XML 30 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Derivative Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS:
CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.

In March 2020, CNX entered into interest rate swaps related to $175,000 of borrowings under the Cardinal States Facility and CSG Holdings Facility (See Note 9 - Long-Term Debt). In order to manage exposure to interest rate volatility, each respective entity entered into an interest rate swap for the full outstanding principal amounts inclusive of a put option at 25 basis points. The underlying notional for each swap and put option reduces over time based upon an expected amortization profile for each respective credit facility. In addition, CSG Holdings entered into a call option commencing March 31, 2023.

In June 2019, CNX entered into an interest rate swap agreement related to $160,000 of borrowings under CNX’s Credit Facility (See Note 7 - Revolving Credit Facilities) which has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-year period. In March 2020, this swap was blended and extended via a new interest rate swap, effective April 3, 2020, into a new four-year interest rate swap inclusive of a put option at zero basis points. Also executed in March 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at zero basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, the $250,000 interest rate swap was entered into to manage CNX's exposure to interest rate volatility.

CNX enters into financial derivative instruments (over-the-counter swaps) to manage its exposure to commodity price volatility. Typically, CNX “sells” swaps under which it receives a fixed price from counterparties and pays a floating market price. During the second quarter of 2020, CNX purchased, rather than sold, financial swaps for the period May through November of 2020 under which CNX will pay a fixed price to and receive a floating price from its hedge counterparties. Swaps purchased have the effect of reducing total hedged volumes for the period of the swap. 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 CNX's derivative instruments were as follows:
September 30,December 31,Forecasted to
20202019Settle Through
Natural Gas Commodity Swaps (Bcf)1,280.9 *1,460.6 2025
Natural Gas Basis Swaps (Bcf)1,311.8 *1,290.4 2025
Interest Rate Swaps$575,625 $160,000 2028
*Net of purchased natural gas commodity swaps and natural gas basis swaps of 5.7 Bcf and 3.8 Bcf, respectively.

The gross fair value of CNX's derivative instruments was as follows:
September 30, December 31,
20202019
Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$39,263 $234,238 
     Basis Only Swaps38,201 13,556 
  Interest Rate Swaps144 — 
Total Current Assets$77,608 $247,794 
Other Non-Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$118,210 $288,543 
     Basis Only Swaps41,060 25,553 
  Interest Rate Swaps828 — 
Total Other Non-Current Assets$160,098 $314,096 
Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$103,297 $345 
     Basis Only Swaps36,878 40,626 
  Interest Rate Swaps4,370 495 
Total Current Liabilities$144,545 $41,466 
Non-Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$92,125 $9,693 
     Basis Only Swaps99,373 105,445 
  Interest Rate Swaps12,211 724 
Total Non-Current Liabilities$203,709 $115,862 
The effect of commodity derivative instruments on the Company's Consolidated Statements of Income was as follows:
For the Three Months EndedFor the Nine Months Ended
September 30, September 30,
2020201920202019
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps$72,062 $61,441 $382,891 $53,058 
Basis Swaps18,248 (4,400)836 (26,727)
Total Cash Received in Settlement of Commodity Derivative Instruments90,310 57,041 383,727 26,331 
Unrealized (Loss) Gain on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps(369,121)126,617 (550,694)302,701 
Basis Swaps109,977 30,255 49,972 (88,914)
Total Unrealized (Loss) Gain on Commodity Derivative Instruments(259,144)156,872 (500,722)213,787 
(Loss) Gain on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps(297,059)188,058 (167,803)355,759 
Basis Swaps128,225 25,855 50,808 (115,641)
Total (Loss) Gain on Commodity Derivative Instruments$(168,834)$213,913 $(116,995)$240,118 

The effect of interest rate swaps on Interest Expense in the Company's Consolidated Statements of Income was as follows:
For the Three Months EndedFor the Nine Months Ended
September 30, September 30,
2020201920202019
Cash (Paid) Received in Settlement of Interest Rate Swaps$(1,257)$195 $(1,850)$195 
Unrealized Loss on Interest Rate Swaps(152)(713)(14,389)(1,774)
Loss on Interest Rate Swaps$(1,409)$(518)$(16,239)$(1,579)

Cash (Paid) Received in Settlement of Commodity Derivative Instruments for the nine months ended September 30, 2020 includes $54,982 related to the monetization of certain NYMEX commodity swaps. The monetization resulted from reducing the contract swap prices of certain 2022, 2023 and 2024 NYMEX natural gas swap contracts. The notional quantities of the contracts were not changed by this monetization. In addition, Cash (Paid) Received in Settlement of Commodity Derivative Instruments for the nine months ended September 30, 2020 includes $5,851 related to the monetization and termination of approximately 8 million MMBtus of NYMEX natural gas hedges and a similar quantity of financial basis hedges that were to settle at various times from October through November of 2020. Net proceeds received from the monetizations are classified as operating cash flows in the Consolidated Statements of Cash Flows.

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.