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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2019

The purchase and sale agreements for the acquisition of properties in the Delaware Basin from ExL Petroleum Management, LLC and ExL Petroleum Operating Inc. (the “ExL Acquisition”) in 2017 and divestitures of the Company’s assets in the Niobrara in 2018, and Marcellus and Utica in 2017, included contingent consideration arrangements that require the Company to pay or entitle the Company to receive specified amounts if commodity prices exceed specified thresholds, which are summarized in the tables below. If the pricing threshold for the respective contingent consideration arrangement is met, the payment is made or received in the first quarter of the following year. See “Note 3. Acquisitions and Divestitures of Oil and Gas Properties” of the Notes to Consolidated Financial Statements in the 2018 Annual Report for further discussion of these transactions. See “—Cash received (paid) for settlements of contingent consideration arrangements, net” below for discussion of the settlements that occurred during the first quarter of 2019.

Contingent ExL Consideration



	Year	Threshold ⁽¹⁾		Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Payment - Annual			Remaining Contingent Payments - Aggregate Limit			Acquisition Date Fair Value
						(In thousands)
													($52,300	)

Actual Settlement	2018		$50.00	1Q19	Financing		($50,000	)

Remaining Potential Settlements	2019-2021	50.00		⁽²⁾	⁽²⁾	(50,000		)		($75,000	)


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. Energy Information Administration (“U.S. EIA”).

(2)

Cash paid for settlements of contingent consideration arrangements are classified as cash flows from financing activities up to the acquisition date fair value with any excess classified as cash flows from operating activities. Therefore, if the commodity price threshold is reached, $2.3 million of the next contingent payment will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent payments, presented in cash flows from operating activities.

Contingent Niobrara Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$7,880

Actual Settlement	2018	$55.00	1Q19	Financing		$5,000

Remaining Potential Settlements	2019	55.00	1Q20	⁽²⁾	5,000			$10,000
	2020	60.00	1Q21	⁽²⁾	5,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. EIA.


(2)	If the commodity price threshold is reached, $2.9 million of the next contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.

Contingent Marcellus Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$2,660

Actual Settlement	2018	$3.13	1Q19	N/A		$—

Remaining Potential Settlements	2019	3.18	1Q20	⁽²⁾	3,000			$6,000
	2020	3.30	1Q21	⁽²⁾	3,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average monthly settlement price per MMBtu of Henry Hub natural gas for the next calendar month, as determined on the last business day preceding each calendar month as measured by the CME Group Inc.


(2)	For the first quarter of 2019, there was no settlement for the Contingent Marcellus Consideration. Therefore, if the commodity price threshold is reached, $2.7 million of the contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.

Contingent Utica Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$6,145

Actual Settlement	2018	$50.00	1Q19	Financing		$5,000

Remaining Potential Settlements	2019	53.00	1Q20	⁽²⁾	5,000			$10,000
	2020	56.00	1Q21	⁽²⁾	5,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. EIA.


(2)	If the commodity price threshold is reached, $1.1 million of the next contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.

Schedule of Derivative Instrument Fair Value Assets and Liabilities

The derivative instrument asset and liability fair values recorded in the consolidated balance sheets as of June 30, 2019 and December 31, 2018 are summarized below:



	June 30, 2019
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Commodity derivative instruments		$21,704			($15,582	)		$6,122
Contingent Niobrara Consideration	3,409			—			3,409
Contingent Marcellus Consideration	3			—			3
Contingent Utica Consideration	4,087			—			4,087
Derivative assets		$29,203			($15,582	)		$13,621
Commodity derivative instruments	10,303			(8,243		)	2,060
Contingent Niobrara Consideration	1,538			—			1,538
Contingent Marcellus Consideration	447			—			447
Contingent Utica Consideration	1,970			—			1,970
Other long-term assets		$14,258			($8,243	)		$6,015

Commodity derivative instruments		($26,390	)		$8,024			($18,366	)
Deferred premium obligations	(7,558		)	7,558			—
Contingent ExL Consideration	(46,385		)	—			(46,385		)
Derivative liabilities-current		($80,333	)		$15,582			($64,751	)
Commodity derivative instruments	(10,988		)	6,474			(4,514		)
Deferred premium obligations	(1,769		)	1,769			—
Contingent ExL Consideration	(14,413		)	—			(14,413		)
Other long-term liabilities		($27,170	)		$8,243			($18,927	)



