Derivative Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Note 8—Derivative Instruments

Commodity Derivatives

The Company is exposed to market risk from changes in energy commodity prices within its operations. The Company utilizes derivatives to manage exposure to the variability in expected future cash flows from forecasted sales of natural gas and oil. The Company currently uses a mix of over-the-counter fixed price swaps, basis swaps, options and collars to manage its exposure to commodity price fluctuations. All of the Company’s derivative instruments are used for risk management purposes and none are held for trading or speculative purposes.

The Company is exposed to credit risk in the event of non-performance by counterparties. To mitigate this risk, the Company enters into derivative contracts only with counterparties that are rated “A” or higher by S&P or Moody’s. The creditworthiness of counterparties is subject to periodic review. As of September 30, 2019, the Company’s derivative instruments were with Bank of Montreal, BP Energy Company, Capital One N.A., Citibank, EDF Energy, J Aron, KeyBank N.A., Morgan Stanley, NextEra Energy, Inc., Royal Bank of Canada, and Wells Fargo. The Company has not experienced any issues of non-performance by derivative counterparties. Below is a summary of the Company’s derivative instrument positions, as of September 30, 2019, for future production periods:

Natural Gas Derivatives:

Description	Volume (MMBtu/d)		Production Period	Weighted Average Price ($/MMBtu)
Natural Gas Swaps:
		120,000	October 2019 – December 2019	$	2.80
		50,000	January 2020 – December 2020	$	2.67
		20,000	January 2020 – March 2020	$	2.80
		50,000	January 2020 – June 2020	$	2.70
		20,000	April 2020 – June 2020	$	2.75
		30,000	July 2020 – December 2020	$	2.60
Natural Gas Collars:
Floor purchase price (put)		95,000	October 2019 – December 2019	$	2.60
Ceiling sold price (call)		95,000	October 2019 – December 2019	$	2.91
Floor purchase price (put)		50,000	January 2020 – December 2020	$	2.49
Ceiling sold price (call)		50,000	January 2020 – December 2020	$	2.88
Floor purchase price (put)		30,000	January 2020 – March 2020	$	2.65
Ceiling sold price (call)		30,000	January 2020 – March 2020	$	2.98
Floor purchase price (put)		15,000	April 2020 – June 2020	$	2.50
Ceiling sold price (call)		15,000	April 2020 – June 2020	$	2.80
Natural Gas Three-way Collars:
Floor purchase price (put)		77,500	October 2019 – December 2019	$	2.72
Floor sold price (put)		77,500	October 2019 – December 2019	$	2.30
Ceiling sold price (call)		77,500	October 2019 – December 2019	$	3.04
Floor purchase price (put)		30,000	January 2020 – December 2020	$	2.70
Floor sold price (put)		30,000	January 2020 – December 2020	$	2.40
Ceiling sold price (call)		30,000	January 2020 – December 2020	$	3.05
Floor purchase price (put)		30,000	January 2020 – March 2020	$	2.72
Floor sold price (put)		30,000	January 2020 – March 2020	$	2.25
Ceiling sold price (call)		30,000	January 2020 – March 2020	$	3.15
Floor purchase price (put)		20,000	January 2020 – June 2020	$	2.70
Floor sold price (put)		20,000	January 2020 – June 2020	$	2.25
Ceiling sold price (call)		20,000	January 2020 – June 2020	$	3.05
Floor purchase price (put)		30,000	October 2019 – June 2020	$	2.90
Floor sold price (put)		30,000	October 2019 – June 2020	$	2.50
Ceiling sold price (call)		30,000	October 2019 – June 2020	$	3.15
Natural Gas Call/Put Options:
Ceiling sold price (call)		40,000	October 2019 – December 2019	$	3.44
Floor sold price (put)		50,000	January 2020 – December 2020	$	2.30
Floor sold price (put)		50,000	January 2020 – June 2020	$	2.25
Swaption sold price (call)		50,000	January 2021 – December 2021	$	2.75
Swaption sold price (call)		50,000	January 2022 – December 2022	$	3.00
Basis Swaps:
Appalachia - Dominion		12,500	October 2019	$	(0.52	)
Appalachia - Dominion		12,500	April 2020 – October 2020	$	(0.52	)
Appalachia - Dominion		20,000	January 2020 – December 2020	$	(0.59	)
Appalachia - Dominion		20,000	October 2019 – March 2020	$	(0.39	)
Appalachia - Dominion		17,500	October 2019 – December 2019	$	(0.50	)

