Derivative Instruments and Hedging Activities (Tables)
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3 Months Ended |
Mar. 31, 2020 |
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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Actual 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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$41,666 |
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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.
(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.
(3) The specified pricing threshold for 2019 was not met. As such, approximately $41.7 million remains for potential settlements in future years.
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Fair Value of Derivative Instruments |
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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Actual Settlement(2)(3)
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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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($25,000) |
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($25,000) |
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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”).
(2) Cash paid for settlements related to 2019 are classified as cash flows used in investing activities as the cash payment was made soon after the acquisition date. Due to the extended time frame over which the 2020 and 2021 contingent arrangements could settle, any future payments would be considered financing arrangements. As such, cash settlements of those contingent consideration arrangements would be 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 were reached, $19.2 million of the final contingent payment would be presented in cash flows used in financing activities with the remainder presented in operating cash flows. (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 |
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 March 31, 2020 |
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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 |
ASSETS |
(In thousands) |
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Commodity derivative instruments |
$262,178 |
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($37,863) |
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$224,315 |
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Contingent consideration arrangements |
350 |
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— |
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350 |
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Fair value of derivatives - current |
$262,528 |
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($37,863) |
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$224,665 |
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Commodity derivative instruments |
1,187 |
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(208) |
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979 |
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Contingent consideration arrangements |
1,004 |
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— |
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1,004 |
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Fair value of derivatives - non current |
$2,191 |
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($208) |
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$1,983 |
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LIABILITIES |
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Commodity derivative instruments |
($41,750) |
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$37,863 |
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($3,887) |
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Contingent consideration arrangements |
(964) |
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— |
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(964) |
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Fair value of derivatives - current |
($42,714) |
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$37,863 |
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($4,851) |
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Commodity derivative instruments |
(1,723) |
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208 |
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(1,515) |
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Contingent consideration arrangements |
(2,742) |
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— |
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(2,742) |
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Fair value of derivatives - non current |
($4,465) |
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$208 |
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($4,257) |
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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 |
ASSETS |
(In thousands) |
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Commodity derivative instruments |
$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 |
$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 |
$9,216 |
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$— |
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$9,216 |
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LIABILITIES |
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Commodity derivative instruments |
($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 |
($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 |
($32,695) |
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$— |
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($32,695) |
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Schedule of Offsetting Liabilities |
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 March 31, 2020 |
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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 |
ASSETS |
(In thousands) |
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Commodity derivative instruments |
$262,178 |
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($37,863) |
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$224,315 |
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Contingent consideration arrangements |
350 |
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— |
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350 |
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Fair value of derivatives - current |
$262,528 |
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($37,863) |
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$224,665 |
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Commodity derivative instruments |
1,187 |
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(208) |
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979 |
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Contingent consideration arrangements |
1,004 |
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— |
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1,004 |
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Fair value of derivatives - non current |
$2,191 |
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($208) |
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$1,983 |
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LIABILITIES |
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Commodity derivative instruments |
($41,750) |
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$37,863 |
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($3,887) |
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Contingent consideration arrangements |
(964) |
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— |
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(964) |
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Fair value of derivatives - current |
($42,714) |
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$37,863 |
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($4,851) |
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Commodity derivative instruments |
(1,723) |
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208 |
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(1,515) |
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Contingent consideration arrangements |
(2,742) |
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— |
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(2,742) |
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Fair value of derivatives - non current |
($4,465) |
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$208 |
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($4,257) |
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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 |
ASSETS |
(In thousands) |
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Commodity derivative instruments |
$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 |
$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 |
$9,216 |
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$— |
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$9,216 |
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LIABILITIES |
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Commodity derivative instruments |
($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 |
($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 |
($32,695) |
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$— |
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($32,695) |
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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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Three Months Ended March 31, |
