in January 2022. We expect the first lease payment to commence sometime in the period from December 2021 to May 2022. The last swap will mature on September 9, 2026. See Note 13 for further details regarding the lease of the new Houston office.
The following table presents information about our interest rate swap agreements, including the weighted average LIBOR-based, fixed rate.
 
September 30, 2019
 
December 31, 2018
(In millions, except fixed rates)
Aggregate Notional Amount
 
Weighted Average, LIBOR
 
Aggregate Notional Amount
 
Weighted Average, LIBOR
Interest rate swaps
$
160

 
1.50
%
 
$
—

 
—
%

At September 30, 2019, accumulated other comprehensive income included deferred losses of $1 million related to forward starting interest rate swaps. No amounts related to these swaps are expected to impact the consolidated statements of income in the next 12 months.