Oil Derivatives:

Description	Volume (Bbls/d)		Production Period	Weighted Average Price ($/Bbl)
Oil Swaps:
		1,500	October 2019 – December 2019	$	59.18
		1,000	January 2020 – December 2020	$	58.60
		1,000	July 2020 – December 2020	$	56.53
Oil Collars:
Floor purchase price (put)		1,500	October 2019 – December 2019	$	51.67
Ceiling sold price (call)		1,500	October 2019 – December 2019	$	65.92
Floor purchase price (put)		1,000	January 2020 – December 2020	$	51.50
Ceiling sold price (call)		1,000	January 2020 – December 2020	$	64.25
Floor purchase price (put)		500	July 2020 – December 2020	$	52.00
Ceiling sold price (call)		500	July 2020 – December 2020	$	60.00
Floor purchase price (put)		500	October 2019 – March 2020	$	60.00
Ceiling sold price (call)		500	October 2019 – March 2020	$	67.00
Oil Three-way Collars:
Floor purchase price (put)		2,000	October 2019 – December 2019	$	50.00
Floor sold price (put)		2,000	October 2019 – December 2019	$	40.00
Ceiling sold price (call)		2,000	October 2019 – December 2019	$	60.56
Floor purchase price (put)		2,000	January 2020 – June 2020	$	62.50
Floor sold price (put)		2,000	January 2020 – June 2020	$	55.00
Ceiling sold price (call)		2,000	January 2020 – June 2020	$	74.00
Oil Call/Put Options:
Swaption sold price (call)		500	January 2021 – December 2021	$	56.80

NGL Derivatives:

Description

Volume

(Bbls/d)

Production Period

Weighted Average

Price ($/Bbl)

Propane Swaps:

350

October 2019 – December 2019

39.90

Fair Values and Gains (Losses)

The following table summarizes the fair value of the Company’s derivative instruments on a gross basis and on a net basis as presented in the Condensed Consolidated Balance Sheets (in thousands). None of the derivative instruments are designated as a hedge for accounting purposes.

As of September 30, 2019	Gross Amount			Netting Adjustments(a)			Net Amount Presented in Balance Sheets			Balance Sheet Location
Assets
Commodity derivatives - current	$	32,344		$	(3,279	)		29,065		Other current assets
Commodity derivatives - noncurrent		2,816			(699	)		2,117		Other assets
Total assets	$	35,160		$	(3,978	)	$	31,182

Liabilities
Commodity derivatives - current	$	(4,232	)	$	3,279		$	(953	)	Accrued liabilities
Commodity derivatives - noncurrent		(2,804	)		699			(2,105	)	Other liabilities
Total liabilities	$	(7,036	)	$	3,978		$	(3,058	)

As of December 31, 2018	Gross Amount			Netting Adjustments(a)			Net Amount Presented in Balance Sheets			Balance Sheet Location
Assets
Commodity derivatives - current	$	4,960		$	(845	)	$	4,115		Other current assets
Commodity derivatives - noncurrent		1,910			—			1,910		Other assets
Total assets	$	6,870		$	(845	)	$	6,025

Liabilities
Commodity derivatives - current	$	(845	)	$	845		$	—		Accrued liabilities
Commodity derivatives - noncurrent		(326	)		—			(326	)	Other liabilities
Total liabilities	$	(1,171	)	$	845		$	(326	)

(a)	The Company has agreements in place that allow for the financial right to offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

The following table presents the Company’s reported gains and losses on derivative instruments and where such values are recorded in the Condensed Consolidated Statements of Operations for the periods presented (in thousands):

		Amount of Gain (Loss) Recognized in Income
Derivatives not designated as hedging instruments under ASC 815	Location of Gain (Loss) Recognized in Income	Three Months Ended September 30,					Nine Months Ended September 30,
		2019		2018			2019		2018
Commodity derivatives	Gain (loss) on derivative instruments	$	15,812	$	(3,263	)	$	40,620	$	(24,055	)