Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments and Hedging Activities (Tables)

v3.19.2
Derivative Instruments and Hedging Activities (Tables)
6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Price Risk Derivatives
Our Ranger Asset Divestiture in June of 2019 provides for potential contingent consideration to be received by the Company if commodity prices exceed specific thresholds in each of the next several years. On the disposition date, we recognized a derivative asset of $8,512 based on the initial fair value measurement. See Note 7 for additional information regarding fair value measurement. These contingent payments are summarized in the tables below (in thousands):
Year of Potential Settlement
 
Threshold (a)
 
Contingent Payment Amount
 
Threshold (a)
 
Contingent Payment Amount
 
Fair Value as of June 30, 2019 (b)
 
Aggregate Settlements Limit(c)
 
 
 
 
 
 
 
 
 
 
 
 
$
60,000

2019
 
Greater than $60/bbl, less than $65/bbl
 
$9,000
 
Equal to or greater than $65/bbl
 
$20,833
 
$2,485
 
 
2020
 
Greater than $60/bbl, less than $65/bbl
 
$9,000
 
Equal to or greater than $65/bbl
 
$20,833
 
$5,085
 
 
2021
 
Greater than $60/bbl, less than $65/bbl
 
$9,000
 
Equal to or greater than $65/bbl
 
$20,833
(c) 
$4,255
 
 
(a)
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.
(b)
Contingent consideration to be received will be classified as cash flows from financing activities up to the initial recognition fair value of $8,512; amounts in excess of the initial recognition fair value will be classified as cash flows from operating activities.
(c)
In the event that the 2019 and 2020 prices exceed the $65/bbl threshold, the aggregate amount of contingent consideration is limited to $60,000, resulting in the potential reduction in settlement for 2021 to $18,334.
Fair Value of Derivative Instruments
The following table reflects the fair value of the Company’s derivative instruments for the periods presented:
As of June 30, 2019
Derivative Instrument
 
Balance Sheet Presentation
 
Asset
 
Liability
 
Net Asset (Liability)
Commodity - Oil
 
Fair value of derivatives - Current
 
$
8,671

 
$
(17,251
)
 
$
(8,580
)
Commodity - Natural gas
 
Fair value of derivatives - Current
 
2,008

 

 
2,008

Contingent consideration arrangement
 
Fair value of derivatives - Current
 
2,485

 

 
2,485

Commodity - Oil
 
Fair value of derivatives - Non-current
 
2,335

 
(3,327
)
 
(992
)
Commodity - Natural gas
 
Fair value of derivatives - Non-current
 
4

 
(336
)
 
(332
)
Contingent consideration arrangement
 
Fair value of derivatives - Non-current
 
9,340

 

 
9,340

   Totals
 
 
 
$
24,843

 
$
(20,914
)
 
$
3,929

 
 
 
 
 
 
 
 
 
As of December 31, 2018
Derivative Instrument
 
Balance Sheet Presentation
 
Asset
 
Liability
 
Net Asset (Liability)
Commodity - Oil
 
Fair value of derivatives - Current
 
$
60,097

 
$
(10,480
)
 
$
49,617

Commodity - Natural gas
 
Fair value of derivatives - Current
 
5,017

 

 
5,017

Commodity - Oil
 
Fair value of derivatives - Non-current
 

 
(5,672
)
 
(5,672
)
Commodity - Natural gas
 
Fair value of derivatives - Non-current
 

 
(1,768
)
 
(1,768
)
   Totals
 
 
 
$
65,114

 
$
(17,920
)
 
$
47,194


Schedule of Offsetting Assets The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:
 
As of June 30, 2019
 
Presented without
 
 
 
As Presented with
 
Effects of Netting
 
Effects of Netting
 
Effects of Netting
Current assets: Fair value of commodity derivatives
$
20,044

 
$
(9,365
)
 
$
10,679

Long-term assets: Fair value of commodity derivatives
4,420

 
(2,081
)
 
2,339

 
 
 
 
 
 
Current liabilities: Fair value of commodity derivatives
$
(26,616
)
 
$
9,365

 
$
(17,251
)
Long-term liabilities: Fair value of commodity derivatives
(5,744
)
 
2,081

 
(3,663
)
 
As of December 31, 2018
 
Presented without
 
 
 
As Presented with
 
Effects of Netting
 
Effects of Netting
 
Effects of Netting
Current assets: Fair value of commodity derivatives
$
78,091

 
$
(12,977
)
 
$
65,114

 
 
 
 
 
 
Current liabilities: Fair value of commodity derivatives
$
(23,457
)
 
$
12,977

 
$
(10,480
)
Long-term liabilities: Fair value of commodity derivatives
(7,440
)
 

 
(7,440
)

Schedule of Offsetting Liabilities The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:
 
