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Derivatives
 9 Months Ended
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
(9) Derivatives

Interest Rate Swap

In January 2023, we entered into a $400.0 million interest rate swap to manage the interest rate risk associated with our floating-rate, SOFR-based borrowings, including borrowings on the Revolving Credit Facility and the AR Facility. Under this arrangement, we pay a fixed interest rate of 3.8565% in exchange for SOFR-based variable interest through February 2026. Assets or liabilities related to this interest rate swap contract are included in the fair value of derivative assets and liabilities on the consolidated balance sheets, and the change in fair value of this contract is recorded net as a gain or loss on designated cash flow hedges on the consolidated statements of comprehensive income. Monthly, upon settlement, we reclassify the gain or loss associated with the interest rate swap into interest expense from accumulated other comprehensive income (loss). We designated our interest rate swap as a cash flow hedge in accordance with ASC 815, Derivatives and Hedging. There is no ineffectiveness related to our hedge.

The components of the unrealized gain (loss) on designated cash flow hedge related to changes in the fair value of our interest rate swap are as follows (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Change in fair value of interest rate swap$(6.6)$2.2 $(2.4)$8.1 
Tax benefit (expense)1.7 (0.5)0.6 (1.9)
Unrealized gain (loss) on designated cash flow hedge$(4.9)$1.7 $(1.8)$6.2 
The fair value of derivative assets and liabilities related to the interest rate swap are as follows (in millions):
September 30, 2024December 31, 2023
Fair value of derivative assets—current$— $3.3 
Fair value of derivative liabilities—current(0.2)— 
Fair value of derivative liabilities—long-term(1.3)(2.4)
Net fair value of interest rate swap$(1.5)$0.9 

Interest income is recognized from accumulated other comprehensive income (loss) from the monthly settlement of our interest rate swap and was included in our consolidated statements of operations as follows (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Interest income$1.5 $1.4 $4.5 $3.0 

We expect to recognize an additional $0.2 million of interest expense out of accumulated other comprehensive income (loss) over the next twelve months.

Commodity Derivatives

We manage our exposure to changes in commodity prices by hedging the impact of market fluctuations by utilizing various over-the-counter and exchange-traded commodity financial instrument contracts. Commodity swaps and futures are used both to manage and hedge price and location risk related to these market exposures and to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of crude, condensate, natural gas, and NGLs. We do not designate commodity swaps or futures as cash flow or fair value hedges for hedge accounting treatment under ASC 815, Derivatives and Hedging. Therefore, changes in the fair value of our derivatives are recorded in revenue in the period incurred. In addition, our commodity risk management policy does not allow us to take speculative positions with our derivative contracts.

We commonly enter into index (float-for-float) or fixed-for-float swaps in order to mitigate our cash flow exposure to fluctuations in the future prices of natural gas, NGLs, and crude oil. For natural gas, index swaps are used to protect against the price exposure of daily priced natural gas versus first-of-month priced natural gas. For condensate, crude oil, and natural gas, index swaps are also used to hedge the basis location price risk resulting from supply and markets being priced on different indices. Similarly, we use futures in order to mitigate our cash flow exposure to fluctuations in the future prices of natural gas, crude, and condensate. For natural gas, NGLs, condensate, and crude oil, fixed-for-float swaps and futures are used to protect cash flows against price fluctuations: (1) where we receive a percentage of liquids as a fee for processing third-party natural gas or where we receive a portion of the proceeds of the sales of natural gas and liquids as a fee, (2) in the natural gas processing and fractionation components of our business and (3) where we are mitigating the price risk for product held in inventory or storage.

Assets and liabilities related to our derivative contracts are included in the fair value of derivative assets and liabilities, and the change in fair value of these contracts is recorded net as a gain (loss) on derivative activity on the consolidated statements of operations. We estimate the fair value of all of our derivative contracts based upon actively-quoted prices of the underlying commodities.

The components of gain (loss) on derivative activity in the consolidated statements of operations related to commodity derivatives are as follows (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Change in fair value of derivatives$18.0 $(22.9)$(4.1)$(19.0)
Realized gain (loss) on derivatives3.8 0.9 (3.9)20.2 
Gain (loss) on derivative activity$21.8 $(22.0)$(8.0)$1.2 
The fair value of derivative assets and liabilities related to commodity derivatives are as follows (in millions):
September 30, 2024December 31, 2023
Fair value of derivative assets—current$40.3 $73.6 
Fair value of derivative assets—long-term13.9 27.0 
Fair value of derivative liabilities—current(32.3)(62.7)
Fair value of derivative liabilities—long-term(12.4)(24.3)
Net fair value of commodity derivatives$9.5 $13.6 

Set forth below are the summarized notional volumes and fair values of all instruments related to commodity derivatives that we held for price risk management purposes and the related physical offsets at September 30, 2024 (in millions, except volumes). The remaining term of the contracts extend no later than January 2029.
CommodityInstrumentsUnitVolumeNet Fair Value
NGL (short contracts)SwapsMMgals(88.8)$(1.0)
NGL (long contracts)SwapsMMgals31.5 2.6 
Natural gas (short contracts)Swaps and futuresBbtu(105.8)41.5 
Natural gas (long contracts)Swaps and futuresBbtu94.6 (35.8)
Crude and condensate (short contracts)Swaps and futuresMMbbls(5.3)6.3 
Crude and condensate (long contracts)Swaps and futuresMMbbls0.9 (4.1)
Total fair value of commodity derivatives$9.5 

On all transactions where we are exposed to counterparty risk, we analyze the counterparty’s financial condition prior to entering into an agreement, establish limits, and monitor the appropriateness of these limits on an ongoing basis. We primarily deal with financial institutions when entering into financial derivatives on commodities. We have entered into Master ISDAs that allow for netting of swap contract receivables and payables in the event of default by either party. Additionally, we have entered into FCDTCs that allow for netting of futures contract receivables and payables in the event of default by either party. If our counterparties failed to perform under existing commodity swap and futures contracts, the maximum loss on our gross receivable position of $54.2 million as of September 30, 2024 would be reduced to $10.5 million due to the offsetting of gross fair value payables against gross fair value receivables as allowed by the ISDAs and the FCDTCs.