Derivatives and Risk Management (Tables)

9 Months Ended

Sep. 30, 2021

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 September 30, 2021:

Financial Protection on Production
		Weighted Average Price per MMBtu
	Volume (Bcf)	Swaps		Sold Puts		Purchased Puts		Sold Calls		Basis Differential		Fair Value at September 30, 2021 (in millions)
Natural Gas
2021
Fixed price swaps	102	$	2.83	$	—	$	—	$	—	$	—	$	(314)
Two-way costless collars	88	—		—		2.70		3.04		—		(253)
Three-way costless collars	84	—		2.19		2.54		2.91		—		(251)
Total	274											$	(818)
2022
Fixed price swaps	539	$	2.77	$	—	$	—	$	—	$	—	$	(868)
Two-way costless collars	141	—		—		2.66		3.06		—		(253)
Three-way costless collars	333	—		2.06		2.51		2.94		—		(493)
Total	1,013											$	(1,614)
2023
Fixed price swaps	274	$	2.76	$	—	$	—	$	—	$	—	$	(192)
Two-way costless collars	83	—		—		2.69		2.92		—		(43)
Three-way costless collars	215	—		2.09		2.54		3.00		—		(159)
Total	572											$	(394)
2024
Fixed price swaps	57	$	2.43	$	—	$	—	$	—	$	—	$	(42)
Three-way costless collars	11	—		2.25		2.80		3.54		—		(6)
Total	68											$	(48)
Basis Swaps
2021	71	$	—	$	—	$	—	$	—	$	(0.36)	$	19
2022	284	—		—		—		—		(0.38)		17
2023	197	—		—		—		—		(0.49)		2
2024	46	—		—		—		—		(0.71)		3
2025	9	—		—		—		—		(0.64)		1
Total	607											$	42

	Volume (MBbls)	Weighted Average Strike Price per Bbl								Fair Value at September 30, 2021 (in millions)
		Swaps		Sold Puts		Purchased Puts		Sold Calls
Oil
2021
Fixed price swaps	780	$	48.94	$	—	$	—	$	—	$	(20)
Two-way costless collars	46	—		—		37.50		45.50		(1)
Three-way costless collars	550	—		39.18		48.95		54.35		(11)
Total	1,376									$	(32)
2022
Fixed price swaps	3,203	$	53.54	$	—	$	—	$	—	$	(53)
Three-way costless collars	1,380	—		39.89		50.23		57.05		(20)
Total	4,583									$	(73)
2023
Fixed price swaps	846	$	55.98	$	—	$	—	$	—	$	(7)
Three-way costless collars	1,268	—		33.97		45.51		56.12		(16)
Total	2,114									$	(23)
2024
Fixed price swaps	54	$	53.15	$	—	$	—	$	—	$	—
Ethane
2021
Fixed price swaps	2,483	$	9.74	$	—	$	—	$	—	$	(19)
Two-way costless collars	147	—		—		7.14		10.40		(1)
Total	2,630									$	(20)
2022
Fixed price swaps	3,361	$	10.01	$	—	$	—	$	—	$	(16)
Two-way costless collars	135	—		—		7.56		9.66		(1)
Total	3,496									$	(17)
Propane
2021
Fixed price swaps	2,107	$	23.98	$	—	$	—	$	—	$	(74)
2022
Fixed price swaps	4,471	$	26.96	$	—	$	—	$	—	$	(84)
Three-way costless collars	305	—		16.80		21.00		31.92		(5)
Total	4,776									$	(89)
Normal Butane
2021
Fixed price swaps	617	$	29.08	$	—	$	—	$	—	$	(22)
2022
Fixed price swaps	1,295	$	29.16	$	—	$	—	$	—	$	(28)
Natural Gasoline
2021
Fixed price swaps	635	$	43.62	$	—	$	—	$	—	$	(19)
2022
Fixed price swaps	1,256	$	46.41	$	—	$	—	$	—	$	(26)

Other Derivative Contracts
	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Fair Value at September 30, 2021 (in millions)
Call Options – Natural Gas (Net)
2021	19	$	3.19	$	(52)
2022	77	3.00		(118)
2023	46	2.94		(37)
2024	9	3.00		(9)
Total	151			$	(216)
Put Options – Natural Gas
2021	5	$	2.00	$	—
2022	5	2.00		—
Total	10			$	—

	Volume (MBbls)	Weighted Average Strike Price per Bbl		Fair Value at September 30, 2021 (in millions)
Call Options – Oil
2021	57	$	60.00	$	(1)

	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Fair Value at September 30, 2021 (in millions)
Swaptions – Natural Gas
2021 (1)	18	$	3.00	$	(26)

(1)The Company has sold swaptions with an underlying tenor of January 2022 to December 2022, with an exercise date of December 23, 2021.