	December 31, 2018
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Commodity derivative instruments		$50,406			($20,502	)		$29,904
Contingent Niobrara Consideration	5,000			—			5,000
Contingent Utica Consideration	5,000			—			5,000
Derivative assets		$60,406			($20,502	)		$39,904
Commodity derivative instruments	6,083			(4,236		)	1,847
Contingent Niobrara Consideration	2,035			—			2,035
Contingent Marcellus Consideration	1,369			—			1,369
Contingent Utica Consideration	2,501			—			2,501
Other long-term assets		$11,988			($4,236	)		$7,752

Commodity derivative instruments		($15,345	)		$10,140			($5,205	)
Deferred premium obligations	(10,362		)	10,362			—
Contingent ExL Consideration	(50,000		)	—			(50,000		)
Derivative liabilities-current		($75,707	)		$20,502			($55,205	)
Commodity derivative instruments	(10,751		)	518			(10,233		)
Deferred premium obligations	(3,718		)	3,718			—
Contingent ExL Consideration	(30,584		)	—			(30,584		)
Other long-term liabilities		($45,053	)		$4,236			($40,817	)

Schedule of (Gain) Loss on Derivative Instruments

The components of “(Gain) loss on derivatives, net” in the consolidated statements of income for the three and six months ended June 30, 2019 and 2018 are summarized below:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands)
(Gain) loss on derivatives, net
Crude oil		($20,915	)		$53,437			$41,846			$82,948
NGL	—			6,564			(6		)	4,799
Natural gas	(1,600		)	153			(3,670		)	(2,892		)
Contingent ExL Consideration	1,215			10,600			30,214			16,430
Contingent Niobrara Consideration	265			(1,705		)	(2,912		)	(2,090		)
Contingent Marcellus Consideration	438			205			919			675
Contingent Utica Consideration	148			(1,540		)	(3,556		)	(2,560		)
(Gain) loss on derivatives, net		($20,449	)		$67,714			$62,835			$97,310

Schedule of Cash Received for Derivatives

The components of “Cash paid for derivative settlements, net” and “Cash paid for settlements of contingent consideration arrangements, net” in the consolidated statements of cash flows for the three and six months ended June 30, 2019 and 2018 are summarized below:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Cash Flows From Operating Activities	(In thousands)
Cash received (paid) for commodity derivative settlements, net
Crude oil		($3,698	)		($21,210	)		($4,018	)		($33,333	)
NGL	—			(756		)	623			(1,188		)
Natural gas	1,925			488			1,625			540
Deferred premium obligations	(2,749		)	(2,605		)	(5,390		)	(4,467		)
Cash paid for commodity derivative settlements, net		($4,522	)		($24,083	)		($7,160	)		($38,448	)

Cash Flows From Financing Activities
Cash received (paid) for settlements of contingent consideration arrangements, net
Contingent ExL Consideration		$—			$—			($50,000	)		$—
Contingent Niobrara Consideration	—			—			5,000			—
Contingent Utica Consideration	—			—			5,000			—
Cash paid for settlements of contingent consideration arrangements, net		$—			$—			($40,000	)		$—

Crude Oil

Derivative [Line Items]

Schedule of Derivative Instruments

As of June 30, 2019, the Company had the following outstanding commodity derivative instruments at weighted average contract volumes and prices:



Commodity	Period	Type of Contract	Index	Volumes (Bbls per day)	Fixed Price ($ per Bbl)		Sub-Floor Price ($ per Bbl)		Floor Price ($ per Bbl)		Ceiling Price ($ per Bbl)		Fixed Price Differential ($ per Bbl)
Crude oil	3Q19	Price Swaps	NYMEX WTI	5,000		$64.80	—		—		—		—
Crude oil	3Q19	Three-Way Collars	NYMEX WTI	27,000	—			$41.67		$50.96		$74.23	—
Crude oil	3Q19	Basis Swaps	LLS-WTI Cushing	6,000	—		—		—		—			$5.16
Crude oil	3Q19	Basis Swaps	WTI Midland-WTI Cushing	9,100	—		—		—		—			($4.44	)
Crude oil	3Q19	Sold Call Options	NYMEX WTI	3,875	—		—		—			$81.07	—

