Derivative Instruments and Hedging Activities (Tables)
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12 Months Ended |
Dec. 31, 2019 |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] |
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| Schedule of Price Risk Derivatives |
This contingent consideration arrangement is summarized in the table below (in thousands except for per Bbl amounts):
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Year |
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Threshold (1)
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Contingent
Receipt -
Annual
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Threshold (1)
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Contingent
Receipt -
Annual
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Period
Cash Flow
Occurs
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Statement of
Cash Flows Presentation
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Remaining Contingent
Receipt -
Aggregate Limit (3)
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Divestiture
Date
Fair Value
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$8,512 |
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Pending Settlement |
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2019 |
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Greater than $60/Bbl, less than $65/Bbl |
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$— |
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Equal to or greater than $65/Bbl |
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$— |
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1Q20 |
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N/A |
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Remaining Potential Settlements |
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2020-2021 |
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Greater than $60/Bbl, less than $65/Bbl |
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$9,000 |
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Equal to or greater than $65/Bbl |
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$20,833 |
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(2) |
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(2) |
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$60,000 |
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(1) |
The price used to determine whether the specified thresholds have been met is the average of the final monthly settlements for each month during each annual period end for NYMEX Light Sweet Crude Oil Futures, as reported by the CME Group Inc. |
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(2) |
Cash received for settlements of contingent consideration arrangements are classified as cash flows from financing activities up to the divestiture date fair value with any excess classified as cash flows from operating activities. Therefore, if the commodity price threshold is reached, $8.5 million of the next contingent receipt will be presented in cash flows from financing activities with the remainder, as well as all subsequent contingent receipts, presented in cash flows from operating activities.
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(3) |
The specified pricing threshold for 2019 was not met. As such, approximately $41.5 million remains for potential settlements in future years.
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As a result of the Carrizo Acquisition, the Company assumed all contingent consideration arrangements previously entered into by Carrizo. These contingent consideration arrangements are summarized below:
Contingent ExL Consideration
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Year |
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Threshold (1)
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Period
Cash Flow
Occurs
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Statement of
Cash Flows Presentation
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Contingent
Payment -
Annual
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Remaining Contingent
Payments -
Aggregate Limit
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Acquisition
Date
Fair Value
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(In thousands) |
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($69,171 |
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Pending Settlement |
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2019 |
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$50.00 |
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1Q20 |
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Investing |
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($50,000 |
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Remaining Potential Settlements |
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2020-2021 |
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$50.00 |
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(2) |
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(2) |
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($50,000 |
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($75,000 |
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(3) |
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(1) |
The price used to determine whether the specified threshold for each year has been met is the average daily closing spot price per barrel of WTI crude oil as measured by the U.S. Energy Information Administration (“U.S. EIA”). |
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(2) |
Cash paid for settlements of contingent consideration arrangements are classified as cash flows from financing activities up to the acquisition date fair value with any excess classified as cash flows from operating activities. Therefore, if the commodity price threshold is reached, all of the next contingent payment will be presented in cash flows from financing activities. |
(3)
In January 2020, the Company paid $50.0 million as the specified pricing threshold was met. Only $25.0 million remains for potential settlements in future years.
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| Schedule of Offsetting Assets |
As previously discussed, the Company’s commodity derivative contracts are subject to master netting arrangements. The Company’s policy is to present the fair value of derivative contracts on a net basis in the consolidated balance sheet. The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:
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As of December 31, 2019 |
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Presented without |
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As Presented with |
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Effects of Netting |
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Effects of Netting |
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Effects of Netting |
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(In thousands) |
Commodity derivative instruments |
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$26,849 |
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($17,511 |
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$9,338 |
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Contingent consideration arrangements |
16,718 |
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— |
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16,718 |
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Fair value of derivatives - current |
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$43,567 |
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($17,511 |
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$26,056 |
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Commodity derivative instruments |
— |
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— |
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— |
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Contingent consideration arrangements |
9,216 |
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— |
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9,216 |
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Fair value of derivatives - non current |
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$9,216 |
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$— |
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$9,216 |
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Commodity derivative instruments |
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($38,708 |
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$17,511 |
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($21,197 |
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Contingent consideration arrangements |
(50,000 |
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— |
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(50,000 |
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Fair value of derivatives - current |
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($88,708 |
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$17,511 |
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($71,197 |
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Commodity derivative instruments |
(12,935 |
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— |
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(12,935 |
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Contingent consideration arrangements |
(19,760 |
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— |
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(19,760 |
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Fair value of derivatives - non current |
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($32,695 |
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$— |
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($32,695 |
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As of December 31, 2018 |
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Presented without |
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As Presented with |
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Effects of Netting |
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Effects of Netting |
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Effects of Netting |
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(In thousands) |
Fair value of derivatives - current |
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$78,091 |
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($12,977 |
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$65,114 |
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Fair value of derivatives - current |
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($23,457 |
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$12,977 |
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($10,480 |
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Fair value of derivatives - non current |
(7,440 |
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— |
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(7,440 |
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| Schedule of Offsetting Liabilities |
As previously discussed, the Company’s commodity derivative contracts are subject to master netting arrangements. The Company’s policy is to present the fair value of derivative contracts on a net basis in the consolidated balance sheet. The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:
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As of December 31, 2019 |
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Presented without |
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As Presented with |
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Effects of Netting |
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Effects of Netting |
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Effects of Netting |
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(In thousands) |
Commodity derivative instruments |
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$26,849 |
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($17,511 |
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$9,338 |
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Contingent consideration arrangements |
16,718 |
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— |
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16,718 |
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Fair value of derivatives - current |
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$43,567 |
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($17,511 |
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$26,056 |
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Commodity derivative instruments |
— |
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— |
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— |
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Contingent consideration arrangements |
9,216 |
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— |
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9,216 |
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Fair value of derivatives - non current |
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$9,216 |
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$— |
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$9,216 |