	Volume (Bcf)	Weighted Average Strike Price per MMBtu				Fair Value at September 30, 2021 (in millions)
		Swaps		Basis Differential
Storage (1)
2021
Purchased fixed price swaps	—	$	2.20	$	—	$	1
Purchased basis swaps	—	—		(0.88)		—
Fixed price swaps	—	3.17		—		—
Basis swaps	—	—		(0.57)		—
Total	—					$	1
2022
Purchased fixed price swaps	—	$	2.14	$	—	$	1
Fixed price swaps	2	2.82		—		(5)
Basis swaps	1	—		(0.57)		—
Total	3					$	(4)

(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 and sold at a later date.

Purchased Fixed Price Swaps – Marketing (Natural Gas) (1)	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Fair Value at September 30, 2021 (in millions)
2021	1	$	2.44	$	2

(1)The Company has entered into a limited number of derivatives to protect the value of certain long-term sales contracts.

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 September 30, 2021 and December 31, 2020, and excludes net liability reductions of $7 million and $1 million respectively, for non-performance risk:

Derivative Assets
		Fair Value
(in millions)	Balance Sheet Classification	September 30, 2021		December 31, 2020
Derivatives not designated as hedging instruments:
Purchased fixed price swaps – natural gas	Derivative assets	$	2	$	1
Fixed price swaps – natural gas	Derivative assets	—		37
Fixed price swaps – oil	Derivative assets	—		13
Two-way costless collars – natural gas	Derivative assets	11		54
Three-way costless collars – natural gas	Derivative assets	13		57
Three-way costless collars – oil	Derivative assets	1		15
Basis swaps – natural gas	Derivative assets	66		60
Call options – natural gas	Derivative assets	35		4
Purchased fixed price swaps – natural gas storage	Derivative assets	2		—
Fixed price swaps – natural gas	Other long-term assets	—		7
Fixed price swaps – oil	Other long-term assets	—		2
Two-way costless collars – natural gas	Other long-term assets	17		20
Three-way costless collars – natural gas	Other long-term assets	41		87
Three-way costless collars – oil	Other long-term assets	4		15
Basis swaps – natural gas	Other long-term assets	44		15
Interest rate swaps	Other long-term assets	1		—
Total derivative assets		$	237	$	387

Derivative Liabilities
		Fair Value
(in millions)	Balance Sheet Classification	September 30, 2021		December 31, 2020
Derivatives not designated as hedging instruments:
Fixed price swaps – natural gas	Derivative liabilities	$	1,010	$	7
Fixed price swaps – oil	Derivative liabilities	60		12
Fixed price swaps – ethane	Derivative liabilities	32		10
Fixed price swaps – propane	Derivative liabilities	143		36
Fixed price swaps – normal butane	Derivative liabilities	44		8
Fixed price swaps – natural gasoline	Derivative liabilities	40		13
Two-way costless collars – natural gas	Derivative liabilities	495		43
Two-way costless collars – oil	Derivative liabilities	1		1
Two-way costless collars – ethane	Derivative liabilities	2		—
Three-way costless collars – natural gas	Derivative liabilities	650		82
Three-way costless collars – oil	Derivative liabilities	28		15
Three-way costless collars – propane	Derivative liabilities	4		—
Basis swaps – natural gas	Derivative liabilities	48		3
Call options – natural gas	Derivative liabilities	182		12
Call options – oil	Derivative liabilities	1		—
Put options – natural gas	Derivative liabilities	—		1
Swaptions – natural gas	Derivative liabilities	26		2
Fixed price swaps – natural gas storage	Derivative liabilities	5		—
Fixed price swaps – natural gas	Long-term derivative liabilities	406		3
Fixed price swaps – oil	Long-term derivative liabilities	20		2
Fixed price swaps – ethane	Long-term derivative liabilities	3		—
Fixed price swaps – propane	Long-term derivative liabilities	15		2
Fixed price swaps – normal butane	Long-term derivative liabilities	6		1
Fixed price swaps – natural gasoline	Long-term derivative liabilities	5		2
Two-way costless collars – natural gas	Long-term derivative liabilities	82		21
Three-way costless collars – natural gas	Long-term derivative liabilities	313		102
Three-way costless collars – oil	Long-term derivative liabilities	24		15
Three-way costless collars – propane	Long-term derivative liabilities	1		—
Basis swap – natural gas	Long-term derivative liabilities	20		7
Call options – natural gas	Long-term derivative liabilities	69		28
Total derivative liabilities		$	3,735	$	428

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 nine months ended September 30, 2021 and 2020:

