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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2014
Derivative Instruments and Hedges, Assets [Abstract]  
Derivative Financial Instruments Text Block
Derivative Financial Instruments:

Commodity Derivative Instruments

We utilize the following derivative strategies, which consist of either a single derivative instrument or a combination of instruments, to manage the variability in cash flows associated with the forecasted sale of our domestic oil and natural gas production.

•
Fixed-price swaps. With respect to a swap position, the counterparty is required to make a payment to us if the settlement price for any settlement period is less than the swap strike price, and we are required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap strike price.
•
Collars (combination of purchased put options (floor) and sold call options (ceiling)). For a collar position, the counterparty is required to make a payment to us if the settlement price for any settlement period is below the floor strike price while we are required to make payment to the counterparty if the settlement price for any settlement period is above the ceiling strike price. Neither party is required to make a payment to the other party if the settlement price for any settlement period is equal to or greater than the floor strike price and equal to or less than the ceiling strike price.
•
Fixed-price swaps with sold puts. A swap with a sold put position consists of a standard swap position plus a put sold by us with a strike price below the associated fixed-price swap. This structure enables us to increase the fixed-price swap with the value received through the sale of the put. If the settlement price for any settlement period falls equal to or below the put strike price, then we will only receive the difference between the swap price and the put strike price. If the settlement price is greater than the put strike price, the result is the same as it would have been with a standard swap only.
•
Collars with sold puts. A collar with a sold put position consists of a standard collar position plus a put sold by us with a strike price below the floor strike price of the collar. This structure enables us to improve the collar strike prices with the value received through the sale of the additional put. If the settlement price for any settlement period falls equal to or below the additional put strike price, then we will receive the difference between the floor strike price and the additional put strike price. If the settlement price is greater than the additional put strike price, the result is the same as it would have been with a standard collar only.
•
Swaptions. A swaption is an option to exercise a swap where the buyer (counterparty) of the swaption purchases the right from the seller (Newfield), but not the obligation, to enter into a fixed-price swap with the seller on a predetermined date (expiration date). The swap price is a fixed price determined at the time of the swaption contract. If the swaption is exercised, the contract will become a swap treated consistent with our other fixed-price swaps. 

While the use of these derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements, their use also may limit future income from favorable commodity price movements. For discussion of the accounting policies associated with our derivative financial instruments (including the offsetting of derivative assets and liabilities), see Note 1, "Organization and Summary of Significant Accounting Policies."
     
Our oil and gas derivative contracts are settled based upon reported prices on the NYMEX. The estimated fair value of these contracts is based upon various factors, including closing exchange prices on the NYMEX, over-the-counter quotations, estimated volatility, non-performance risk adjustments using credit default swaps, interest rates and time to maturity. The calculation of the fair value of options requires the use of an option-pricing model. See Note 8, “Fair Value Measurements.”

At December 31, 2014, we had outstanding derivative positions as set forth in the tables below.

Natural Gas
 
Period and Type of Instrument
 
 
 
NYMEX Contract Price Per MMBtu
 
 
 
 
 
 
 
 
 
Collars
 
 
 
Volume in
MMMBtus
 
Swaps
(Weighted
Average)
 
Sold Puts(Weighted
Average)
 
Floors(Weighted
Average)
 
Ceilings(Weighted
Average)
 
Estimated
Fair Value
Asset
(Liability)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
 
2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
49,275

 
$
4.28

 
$
—

 
$
—

 
$
—

 
$
62

 
Collars
 
38,325

 
—

 
—

 
3.93

 
4.74

 
36

 
2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
Swaptions (1)
 
—

 
4.10

 
—

 
—

 
—

 
(2
)
 
Collars
 
10,980

 
—

 
—

 
4.00

 
4.54

 
7

 
Total
 
 
 
 
 
 
 
 
 
 
 
$
103

_________________
(1)
During the fourth quarter of 2014, we sold natural gas swaption contracts that, if exercised on their expiration date in the second quarter of 2015, would protect 14,640 MMMBtus of calendar-year 2016 production from future commodity price volatility. These contracts give the counterparties the option to enter into swap contracts with us at $4.10/MMBtu for calendar-year 2016.

