Derivatives and Risk Management

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Risk Management

DERIVATIVES AND RISK MANAGEMENT

The Company is exposed to volatility in market prices and basis differentials for natural gas, oil and NGLs, which impacts the predictability of its cash flows related to the sale of those commodities. These risks are managed by the Company’s use of certain derivative financial instruments.  As of December 31, 2021, the Company’s derivative financial instruments consisted of fixed price swaps, two-way costless collars, three-way costless collars, basis swaps, call options and interest rate swaps.  A description of the Company’s derivative financial instruments is provided below:

Fixed price swaps	If the Company sells a fixed price swap, the Company receives a fixed price for the contract, and pays a floating market price to the counterparty.  If the Company purchases a fixed price swap, the Company receives a floating market price for the contract, and pays a fixed price to the counterparty.
Two-way costless collars	Arrangements that contain a fixed floor price (“purchased put option”) and a fixed ceiling price (“sold call option”) based on an index price which, in aggregate, have no net cost.  At the contract settlement date, (1) if the index price is higher than the ceiling price, the Company pays the counterparty the difference between the index price and ceiling price, (2) if the index price is between the floor and ceiling prices, no payments are due from either party, and (3) if the index price is below the floor price, the Company will receive the difference between the floor price and the index price.
Three-way costless collars	Arrangements that contain a purchased put option, a sold call option and a sold put option based on an index price that, in aggregate, have no net cost.  At the contract settlement date, (1) if the index price is higher than the sold call strike price, the Company pays the counterparty the difference between the index price and sold call strike price, (2) if the index price is between the purchased put strike price and the sold call strike price, no payments are due from either party, (3) if the index price is between the sold put strike price and the purchased put strike price, the Company will receive the difference between the purchased put strike price and the index price, and (4) if the index price is below the sold put strike price, the Company will receive the difference between the purchased put strike price and the sold put strike price.

Basis swaps	Arrangements that guarantee a price differential for natural gas from a specified delivery point.  If the Company sells a basis swap, the Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract, and pays the counterparty if the price differential is less than the stated terms of the contract.  If the Company purchases a basis swap, the Company pays the counterparty if the price differential is greater than the stated terms of the contract, and receives a payment from the counterparty if the price differential is less than the stated terms of the contract.
Options (Calls and Puts)	The Company purchases and sells options in exchange for premiums.  If the Company purchases a call option, the Company receives from the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is below the call’s strike price, no payment is due from either party.  If the Company sells a call option, the Company pays the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is below the call’s strike price, no payment is due from either party. If the Company purchases a put option, the Company receives from the counterparty the excess (if any) of the strike price over the market price of the put option at the time of settlement, but if the market price is above the put’s strike price, no payment is due from either party. If the Company sells a put option, the Company pays the counterparty the excess (if any) of the strike price over the market price of the put option at the time of settlement, but if the market price is above the put’s strike price, no payment is due from either party.
Swaptions	Instruments that refer to an option to enter into a fixed price swap. In exchange for an option premium, the purchaser gains the right but not the obligation to enter a specified swap agreement with the issuer for specified future dates. If the Company sells a swaption, the counterparty has the right to enter into a fixed price swap wherein the Company receives a fixed price for the contract and pays a floating market price to the counterparty. If the Company purchases a swaption, the Company has the right to enter into a fixed price swap wherein the Company receives a floating market price for the contract and pays a fixed price to the counterparty.
Interest rate swaps	Interest rate swaps are used to fix or float interest rates on existing or anticipated indebtedness.  The purpose of these instruments is to manage the Company’s existing or anticipated exposure to unfavorable interest rate changes.

The Company chooses counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into, and the Company actively monitors the credit ratings and credit default swap rates of these counterparties where applicable. However, there can be no assurance that a counterparty will be able to meet its obligations to the Company.  The Company presents its derivative positions on a gross basis and does not net the asset and liability positions.

