Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments and Hedging Activities (Tables)

v3.20.2
Derivative Instruments and Hedging Activities (Tables)
 9 Months Ended
Sep. 30, 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)
Divestiture Date Fair Value
$8,512 
Actual Settlement 2019 Greater than $60/Bbl, less than $65/Bbl $—
Equal to or greater than $65/Bbl
 $— 1Q20 N/A
Remaining Potential Settlements 2020-2021 Greater than $60/Bbl, less than $65/Bbl $9,000
Equal to or greater than $65/Bbl
 $20,833
(2)
(2)
 $41,666 

(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.
Fair Value of Derivative Instruments 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		 Acquisition
Date
Fair Value
(In thousands)
($69,171)
Actual Settlement(2)(3)
2019 $50.00  1Q20 Investing ($50,000)
Remaining Potential Settlements 2020-2021 $50.00 
(2)
(2)
 ($25,000) ($25,000)

(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.
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 September 30, 2020
Presented without   As Presented with
Effects of Netting Effects of Netting Effects of Netting
ASSETS (In thousands)
Commodity derivative instruments $34,362  ($24,541) $9,821 
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current $34,362  ($24,541) $9,821 
Commodity derivative instruments 5,689  (5,457) 232 
Contingent consideration arrangements 1,089  —  1,089 
Other assets, net $6,778  ($5,457) $1,321 
LIABILITIES      
Commodity derivative instruments ($59,488) $24,541  ($34,947)
Contingent consideration arrangements (3) —  (3)
Fair value of derivatives - current ($59,491) $24,541  ($34,950)
Commodity derivative instruments (13,195) 5,457  (7,738)
Contingent consideration arrangements (4,058) —  (4,058)
Warrant liability (23,909) —  (23,909)
Fair value of derivatives - non current ($41,162) $5,457  ($35,705)

As of December 31, 2019
Presented without   As Presented with
Effects of Netting Effects of Netting Effects of Netting
ASSETS (In thousands)
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 The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:
As of September 30, 2020
Presented without   As Presented with
Effects of Netting Effects of Netting Effects of Netting
ASSETS (In thousands)
Commodity derivative instruments $34,362  ($24,541) $9,821 
Contingent consideration arrangements —  —  — 
Fair value of derivatives - current $34,362  ($24,541) $9,821 
Commodity derivative instruments 5,689  (5,457) 232 
Contingent consideration arrangements 1,089  —  1,089 
Other assets, net $6,778  ($5,457) $1,321 
LIABILITIES      
Commodity derivative instruments ($59,488) $24,541  ($34,947)
Contingent consideration arrangements (3) —  (3)
Fair value of derivatives - current ($59,491) $24,541  ($34,950)
Commodity derivative instruments (13,195) 5,457  (7,738)
Contingent consideration arrangements (4,058) —  (4,058)
Warrant liability (23,909) —  (23,909)
Fair value of derivatives - non current ($41,162) $5,457  ($35,705)

As of December 31, 2019
Presented without   As Presented with
Effects of Netting Effects of Netting Effects of Netting
ASSETS (In thousands)
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:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(In thousands)
(Gain) loss on oil derivatives $16,606  ($24,722) ($118,348) $34,798 
(Gain) loss on natural gas derivatives 7,296  (1,323) 18,819  (4,306)
(Gain) loss on NGL derivatives 2,421  —  2,418  — 
(Gain) loss on contingent consideration arrangements 715  4,236  (855) 923 
(Gain) loss on derivative contracts $27,038  ($21,809) ($97,966) $31,415 
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:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(In thousands)
Cash flows from operating activities        
Cash (paid) received on oil derivatives $2,130  ($1,045) $100,823  ($7,048)
Cash (paid) received on natural gas derivatives (1,677) 2,056  931  6,612 
Cash (paid) received for commodity derivative settlements $453  $1,011  $101,754  ($436)
Cash flows from investing activities        
Cash paid for settlements of contingent consideration arrangements, net $—  $—  ($40,000) $— 
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 September 30, 2020:  
For the Remainder For the Full Year
Oil contracts (WTI) of 2020 of 2021
   Swap contracts
   Total volume (Bbls) 2,496,880  1,377,000 
   Weighted average price per Bbl $42.10  $42.00 
   Collar contracts
   Total volume (Bbls) 1,501,440  4,653,750 
   Weighted average price per Bbl
   Ceiling (short call) $45.00  $45.31 
   Floor (long put) $35.00  $40.00 
   Short put contracts
      Total volume (Bbls) 552,000  — 
      Weighted average price per Bbl $42.50  $— 
   Long call contracts
    Total volume (Bbls) 460,000  — 
    Weighted average price per Bbl $67.50  $— 
   Short call contracts
   Total volume (Bbls) 460,000 
(1)
 4,825,300 
(1)
   Weighted average price per Bbl $55.00  $63.62 
Short call swaption contracts
   Total volume (Bbls) —  730,000 
(2)
   Weighted average price per Bbl $—  $47.00 
Oil contracts (Brent ICE)    
   Swap contracts
   Total volume (Bbls) —  1,272,450 
   Weighted average price per Bbl $—  $38.24 
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) 1,380,000  3,022,900 
   Weighted average price per Bbl ($1.89) $0.26 
Oil contracts (Argus Houston MEH basis differential)
   Swap contracts
   Total volume (Bbls) 1,435,202  — 
   Weighted average price per Bbl $0.03  $— 
Oil contracts (Argus Houston MEH swaps)
   Swap contracts
   Total volume (Bbls) —  2,969,050 
   Weighted average price per Bbl $—  $39.48 

(1)    Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps.
(2)    The short call swaption contract has an exercise expiration date of October 30, 2020.
For the Remainder For the Full Year
Natural gas contracts (Henry Hub) of 2020 of 2021
   Swap contracts
      Total volume (MMBtu) 1,633,000  11,123,000 
      Weighted average price per MMBtu $2.05  $2.60 
   Collar contracts (three-way collars)
      Total volume (MMBtu) 1,525,000  1,350,000 
      Weighted average price per MMBtu
         Ceiling (short call) $2.72  $2.70 
         Floor (long put) $2.45  $2.42 
         Floor (short put) $2.00  $2.00 
Collar contracts (two-way collars)
      Total volume (MMBtu) 1,525,000  9,550,000 
      Weighted average price per MMBtu
         Ceiling (short call) $3.25  $3.04 
         Floor (long put) $2.67  $2.59 
   Short call contracts
      Total volume (MMBtu) 2,013,000  7,300,000 
      Weighted average price per MMBtu $3.50  $3.09 
Natural gas contracts (Waha basis differential)
   Swap contracts
      Total volume (MMBtu) 4,421,000  12,775,000 
      Weighted average price per MMBtu ($0.91) ($0.47)

For the Remainder For the Full Year
NGL contracts (OPIS Mont Belvieu Purity Ethane) of 2020 of 2021
   Swap contracts
      Total volume (Bbls) —  1,825,000 
      Weighted average price per Bbl $—  $7.62 
Subsequent to September 30, 2020, the Company entered into the following derivative contracts:
For the Full Year
Oil contracts (WTI) of 2021
   Collar contracts
   Total volume (Bbls) 4,769,525 
   Weighted average price per Bbl
   Ceiling (short call) $48.22 
   Floor (long put) $38.44 
For the Full Year
Natural gas contracts (Waha basis differential) of 2021
   Swap contracts
      Total volume (MMBtu) 3,650,000 
      Weighted average price per MMBtu ($0.25)