Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 11. Derivative Instruments and Hedging Activities

Objective and Strategies for Using Derivative Instruments We enter into price hedging arrangements to mitigate effects of commodity price volatility and enhance the predictability of cash flows for a portion of our production. 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.

Unsettled Commodity Derivative Instruments As of June 30, 2020, we had entered into the following crude oil derivative instruments:



					Swaps					Collars
Settlement Month	Settlement Year	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
Jul-Sept	2020	Swaps	NYMEX WTI	37,500	$	—		$	36.80	$	—	$	—	$	—
Oct-Dec	2020	Swaps	NYMEX WTI	14,500	—			51.91		—		—		—
Jul-Dec	2020	Three-Way Collars	NYMEX WTI	53,000	—			—		10.00		25.00		37.20
Jul-Dec	2020	Sold Calls	NYMEX WTI	8,000	—			65.59		—		—		—
Jul-Sept	2020	Basis Swaps	Midland ⁽¹⁾	27,000	(4.03		)	—		—		—		—
Oct-Dec	2020	Basis Swaps	Midland ⁽¹⁾	22,000	(4.21		)	—		—		—		—
Jul-Sept	2020	Basis Swaps	WTI Roll ⁽²⁾	78,000	(2.28		)	—		—		—		—
Oct-Dec	2020	Basis Swaps	WTI Roll ⁽²⁾	64,000	(2.19		)	—		—		—		—


⁽¹⁾	These contracts 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⁾	Represents the value differential associated with NYMEX West Texas Intermediate (WTI) futures delivery months and prompt month physical delivery.

As of June 30, 2020, we had entered into the following natural gas liquid (NGL) derivative instruments:



					Swaps
Settlement Month	Settlement Year	Type of Contract	Index	Bbls per Day	Weighted Average Fixed Price
Jul	2020	Ethane Swaps	Mont Belvieu	6,500	$	8.39
Aug	2020	Ethane Swaps	Mont Belvieu	8,500	8.39
Sept	2020	Ethane Swaps	Mont Belvieu	10,500	8.45
Oct-Dec	2020	Ethane Swaps	Mont Belvieu	8,500	8.60
Jul-Sept	2020	Propane Swaps	Mont Belvieu	5,000	21.04
Jul-Sept	2020	Isobutane Swaps	Mont Belvieu	1,000	25.36
Jul-Sept	2020	Butane Swaps	Mont Belvieu	1,500	24.31

As of June 30, 2020, we had entered into the following natural gas derivative instruments:



					Swaps					Collars
Settlement Month	Settlement Year	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
Jul-Dec	2020	Swaps	NYMEX HH	90,000	$	—		$	2.60	$	—	$	—	$	—
Jul-Dec	2020	Sold Puts	NYMEX HH	90,000	—			—		2.15		—		—
Jul-Oct	2020	Three-Way Collars	NYMEX HH	40,000	—			—		2.25		2.70		2.85
Jul-Dec	2020	Basis Swaps	CIG ⁽¹⁾	139,000	(0.57		)	—		—		—		—
Jul-Dec	2020	Basis Swaps	WAHA ⁽¹⁾	49,500	(1.05		)	—		—		—		—
Jan-Dec	2021	Swaps	NYMEX HH	70,000	—			2.42		—		—		—
Jan-Dec	2021	Sold Call Swaptions	NYMEX HH	70,000	—			2.42		—		—		—
Jan-Dec	2021	Three-Way Collars	NYMEX HH	62,000	—			—		1.90		2.40		2.88
Jan-Dec	2021	Basis Swaps	CIG ⁽¹⁾	114,000	(0.44		)	—		—		—		—
Jan-Dec	2021	Basis Swaps	WAHA ⁽¹⁾	32,000	(0.71		)	—		—		—		—
Jan-Dec	2021	Swaps	ICE TTF ⁽²⁾	35,000	—			4.15		—		—		—
Jan-Dec	2022	Swaps	ICE TTF ⁽²⁾	49,000	—			4.26		—		—		—


⁽¹⁾	These contracts establish a fixed amount for the differential between index pricing for Colorado Interstate Gas (CIG) and Waha Hub versus NYMEX Henry Hub (HH). The weighted average differential represents the amount of reduction to NYMEX HH prices for the notional volumes covered by the basis swap contracts.


⁽²⁾	In second quarter 2020, we entered into derivative instruments for price hedging protection related to our future production of liquified natural gas (LNG) from our Alen natural gas monetization project, offshore West Africa. The swaps, which were entered into in US dollars per MMBtu, are indexed to ICE Dutch Title Transfer Facility (TTF), an international natural gas benchmark.

Fair Value Amounts The fair values of commodity derivative instruments on our consolidated balance sheets were as follows (in millions):



Asset Derivative Instruments					Liability Derivative Instruments
Balance Sheet Location	June 30, 2020		December 31, 2019		Balance Sheet Location	June 30, 2020		December 31, 2019
Other Current Assets	$	61	$	14	Other Current Liabilities	$	151	$	36
Other Noncurrent Assets	—		1		Other Noncurrent Liabilities	15		1
Total	$	61	$	15		$	166	$	37

We estimate the fair values of these instruments using published forward commodity price curves as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published LIBOR rates, Eurodollar futures rates and interest swap rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. In addition, for collars, we estimate the values of put options sold and contract floors and ceilings using an option pricing model which considers market volatility, market prices and contract terms. Amounts include the impact of netting clauses within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.

Gains and Losses on Commodity Derivative Instruments The effect of commodity derivative instruments on our consolidated statements of operations and comprehensive loss was as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(millions)	2020			2019			2020			2019
Cash (Received) Paid in Settlement of Commodity Derivative Instruments
Crude Oil ⁽¹⁾	$	(103	)	$	7		$	(313	)	$	(2	)
NGL	(3		)	—			(3		)	—
Natural Gas	—			(8		)	2			(13		)
Total Cash Received in Settlement of Commodity Derivative Instruments	$	(106	)	$	(1	)	$	(314	)	$	(15	)
Non-cash Portion of Loss (Gain) on Commodity Derivative Instruments
Crude Oil	$	226		$	(54	)	$	39		$	169
NGL	10			—			—			—
Natural Gas	28			(5		)	44			(2		)
Total Non-cash Portion of Loss (Gain) on Commodity Derivative Instruments	$	264		$	(59	)	$	83		$	167
Loss (Gain) on Commodity Derivative Instruments
Crude Oil	$	123		$	(47	)	$	(274	)	$	167
NGL	7			—			(3		)	—
Natural Gas	28			(13		)	46			(15		)
Total Loss (Gain) on Commodity Derivative Instruments	$	158		$	(60	)	$	(231	)	$	152

⁽¹⁾

Six months ended June 30, 2020 includes first quarter 2020 monetization of certain crude oil derivative instruments by settling the instruments prior to their original settlement dates. Additionally, in first quarter 2020 we entered into certain new instruments for the remainder of the year. Certain of this activity was intraperiod and related to crude oil instruments that were not part of our derivative portfolio as of December 31, 2019 and March 31, 2020. Net cash received in first quarter 2020 for these transactions was $160 million.