Crude Oil
 
 
 
 
NYMEX Contract Price Per Bbl
 
 
 
 
 
 
 
 
 
 
Collars
 
Estimated Fair Value
Asset (Liability)
Period and Type of Instrument
 
Volume in MBbls
 
Swaps
(Weighted Average)
 
Sold Puts
(Weighted Average) (1)
 
Floors
(Weighted Average)
 
Ceilings
(Weighted Average)
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
2015:
 
 
 
 
 
 
 
 
 
 
 
 
  Fixed-price swaps
 
2,275

 
$
90.20

 
$
—

 
$
—

 
$
—

 
$
78

  Fixed-price swaps with sold puts:
 
15,019

 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
 
 
90.02

 
—

 
—

 
—

 
495

Sold puts
 
 
 
—

 
71.67

 
—

 
—

 
(258
)
  Collars with sold puts:
 
730

 
 
 
 
 
 
 
 
 
 
Collars
 
 
 
—

 
—

 
90.00

 
104.00

 
25

Sold puts
 
 
 
—

 
75.00

 
—

 
—

 
(15
)
2016:
 
 

 
 

 
 

 
 

 
 

 
 

  Fixed-price swaps with sold puts:
 
10,060

 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
 
 
89.98

 
—

 
—

 
—

 
266

Sold puts
 
 
 
—

 
74.14

 
—

 
—

 
(174
)
  Collars with sold puts:
 
6,220

 
 
 
 
 
 
 
 
 
 
Collars
 
 
 
—

 
—

 
90.00

 
96.15

 
170

Sold puts
 
 
 
—

 
75.00

 
—

 
—

 
(112
)
  Swaptions (2)
 
—

 
91.00

 
—

 
—

 
—

 
—

2017:
 
 
 
 
 
 
 
 
 
 
 
 
  Fixed-price swaps with sold puts:
 
4,468

 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
 
 
88.37

 
—

 
—

 
—

 
93

Sold puts
 
 
 
—

 
73.28

 
—

 
—

 
(72
)
  Collars with sold puts:
 
2,080

 
 
 
 
 
 
 
 
 
 
Collars
 
 
 
—

 
—

 
90.00

 
95.59

 
50

Sold puts
 
 
 
—

 
75.00

 
—

 
—

 
(36
)
Total
 
$
510

_________________
(1)
If the market prices remain below our sold puts at contract settlement, we will receive the market price plus the following associated with our production:

•
the difference between our floors and our sold puts for collars with sold puts; or
•
the difference between our swaps and our sold puts for fixed-price swaps with sold puts.

(2)
During the third quarter of 2014, we sold crude oil swaption contracts that, if exercised on their expiration date in the first quarter of 2015, would protect 732 MBbls of calendar-year 2016 production from future commodity price volatility. These contracts give the counterparties the option to enter into swap contracts with us at $91.00/Bbl for calendar-year 2016.

Additional Disclosures about Derivative Instruments

We had derivative financial instruments recorded in our consolidated balance sheet as assets (liabilities) at their respective estimated fair value, as set forth below. 
 
 
Derivative Assets
 
Derivative Liabilities
 
 
Gross Fair Value
 
Offset in Balance Sheet
 
Balance Sheet Location
 
Gross Fair Value
 
Offset in Balance Sheet
 
Balance Sheet Location
 
 
 
 
Current
 
Noncurrent
 
 
 
Current
 
Noncurrent
December 31, 2014
 
(In millions)
 
(In millions)
Natural gas positions
 
$
105

 
$
(2
)
 
$
99

 
$
4

 
$
(2
)
 
$
2

 
$
—

 
$
—

Oil positions
 
1,115

 
(597
)
 
332

 
186

 
(605
)
 
597

 
(8
)
 
—

Total
 
$
1,220

 
$
(599
)
 
$
431

 
$
190

 
$
(607
)
 
$
599

 
$
(8
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Natural gas positions
 
$
11

 
$
(2
)
 
$
—

 
$
9

 
$
(22
)
 
$
2

 
$
(20
)
 
$
—

Oil positions
 
26

 
(9
)
 
—

 
17

 
(51
)
 
9

 
(42
)
 
—

Total
 
$
37

 
$
(11
)
 
$
—

 
$
26

 
$
(73
)
 
$
11

 
$
(62
)
 
$
—



The amount of gain (loss) recognized in “Commodity derivative income (expense)” in our consolidated statement of operations related to our derivative financial instruments follows: 

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
 
(In millions)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Realized gain (loss) on natural gas positions
 
$
(36
)
 
$
66

 
$
144

Realized gain (loss) on oil positions
 
(3
)
 
(6
)
 
1

Realized gain (loss) on basis positions
 
—

 
—

 
(10
)
Total realized gain (loss)
 
(39
)
 
60

 
135

Unrealized gain (loss) on natural gas positions
 
114

 
(81
)
 
(124
)
Unrealized gain (loss) on oil positions
 
535

 
(76
)
 
99

Unrealized gain (loss) on basis positions
 
—

 
—

 
10

Total unrealized gain (loss)
 
649

 
(157
)
 
(15
)
Total gain (loss)
 
$
610

 
$
(97
)
 
$
120