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 December 31, 2021:

Financial Protection on Production

		Weighted Average Price per MMBtu										Fair value at December 31, 2021 ($ in millions)
	Volume (Bcf)	Swaps		Sold Puts		Purchased Puts		Sold Calls		Basis Differential
Natural Gas
2022
Fixed price swaps	806	$	3.08	$	—	$	—	$	—	$	—	$	(486)
Two-way costless collars	144	—		—		2.71		3.14		—		(95)
Three-way costless collars	347	—		2.06		2.52		2.94		—		(286)
Total	1,297											$	(867)
2023
Fixed price swaps	489	$	3.07	$	—	$	—	$	—	$	—	$	(143)
Two-way costless collars	219	—		—		3.03		3.55		—		(19)
Three-way costless collars	215	—		2.09		2.54		3.00		—		(136)
Total	923											$	(298)
2024
Fixed price swaps	224	$	2.96	$	—	$	—	$	—	$	—	$	(39)
Two-way costless collars	44	$	—	$	—	$	3.07	$	3.53	$	—	4
Three-way costless collars	11	$	—	$	2.25	$	2.80	$	3.54	$	—	(5)
Total	279											$	(40)
Basis swaps
2022	322	$	—	$	—	$	—	$	—	$	(0.38)	$	68
2023	200	—		—		—		—		(0.45)		(1)
2024	46	—		—		—		—		(0.71)		—
2025	9	—		—		—		—		(0.64)		1
Total	577											$	68

		Weighted Average Price per Bbl								Fair value at December 31, 2021 ($ in millions)
	Volume (MBbls)	Swaps		Sold Puts		Purchased Puts		Sold Calls
Oil
2022
Fixed price swaps	3,203	$	53.54	$	—	$	—	$	—	$	(60)
Three-way costless collars	1,380	—		39.89		50.23		57.05		(23)
Total	4,583									$	(83)
2023
Fixed price swaps	846	$	55.98	$	—	$	—	$	—	$	(8)
Three-way costless collars	1,268	—		33.97		45.51		56.12		(18)
Total	2,114									$	(26)
2024
Fixed price swaps	54	$	53.15	$	—	$	—	$	—	$	(1)

		Weighted Average Price per Bbl								Fair value at December 31, 2021 ($ in millions)
	Volume (MBbls)	Swaps		Sold Puts		Purchased Puts		Sold Calls
Ethane
2022
Fixed price swaps	5,797	$	11.37	$	—	$	—	$	—	$	(8)
Two-way costless collars	135	—		—		7.56		9.66		(1)
Total	5,932									$	(9)
2023
Fixed price swaps	432	$	11.67	$	—	$	—	$	—	$	—
Propane
2022
Fixed price swaps	6,369	$	31.14	$	—	$	—	$	—	$	(76)
Three-way costless collars	305	$	—	$	16.80	$	21.00	31.92		(4)
Total	6,674									$	(80)
2023
Fixed price swaps	518	$	33.62	$	—	$	—	—		$	(1)
Normal Butane
2022
Fixed price swaps	1,587	$	32.86	$	—	$	—	$	—	$	(26)
2023
Fixed price swaps	164	$	37.84	$	—	$	—	$	—	$	—
Natural Gasoline
2022
Fixed price swaps	1,840	$	52.85	$	—	$	—	$	—	$	(33)
2023
Fixed price swaps	157	$	58.65	$	—	$	—	$	—	$	(1)

Other Derivative Contracts
	Volume (Bcf)	Weighted Average Strike Price per MMBtu		Fair value at December 31, 2021 ($ in millions)
Call Options – Natural Gas (Net)
2022	84	$	3.01	$	(67)
2023	46	2.94		(33)
2024	9	3.00		(9)
Total	139			$	(109)
Put Options – Natural Gas
2022	5	$	2.00	$	—

		Weighted Average Strike Price per MMBtu				Fair value at December 31, 2021 ($ in millions)
Storage (1)	Volume (Bcf)	Swaps		Basis Differential
2022
Purchased fixed price swap	—	$	2.14	$	—	$	—
Fixed price swaps	2	2.82		—		(1)
Basis swaps	1	—		(0.57)		—
Total	3					$	(1)

(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.

At December 31, 2021, the net fair value of the Company’s financial instruments was a $1,502 million liability, including a net reduction of the liability of $3 million due to a non-performance risk adjustment.  See Note 8 for additional details regarding the Company's fair value measurements of its derivative positions.

As of December 31, 2021, the Company had no positions designated for hedge accounting treatment.  Gains and losses on derivatives that are not designated for hedge accounting treatment, or do not meet hedge accounting requirements, are recorded as a component of gain (loss) on derivatives on the consolidated statements of operations.  Accordingly, the gain (loss) on derivatives component of the statement of operations reflects the gains and losses on both settled and unsettled derivatives.  Only the settled gains and losses are included in the Company’s realized commodity price calculations.