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Commodity derivative instruments |
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($38,708 |
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$17,511 |
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($21,197 |
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Contingent consideration arrangements |
(50,000 |
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— |
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(50,000 |
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Fair value of derivatives - current |
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($88,708 |
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$17,511 |
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($71,197 |
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Commodity derivative instruments |
(12,935 |
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— |
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(12,935 |
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Contingent consideration arrangements |
(19,760 |
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— |
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(19,760 |
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Fair value of derivatives - non current |
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($32,695 |
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$— |
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($32,695 |
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As of December 31, 2018 |
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Presented without |
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As Presented with |
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Effects of Netting |
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Effects of Netting |
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Effects of Netting |
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(In thousands) |
Fair value of derivatives - current |
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$78,091 |
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($12,977 |
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$65,114 |
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Fair value of derivatives - current |
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($23,457 |
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$12,977 |
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($10,480 |
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Fair value of derivatives - non current |
(7,440 |
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— |
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(7,440 |
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| Schedule of Gain or Loss on Derivative Contracts |
The components of “(Gain) loss on derivative contracts” are as follows for the respective periods:
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Years Ended December 31, |
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2019 |
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2018 |
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2017 |
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(In thousands) |
Oil derivatives |
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Net gain (loss) on settlements |
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($11,188 |
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($27,510 |
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($9,067 |
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Net gain (loss) on fair value adjustments |
(62,125 |
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72,973 |
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(11,426 |
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Total gain (loss) on oil derivatives |
(73,313 |
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45,463 |
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(20,493 |
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Natural gas derivatives |
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Net gain (loss) on settlements |
7,399 |
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238 |
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594 |
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Net gain (loss) on fair value adjustments |
1,490 |
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2,843 |
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998 |
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Total gain (loss) on natural gas derivatives |
8,889 |
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3,081 |
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1,592 |
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Contingent consideration arrangements |
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Net gain (loss) on fair value adjustments |
2,315 |
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— |
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— |
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Total gain (loss) on derivative contracts |
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($62,109 |
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$48,544 |
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($18,901 |
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| Schedule of Outstanding Oil and Natural Gas Derivative Contracts |
Listed in the tables below are the outstanding oil and natural gas derivative contracts as of December 31, 2019:
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For the Full Year of |
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For the Full Year of |
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Oil contracts (WTI) |
2020 |
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2021 |
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Collar contracts with short puts (three-way collars) |
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Total volume (Bbls) |
13,176,000 |
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— |
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Weighted average price per Bbl |
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Ceiling (short call) |
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$65.28 |
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$ |
— |
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Floor (long put) |
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$55.38 |
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$ |
— |
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Floor (short put) |
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$45.08 |
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$ |
— |
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Short call contracts |
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Total volume (Bbls) |
1,674,450 |
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(1 |
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4,825,300 |
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(1) |
Weighted average price per Bbl |
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$75.98 |
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$63.62 |
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Swap contracts |
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Total volume (Bbls) |
1,303,900 |
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— |
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Weighted average price per Bbl |
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$55.19 |
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$— |
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Swap contracts with short puts |
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Total volume (Bbls) |
2,196,000 |
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— |
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Weighted average price per Bbl |
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Swap |
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$56.06 |
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$— |
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Floor (short put) |
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$42.50 |
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$— |
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Oil contracts (Brent ICE) |
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Collar contracts with short puts (three-way collars) |
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Total volume (Bbls) |
837,500 |
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— |
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Weighted average price per Bbl |
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Ceiling (short call) |
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$70.00 |
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$— |
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Floor (long put) |
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$58.24 |
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$— |
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Floor (short put) |
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$50.00 |
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$— |
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Oil contracts (Midland basis differential) |
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Swap contracts |
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Total volume (Bbls) |
8,476,700 |
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4,015,100 |
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Weighted average price per Bbl |
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($1.47 |
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$0.40 |
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Oil contracts (Argus Houston MEH basis differential) |
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Swap contracts |
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Total volume (Bbls) |
1,439,205 |
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— |
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Weighted average price per Bbl |
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$2.40 |
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$— |
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Oil contracts (Argus Houston MEH swaps) |
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Swap contracts |
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Total volume (Bbls) |
504,500 |
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— |
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Weighted average price per Bbl |
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$58.22 |
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$— |
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Natural gas contracts (Henry Hub) |
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Collar contracts (three-way collars) |
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Total volume (MMBtu) |
3,660,000 |
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— |
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Weighted average price per MMBtu |
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Ceiling (short call) |
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$2.75 |
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$— |
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Floor (long put) |
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$2.50 |
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$— |
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Floor (short put) |
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$2.00 |
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$— |
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Swap contracts |
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Total volume (MMBtu) |
3,660,000 |
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— |
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Weighted average price per MMBtu |
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$2.48 |
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$— |
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Short call contracts |
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Total volume (MMBtu) |
12,078,000 |
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7,300,000 |
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Weighted average price per MMBtu |
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$3.50 |
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$3.09 |
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Natural gas contracts (Waha basis differential) |
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Swap contracts |
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Total volume (MMBtu) |
21,596,000 |
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— |
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Weighted average price per MMBtu |
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($1.04 |
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$— |
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(1)
Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps and three-way collars.
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