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2020 |
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2019 |
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(In thousands) |
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Gain (loss) on oil derivatives |
$257,323 |
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($68,369) |
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Gain (loss) on natural gas derivatives |
(6,829) |
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1,109 |
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Gain on contingent consideration arrangements |
1,475 |
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— |
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Gain (loss) on derivative contracts |
$251,969 |
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($67,260) |
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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 March 31, 2020:
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For the Remainder |
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For the Full Year |
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Oil contracts (WTI) |
of 2020 |
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of 2021 |
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Swap contracts |
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Total volume (Bbls) |
13,085,720 |
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— |
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Weighted average price per Bbl |
$42.11 |
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$— |
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Swap contracts with short puts |
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Total volume (Bbls) |
1,650,000 |
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— |
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Weighted average price per Bbl |
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Swap |
$56.06 |
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$— |
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Floor (short put) |
$42.50 |
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$— |
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Short call contracts |
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Total volume (Bbls) |
2,750,000 |
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(1) |
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4,825,300 |
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(1) |
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Weighted average price per Bbl |
$45.59 |
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$63.62 |
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Oil contracts (Brent ICE) |
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Swap contracts |
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Total volume (Bbls) |
366,000 |
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— |
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Weighted average price per Bbl |
$46.15 |
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$— |
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Oil contracts (Midland basis differential) |
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Swap contracts |
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Total volume (Bbls) |
6,574,800 |
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4,015,100 |
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Weighted average price per Bbl |
($1.24) |
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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) |
4,612,205 |
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— |
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Weighted average price per Bbl |
($0.24) |
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$— |
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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 |
$58.22 |
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$— |
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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) |
3,665,000 |
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1,350,000 |
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Weighted average price per MMBtu |
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Ceiling (short call) |
$2.74 |
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$2.70 |
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Floor (long put) |
$2.48 |
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$2.42 |
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Floor (short put) |
$2.00 |
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$2.00 |
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Swap contracts |
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Total volume (MMBtu) |
9,170,000 |
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— |
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Weighted average price per MMBtu |
$2.20 |
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$— |
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Short call contracts |
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Total volume (MMBtu) |
9,075,000 |
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7,300,000 |
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Weighted average price per MMBtu |
$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) |
18,982,000 |
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— |
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Weighted average price per MMBtu |
($1.08) |
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$— |
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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.
Subsequent to March 31, 2020, the Company entered into the following derivative contracts:
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For the Remainder |
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For the Full Year |
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Oil contracts (WTI) |
of 2020 |
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of 2021 |
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Swap contracts |
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Total volume (Bbls) |
915,000 |
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— |
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Weighted average price per Bbl |
$29.77 |
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$— |
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Oil contracts (WTI Calendar Month Average Roll) |
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Swap contracts |
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Total volume (Bbls) |
5,697,500 |
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— |
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Weighted average price per Bbl |
($2.66) |
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$— |
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Oil contracts (Brent ICE differential) |
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Swap contracts |
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Total volume (Bbls) |
396,800 |
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— |
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Weighted average price per Bbl |
($4.00) |
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$— |
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Natural gas contracts (Henry Hub) |
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Collar contracts |
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Total volume (MMBtu) |
1,525,000 |
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7,750,000 |
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Weighted average price per MMBtu |
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Ceiling (short call) |
$3.25 |
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$2.93 |
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Floor (long put) |
$2.67 |
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$2.55 |
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Swap contracts |
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Total volume (MMBtu) |
— |
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8,675,000 |
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Weighted average price per MMBtu |
$— |
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$2.70 |
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Schedule of Derivative Instruments |
The components of “Cash received (paid) for commodity derivative settlements, net” and “Cash paid for settlements of contingent consideration arrangements, net” are as follows for the respective periods:
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Three Months Ended March 31, |
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2020 |
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2019 |
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(In thousands) |
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Cash flows from operating activities |
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|
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|
|
|
|
Cash paid on oil derivatives |
($1,777) |
|
|
($1,542) |
|
|
|
|
|
Cash received on gas derivatives |
4,390 |
|
|
1,252 |
|
|
|
|
|
Cash received (paid) for commodity derivative settlements |
$2,613 |
|
|
($290) |
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Cash flows from investing activities |
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|
|
Net cash paid for settlements of contingent consideration arrangements |
($40,000) |
|
|
$— |
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|