NOTE 8DERIVATIVES

General

We use a variety of derivative instruments to protect our cash flows, margins and capital investment program from the cyclical nature of commodity prices and to improve our ability to comply with the covenants of our credit facilities in case of further price deterioration. We will continue to be strategic and opportunistic in implementing our hedging program as market conditions permit. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty.

As of March 31, 2017, we did not have any derivatives designated as hedges. Unless otherwise indicated, we use the term “hedge” to describe derivative instruments that are designed to achieve our hedging program goals, even though they are not necessarily accounted for as cash-flow or fair-value hedges. As part of our hedging program, we entered into a number of derivative transactions that resulted in the following Brent-based crude oil contracts as of March 31, 2017:

	Q2 2017		Q3 2017		Q4 2017		Q1 2018		Q2 - Q4 2018		FY 2019		FY 2020
Crude Oil
Calls:
Barrels per day	5,600		10,600		15,600		16,200		15,500		500		400
Weighted-average price per barrel	$	55.60	$	56.37	$	56.26	$	58.81	$	58.87	$	60.00	$	60.00

Puts:
Barrels per day	20,600		17,600		10,600		600		500		500		400
Weighted-average price per barrel	$	50.24	$	50.85	$	48.11	$	50.00	$	50.00	$	50.00	$	50.00

Swaps:
Barrels per day	20,000		25,000		25,000		—		—		—		—
Weighted-average price per barrel	$	53.98	$	54.99	$	54.99	$	—	$	—	$	—	$	—

A small portion of these derivatives are attributable to BSP’s noncontrolling interest, including all the 2019 and 2020 positions. Some of our third and fourth quarter 2017 crude oil swaps grant our counterparties quarterly options to increase volumes by up to 10,000 barrels per day for each quarter at a weighted-average Brent price of $55.46. Our counterparties also have options to further increase volumes for the second half of 2017 by up to 10,000 barrels per day at a weighted-average Brent price of $60.24.

Fair Value of Derivatives

Our commodity derivatives are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are all classified as Level 2 in the required fair value hierarchy for the periods presented. The following table presents the fair values (at gross and net) of our outstanding derivatives as of March 31, 2017 and December 31, 2016 (in millions):

	March 31, 2017
	Balance Sheet Classification	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheet		Net Fair Value Presented in the Balance Sheet
Assets
Commodity Contracts	Other current assets	$	48	$	(14)	$	34
Commodity Contracts	Other assets	9		—		9

Liabilities
Commodity Contracts	Accrued liabilities	(53)		14		(39)
Commodity Contracts	Other long-term liabilities	(24)		—		(24)

Total derivatives		$	(20)	$	—	$	(20)

The above table includes amounts related to the noncontrolling interest.

	December 31, 2016
	Balance Sheet Classification	Gross Amounts Recognized at Fair Value			Gross Amounts Offset in the Balance Sheet			Net Fair Value Presented in the Balance Sheet
Assets
Commodity Contracts	Other current assets	$	88		$	(49	)	$	39
Commodity Contracts	Other assets	25			(6		)	19

Liabilities
Commodity Contracts	Accrued liabilities	(152		)	49			(103		)
Commodity Contracts	Other long-term liabilities	(58		)	6			(52		)

Total derivatives		$	(97	)	$	—		$	(97	)