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Derivatives
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
See Note 16 for further information regarding the fair value measurement of derivative instruments. See Note 1 for discussion of the types of derivatives we may use and the reasons for them. All of our commodity derivatives and interest rate derivatives are/were 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.
 
December 31, 2019
 
 
(In millions)
Asset
 
Liability
 
Net Asset (Liability)
 
Balance Sheet Location
Not Designated as Hedges
 
 
 
 
 
 
 
Commodity
$
9

 
$
1

 
$
8

 
Other current assets
Commodity
1

 
—

 
1

 
Other noncurrent assets
Commodity
—

 
5

 
(5
)
 
Other current liabilities
Total Not Designated as Hedges
$
10

 
$
6

 
$
4

 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
Interest Rate
$
2

 
$
—

 
$
2

 
Other noncurrent assets
Total Designated Hedges
$
2

 
$
—

 
$
2

 
 
Total
$
12

 
$
6

 
$
6

 
 
 
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
Terminated Interest Rate Swaps
During the second quarter of 2017, we de-designated forward starting interest rate swaps used to hedge the variations in cash flows related to fluctuations in long term interest rates from debt that was refinanced in the third quarter of 2017. In the third quarter of 2017, we terminated our forward starting interest rate swaps for proceeds of $54 million and recognized a gain of $46 million in net interest. See Note 17 for further detail.
The following table sets forth the net impact of the terminated forward starting interest rate swap derivatives de-designated as cash flow hedges on other comprehensive income (loss).
 
 
Year Ended December 31,
(In millions)
 
2017
Interest Rate Swaps
 
 
 Beginning balance
 
$
60

Change in fair value recognized in other comprehensive income
 
(13
)
Reclassification from other comprehensive income
 
(47
)
 Ending balance
 
$
—


Commodity Derivatives
We have entered into multiple crude oil and natural gas derivatives indexed to NYMEX WTI and Henry Hub related to a portion of our forecasted United States sales through 2021. These commodity derivatives consist of three-way collars and 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 December 31, 2019 and the weighted average prices for those contracts:
 
2020
 
 
2021
Crude Oil
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
 
Full Year
NYMEX WTI Three-Way Collars
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
60,000

 
60,000

 
60,000

 
60,000

 
 
—

Weighted average price per Bbl:
 
 
 
 
 
 
 
 
 
 
Ceiling
$
66.04

 
$
66.04

 
$
63.74

 
$
63.74

 
 
$
—

Floor
$
55.00

 
$
55.00

 
$
55.00

 
$
55.00

 
 
$
—

Sold put
$
47.67

 
$
47.67

 
$
48.00

 
$
48.00

 
 
$
—

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

 
15,000

 
15,000

 
15,000

 
 
—

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

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

 
5,000

 
5,000

 
5,000

 
 
808

Weighted average price per Bbl
$
(7.24
)
 
$
(7.24
)
 
$
(7.24
)
 
$
(7.24
)
 
 
$
(7.24
)
Natural Gas
 
 
 
 
 
 
 
 
 
 
Three-Way Collars
 
 
 
 
 
 
 
 
 
 
Volume (MMBtu/day)
100,000

 
—

 
—

 
—

 
 
—

Weighted average price per MMBtu:
 
 
 
 
 
 
 
 
 
 
Ceiling
$
3.32

 
$
—

 
$
—

 
$
—

 
 
$
—

Floor
$
2.75

 
$
—

 
$
—

 
$
—

 
 
$
—

Sold put
$
2.25

 
$
—

 
$
—

 
$
—

 
 
$
—


(a) 
The basis differential price is indexed against Argus WTI Midland.
(b) 
The basis differential price is indexed against Intercontinental Exchange (“ICE”) Brent and NYMEX WTI.
Between January 1, 2020 and February 10, 2020, we entered into 20,000 bbls/day of three-way collars for 2020 with a ceiling price of $66.37, a floor price of $55.00 and a sold put price of $48.00.
The mark-to-market impact and settlement of these commodity derivative instruments appears in the table below and is reflected in net gain (loss) on commodity derivatives in the consolidated statements of income.
 
Year Ended December 31,
(In millions)
2019
 
2018
2017
Mark-to-market gain (loss)
$
(124
)
 
$
267

$
(81
)
Net settlements of commodity derivative instruments
$
52

 
$
(281
)
$
45


Derivatives Designated as Cash Flow Hedges
During 2019, we entered into forward starting interest rate swaps with a total notional amount of $320 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.
 
December 31, 2019
 
December 31, 2018
(In millions, except fixed rates)
Aggregate Notional Amount
 
Weighted Average, LIBOR
 
Aggregate Notional Amount
 
Weighted Average, LIBOR
Interest rate swaps
$
320

 
1.514
%
 
$
—

 
—
%

At December 31, 2019, accumulated other comprehensive income included deferred gains of $2 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.