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Derivatives
 3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
For further information regarding the fair value measurement of derivative instruments, see Note 16. 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.
 
March 31, 2020
 
 
(In millions)
Asset
 
Liability
 
Net Asset (Liability)
 
Balance Sheet Location
Not Designated as Hedges
 
 
 
 
 
 
 
Commodity
$
176

 
$
1

 
$
175

 
Derivative assets
Total Not Designated as Hedges
$
176

 
$
1

 
$
175

 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
Interest Rate
$
—

 
$
20

 
$
(20
)
 
Other noncurrent liabilities
Total Designated Hedges
$
—

 
$
20

 
$
(20
)
 
 
Total
$
176

 
$
21

 
$
155

 
 
 
December 31, 2019
 
 
(In millions)
Asset
 
Liability
 
Net Asset (Liability)
 
Balance Sheet Location
Not Designated as Hedges
 
 
 
 
 
 
 
Commodity
$
9

 
$
1

 
$
8

 
Derivative 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

 
 

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, fixed price swaps, 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 March 31, 2020, and the weighted average prices for those contracts:
 
 
2020
 
 
2021
 
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
 
Full Year
Crude Oil
 
 
 
 
 
 
 
 
 
NYMEX WTI Three-Way Collars
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
80,000

 
80,000

 
80,000

 
 
—

Weighted average price per Bbl:
 
 
 
 
 
 
 
 
 
Ceiling
 
$
66.12

 
$
64.40

 
$
64.40

 
 
$
—

Floor
 
$
55.00

 
$
55.00

 
$
55.00

 
 
$
—

Sold put
 
$
47.75

 
$
48.00

 
$
48.00

 
 
$
—

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

 
15,000

 
15,000

 
 
—

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

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

 
5,000

 
5,000

 
 
808

Weighted average price per Bbl
 
$
(7.24
)
 
$
(7.24
)
 
$
(7.24
)
 
 
$
(7.24
)
Basis Swaps - Argus WTI Houston (c)
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
26,813

 
—

 
—

 
 
—

Weighted average price per Bbl
 
$
(0.75
)
 
$
—

 
$
—

 
 
$
—

NYMEX Roll Basis Swaps
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
43,571

 
—

 
—

 
 
—

Weighted average price per Bbl
 
$
(1.62
)
 
$
—

 
$
—

 
 
$
—

Fixed Price Swaps
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
20,000

 
—

 
—

 
 
—

Weighted average price per Bbl
 
$
24.61

 
$
—

 
$
—

 
 
$
—


(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.
(c) 
The basis differential price is indexed against Argus WTI Houston.
Subsequent to March 31, 2020, we terminated our 80,000 bbls/day NYMEX WTI three-way collars and replaced them with 40,000 bbls/day of two-way collars with an average ceiling price of $40.31 and an average floor price of $32.89 and 40,000 bbls/day of fixed price swaps with an average price of $33.79. This termination and subsequent replacement applies only to derivative positions for the second quarter of 2020. Thus, the NYMEX WTI three-way collars for the third and fourth quarters of 2020 remain as presented in the schedule above.



The following table sets forth outstanding derivative contracts as of May 4, 2020, and the weighted average prices for those contracts:
 
 
2020
 
 
2021
 
 
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
 
Full Year
 
Crude Oil
 
 
 
 
 
 
 
 
 
 
NYMEX WTI Three-Way Collars
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
—

 
80,000

 
80,000

 
 
—

 
Weighted average price per Bbl:
 
 
 
 
 
 
 
 
 
 
Ceiling
 
$
—

 
$
64.40

 
$
64.40

 
 
$
—

 
Floor
 
$
—

 
$
55.00

 
$
55.00

 
 
$
—

 
Sold put
 
$
—

 
$
48.00

 
$
48.00

 
 
$
—

 
NYMEX WTI Two-Way Collars
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
40,000

 
—

 
—

 
 
—

 
Weighted average price per Bbl:
 
 
 
 
 
 
 
 
 
 
Ceiling
 
$
40.31

 
$
—

 
$
—

 
 
$
—

 
Floor
 
$
32.89

 
$
—

 
$
—

 
 
$
—

 
Fixed Price WTI Swaps
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
76,703

 
10,000

 
—

 
 
—

 
Weighted average price per Bbl:
 
$
28.99

 
$
32.77

 
$
—

 
 
$
—

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

 
15,000

 
15,000

 
 
—

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

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

 
5,000

 
5,000

 
 
808

 
Weighted average price per Bbl
 
$
(7.24
)
 
$
(7.24
)
 
$
(7.24
)
 
 
$
(7.24
)
 
Basis Swaps - NYMEX WTI / MEH (c)
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
26,813

 
—

 
—

 
 
—

 
Weighted average price per Bbl
 
$
(0.75
)
 
$
—

 
$
—

 
 
$
—

 
NYMEX Roll Basis Swaps
 
 
 
 
 
 
 
 
 
 
Volume (Bbls/day)
 
43,571

 
60,000

 
10,000

 
 
—

 
Weighted average price per Bbl
 
$
(1.62
)
 
$
(1.58
)
 
$
(1.94
)
 
 
$
—

 
(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.
(c) 
The basis differential price is indexed against Argus WTI Houston.
The mark-to-market impact and settlement of our commodity derivative instruments appears in the table below and is reflected in net gain (loss) on commodity derivatives in the consolidated statements of income.
 
Three Months Ended March 31,
 
(In millions)
2020
 
2019
 
Mark-to-market gain (loss)
$
171

 
$
(113
)
 
Net settlements of commodity derivative instruments
$
31

 
$
22

 
Derivatives Designated as Cash Flow Hedges
In March 2020, we entered into forward starting interest rate swaps with a notional amount of $350 million to hedge variations in cash flows arising from fluctuations in the London Interbank Offered Rate (“LIBOR”) benchmark interest rate related to forecasted interest payments of a future debt issuance in 2022; and an additional $100 million of notional for our future debt issuance in 2025. We expect to refinance both of the debt maturities in 2022 and 2025. The swaps will terminate on
or prior to the refinancing of the debt and the final value will be reclassified from accumulated other comprehensive income into earnings with each future interest payment. Subsequent to March 31, 2020, we entered into additional forward starting interest rate swaps with a notional amount of $150 million to hedge variations in cash flows related to the same LIBOR interest rate for our debt due in 2022 and $150 million notional for our debt due in 2025.
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 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, by maturity date, information about our interest rate swap agreements, including the weighted average LIBOR-based, fixed rate.
 
March 31, 2020
 
December 31, 2019
Maturity Date
Aggregate Notional Amount
(in millions)
 
Weighted Average, LIBOR
 
Aggregate Notional Amount
(in millions)
 
Weighted Average, LIBOR
November 1, 2022
$
350

 
1.04
%
 
$
—

 
—
%
June 1, 2025
$
100

 
0.96
%
 
$
—

 
—
%
September 9, 2026
$
320

 
1.51
%
 
$
320

 
1.51
%
At March 31, 2020, accumulated other comprehensive income included deferred losses of $20 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.