Derivatives and Risk Management (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments Notional Amount, Weighted Average Contract Prices and Fair Value

The following tables provide information about the Company’s financial instruments that are sensitive to changes in commodity prices and that are used to protect the Company’s exposure. None of the financial instruments below are designated for hedge accounting treatment.  The tables present the notional amount, the weighted average contract prices and the fair value by expected maturity dates as of June 30, 2019:

Financial Protection on Production
		Weighted Average Price per MMBtu
	Volume (Bcf)	Swaps		Sold Puts		Purchased Puts		Sold Calls		Basis Differential			Fair Value at June 30, 2019 (in millions)
Natural Gas
2019
Fixed price swaps	131	$	2.92	$	—	$	—	$	—	$	—		$	75
Two-way costless collars	25	—		—		2.78		2.92		—			13
Three-way costless collars	67	—		2.47		2.88		3.22		—			22
Total	223												$	110
2020
Fixed price swaps	24	$	2.88	$	—	$	—	$	—	$	—		$	8
Three-way costless collars	148	—		2.36		2.67		2.97		—			10
Total	172												$	18
2021
Three-way costless collars	37	$	—	$	2.35	$	2.60	$	2.93	$	—		$	(1	)
Basis Swaps
2019	80	$	—	$	—	$	—	$	—	$	(0.45	)	$	(6	)
2020	132	—		—		—		—		(0.34		)	(10		)
2021	28	—		—		—		—		(0.51		)	(1		)
Total	240												$	(17	)

	Volume (MBbls)	Weighted Average Strike Price per Bbl								Fair Value at June 30, 2019 (in millions)
		Swaps		Sold Puts		Purchased Puts		Sold Calls
Oil
2019
Fixed price swaps (1)	1,003	$	60.89	$	—	$	—	$	—	$	4
Two-way costless collars	764	—		—		61.45		67.16		4
Three-way costless collars	276	—		45.00		55.00		63.67		—
Total	2,043									$	8
2020
Fixed price swaps	1,556	$	60.18	$	—	$	—	$	—	$	7
Two-way costless collars	366	—		—		60.00		69.80		3
Three-way costless collars	641	—		45.00		55.00		63.36		1
Total	2,563									$	11
Propane
2019
Fixed price swaps	1,955	$	30.18	$	—	$	—	$	—	$	14
Two-way costless collars	276	—		—		25.62		28.77		1
Total	2,231									$	15
2020
Fixed price swaps	2,196	$	26.97	$	—	$	—	$	—	$	6
Two-way costless collars	366	—		—		25.20		$	29.40	1
Total	2,562									$	7
Ethane
2019
Fixed price swaps	1,858	$	13.90	$	—	$	—	$	—	$	10
2020
Fixed price swaps	732	$	13.49	$	—	$	—	$	—	$	2

(1) Includes 138 MBbls of purchased fixed price oil swaps hedged at $69.10 per barrel with a fair value of ($1) million and 1,141 MBbls of sold fixed price oil swaps hedged at $61.88 with a fair value of $5 million.

Other Derivative Contracts
	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Fair Value at June 30, 2019 (in millions)
Purchased Call Options – Natural Gas
2019	17	$	3.50	$	—
2020	68	3.63		2
2021	57	3.52		2
Total	142			$	4
Sold Call Options – Natural Gas
2019	26	$	3.50	$	—
2020	137	3.39		(8		)
2021	114	3.33		(8		)
Total	277			$	(16	)

໿

	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Basis Differential per MMBtu			Fair Value at June 30, 2019 ($ in millions)
Storage (1)
2019
Purchased fixed price swaps	1	$	2.87	$	—		$	(1	)
Purchased basis swaps	1	—		(0.53		)	—
Total	2						$	(1	)
2020
Fixed price swap	1	$	3.14	$	—		$	—

(1)

The Company has entered into certain derivatives to protect the value of volumes of natural gas injected into a storage facility that will be withdrawn at a later date.

Balance Sheet Classification of Derivative Financial Instruments

The balance sheet classification of the assets and liabilities related to derivative financial instruments (none of which are designated for hedge accounting treatment) is summarized below as of June 30, 2019 and December 31, 2018:

Derivative Assets
		Fair Value
(in millions)	Balance Sheet Classification	June 30, 2019			December 31, 2018
Derivatives not designated as hedging instruments:
Fixed price swaps – natural gas	Derivative assets	$	79		$	32
Fixed price swaps – oil	Derivative assets	7			13
Fixed price swaps – propane	Derivative assets	18			11
Fixed price swaps – ethane	Derivative assets	11			7
Two-way costless collars – natural gas	Derivative assets	13			11
Two-way costless collars – oil	Derivative assets	6			6
Two-way costless collars – propane	Derivative assets	2			—
Three-way costless collars – natural gas	Derivative assets	65			41
Three-way costless collars – oil	Derivative assets	2			—
Basis swaps – natural gas	Derivative assets	5			8
Purchased call options – natural gas	Derivative assets	1		(1)	—
Interest rate swaps	Derivative assets	—			1
Fixed price swaps – natural gas	Other long-term assets	4			6
Fixed price swaps – oil	Other long-term assets	4			6
Fixed price swaps – propane	Other long-term assets	2			—
Fixed price swaps – ethane	Other long-term assets	1			1
Two-way costless collars – oil	Other long-term assets	2			5
Three-way costless collars – natural gas	Other long-term assets	31			34
Three-way costless collars – oil	Other long-term assets	2			—
Basis swaps – natural gas	Other long-term assets	2			3
Purchased call options – natural gas	Other long-term assets	4			6
Total derivative assets		$	261		$	191

