Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Carrying Amount and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of June 30, 2019 and December 31, 2018 were as follows:



	June 30, 2019						December 31, 2018
(in millions)	Carrying Amount			Fair Value			Carrying Amount		Fair Value
Cash and cash equivalents	$	155		$	155		$	201	$	201
2018 revolving credit facility due April 2023	—			—			—		—
Senior notes⁽¹⁾	2,342			2,220			2,342		2,190
Derivative instruments, net	149		⁽²⁾	149		⁽²⁾	52		52


(1)	Excludes unamortized debt issuance costs and debt discounts.


(2)	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.

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:



	June 30, 2019
	Fair Value Measurements Using:
(in millions)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Assets (Liabilities) at Fair Value
Assets
Fixed price swap – natural gas	$	—	$	83		$	—	$	83
Fixed price swap – oil	—		11			—		11
Fixed price swap – propane	—		20			—		20
Fixed price swap – ethane	—		12			—		12
Two-way costless collar – natural gas	—		13			—		13
Two-way costless collar – oil	—		8			—		8
Two-way costless collar – propane	—		2			—		2
Three-way costless collar – natural gas	—		96			—		96
Three-way costless collar – oil	—		4			—		4
Basis swap – natural gas	—		7			—		7
Purchased call option – natural gas ⁽¹⁾	—		5			—		5
Liabilities
Purchased fixed price swap – oil	—		(1		)	—		(1		)
Two-way costless collar – oil	—		(1		)	—		(1		)
Three-way costless collar – natural gas	—		(65		)	—		(65		)
Three-way costless collar – oil	—		(3		)	—		(3		)
Basis swap – natural gas	—		(24		)	—		(24		)
Sold call option – natural gas	—		(16		)	—		(16		)
Storage – fixed price swap	—		(1		)	—		(1		)
Interest rate swap	—		(1		)	—		(1		)
Total	$	—	$	149		$	—	$	149

(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.



	December 31, 2018
	Fair Value Measurements Using:
(in millions)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Assets (Liabilities) at Fair Value
Assets
Fixed price swap – natural gas	$	—	$	38		$	—	$	38
Fixed price swap – oil	—		19			—		19
Fixed price swap – propane	—		11			—		11
Fixed price swap – ethane	—		8			—		8
Two-way costless collar – natural gas	—		11			—		11
Two-way costless collar – oil	—		11			—		11
Three-way costless collar – natural gas	—		75			—		75
Basis swap – natural gas	—		11			—		11
Purchased call option – natural gas	—		6			—		6
Interest rate swap	—		1			—		1
Liabilities
Purchased fixed price swap – oil	—		(6		)	—		(6		)
Fixed price swap – natural gas	—		(10		)	—		(10		)
Fixed price swap – ethane	—		(3		)	—		(3		)
Two-way costless collar – natural gas	—		(7		)	—		(7		)
Two-way costless collar – oil	—		(1		)	—		(1		)
Three-way costless collar – natural gas	—		(68		)	—		(68		)
Basis swap – natural gas	—		(22		)	—		(22		)
Sold call option – natural gas	—		(22		)	—		(22		)
Total	$	—	$	52		$	—	$	52

Reconciliations for Change in Net Fair Value of Derivative Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The table below presents reconciliations for the change in net fair value of derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2019 and 2018. The fair values of Level 3 derivative instruments were estimated using proprietary valuation models that utilized both market observable and unobservable parameters. Level 3 instruments presented in the table consisted of net derivatives valued using pricing models incorporating assumptions that, in the Company’s judgment, reflected reasonable assumptions a marketplace participant would have used as of June 30, 2018. Commodity derivatives previously presented as Level 3 were transferred to Level 2 in the second quarter of 2018 as the Company moved from using proprietary volatility inputs and forward curves to more widely available published information, increasing market observability.

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	For the three months ended June 30,						For the six months ended June 30,
(in millions)	2019		2018				2019		2018
Balance at beginning of period	$	—	$	22			$	—	$	22
Total gains (losses):
Included in earnings	—		(8		)		—		(17		)
Settlements	—		(8		)		—		1			⁽¹⁾
Transfers into/out of Level 3	—		(6		)	⁽²⁾	—		(6		)	⁽²⁾
Balance at end of period	$	—	$	—			$	—	$	—
Change in gains (losses) included in earnings relating to derivatives still held as of June 30	$	—	$	—			$	—	$	—


(1)	Includes $1 million amortization of premiums paid related to certain natural gas call options for the six months ended June 30, 2018.

(2)

Commodity derivatives previously presented as Level 3 were transferred to Level 2 in the second quarter of 2018 as the Company moved from using proprietary volatility inputs and forward curves to more widely available published information, increasing market observability.