Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 4. Derivative Instruments and Hedging Activities

Objective and Strategies for Using Derivative Instruments We are exposed to fluctuations in crude oil, natural gas and NGL pricing. In order to mitigate the effect of commodity price volatility and enhance the predictability of cash flows relating to the marketing of our global crude oil and domestic natural gas, we enter into crude oil and natural gas price hedging arrangements.

While these instruments mitigate the cash flow risk of future decreases in commodity prices, they may also curtail benefits from future increases in commodity prices. See Note 6. Fair Value Measurements and Disclosures for a discussion of methods and assumptions used to estimate the fair values of our derivative instruments.

Unsettled Commodity Derivative Instruments As of September 30, 2018, the following crude oil derivative contracts were outstanding:



				Swaps					Collars
Settlement Period	Type of Contract	Index	Bbls Per Day	Weighted Average Differential			Weighted Average Fixed Price		Weighted Average Short Put Price		Weighted Average Floor Price		Weighted Average Ceiling Price
2018	Swaps	NYMEX WTI	66,000	$	—		$	60.30	$	—	$	—	$	—
2018	Collars	NYMEX WTI	18,000	—			—		—		50.42		58.82
2018	Three-Way Collars	NYMEX WTI	10,000	—			—		45.50		52.50		69.09
2018	Three-Way Collars	Dated Brent	3,000	—			—		40.00		50.00		70.41
2018	Swaps	ICE Brent	2,000	—			59.00		—		—		—
2018	Collars	ICE Brent	2,000	—			—		—		50.00		55.25
2018	Three-Way Collars	ICE Brent	5,000	—			—		43.00		50.00		59.50
2018	Basis Swaps	⁽¹⁾	20,000	(2.30		)	—		—		—		—
2019	Swaps	NYMEX WTI	44,000	—			58.37		—		—		—
2019	Three-Way Collars	NYMEX WTI	11,000	—			—		52.05		62.05		75.84
2019	Swaps	ICE Brent	5,000	—			57.00		—		—		—
2019	Three-Way Collars	ICE Brent	3,000	—			—		43.00		50.00		64.07
2019	Basis Swaps	⁽¹⁾	27,000	(3.23		)	—		—		—		—
2020	Swaption ⁽²⁾	NYMEX WTI	5,000	—			61.79		—		—		—
2020	Basis Swaps	⁽¹⁾	15,000	(5.01		)	—		—		—		—


⁽¹⁾	We have entered into crude oil basis swap contracts in order to establish a fixed amount for the differential between pricing in Midland, Texas, and Cushing, Oklahoma. The weighted average differential represents the amount of reduction to Cushing, Oklahoma prices for the notional volumes covered by the basis swap contracts.


⁽²⁾	We have entered into certain derivative contracts (swaptions), which give counterparties the right, but not the obligation, to enter into swap agreements with us on the option expiration dates.

As of September 30, 2018, the following natural gas derivative contracts were outstanding:



				Swaps					Collars
Settlement Period	Type of Contract	Index	MMBtu Per Day	Weighted Average Differential			Weighted Average Fixed Price		Weighted Average Short Put Price		Weighted Average Floor Price		Weighted Average Ceiling Price
2018	Three-Way Collars	NYMEX HH	120,000	$	—		$	—	$	2.50	$	2.88	$	3.65
2019	Three-Way Collars	NYMEX HH	104,000	—			—		2.25		2.65		2.95
2019	Basis Swaps	⁽¹⁾	52,000	(0.74		)	—		—		—		—


⁽¹⁾	We have entered into natural gas basis swap contracts in order to establish a fixed amount for the differential between index pricing for Colorado Interstate Gas and NYMEX Henry Hub. The weighted average differential represents the amount of reduction to NYMEX Henry Hub prices for the notional volumes covered by the basis swap contracts.

Fair Value Amounts and Loss (Gain) on Commodity Derivative Instruments The fair values of commodity derivative instruments in our consolidated balance sheets were as follows:



	Fair Value of Derivative Instruments
	Asset Derivative Instruments						Liability Derivative Instruments
	September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
(millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity Derivative Instruments	Current Assets	$	—	Current Assets	$	2	Current Liabilities	$	294	Current Liabilities	$	58
	Noncurrent Assets	—		Noncurrent Assets	—		Noncurrent Liabilities	100		Noncurrent Liabilities	15
Total		$	—		$	2		$	394		$	73

The effect of commodity derivative instruments on our consolidated statements of operations was as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(millions)	2018			2017			2018			2017
Cash Paid (Received) in Settlement of Commodity Derivative Instruments
Crude Oil	$	68		$	(4	)	$	164		$	(20	)
Natural Gas	(1		)	—			(4		)	2
Total Cash Paid (Received) in Settlement of Commodity Derivative Instruments	67			(4		)	160			(18		)
Non-cash Portion of Loss (Gain) on Commodity Derivative Instruments
Crude Oil	85			27			316			(64		)
Natural Gas	3			(1		)	7			(63		)
Total Non-cash Portion of Loss (Gain) on Commodity Derivative Instruments	88			26			323			(127		)
Loss (Gain) on Commodity Derivative Instruments
Crude Oil	153			23			480			(84		)
Natural Gas	2			(1		)	3			(61		)
Total Loss (Gain) on Commodity Derivative Instruments	$	155		$	22		$	483		$	(145	)