Crude oil	4Q19	Price Swaps	NYMEX WTI	5,000		$64.80	—		—		—		—
Crude oil	4Q19	Three-Way Collars	NYMEX WTI	27,000	—			$41.67		$50.96		$74.23	—
Crude oil	4Q19	Basis Swaps	WTI Midland-WTI Cushing	9,200	—		—		—		—			($4.64	)
Crude oil	4Q19	Sold Call Options	NYMEX WTI	3,875	—		—		—			$81.07	—

Crude oil	2020	Price Swaps	NYMEX WTI	3,000		$55.06	—		—		—		—
Crude oil	2020	Three-Way Collars	NYMEX WTI	12,000	—			$45.63		$55.63		$66.04	—
Crude oil	2020	Basis Swaps	WTI Midland-WTI Cushing	10,658	—		—		—		—			($1.68	)
Crude oil	2020	Sold Call Options	NYMEX WTI	4,575	—		—		—			$75.98	—

Crude oil	2021	Basis Swaps	WTI Midland-WTI Cushing	8,000	—		—		—		—			$0.18

Natural Gas

Derivative [Line Items]

Schedule of Derivative Instruments



Commodity	Period	Type of Contract	Index	Volumes (MMBtu per day)	Fixed Price ($ per MMBtu)	Sub-Floor Price ($ per MMBtu)	Floor Price ($ per MMBtu)	Ceiling Price ($ per MMBtu)		Fixed Price Differential ($ per MMBtu)
Natural gas	3Q19	Basis Swaps	Waha-NYMEX Henry Hub	42,500	—	—	—	—			($1.49	)
Natural gas	3Q19	Sold Call Options	NYMEX Henry Hub	33,000		—	—		$3.25	—

Natural gas	4Q19	Basis Swaps	Waha-NYMEX Henry Hub	42,500	—	—	—	—			($1.30	)
Natural gas	4Q19	Sold Call Options	NYMEX Henry Hub	33,000		—	—		$3.25	—

Natural gas	2020	Basis Swaps	Waha-NYMEX Henry Hub	29,541	—	—	—	—			($0.77	)
Natural gas	2020	Sold Call Options	NYMEX Henry Hub	33,000		—	—		$3.50	—

ExL Acquisition

Derivative [Line Items]

Schedule of Contingent Consideration

Contingent ExL Consideration



	Year	Threshold ⁽¹⁾		Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Payment - Annual			Remaining Contingent Payments - Aggregate Limit			Acquisition Date Fair Value
						(In thousands)
													($52,300	)

Actual Settlement	2018		$50.00	1Q19	Financing		($50,000	)

Remaining Potential Settlements	2019-2021	50.00		⁽²⁾	⁽²⁾	(50,000		)		($75,000	)


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. Energy Information Administration (“U.S. EIA”).

(2)

Niobrara Divestiture

Derivative [Line Items]

Schedule of Contingent Consideration

Contingent Niobrara Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$7,880

Actual Settlement	2018	$55.00	1Q19	Financing		$5,000

Remaining Potential Settlements	2019	55.00	1Q20	⁽²⁾	5,000			$10,000
	2020	60.00	1Q21	⁽²⁾	5,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. EIA.

(2)

If the commodity price threshold is reached, $2.9 million of the next contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.

Marcellus Shale Divestiture

Derivative [Line Items]

Schedule of Contingent Consideration

Contingent Marcellus Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$2,660

Actual Settlement	2018	$3.13	1Q19	N/A		$—

Remaining Potential Settlements	2019	3.18	1Q20	⁽²⁾	3,000			$6,000
	2020	3.30	1Q21	⁽²⁾	3,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average monthly settlement price per MMBtu of Henry Hub natural gas for the next calendar month, as determined on the last business day preceding each calendar month as measured by the CME Group Inc.

(2)

For the first quarter of 2019, there was no settlement for the Contingent Marcellus Consideration. Therefore, if the commodity price threshold is reached, $2.7 million of the contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.

Utica Shale Divestiture

Derivative [Line Items]

Schedule of Contingent Consideration

Contingent Utica Consideration



	Year	Threshold ⁽¹⁾	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Receipt - Annual		Remaining Contingent Payments - Aggregate Limit		Divestiture Date Fair Value
					(In thousands)
										$6,145

Actual Settlement	2018	$50.00	1Q19	Financing		$5,000

Remaining Potential Settlements	2019	53.00	1Q20	⁽²⁾	5,000			$10,000
	2020	56.00	1Q21	⁽²⁾	5,000


(1)	The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. EIA.

(2)

If the commodity price threshold is reached, $1.1 million of the next contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.