Annual report pursuant to Section 13 and 15(d)

Derivative Instruments and Hedging Activities (Tables)

v3.20.4
Derivative Instruments and Hedging Activities (Tables)
12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Price Risk Derivatives This contingent consideration arrangement is summarized in the table below (in thousands except for per Bbl amounts):
Year
Threshold (1)
Contingent
Receipt -
Annual
Threshold (1)
Contingent
Receipt -
Annual
Period
Cash Flow
Occurs
Statement of
Cash Flows Presentation
Remaining Contingent
Receipt -
Aggregate Limit (3)
Remaining Potential Settlement 2021
Greater than $60/Bbl, less than $65/Bbl
$9,000 
Equal to or greater than $65/Bbl
$20,833 
(2)
(2)
$20,833 

(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.
(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 presented in cash flows from operating activities.
(3)    The specified pricing threshold for both 2019 and 2020 was not met. As such, approximately $20.8 million remains for potential settlements in future years.

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
Year
Threshold (1)
Period
Cash Flow
Occurs
Statement of
Cash Flows Presentation
Contingent
Payment -
Annual
Remaining Contingent
Payments -
Aggregate Limit
(In thousands)
Remaining Potential Settlement 2021 $50.00 
(2)
(2)
($25,000) ($25,000)
(3)

(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”).
(2)    Cash paid for settlements of contingent consideration arrangements are classified as cash flows from investing activities up to the acquisition date fair value with any excess classified as cash flows from operating activities. In January 2020, the Company paid $50.0 million as the specified pricing threshold for 2019 was met. Therefore, if the commodity price threshold is reached in 2021, $19.2 million of the next contingent payment will be presented in cash flows from investing activities with the remainder presented in cash flows from operating activities.
(3)    The specified pricing threshold for 2020 was not met. Only $25.0 million remains for potential settlements in future years.
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:
As of December 31, 2020
Presented without As Presented with
Effects of Netting Effects of Netting Effects of Netting
(In thousands)
Assets
Commodity derivative instruments $21,156  ($20,235) $921 
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current $21,156  ($20,235) $921 
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements 1,816  —  1,816 
Other assets, net $1,816  $—  $1,816 
Liabilities
Commodity derivative instruments ($117,295) $20,235  ($97,060)
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current ($117,295) $20,235  ($97,060)
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements (8,618) —  (8,618)
September 2020 Warrants liability (79,428) —  (79,428)
Fair value of derivatives - non current ($88,046) $—  ($88,046)
As of December 31, 2019
Presented without As Presented with
Effects of Netting Effects of Netting Effects of Netting
(In thousands)
Assets
Commodity derivative instruments $26,849  ($17,511) $9,338 
Contingent consideration arrangements 16,718  —  16,718 
Fair value of derivatives - current $43,567  ($17,511) $26,056 
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements 9,216  —  9,216 
Other assets, net $9,216  $—  $9,216 
Liabilities
Commodity derivative instruments ($38,708) $17,511  ($21,197)
Contingent consideration arrangements (50,000) —  (50,000)
Fair value of derivatives - current ($88,708) $17,511  ($71,197)
Commodity derivative instruments ($12,935) —  ($12,935)
Contingent consideration arrangements (19,760) —  (19,760)
Fair value of derivatives - non current ($32,695) $—  ($32,695)
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:
As of December 31, 2020
Presented without As Presented with
Effects of Netting Effects of Netting Effects of Netting
(In thousands)
Assets
Commodity derivative instruments $21,156  ($20,235) $921 
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current $21,156  ($20,235) $921 
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements 1,816  —  1,816 
Other assets, net $1,816  $—  $1,816 
Liabilities
Commodity derivative instruments ($117,295) $20,235  ($97,060)
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current ($117,295) $20,235  ($97,060)
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements (8,618) —  (8,618)
September 2020 Warrants liability (79,428) —  (79,428)
Fair value of derivatives - non current ($88,046) $—  ($88,046)
As of December 31, 2019
Presented without As Presented with
Effects of Netting Effects of Netting Effects of Netting
(In thousands)
Assets
Commodity derivative instruments $26,849  ($17,511) $9,338 
Contingent consideration arrangements 16,718  —  16,718 
Fair value of derivatives - current $43,567  ($17,511) $26,056 
Commodity derivative instruments $—  $—  $— 
Contingent consideration arrangements 9,216  —  9,216 
Other assets, net $9,216  $—  $9,216 
Liabilities
Commodity derivative instruments ($38,708) $17,511  ($21,197)
Contingent consideration arrangements (50,000) —  (50,000)
Fair value of derivatives - current ($88,708) $17,511  ($71,197)
Commodity derivative instruments ($12,935) —  ($12,935)
Contingent consideration arrangements (19,760) —  (19,760)
Fair value of derivatives - non current ($32,695) $—  ($32,695)
Schedule of Gain or Loss on Derivative Contracts
The components of “(Gain) loss on derivative contracts” are as follows for the respective periods:
Years Ended December 31,
2020 2019 2018
(In thousands)
(Gain) loss on oil derivatives ($48,031) $73,313  ($45,463)
(Gain) loss on natural gas derivatives 14,883  (8,889) (3,081)
(Gain) loss on NGL derivatives 2,426  —  — 
(Gain) loss on contingent consideration arrangements 2,976  (2,315) — 
(Gain) loss on September 2020 Warrants liability 55,519  —  — 
(Gain) loss on derivative contracts $27,773  $62,109  ($48,544)
Schedule of Derivative Instruments
The components of “Cash (paid) received for commodity derivative settlements” and “Cash paid for settlements of contingent consideration arrangements, net” are as follows for the respective periods:

