Price-Risk Management Activities

Derivatives are recorded on the balance sheet at fair value with changes in fair value recognized in earnings. The changes in the fair value of our derivatives are recognized in “Gain (loss) on commodity derivatives, net” on the accompanying consolidated statements of operations. We have a price-risk management policy to use derivative instruments to protect against declines in oil and natural gas prices, primarily through the purchase of commodity price swaps and collars as well as basis swaps.

During the years ended December 31, 2019 and 2018, the Company recorded gains of $24.2 million and losses of $9.8 million, respectively, relating to our derivative activities. The Company received net cash payments of $24.6 million and made net cash payments of $19.7 million for settled derivative contracts during the years ended December 31, 2019 and 2018, respectively.

At December 31, 2019 and 2018, we had $2.9 million and $0.7 million, respectively, in receivables for settled derivatives which were included on the accompanying consolidated balance sheet in “Accounts receivable, net” and were subsequently collected in January 2020 and 2019, respectively. At December 31, 2019 and 2018, we also had $0.2 million and $2.2 million, respectively, in payables for settled derivatives which were included on the accompanying consolidated balance sheet in “Accounts payable and accrued liabilities” and were subsequently paid in January 2020 and 2019, respectively.

The fair values of our swap contracts are computed using observable market data whereas our collar contracts are valued using a Black-Scholes pricing model and are periodically verified against quotes from brokers. At December 31, 2019 there was $12.8 million and $3.9 million in current unsettled derivative assets and long-term unsettled derivative assets, respectively, and $6.6 million and $1.6 million in current unsettled derivative liabilities and long-term unsettled derivative liabilities, respectively. At December 31, 2018, the Company had $15.3 million and $4.3 million in current unsettled derivative assets and long-term unsettled derivative assets, respectively, and $2.8 million and $3.7 million in current unsettled derivative liabilities and long-term unsettled derivative liabilities, respectively.

The Company uses an International Swap and Derivatives Association master agreement for our derivative contracts. This is an industry-standardized contract containing the general conditions of our derivative transactions including provisions relating to netting derivative settlement payments under certain circumstances (such as default). For reporting purposes, the Company has elected to not offset the asset and liability fair value amounts of its derivatives on the accompanying balance sheets. Under the right of set-off, there was an $8.4 million net fair value asset at December 31, 2019 and $13.0 million net fair value asset at December 31, 2018. For further discussion related to the fair value of the Company's derivatives, refer to Note 10 of these Notes to Consolidated Financial Statements.

The following tables summarize the weighted average prices as well as future production volumes for our future derivative contracts in place as of December 31, 2019.



Oil Derivative Swaps (NYMEX WTI Settlements)	Total Volumes (Bbls)	Weighted Average Price
2020 Contracts
1Q20	361,597	$	56.61
2Q20	452,569	$	56.41
3Q20	500,279	$	55.92
4Q20	421,621	$	54.61

2021 Contracts
1Q21	328,603	$	53.11
2Q21	320,033	$	53.46
3Q21	313,848	$	52.38
4Q21	230,000	$	53.22



Natural Gas Derivative Swaps (NYMEX Henry Hub Settlements)	Total Volumes (MMBtu)	Weighted Average Price		Weighted Average Collar Floor Price		Weighted Average Collar Call Price
2020 Contracts
1Q20	9,920,000	$	2.73
2Q20	7,328,000	$	2.63
3Q20	7,265,000	$	2.63
4Q20	7,042,000	$	2.63

2021 Contracts
1Q21	148,078	$	2.70
2Q21	442,255	$	2.30

Collar Contracts
1Q21	4,354,800			$	2.50	$	3.52
2Q21	3,791,000			$	2.20	$	2.75
3Q21	4,007,175			$	2.00	$	2.70
4Q21	3,726,000			$	2.25	$	2.75



Natural Gas Basis Derivative Swaps (East Texas Houston Ship Channel vs. NYMEX Settlements)	Total Volumes (MMBtu)	Weighted Average Price
2020 Contracts
1Q20	11,739,000	$	(0.03	)
2Q20	11,739,000	$	(0.04	)
3Q20	11,868,000	$	(0.03	)
4Q20	11,868,000	$	(0.04	)

2021 Contracts
1Q21	7,200,000	$	(0.003	)
2Q21	7,280,000	$	(0.003	)
3Q21	7,360,000	$	(0.003	)
4Q21	7,360,000	$	(0.003	)



Oil Basis Derivative Swaps (Argus Cushing (WTI) and LLS Settlements)	Total Volumes (Bbls)	Weighted Average Price
2020 Contracts (Calendar Monthly Roll Differential Swaps)
1Q20	182,000	$	0.49
2Q20	182,000	$	0.49
3Q20	184,000	$	0.49
4Q20	184,000	$	0.49