Unsettled Gain (Loss) on Derivatives Recognized in Earnings
	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Unsettled	For the three months ended September 30,				For the nine months ended September 30,
Derivative Instrument		2021		2020		2021		2020
		(in millions)
Purchased fixed price swaps – natural gas	Gain (Loss) on Derivatives	$	(1)	$	4	$	1	$	4
Fixed price swaps – natural gas	Gain (Loss) on Derivatives	(748)		(138)		(991)		(74)
Fixed price swaps – oil	Gain (Loss) on Derivatives	—		(20)		(81)		54
Fixed price swaps – ethane	Gain (Loss) on Derivatives	(12)		(13)		(25)		(23)
Fixed price swaps – propane	Gain (Loss) on Derivatives	(32)		(17)		(120)		(25)
Fixed price swaps – normal butane	Gain (Loss) on Derivatives	(7)		—		(41)		—
Fixed price swaps – natural gasoline	Gain (Loss) on Derivatives	1		—		(30)		—
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	(358)		(34)		(518)		(45)
Two-way costless collars – oil	Gain (Loss) on Derivatives	1		(5)		—		4
Two-way costless collars – ethane	Gain (Loss) on Derivatives	(1)		—		(2)		—
Two-way costless collars – propane	Gain (Loss) on Derivatives	—		(1)		—		(2)
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	(619)		(98)		(869)		(195)
Three-way costless collars – oil	Gain (Loss) on Derivatives	—		(4)		(47)		15
Three-way costless collars – propane	Gain (Loss) on Derivatives	(3)		—		(5)		—
Basis swaps – natural gas	Gain (Loss) on Derivatives	(70)		54		(23)		40
Call options – natural gas	Gain (Loss) on Derivatives	(143)		(16)		(180)		(25)
Call options – oil	Gain (Loss) on Derivatives	—		—		(1)		1
Put options – natural gas	Gain (Loss) on Derivatives	—		—		1		—
Swaptions – natural gas	Gain (Loss) on Derivatives	(21)		—		(24)		—
Purchased fixed price swap – natural gas storage	Gain (Loss) on Derivatives	1		1		2		—
Fixed price swap – natural gas storage	Gain (Loss) on Derivatives	(3)		(2)		(5)		(2)
Interest rate swaps	Gain (Loss) on Derivatives	—		—		1		—
Total loss on unsettled derivatives		$	(2,015)	$	(289)	$	(2,957)	$	(273)

Settled Gain (Loss) on Derivatives Recognized in Earnings (1)
	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Settled	For the three months ended September 30,					For the nine months ended September 30,
Derivative Instrument		2021		2020			2021			2020
		(in millions)
Purchased fixed price swaps – natural gas	Gain (Loss) on Derivatives	$	4	$	(2)		$	5		$	(4)
Fixed price swaps – natural gas	Gain (Loss) on Derivatives	(111)		61		(2)	(112)			150		(2)
Fixed price swaps – oil	Gain (Loss) on Derivatives	(18)		17			(63)			44
Fixed price swaps – ethane	Gain (Loss) on Derivatives	(13)		(2)			(23)			6
Fixed price swaps – propane	Gain (Loss) on Derivatives	(53)		2			(113)			19
Fixed price swaps – normal butane	Gain (Loss) on Derivatives	(17)		—			(33)			—
Fixed price swaps – natural gasoline	Gain (Loss) on Derivatives	(16)		—			(38)			—
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	(79)		(5)			(79)			1
Two-way costless collars – oil	Gain (Loss) on Derivatives	(1)		4			(3)			13
Two-way costless collars – ethane	Gain (Loss) on Derivatives	(1)		—			(1)			—
Two-way costless collars – propane	Gain (Loss) on Derivatives	—		—			—			2
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	(84)		—			(91)			43
Three-way costless collars – oil	Gain (Loss) on Derivatives	(10)		1			(16)			5
Basis swaps – natural gas	Gain (Loss) on Derivatives	27		20			76			29
Call options – natural gas	Gain (Loss) on Derivatives	(16)		—			(16)			—
Call options – oil	Gain (Loss) on Derivatives	(1)		—			(1)			—
Put options – natural gas	Gain (Loss) on Derivatives	—		—			(2)		(3)	—
Purchased fixed price swaps – natural gas storage	Gain (Loss) on Derivatives	1		—			1			—
Fixed price swaps – natural gas storage	Gain (Loss) on Derivatives	—		1			—			2
Total gain (loss) on settled derivatives		$	(388)	$	97		$	(509)		$	310

Total Gain (Loss) on Derivatives Recognized in Earnings
	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020
	(in millions)
Total loss on unsettled derivatives	(2,015)		(289)		(2,957)		(273)
Total gain (loss) on settled derivatives	(388)		97		(509)		310
Non-performance risk adjustment	4		—		5		1
Total gain (loss) on derivatives	$	(2,399)	$	(192)	$	(3,461)	$	38

(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 $4 million and $8 million in amortization of premiums paid related to certain natural gas fixed price options for the three and nine months ended September 30, 2020, which is included in gain (loss) on derivatives on the consolidated statements of operations.

(3)Includes $2 million amortization of premiums paid related to certain natural gas put options for the nine months ended September 30, 2021, which is included in gain (loss) on derivatives on the consolidated statements of operations.