Years Ended December 31,
2020 2019 2018
(In thousands)
Cash flows from operating activities
Cash (paid) received on oil derivatives $98,723  ($11,188) ($27,510)
Cash (paid) received on natural gas derivatives 147  7,399  238 
Cash (paid) received for commodity derivative settlements $98,870  ($3,789) ($27,272)
Cash flows from investing activities
Cash paid for settlements of contingent consideration arrangements, net ($40,000) $—  $— 
Subsequent to December 31, 2020, the Company entered into the following derivative contracts:
For the Full Year of For the Full Year of
Oil contracts (WTI) 2021 2022
Collar contracts
Total volume (Bbls) 920,000  1,355,000 
Weighted average price per Bbl
Ceiling (short call) $60.18  $60.00 
Floor (long put) $47.50  $45.00 
Short call swaption contracts 1
Total volume (Bbls) —  1,825,000  (2)
Weighted average price per Bbl $—  $52.18 

(1)    In February 2021, the Company terminated a total of 920,000 Bbls of short call swaption contracts for the second half of 2021 and simultaneously executed the full year 2022 short call swaption contracts shown in the table above.
(2)    The short call swaption contracts shown in the table above have exercise expiration dates of December 31, 2021.

For the Full Year of
Natural gas contracts (Henry Hub) 2022
Collar contracts (two-way collars)
Total volume (MMBtu) 1,800,000 
Weighted average price per MMBtu
Ceiling (short call) $3.88 
Floor (long put) $2.78 
Schedule of Outstanding Oil and Natural Gas Derivative Contracts
Listed in the tables below are the outstanding oil, natural gas and NGL derivative contracts as of December 31, 2020:
For the Full Year of
Oil contracts (WTI) 2021
Swap contracts
Total volume (Bbls) 1,827,000 
Weighted average price per Bbl $43.54 
Collar contracts
Total volume (Bbls) 10,282,775 
Weighted average price per Bbl  
Ceiling (short call) $46.69 
Floor (long put) $39.28 
Short call contracts
Total volume (Bbls) 4,825,300  (1)
Weighted average price per Bbl $63.62 
Short call swaption contracts
Total volume (Bbls) 1,375,000  (2)
Weighted average price per Bbl $49.01 
Oil contracts (ICE Brent)  
Swap contracts
Total volume (Bbls) 848,300 
Weighted average price per Bbl $37.36 
Collar contracts
Total volume (Bbls) 730,000 
Weighted average price per Bbl  
Ceiling (short call) $50.00 
Floor (long put) $45.00 
Oil contracts (Midland basis differential)
Swap contracts
Total volume (Bbls) 3,022,900 
Weighted average price per Bbl $0.26 
Oil contracts (Argus Houston MEH)
Swap contracts
Total volume (Bbls) 450,000 
Weighted average price per Bbl $46.50 
Collar contracts
Total volume (Bbls) 409,500 
Weighted average price per Bbl
Ceiling (short call) $47.00 
Floor (long put) $41.00 

(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.
(2)    The short call swaption contracts have exercise expiration dates as follows: 455,000 Bbls expire on March 31, 2021, 460,000 Bbls expire on June 30, 2021 and 460,000 Bbls expire on September 30, 2021.
For the Full Year of
Natural gas contracts (Henry Hub) 2021
Swap contracts
Total volume (MMBtu) 11,123,000 
Weighted average price per MMBtu $2.60 
Collar contracts (three-way collars)
Total volume (MMBtu) 1,350,000 
Weighted average price per MMBtu
Ceiling (short call) $2.70 
Floor (long put) $2.42 
Floor (short put) $2.00 
Collar contracts (two-way collars)
Total volume (MMBtu) 9,550,000 
Weighted average price per MMBtu
Ceiling (short call) $3.04 
Floor (long put) $2.59 
Short call contracts
Total volume (MMBtu) 7,300,000  (1)
Weighted average price per MMBtu $3.09 
Natural gas contracts (Waha basis differential)
Swap contracts
Total volume (MMBtu) 16,425,000 
Weighted average price per MMBtu ($0.42)

(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.

For the Full Year of
NGL contracts (OPIS Mont Belvieu Purity Ethane) 2021
Swap contracts
Total volume (Bbls) 1,825,000 
Weighted average price per Bbl $7.62