Derivative instruments

Overview

Our results of operations, financial condition and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil, natural gas and natural gas liquids. These commodity prices are subject to wide fluctuations and market uncertainties. To mitigate a portion of this exposure, we enter into various types of derivative instruments, which in the past have included commodity price swaps, collars, put options and basis protection swaps. During 2018, we also entered into additional derivative contracts to hedge our exposure to the WTI NYMEX calendar month average roll (“oil roll”), which is a contractual component of our crude oil sales prices.

As of December 31, 2019, our derivatives consisted of commodity price swaps (including basis and oil roll) and collars. See “Note 1: Nature of operations and summary of significant accounting policies” for additional information regarding our accounting policies for derivative transactions.

Commodity price swaps allow us to receive a fixed price for the hedged commodity and pay a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

Collars contain a fixed floor price (purchased put) and ceiling price (sold call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the call and the put strike price, no payments are due from either party.

The following table summarizes our crude oil derivatives outstanding as of December 31, 2019:



	Volume	Weighted average fixed price per Bbl
Period and type of contract	MBbls	Swaps		Purchase puts		Sold calls
2020
Oil swaps	2,274	$	51.01	$	—	$	—
Oil collars	195	$	—	$	55.00	$	66.42
Oil roll swaps	410	$	0.38	$	—	$	—
2021
Oil swaps	689	$	46.24	$	—	$	—
Oil roll swaps	150	$	0.30	$	—	$	—

The following table summarizes our natural gas derivative instruments outstanding as of December 31, 2019:



		Weighted average fixed price per MMBtu
Period and type of contract	Volume BBtu	Swaps
2020
Natural gas swaps	7,680	$	2.71
Natural gas basis swaps	7,080	$	(0.46	)

The following table summarizes our natural gas liquids derivative instruments outstanding as of December 31, 2019:



	Volume	Weighted average fixed price per gallon
Period and type of contract	Gallons	Swaps
2020
Butane	2,849	$	0.68
Natural gasoline swaps	6,508	$	1.15
Propane swaps	14,872	$	0.57

In February 2018, we renegotiated the fixed pricing of certain crude oil swaps scheduled to settle during 2018 in exchange for entering crude oil swaps, scheduled to settle from 2020 through 2021, at lower-than-market pricing. The renegotiated swaps cover 1,086 MBbls and have a new fixed price of $60.00 per barrel, replacing the original weighted average fixed price of $54.80 per barrel. The new crude oil swaps scheduled to settle from 2020 through 2021 have weighted average fixed prices of $46.26 and $44.34 per barrel, respectively, and cover 543 MBbls each year.

Effect of derivative instruments on the consolidated balance sheets

All derivative financial instruments are recorded on the consolidated balance sheets at fair value. See “Note 10: Fair value measurements” for additional information regarding fair value measurements. The estimated fair values of derivative instruments are provided below. The carrying amounts of these instruments are equal to the estimated fair values.



	As of December 31, 2019									As of December 31, 2018
	Assets			Liabilities			Net value			Assets			Liabilities			Net value
Natural gas derivative contracts	$	3,552		$	(1	)	$	3,551		$	833		$	(488	)	$	345
NGL derivative contracts	2,868			(699		)	2,169			4,581			—			4,581
Crude oil derivative contracts	391			(22,196		)	(21,805		)	24,208			(4,452		)	19,756
Total derivative instruments	6,811			(22,896		)	(16,085		)	29,622			(4,940		)	24,682
Less:
Netting adjustments (1)	(5,864		)	5,864			—			(3,398		)	3,398			—
Derivative instruments - current	947			(11,957		)	(11,010		)	24,025			—			24,025
Derivative instruments - long-term	$	—		$	(5,075	)	$	(5,075	)	$	2,199		$	(1,542	)	$	657

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(1)	Amounts represent the impact of master netting agreements that allow us to net settle positive and negative positions with the same counterparty. Positive and negative positions with counterparties are netted only to the extent that they related to the same current versus noncurrent classification on the balance sheet.

Effect of derivative instruments on the consolidated statements of operations

We do not apply hedge accounting to any of our derivative instruments. As a result, all gains and losses associated with our derivative contracts are recognized immediately as “Derivative (losses) gains” in the consolidated statements of operations.

“Derivative (losses) gains” in the consolidated statements of operations consists of the following:



	Successor									Predecessor
							Period from			Period from
							March 22, 2017			January 1, 2017
	For the Year Ended December 31,						through			through
	2019			2018			December 31, 2017			March 21, 2017
Change in fair value of commodity price derivatives	$	(40,765	)	$	37,807		$	(46,478	)	$	46,721
Settlement gains (losses) on commodity price derivatives	7,567			(18,510		)	15,676			1,285
Derivative (losses) gains	$	(33,198	)	$	19,297		$	(30,802	)	$	48,006