We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. These commodity derivative financial instruments include financial price swaps, basis protection swaps, collars, three-way collars, options and swaptions. All of our oil and natural gas derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty.

The estimated fair values of our oil and natural gas derivative instrument assets (liabilities) as of March 31, 2022 and December 31, 2021 are provided below:


	Successor
	March 31, 2022			December 31, 2021
	Notional Volume	Fair Value		Notional Volume	Fair Value
Oil (MMBbls):
Fixed-price swaps	10	$	(469)	13	$	(356)
Collars	5	(40)		—	—
Basis protection swaps	17	(14)		9	(2)
Total oil	32	(523)		22	(358)
Natural gas (Bcf):
Fixed-price swaps	700	(1,784)		637	(675)
Collars	572	(610)		205	(82)
Three-way collars	23	(47)		—	—
Call options	18	(46)		18	(17)
Swaptions	7	(12)		—	—
Basis protection swaps	396	—		252	(11)
Total natural gas	1,716	(2,499)		1,112	(785)
Total estimated fair value		$	(3,022)		$	(1,143)

The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 on a gross basis and after same-counterparty netting:


	Gross Fair Value		Amounts Netted in the Consolidated Balance Sheets		Net Fair Value Presented in the Consolidated Balance Sheets
Successor
As of March 31, 2022
Commodity Contracts:
Short-term derivative asset	$	34	$	(33)	$	1
Long-term derivative asset	22		(14)		8
Short-term derivative liability	(2,671)		33		(2,638)
Long-term derivative liability	(407)		14		(393)
Total derivatives	$	(3,022)	$	—	$	(3,022)

As of December 31, 2021
Commodity Contracts:
Short-term derivative asset	$	56	$	(51)	$	5
Short-term derivative liability	(950)		51		(899)
Long-term derivative liability	(249)		—		(249)
Total derivatives	$	(1,143)	$	—	$	(1,143)


	Successor				Predecessor
	Three Months Ended March 31, 2022		Period from February 10, 2021 through March 31, 2021		Period from January 1, 2021 through February 9, 2021
Gains (losses) on undesignated oil and natural gas derivatives	$	(2,125)	$	46	$	(379)
Losses on terminated cash flow hedges	—		—		(3)
Total oil and natural gas derivatives	$	(2,125)	$	46	$	(382)

A reconciliation of the changes in accumulated other comprehensive income in our condensed consolidated statements of stockholders’ equity related to our terminated cash flow hedges is presented below:


	Successor								Predecessor
	Three Months Ended March 31, 2022				Period from February 10, 2021 through March 31, 2021				Period from January 1, 2021 through February 9, 2021
	Before Tax		After Tax		Before Tax		After Tax		Before Tax		After Tax
Balance, beginning of period	$	—	$	—	$	—	$	—	$	(12)	$	45
Losses reclassified to income	—		—		—		—		3		3
Fresh start adjustments	—		—		—		—		9		9
Elimination of tax effects	—		—		—		—		—		(57)
Balance, end of period	$	—	$	—	$	—	$	—	$	—	$	—

Our accumulated other comprehensive loss balance represented the net deferred loss associated with commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months were yet to occur. The remaining deferred gain or loss amounts were to be recognized in earnings in the month for which the original contract months were to occur. In connection with our adoption of fresh start accounting we recorded a fair value adjustment to eliminate the accumulated other comprehensive income related to hedging settlements including the elimination of tax effects. See Note 3 for a discussion of fresh start accounting adjustments.

Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we enter into derivative contracts only with counterparties that are highly rated or deemed by us to have acceptable credit strength and deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of March 31, 2022, our oil and natural gas derivative instruments were spread among 14 counterparties.

Certain of our hedging arrangements are with counterparties that are also lenders (or affiliates of lenders) under our Exit Credit Facility. The contracts entered into with these counterparties are secured by the same collateral that secures the Exit Credit Facility. The counterparties’ obligations must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us exceed defined thresholds. As of March 31, 2022, we did not have any cash or letters of credit posted as collateral for our commodity derivatives.

The fair value of our derivatives is based on third-party pricing models, which utilize inputs that are either readily available in the public market, such as oil, natural gas and NGL forward curves and discount rates, or can be

corroborated from active markets or broker quotes, and as such are classified as Level 2. These values are compared to the values given by our counterparties for reasonableness. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives.

The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:


	Successor
Significant Other Observable Inputs (Level 2)	March 31, 2022		December 31, 2021
Derivative Assets (Liabilities):
Commodity assets	$	56	$	56
Commodity liabilities	(3,078)		(1,199)
Total derivatives	$	(3,022)	$	(1,143)