Derivative Liabilities
		Fair Value
(in millions)	Balance Sheet Classification	June 30, 2019		December 31, 2018
Derivatives not designated as hedging instruments:
Purchased fixed price swap – oil	Derivative liabilities	$	1	$	6
Fixed price swaps – natural gas	Derivative liabilities	—		9
Fixed price swaps – ethane	Derivative liabilities	—		3
Two-way costless collars – natural gas	Derivative liabilities	—		7
Two-way costless collars – oil	Derivative liabilities	1		—
Three-way costless collars – natural gas	Derivative liabilities	37		33
Three-way costless collars – oil	Derivative liabilities	2		—
Basis swaps – natural gas	Derivative liabilities	19		18
Sold call options – natural gas	Derivative liabilities	5		3
Storage – fixed price swap	Derivative liabilities	1		—
Interest rate swaps	Derivative liabilities	1		—
Fixed price swaps – natural gas	Other long-term liabilities	—		1
Two-way costless collars – oil	Other long-term liabilities	—		1
Three-way costless collars – natural gas	Other long-term liabilities	28		35
Three-way costless collars – oil	Other long-term liabilities	1		—
Basis swap – natural gas	Other long-term liabilities	5		4
Sold call options – natural gas	Other long-term liabilities	11		19
Total derivative liabilities		$	112	$	139

(1) Includes $1 million in premiums paid related to certain natural gas purchased call options recognized as a component of derivative assets within current assets on the consolidated balance sheet at June 30, 2019. As certain natural gas purchased call options settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the consolidated statements of operations.

Summary of Before Tax Effect of Fair Value Hedges not Designated for Hedge Accounting

The following tables summarize the before-tax effect of the Company’s derivative instruments on the consolidated statements of operations for the three and six months ended June 30, 2019 and 2018:

Unsettled Gain (Loss) on Derivatives Recognized in Earnings
Derivative Instrument	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Unsettled	For the three months ended June 30,						For the six months ended June 30,
		2019			2018			2019			2018
		(in millions)
Purchased fixed price swaps – oil	Gain (Loss) on Derivatives	$	1		$	—		$	5		$	—
Fixed price swaps – natural gas	Gain (Loss) on Derivatives	57			(26		)	55			(29		)
Fixed price swaps – oil	Gain (Loss) on Derivatives	5			—			(8		)	—
Fixed price swaps – propane	Gain (Loss) on Derivatives	13			(12		)	9			(9		)
Fixed price swaps – ethane	Gain (Loss) on Derivatives	—			(2		)	7			(2		)
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	10			(1		)	9			2
Two-way costless collars – oil	Gain (Loss) on Derivatives	4			—			(3		)	—
Two-way costless collars – propane	Gain (Loss) on Derivatives	2			—			2			—
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	22			(24		)	24			(29		)
Three-way costless collars – oil	Gain (Loss) on Derivatives	1			—			1			—
Basis swaps – natural gas	Gain (Loss) on Derivatives	4			(4		)	(6		)	16
Purchased call options – natural gas	Gain (Loss) on Derivatives	(2		)	(12		)	(2		)	4
Sold call options – natural gas	Gain (Loss) on Derivatives	4			31			6			(3		)
Sold call options – oil	Gain (Loss) on Derivatives	—			(6		)	—			(6		)
Storage – fixed price swap	Gain (Loss) on Derivatives	(1		)	—			(1		)	—
Interest rate swaps	Gain (Loss) on Derivatives	(2		)	—			(2		)	2
Total gain (loss) on unsettled derivatives		$	118		$	(56	)	$	96		$	(54	)
Settled Gain (Loss) on Derivatives Recognized in Earnings (1)
Derivative Instrument	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Settled	For the three months ended June 30,						For the six months ended June 30,
		2019			2018			2019			2018
		(in millions)
Purchased fixed price swaps – oil	Gain (Loss) on Derivatives	$	(1	)	$	—		$	(2	)	$	—
Sold fixed price swaps – natural gas	Gain (Loss) on Derivatives	14			13			8			13
Sold fixed price swaps – oil	Gain (Loss) on Derivatives	2			—			4			—
Sold fixed price swaps – propane	Gain (Loss) on Derivatives	7			(1		)	9			(1		)
Sold fixed price swaps – ethane	Gain (Loss) on Derivatives	5			—			6			—
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	3			—			2			4
Two-way costless collars – oil	Gain (Loss) on Derivatives	1			—			2			—
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	8			12			4			19
Sold basis swaps – natural gas	Gain (Loss) on Derivatives	(4		)	(3		)	(8		)	(24		)
Purchased call options – natural gas	Gain (Loss) on Derivatives	—			—			—			2			(2)
Sold call options – natural gas	Gain (Loss) on Derivatives	(1		)	—			(1		)	(1		)
Sold call options – oil	Gain (Loss) on Derivatives	—			(1		)	—			(1		)
Total gain on settled derivatives		$	34		$	20		$	24		$	11
Total gain (loss) on derivatives		$	152		$	(36	)	$	120		$	(43	)

(1) The Company calculates gain (loss) on derivatives, settled, as the summation of gains and losses on positions that settled within the period.

(2)

Includes $1 million amortization of premiums paid related to certain natural gas call options for the six months ended June 30, 2018, which is included in gain (loss) on derivatives on the consolidated statements of operations.