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Derivative Activities
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Activities

(10) DERIVATIVE ACTIVITIES

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We utilize commodity swaps, collars, three-way collars or swaptions to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget, fixed costs and investment plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (NYMEX) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net gain of $192.1 million at September 30, 2023. These contracts expire monthly through December 2026. The following table sets forth our commodity-based derivative volumes by year as of September 30, 2023, excluding our basis swaps and divestiture contingent consideration which are discussed separately below:

 

Period

 

Contract Type

 

Volume Hedged

 

Weighted Average Hedge Price

 

 

 

 

 

 

 

Swap

 

 

Sold Put

 

 

Floor

 

 

Ceiling

 

Natural Gas (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

Swaps

 

383,315 Mmbtu/day

 

$

 

3.50

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

Collars

 

253,370 Mmbtu/day

 

 

 

 

 

 

 

 

$

 

3.37

 

 

$

 

4.48

 

2023

 

Three-way Collars

 

159,891 Mmbtu/day

 

 

 

 

$

 

2.28

 

 

$

 

3.26

 

 

$

 

4.29

 

2024

 

Swaps

 

304,973 Mmbtu/day

 

$

 

4.01

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

Collars

 

436,694 Mmbtu/day

 

 

 

 

 

 

 

 

$

 

3.50

 

 

$

 

5.63

 

2024

 

Three-way Collars

 

50,000 Mmbtu/day

 

 

 

 

$

 

2.50

 

 

$

 

3.50

 

 

$

 

4.24

 

2025

 

Swaps

 

360,000 Mmbtu/day

 

$

 

4.12

 

 

 

 

 

 

 

 

 

 

 

 

2026

 

Swaps

 

52,500 Mmbtu/day

 

$

 

4.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

Swaps

 

5,582 bbls/day

 

$

 

72.61

 

 

 

 

 

 

 

 

 

 

 

 

January-September 2024

 

Swaps

 

3,664 bbls/day

 

$

 

80.21

 

 

 

 

 

 

 

 

 

 

 

 

January-September 2024

 

Collars

 

832 bbls/day

 

 

 

 

 

 

 

 

$

 

80.00

 

 

$

 

90.12

 

 

(a)

We also sold natural gas swaptions of 90,000 Mmbtu/day for calendar year 2025 at a weighted average price of $4.25/Mmbtu that expire December 2023. Additionally, we sold natural gas swaptions of 20,000 Mmbtu/day for calendar year 2026 at a weighted average price of $4.10/Mmbtu that expire June 2024.

Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur.

Basis Swap Contracts

In addition to the commodity derivatives described above, at September 30, 2023, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through December 2026 and include a total volume of 357,645,000 Mmbtu. The fair value of these contracts was a gain of $17.1 million at September 30, 2023.

Divestiture Contingent Consideration

We have the right to receive contingent consideration in conjunction with the sale of our North Louisiana assets in August 2020 that is a derivative financial instrument not designated as a hedging instrument. The remaining contingent consideration of up to $21.0 million is based on future achievement of natural gas and oil prices based on published indexes and realized NGLs prices of the buyer for 2023. All changes in the fair value are recognized as a gain or loss in earnings in the period they occur in derivative fair value income or loss in our consolidated statements of operations. For first nine months 2023, this fair value has decreased $5.7 million for a fair value of $7.4 million as of September 30, 2023.

Derivative Assets and Liabilities

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of September 30, 2023 and December 31, 2022 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):

 

 

 

 

September 30, 2023

 

 

 

 

Gross
Amounts of
Recognized
Assets

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
Assets
Presented in the
Balance Sheet

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

110,242

 

 

$

(2,726

)

 

$

107,516

 

 

–swaptions

 

 

—

 

 

 

(2,435

)

 

 

(2,435

)

 

–collars

 

 

90,325

 

 

 

(2,536

)

 

 

87,789

 

 

–three-way collars

 

 

8,430

 

 

 

(640

)

 

 

7,790

 

 

–basis swaps

 

 

30,020

 

 

 

(12,459

)