The balance sheet classification of the assets and liabilities related to derivative financial instruments are summarized below as of December 31, 2021 and 2020:

Derivative Assets
	Balance Sheet Classification	Fair Value
(in millions)		December 31, 2021		December 31, 2020
Derivatives not designated as hedging instruments:
Purchased fixed price swaps – natural gas	Derivative assets	$	—	$	1
Fixed price swaps – natural gas	Derivative assets	79		37
Fixed price swaps – oil	Derivative assets	—		13
Fixed price swaps – ethane	Derivative assets	2		—
Fixed price swaps – propane	Derivative assets	2		—
Fixed price swaps – normal butane	Derivative assets	1		—
Two-way costless collars – natural gas	Derivative assets	9		54
Three-way costless collars – natural gas	Derivative assets	12		57
Three-way costless collars – oil	Derivative assets	1		15
Basis swaps – natural gas	Derivative assets	77		60
Call options – natural gas	Derivative assets	—		4
Fixed price swaps – natural gas	Other long-term assets	64		7
Fixed price swaps – oil	Other long-term assets	—		2
Two-way costless collars – natural gas	Other long-term assets	100		20
Three-way costless collars – natural gas	Other long-term assets	37		87
Three-way costless collars – oil	Other long-term assets	3		15
Basis swaps – natural gas	Other long-term assets	22		15
Interest rate swaps	Other long-term assets	2		—
Total derivative assets		$	411	$	387

Derivative Liabilities
	Balance Sheet Classification	Fair Value
(in millions)		December 31, 2021		December 31, 2020
Derivatives not designated as hedging instruments:
Fixed price swaps – natural gas storage	Derivative liabilities	$	1	$	—
Fixed price swaps – natural gas	Derivative liabilities	565		7
Fixed price swaps – oil	Derivative liabilities	60		12
Fixed price swaps – ethane	Derivative liabilities	10		10
Fixed price swaps – propane	Derivative liabilities	78		36
Fixed price swaps – normal butane	Derivative liabilities	27		8
Fixed price swaps – natural gasoline	Derivative liabilities	33		13
Two-way costless collars – natural gas	Derivative liabilities	104		43
Two-way costless collars – oil	Derivative liabilities	—		1
Two-way costless collars – ethane	Derivative liabilities	1		—
Three-way costless collars – natural gas	Derivative liabilities	298		82
Three-way costless collars – oil	Derivative liabilities	24		15
Three-way costless collars – propane	Derivative liabilities	4		—
Basis swaps – natural gas	Derivative liabilities	9		3
Call options – natural gas	Derivative liabilities	67		12
Put options – natural gas	Derivative liabilities	—		1
Swaptions – natural gas	Derivative liabilities	—		2
Fixed price swaps – natural gas	Other long-term liabilities	246		3
Fixed price swaps – oil	Other long-term liabilities	9		2
Fixed price swaps – propane	Other long-term liabilities	1		2
Fixed price swaps – normal butane	Other long-term liabilities	—		1
Fixed price swaps – natural gasoline	Other long-term liabilities	1		2
Two-way costless collars – natural gas	Other long-term liabilities	115		21
Two-way costless collars – oil	Other long-term liabilities	—		—
Three-way costless collars – natural gas	Other long-term liabilities	178		103
Three-way costless collars – oil	Other long-term liabilities	21		15
Basis swaps – natural gas	Other long-term liabilities	22		7
Call options – natural gas	Other long-term liabilities	42		28
Total derivative liabilities		$	1,916	$	429

Net Derivative Position
	As of December 31,
	2021		2020
	(in millions)
Net current derivative liabilities	$	(1,098)	$	(4)
Net long-term derivative liabilities	(407)		(38)
Non-performance risk adjustment	3		1
Net total derivative liabilities	$	(1,502)	$	(41)

The following tables summarize the before-tax effect of the Company’s derivative instruments on the consolidated statements of operations for the years ended December 31, 2021 and 2020:

