Derivative Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS:

In June 2019, CNX entered into an interest rate swap agreement to manage its exposure to interest rate volatility. The interest rate swap agreement relates to $160,000 of borrowings under CNX’s senior secured revolving credit facility (See Note 9 - Revolving Credit Facilities) and has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-year period.

The change in fair value of the interest rate swap agreement is accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings. The fair value at September 30, 2019 and the corresponding change in fair value from inception through September 30, 2019 was nominal.

CNX enters into financial derivative instruments to manage its exposure to commodity price volatility. These natural gas commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.

CNX is exposed to credit risk in the event of non-performance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.

None of the Company's counterparty master agreements currently require CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX's obligations with one of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would have to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis.

Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.

The total notional amounts of production of CNX's derivative instruments were as follows:



	September 30,	December 31,	Forecasted to
	2019	2018	Settle Through
Natural Gas Commodity Swaps (Bcf)	1,502.4	1,484.4	2024
Natural Gas Basis Swaps (Bcf)	1,240.5	1,056.6	2024

The gross fair value of CNX's derivative instruments was as follows:



Asset Derivative Instruments					Liability Derivative Instruments
	September 30,		December 31,			September 30,		December 31,
	2019		2018			2019		2018
Commodity Swaps:
Prepaid Expense	$	172,836	$	28,612	Other Accrued Liabilities	$	1,389	$	34,640
Other Assets	254,967		164,310		Other Liabilities	17,440		52,011
Total Asset	$	427,803	$	192,922	Total Liability	$	18,829	$	86,651

Basis Only Swaps:
Prepaid Expense	$	25,420	$	11,628	Other Accrued Liabilities	$	43,437	$	27,021
Other Assets	20,925		48,788		Other Liabilities	98,638		40,210
Total Asset	$	46,345	$	60,416	Total Liability	$	142,075	$	67,231

The effect of derivative instruments on the Company's Consolidated Statements of Income was as follows:



	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	$	61,441		$	6,916		$	53,058		$	23,540
Basis Swaps	(4,400		)	(4,091		)	(26,727		)	(21,022		)
Total Cash Received in Settlement of Commodity Derivative Instruments	57,041			2,825			26,331			2,518

Unrealized Gain (Loss) on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	126,617			27,749			302,701			76,999
Basis Swaps	30,255			(12,569		)	(88,914		)	(765		)
Total Unrealized Gain on Commodity Derivative Instruments	156,872			15,180			213,787			76,234

Gain (Loss) on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	188,058			34,665			355,759			100,539
Basis Swaps	25,855			(16,660		)	(115,641		)	(21,787		)
Total Gain on Commodity Derivative Instruments	$	213,913		$	18,005		$	240,118		$	78,752

The Company also enters into fixed price natural gas sales agreements that are satisfied by physical delivery. These physical commodity contracts qualify for the normal purchases and normal sales exception and are not subject to derivative instrument accounting.