As of June 30, 2019
 
Presented without
 
 
 
As Presented with
 
Effects of Netting
 
Effects of Netting
 
Effects of Netting
Current assets: Fair value of commodity derivatives
$
20,044

 
$
(9,365
)
 
$
10,679

Long-term assets: Fair value of commodity derivatives
4,420

 
(2,081
)
 
2,339

 
 
 
 
 
 
Current liabilities: Fair value of commodity derivatives
$
(26,616
)
 
$
9,365

 
$
(17,251
)
Long-term liabilities: Fair value of commodity derivatives
(5,744
)
 
2,081

 
(3,663
)
 
As of December 31, 2018
 
Presented without
 
 
 
As Presented with
 
Effects of Netting
 
Effects of Netting
 
Effects of Netting
Current assets: Fair value of commodity derivatives
$
78,091

 
$
(12,977
)
 
$
65,114

 
 
 
 
 
 
Current liabilities: Fair value of commodity derivatives
$
(23,457
)
 
$
12,977

 
$
(10,480
)
Long-term liabilities: Fair value of commodity derivatives
(7,440
)
 

 
(7,440
)

Schedule of Gain or Loss on Derivative Contracts
For the periods indicated, the Company recorded the following in the consolidated statements of operations as a gain or loss on derivative contracts:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Oil derivatives
 
 
 
 
 
 
 
Net gain (loss) on settlements
$
(4,461
)
 
$
(8,131
)
 
$
(6,003
)
 
$
(17,049
)
Net gain (loss) on fair value adjustments
13,310

 
(8,311
)
 
(53,517
)
 
(4,243
)
Total gain (loss) on oil derivatives
8,849

 
(16,442
)
 
(59,520
)
 
(21,292
)
Natural gas derivatives
 
 
 
 
 
 
 
Net gain (loss) on settlements
3,304

 
151

 
4,556

 
607

Net gain (loss) on fair value adjustments
(1,430
)
 
(263
)
 
(1,573
)
 
(351
)
Total gain (loss) on natural gas derivatives
1,874

 
(112
)
 
2,983

 
256

Contingent consideration arrangement
 
 
 
 
 
 
 
Net gain (loss) on fair value adjustments
3,313

 

 
3,313

 

   Total gain (loss) on derivatives
$
14,036

 
$
(16,554
)
 
$
(53,224
)
 
$
(21,036
)

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 June 30, 2019:  
 
For the Remainder
 
For the Full Year
 
For the Full Year
Oil contracts (WTI)
of 2019
 
of 2020
 
of 2021
Puts
 
 
 
 
 
   Total volume (Bbls)
460,000

 

 

   Weighted average price per Bbl
$
65.00

 
$

 
$

Put spreads
 
 
 
 
 
Total volume (Bbls)
460,000

 

 

Weighted average price per Bbl
 
 
 
 
 
Floor (long put)
$
65.00

 
$

 
$

Floor (short put)
$
42.50

 
$

 
$

Collar contracts with short puts (three-way collars)
 
 
 
 
 
Total volume (Bbls)
2,392,000

 
3,294,000

 

Weighted average price per Bbl
 
 
 
 
 
Ceiling (short call)
$
67.46

 
$
65.72

 
$

Floor (long put)
$
56.54

 
$
55.69

 
$

Floor (short put)
$
43.65

 
$
44.47

 
$

 
 
 
 
 
 
Oil contracts (Midland basis differential)
 
 
 
 
 
Swap contracts
 
 
 
 
 
Total volume (Bbls)
4,137,500

 
4,576,000

 
1,095,000

Weighted average price per Bbl
$
(2.64
)
 
$
(1.29
)
 
$
1.00

 
 
 
 
 
 
Oil contracts (Argus Houston MEH basis differential)
 
 
 
 
 
Swap contracts
 
 
 
 
 
Total volume (Bbls)

 
552,000

 

Weighted average price per Bbl
$

 
$
3.30

 
$

 
 
 
 
 
 
Natural gas contracts (Henry Hub)
 
 
 
 
 
Collar contracts (two-way collars)
 
 
 
 
 
   Total volume (MMBtu)
1,196,000

 

 

   Weighted average price per MMBtu
 
 
 
 
 
      Ceiling (short call)
$
3.50

 
$

 
$

      Floor (long put)
$
3.13

 
$

 
$

Swap contracts
 
 
 
 
 
   Total volume (MMBtu)
1,397,000

 

 

   Weighted average price per MMBtu
$
2.89

 
$

 
$

 
 
 
 
 
 
Natural gas contracts (Waha basis differential)
 
 
 
 
 
Swap contracts
 
 
 
 
 
   Total volume (MMBtu)
4,232,000

 
4,758,000

 

   Weighted average price per MMBtu
$
(1.18
)
 
$
(1.12
)
 
$