Fair Value Measurements (Tables)

9 Months Ended

Sep. 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 September 30, 2019 and December 31, 2018 were as follows:


	September 30, 2019								December 31, 2018
(in millions)	Carrying Amount			Fair Value			Carrying Amount		Fair Value
Cash and cash equivalents	$	29		$	29		$	201	$	201
2018 revolving credit facility due April 2023	—			—			—		—
Senior notes⁽¹⁾	2,292			2,109			2,342		2,190
Derivative instruments, net	169		⁽²⁾	169		⁽²⁾	52		52

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

(2)Includes $9 million in premiums paid related to certain natural gas fixed price swaps 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:


	September 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⁽¹⁾	$	—	$	73	$	—	$	73
Fixed price swap – oil	—		19		—		19
Fixed price swap – propane	—		30		—		30
Fixed price swap – ethane	—		13		—		13
Two-way costless collar – natural gas	—		2		—		2
Two-way costless collar – oil	—		7		—		7
Two-way costless collar – propane	—		3		—		3
Three-way costless collar – natural gas	—		147		—		147
Three-way costless collar – oil	—		13		—		13
Basis swap – natural gas	—		24		—		24
Purchased call option – natural gas	—		3		—		3
Storage – fixed price swap	—		1		—		1

Liabilities
Purchased fixed price swap – oil	—		(1)		—		(1)






Three-way costless collar – natural gas	—		(113)		—		(113)
Three-way costless collar – oil	—		(9)		—		(9)
Basis swap – natural gas	—		(29)		—		(29)
Sold call option – natural gas	—		(14)		—		(14)


Total	$	—	$	169	$	—	$	169

(1)Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet at September 30, 2019. As certain natural gas fixed price swaps 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 nine months ended September 30, 2019 and 2018. There were no derivatives presented as Level 3 in the third quarters of 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 September 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 nine months ended September 30,
(in millions)	2019		2018
Balance at beginning of period	$	—	$	22
Total gains (losses):
Included in earnings	—		(17)
Settlements	—		1		⁽¹⁾
Transfers into/out of Level 3	—		(6)		⁽²⁾
Balance at end of period	$	—	$	—
Change in gains (losses) included in earnings relating to derivatives still held as of September 30	$	—	$	—

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

(1)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.

Assets and liabilities measured at fair value on a nonrecurring basis

In accordance with accounting guidance for Property, Plant and Equipment, assets held for sale are measured at the lower of the carrying value or fair value less costs to sell. Because the assets outside of the full cost pool included in the Fayetteville Shale sale met the criteria for held for sale accounting as of September 30, 2018, the Company determined the carrying value of certain non-full cost pool assets exceeded the fair value less costs to sell, the Company recorded an impairment charge of $161 million during the third quarter of 2018, of which $145 million related to midstream gathering assets and $15 million related to E&P assets which were both reflected as assets held for sale as of September 30, 2018. Additionally, the Company recorded an $1 million impairment related to other non-core assets that were not included in the sale. The estimated fair value

of the gathering assets was based on an estimated discounted cash flow model and market assumptions. The significant Level 3 assumptions used in the calculation of estimated discounted cash flows included future commodity prices, projections of estimated quantities of natural gas reserves, operating costs, projections of future rates of production, inflation factors and risk adjusted discount rates.