Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Outstanding Oil and Gas Derivative Contracts and Weighted Average Oil and Gas Prices

As of March 31, 2020, the Company had the following outstanding oil derivative contracts. When aggregating multiple contracts, the weighted average contract price is disclosed.

Oil swaps	Nine Months Ending December 31, 2020			Twelve Months Ending December 31, 2021
	Volume (MBbls)	Fixed Price Swap (per Bbl)		Volume (MBbls)	Fixed Price Swap (per Bbl)
Oil swaps - Midland	4,248	$	30.47	1,825	$	40.50
Oil swaps - Houston	8,427	$	32.87	18,980	$	40.74
Oil swaps - WTI	3,025	$	57.87	—	$	—
Oil swaps - Brent	2,325	$	44.11	8,030	$	44.46

Put spreads(1)	Nine Months Ending December 31, 2020
	Midland		MEH
Volume (MBbls)	300		5,250
Long put price (per Bbl)	$	50.00	$	37.43
Short put price (per Bbl)	$	40.00	$	27.43

Three-way collars	Nine Months Ending December 31, 2020				Year Ending December 31, 2021
	Midland		MEH		Midland		MEH
Volume (MBbls)	1,692		4,828		—		2,850
Short call price (per Bbl)	$	36.74	$	38.73	$	—	$	51.05
Long put price (per Bbl)	$	26.74	$	28.73	$	—	$	41.05
Short put price (per Bbl)	$	52.48	$	53.26	$	—	$	62.89

Two-way collars	Nine Months Ending December 31, 2020
	WTI Midland		Brent
Volume (MBbls)	1,800		1,500
Short call price (per Bbl)	$	43.00	$	47.26
Long put price (per Bbl)	$	48.00	$	52.26

Basis swaps	Nine Months Ending December 31, 2020
	Volume (MBbls)	Basis Differential (per Bbl)
Basis swap - Midland - Cushing index(2)	4,300	$	(1.27)

(1)

Excludes 84,811 notional MBbls with a fair value of $1,075.7 million related to amounts recognized under master netting agreements with derivative counterparties. These amounts are predominately related to new positions entered during the first quarter of 2020 associated with restructuring the Company’s derivative portfolio. The restructuring resulted in additional protection against lower oil prices by converting certain hedge positions with limited downside protection into instruments that provide greater downside protection (such as swaps and two-way collars).

(2)

Represents swaps that fix the basis differentials between the index prices at which the Company sells its oil and the Cushing WTI price.

The following table sets forth the volumes associated with the Company’s outstanding natural gas derivative contracts expiring during the period indicated and the weighted average natural gas prices for those contracts:

	Nine Months Ending December 31, 2020
	Volume (MMbtu)	Fixed Price Swap (per MMbtu)
Natural gas swaps - Waha(1)	13,250,000	$	0.82

(1) Swaps that fix the prices at which the Company sells its natural gas produced in the Permian Basin.

Derivative Instruments, Gain (Loss)

The table below summarizes the Company’s gains (losses) on derivative instruments for the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
Changes in fair value of derivative instruments	498,147		(101,832)
Net derivative settlements(1)	60,549		(8,339)
Net premiums on options that settled during the period(2)	(13,004)		(9,516)
Gain (loss) on derivatives	$	545,692	$	(119,687)

(1)	The net derivative settlements include gains of $3.7 million associated with restructuring the Company’s derivative portfolio as well as $56.9 million associated with positions that settled during the current period. These amounts are included in (Gain) loss on derivatives in the Company’s condensed consolidated statements of operations.
(2)	The net premiums on options that settled during the period represent the cumulative cost of premiums paid and received on positions purchased and sold, which expired during the current period. These amounts are included in (Gain) loss on derivatives in the Company’s condensed consolidated statements of operations.

Schedule of Netting Offsets of Derivative Asset and Liability Positions

The following table presents the Company’s net exposure from its offsetting derivative asset and liability positions, as well as option premiums payable and receivable as of the reporting dates indicated (in thousands):

	Gross Amount		Netting Adjustments		Net Exposure
March 31, 2020
Derivative assets with right of offset or    master netting agreements	$	1,700,481	$	(1,075,715)	$	624,766
Derivative liabilities with right of offset or    master netting agreements	(1,285,802)		1,075,715		(210,087)
December 31, 2019
Derivative assets with right of offset or    master netting agreements	$	136,627	$	(8,995)	$	127,632
Derivative liabilities with right of offset or    master netting agreements	(167,517)		8,995		(158,522)