Unsettled Gain (Loss) on Derivatives Recognized in Earnings
	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Unsettled	For the years ended December 31,
Derivative Instrument		2021		2020
		(in millions)
Purchased fixed price swaps – natural gas	Gain (Loss) on Derivatives	$	(1)	$	2
Fixed price swaps – natural gas	Gain (Loss) on Derivatives	(237)		(25)
Fixed price swaps – oil	Gain (Loss) on Derivatives	(70)		—
Fixed price swaps – ethane	Gain (Loss) on Derivatives	2		(21)
Fixed price swaps – propane	Gain (Loss) on Derivatives	(40)		(60)
Fixed price swaps – normal butane	Gain (Loss) on Derivatives	(18)		(9)
Fixed price swaps – natural gasoline	Gain (Loss) on Derivatives	(18)		(15)
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	(83)		10
Two-way costless collars – oil	Gain (Loss) on Derivatives	1		(1)
Two-way costless collars – propane	Gain (Loss) on Derivatives	—		(1)
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	(375)		(78)
Three-way costless collars – oil	Gain (Loss) on Derivatives	(41)		3
Three-way costless collars – propane	Gain (Loss) on Derivatives	(4)		—
Basis swaps – natural gas	Gain (Loss) on Derivatives	3		59
Call options – natural gas	Gain (Loss) on Derivatives	(68)		(10)
Call options – oil	Gain (Loss) on Derivatives	—		1
Put options – natural gas	Gain (Loss) on Derivatives	1		—
Swaptions – natural gas	Gain (Loss) on Derivatives	2		7
Fixed price swaps – natural gas storage	Gain (Loss) on Derivatives	(1)		(1)
Interest rate swaps	Gain (Loss) on Derivatives	2		—
Total loss on unsettled derivatives		$	(945)	$	(139)

Settled Gain (Loss) on Derivatives Recognized in Earnings (1)
	Consolidated Statement of Operations Classification of Gain (Loss) on Derivatives, Settled	For the years ended December 31,
Derivative Instrument		2021			2020
		(in millions)
Purchased fixed price swaps – natural gas	Gain (Loss) on Derivatives	$	7		$	(3)
Purchased fixed price swaps – oil	Gain (Loss) on Derivatives	1			—
Fixed price swaps – natural gas	Gain (Loss) on Derivatives	(418)			142		(2)
Fixed price swaps – oil	Gain (Loss) on Derivatives	(86)			65
Fixed price swaps – ethane	Gain (Loss) on Derivatives	(39)			6
Fixed price swaps – propane	Gain (Loss) on Derivatives	(173)			18
Fixed price swaps – normal butane	Gain (Loss) on Derivatives	(53)			(2)
Fixed price swaps – natural gasoline	Gain (Loss) on Derivatives	(59)			(1)
Two-way costless collars – natural gas	Gain (Loss) on Derivatives	(325)			(5)
Two-way costless collars – oil	Gain (Loss) on Derivatives	(4)			17
Two-way costless collars – propane	Gain (Loss) on Derivatives	—			2
Two-way costless collars – ethane	Gain (Loss) on Derivatives	(2)			—
Three-way costless collars – natural gas	Gain (Loss) on Derivatives	(335)			38
Three-way costless collars – oil	Gain (Loss) on Derivatives	(29)			9
Basis swaps – natural gas	Gain (Loss) on Derivatives	92			76
Call options – natural gas	Gain (Loss) on Derivatives	(66)			—
Call options – oil	Gain (Loss) on Derivatives	(2)			—
Put options - natural gas	Gain (Loss) on Derivatives	(2)		(3)	—
Purchased fixed price swaps – natural gas storage	Gain (Loss) on Derivatives	2			(1)
Fixed price swaps – natural gas storage	Gain (Loss) on Derivatives	(1)			2
Interest rate swaps	Gain (Loss) on Derivatives	—			(1)
Total gain (loss) on settled derivatives		$	(1,492)		$	362

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

(2)Includes $9 million amortization of premiums paid related to certain natural gas fixed price swaps for the year ended December 31, 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 year ended December 31, 2021, which is included in gain (loss) on derivatives on the consolidated statements of operations.

Total Gain (Loss) on Derivatives Recognized in Earnings
	For the years ended December 31,
	2021		2020
	(in millions)
Total loss on unsettled derivatives	$	(945)	$	(139)
Total gain (loss) on settled derivatives	(1,492)		362
Non-performance risk adjustment	1		1
Total gain (loss) on derivatives	$	(2,436)	$	224