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 do not utilize complex derivatives as we typically utilize commodity swap, calls, swaptions or collar contracts to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. Every derivative instrument is required to be recorded on our consolidated balance sheets as either an asset or a liability measured at its fair value. Their fair value, which is represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price (generally NYMEX for natural gas and crude oil or Mont Belvieu for NGLs), approximated a net derivative liability of $18.0 million at December 31, 2020. These contracts expire monthly through December 2021. The following table sets forth the derivative volumes by year as of December 31, 2020, excluding our basis and freight 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 ⁽¹⁾

2021

Swaps

550,000 Mmbtu/day

2.77

January-October 2021

Collars

342,237 Mmbtu/day

$ 2.51

$ 3.00

2021

Three-way Collars

240,000 Mmbtu/day

$ 1.99

$ 2.33

$ 2.60

Crude Oil

2021

Swaps

3,479 bbls/day

46.11

NGLs (C3-Propane)

January-June 2021

Swaps

6,972 bbls/day

0.55/gallon

January-June 2021

Collars

5,000 bbls/day

$ 0.50/gallon

$ 0.60/gallon

NGLs (NC4-Normal Butane)

January-March 2021

Swaps

2,000 bbls/day

0.71/gallon

January-March 2021

Collars

1,000 bbls/day

$ 0.60/gallon

$ 0.70/gallon

NGLs (C5-Natural Gasoline)

January-September 2021

Swaps

2,821 bbls/day

0.92/gallon

January-March 2021

Calls

1,000 bbls/day

0.95/gallon

⁽¹⁾ We also sold natural gas call swaptions of 280,000 Mmbtu/day for 2022 at a weighted average price of $2.81 per Mmbtu.

In addition to the swaps, collars and swaptions above, at December 31, 2020, we had natural gas basis swap contracts which lock in the differential between NYMEX and certain of our physical pricing points in Appalachia. These contracts settle monthly through December 2024 and include a total volume of 180,510,000 Mmbtu. The fair value of these contracts was a net derivative asset of $3.7 million on December 31, 2020.

At December 31, 2020, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indexes. The contracts settle monthly in 2021. The fair value of these contracts was a net derivative asset of $794,000 on December 31, 2020.

In connection with our international propane sales, we utilize propane swaps. To further hedge our propane price, at December 31, 2020, we had freight swap contracts which lock in the freight rate for a specific trade route on the Baltic Exchange. These contracts settle monthly and cover 5,000 metric tons per month in second quarter 2021 and 10,000 metric tons for the remainder of the year. The fair value of these contracts was a net derivative asset of $1.1 million on December 31, 2020.

In addition to the derivatives described above, our right to receive contingent consideration in conjunction with the sale of our North Louisiana assets was determined to be a derivative financial instrument that is not designated as a hedging instrument. The contingent consideration of up to $90.0 million is based on future realization of natural gas and oil prices based on published indexes and realized NGLs prices of the buyer for the years 2021, 2022 and 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. We currently do not expect to receive any value for the period from July through December 2020. The fair value of this instrument on December 31, 2020 was a derivative asset of $16.0 million.

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of December 31, 2020 and 2019 is summarized below (in thousands). As of December 31, 2020, we are conducting derivative activities with twenty counterparties, of which all but five are secured lenders in our bank credit facility. We believe all of these counterparties are acceptable credit risks. At times, such risks may be concentrated with certain counterparties. The credit worthiness of our counterparties is subject to periodic review. 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.

		December 31, 2020
		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	$	33,559	$	(16,821	)	$	16,738
	–collars		7,016		(2,329	)		4,687
	–three-way collars		535		(6,139	)		(5,604	)
	–basis swaps		7,894		(3,502	)		4,392
Crude oil	–swaps		2,465		(829	)		1,636
NGLs	–C3 propane spread		4,863		(4,863	)		—
	–C3 propane collars		—		(107	)		(107	)
Freight	–swaps		2,310		—			2,310
Divestiture contingent consideration			15,960		—			15,960
		$	74,602	$	(34,590	)	$	40,012


		December 31, 2020
		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	$	(10,120	)	$	16,821	$	6,701
	–swaptions		(9,803	)		—		(9,803	)
	–collars		—			2,329		2,329
	–three-way collars		(18,353	)		6,139		(12,214	)
	–basis swaps		(4,197	)		3,502		(695	)
Crude oil	–swaps		(5,471	)		829		(4,642	)
NGLs	–C3 propane spread		(4,069	)		4,863		794
	–C3 propane swaps		(8,243	)		—		(8,243	)
	–C3 propane collars		(3,086	)		107		(2,979	)
	–C5 natural gasoline swaps		(4,897	)		—		(4,897	)
	–C5 natural gasoline calls		(546	)		—		(546	)
	–NC4 butane swaps		(651	)		—		(651	)
	–NC4 butane collars		(401	)		—		(401	)
Freight	–swaps		(1,206	)		—		(1,206	)
		$	(71,043	)	$	34,590	$	(36,453	)


		December 31, 2019
		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	$	134,364	$	(2,913	)	$	131,451
	–swaptions		—		(1,325	)		(1,325	)
	–basis swaps		10,766		(1,092	)		9,674
Crude oil	–swaps		3,893		(4,794	)		(901	)
	–swaptions		—		(1,597	)		(1,597	)
	–calls		—		(349	)		(349	)
NGLs	–C3 propane spread swaps		1,913		(1,913	)		—
	–NC4 butane swaps		167		—			167
	–C5 natural gasoline swaps		60		(127	)		(67	)
Freight	–swaps		1,529		(1,028	)		501
		$	152,692	$	(15,138	)	$	137,554

		December 31, 2019
		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	$	(1,657	)	$	2,913	$	1,256
	–swaptions		(2,594	)		1,325		(1,269	)
	–basis swaps		(1,371	)		1,092		(279	)
Crude oil	–swaps		(4,814	)		4,794		(20	)
	–swaptions		(2,254	)		1,597		(657	)
	–calls		(349	)		349		—
NGLs	–C3 propane spread swaps		(16,040	)		1,913		(14,127	)
	–C5 natural gasoline swaps		(127	)		127		—
Freight	–swaps		—			1,028		1,028
		$	(29,206	)	$	15,138	$	(14,068	)

The effects of our derivatives on our consolidated statements of operations for the last three years are summarized below (in thousands).

	Derivative Fair Value Income (Loss)
	Year Ended December 31,
	2020			2019			2018
Commodity swaps	$	158,248		$	219,968		$	(57,950	)
Swaptions		(4,955	)		333			(6,556	)
Collars		3,304			(3,903	)		17,583
Three-way collars		(16,346	)		—			—
Basis swaps		48,278			6,661			(1,104	)
Calls		(558	)		(349	)		(2,653	)
Freight swaps		(1,230	)		3,971			(512	)
Divestiture contingent consideration		970			—			—
Total	$	187,711		$	226,681		$	(51,192	)