 

 

17,561

 

Crude oil

–swaps

 

 

354

 

 

 

(9,420

)

 

 

(9,066

)

 

–collars

 

 

515

 

 

 

—

 

 

 

515

 

Divestiture contingent consideration

 

 

7,350

 

 

 

—

 

 

 

7,350

 

 

 

 

$

247,236

 

 

$

(30,216

)

 

$

217,020

 

 

 

 

 

September 30, 2023

 

 

 

 

Gross
Amounts of
Recognized
(Liabilities)

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
(Liabilities)
Presented in the
Balance Sheet

 

Derivative (liabilities):

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

(2,726

)

 

$

2,726

 

 

$

—

 

 

–swaptions

 

 

(2,435

)

 

 

2,435

 

 

 

—

 

 

–collars

 

 

(2,536

)

 

 

2,536

 

 

 

—

 

 

–three-way collars

 

 

(640

)

 

 

640

 

 

 

—

 

 

–basis swaps

 

 

(12,876

)

 

 

12,459

 

 

 

(417

)

Crude oil

–swaps

 

 

(9,420

)

 

 

9,420

 

 

 

—

 

 

 

 

$

(30,633

)

 

$

30,216

 

 

$

(417

)

 

 

 

 

December 31, 2022

 

 

 

 

Gross
Amounts of
Recognized
Assets

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
Assets
Presented in the
Balance Sheet

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

Natural gas

 

–swaps

$

19,438

 

 

$

(6,236

)

 

$

13,202

 

 

 

–collars

 

54,222

 

 

 

(45,452

)

 

 

8,770

 

 

 

–three-way collars

 

12,424

 

 

 

(12,424

)

 

 

—

 

 

 

–basis swaps

 

25,493

 

 

 

(20,437

)

 

 

5,056

 

Crude oil

 

–collars

 

1,807

 

 

 

—

 

 

 

1,807

 

Divestiture contingent consideration

 

13,080

 

 

 

—

 

 

 

13,080

 

 

 

 

$

126,464

 

 

$

(84,549

)

 

$

41,915

 

 

 

 

 

 

December 31, 2022

 

 

 

 

Gross
Amounts of
Recognized (Liabilities)

 

 

Gross
Amounts
Offset in the
Balance Sheet

 

 

Net Amounts of
(Liabilities)
Presented in the
Balance Sheet

 

Derivative (liabilities):

 

 

 

 

 

 

 

 

 

 

Natural gas

–swaps

 

$

(115,374

)

 

$

6,236

 

 

$

(109,138

)

 

–collars

 

 

(72,866

)

 

 

45,452

 

 

 

(27,414

)

 

–three-way collars

 

 

(24,341

)

 

 

12,424

 

 

 

(11,917

)

 

–basis swaps

 

 

(24,972

)

 

 

20,437

 

 

 

(4,535

)

Crude oil

–swaps

 

 

(13,908

)

 

 

—

 

 

 

(13,908

)

 

 

 

$

(251,461

)

 

$

84,549

 

 

$

(166,912

)

 

 

The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):

 

 

 

Derivative Fair Value Income (Loss)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Commodity swaps

$

14,513

 

 

$

(241,437

)

 

$

266,672

 

 

$

(890,741

)

Swaptions

 

57

 

 

 

26,003

 

 

 

(2,435

)

 

 

11,149

 

Three-way collars

 

7,071

 

 

 

(117,151

)

 

 

63,285

 

 

 

(324,583

)

Collars

 

12,566

 

 

 

(161,739

)

 

 

184,924

 

 

 

(477,284

)

Calls

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,363

)

Basis swaps

 

4,977

 

 

 

36,966

 

 

 

23,379

 

 

 

38,398

 

Freight swaps

 

—

 

 

 

—

 

 

 

—

 

 

 

(33

)

Divestiture contingent consideration

 

(790

)

 

 

(350

)

 

 

(5,730

)

 

 

7,770

 

Total

$

38,394

 

 

$

(457,708

)

 

$

530,095

 

 

$

(1,636,687

)