XML 118 R22.htm IDEA: XBRL DOCUMENT v3.20.1
Derivatives
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Commodity Derivatives

We have entered into various types of derivative transactions covering some of our projected natural gas, NGLs, and oil production. These transactions are intended to reduce our exposure to market price volatility by setting the price(s) we will receive for that production. Our decisions on the price(s), type, and quantity of our production subject to a derivative contract are based, in part, on our view of current and future market conditions. As of December 31, 2019, our derivative transactions consisted of the following types of hedges:

•Basis Swaps. We receive or pay the NYMEX settlement value plus or minus a fixed delivery point price for the commodity and pay or receive the published index price at the specified delivery point. We use basis swaps to hedge the price risk between NYMEX and its physical delivery points.
•Three-way collars. A three-way collar contains a fixed floor price (long put), fixed subfloor price (short put) and a fixed ceiling price (short call). If the market price exceeds the ceiling strike price, we receive the ceiling strike price and pay the market price. If the market price is between the ceiling and the floor strike price, no payments are due from either party. If the market price is below the floor price but above the subfloor price, we receive the floor strike price and pay the market price. If the market price is below the subfloor price, we receive the market price plus the difference between the floor and subfloor strike prices and pay the market price.  
We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative purposes. All derivatives are recognized on the balance sheet and measured at fair value. Any changes in our derivatives' fair value occurring before their maturity (i.e., temporary fluctuations in value) are reported in gain (loss) on derivatives in our Consolidated Statements of Operations.

At December 31, 2019, the following non-designated hedges were outstanding:
TermCommodityContracted Volume
Weighted Average 
Fixed Price for Swaps
Contracted Market
Jan'20 - Dec'20Natural gas - basis swap30,000 MMBtu/day$(0.275) NGPL TEXOK
Jan'20 - Dec'20Natural gas - basis swap20,000 MMBtu/day$(0.455) PEPL
Jan'21 - Dec'21Natural gas - basis swap30,000 MMBtu/day$(0.215) NGPL TEXOK
Jan'20 - Dec'20Natural gas - three-way collar30,000 MMBtu/day$2.50 - $2.20 - $2.80  IF - NYMEX (HH)

The following tables present the fair values and locations of the derivative transactions recorded in our Consolidated Balance Sheets at December 31: 
 
Derivative Assets
Fair Value
Balance Sheet Location20192018
  (In thousands)
Commodity derivatives:
CurrentCurrent derivative assets$633  $12,870  
Long-termNon-current derivative assets—  —  
Total derivative assets$633  $12,870  

 
Derivative Liabilities
Fair Value
Balance Sheet Location20192018
  (In thousands)
Commodity derivatives:
CurrentCurrent derivative liabilities$—  $—  
Long-termNon-current derivative liabilities27  293  
Total derivative liabilities$27  $293  

If a legal right of set-off exists, we net the value of the derivative transactions we have with the same counterparty in our Consolidated Balance Sheets.

Effect of derivative instruments on the Consolidated Statements of Operations for the year ended December 31:
Derivatives Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivative
Amount of Gain or (Loss)
Recognized in Income on 
Derivative
20192018
  (In thousands)
Commodity derivatives
Gain (loss) on derivatives (1)
$4,225  $(3,184) 
Total$4,225  $(3,184) 
_________________________
1.Amounts settled during the periods are a gain of $16,196 and a loss of $22,803, respectively.