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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | 3.Derivative Financial Instruments Objectives and Strategies Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, price swaptions, basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of September 30, 2021, Devon did not have any open interest rate swap contracts. Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment. Counterparty Credit Risk By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of September 30, 2021, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties. Commodity Derivatives As of September 30, 2021, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.
|  | Price Swaps |  |  | Price Swaptions |  |  | Price Collars |  |  | Call Options Sold |
Period |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |  |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |  |  | Volume (Bbls/d) |  |  | Weighted Average Floor Price ($/Bbl) |  |  | Weighted Average Ceiling Price ($/Bbl) |  |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |
Q4 2021 |  |  | 66,460 |  |  | $ | 41.24 |  |  |  | — |  |  | $ | — |  |  |  | 48,250 |  |  | $ | 38.82 |  |  | $ | 48.82 |  |  |  | 5,000 |  |  | $ | 39.50 |
Q1-Q4 2022 |  |  | 26,112 |  |  | $ | 43.75 |  |  |  | 10,000 |  |  | $ | 46.67 |  |  |  | 20,233 |  |  | $ | 46.41 |  |  | $ | 56.41 |  |  |  | — |  |  | $ | — |
|  | Oil Basis Swaps |
Period |  | Index |  | Volume (Bbls/d) |  |  | Weighted Average Differential to WTI ($/Bbl) |
Q4 2021 |  | Midland Sweet |  |  | 23,000 |  |  | $ | 0.84 |
Q4 2021 |  | Guernsey Light Sweet |  |  | 4,000 |  |  | $ | (1.49 | )
Q4 2021 |  | BRENT |  |  | 1,000 |  |  | $ | (8.00 | )
Q4 2021 |  | NYMEX Roll |  |  | 13,000 |  |  | $ | 0.39 |
Q1-Q4 2022 |  | BRENT |  |  | 1,000 |  |  | $ | (7.75 | )
Q1-Q4 2022 |  | NYMEX Roll |  |  | 29,000 |  |  | $ | 0.45 |
As of September 30, 2021, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.
|  | Price Swaps (1) |  |  | Price Swaptions (2) |  |  | Price Collars (2) |  |  | Call Options Sold (2) |
Period |  | Volume (MMBtu/d) |  |  | Weighted Average Price ($/MMBtu) |  |  | Volume (MMBtu/d) |  |  | Weighted Average Price ($/MMBtu) |  |  | Volume (MMBtu/d) |  |  | Weighted Average Floor Price ($/MMBtu) |  |  | Weighted Average Ceiling Price ($/MMBtu) |  |  | Volume (MMBtu/d) |  |  | Weighted Average Price ($/MMBtu) |
Q4 2021 |  |  | 254,000 |  |  | $ | 2.63 |  |  |  | — |  |  | $ | — |  |  |  | 133,000 |  |  | $ | 2.55 |  |  | $ | 3.05 |  |  |  | 50,000 |  |  | $ | 2.68 |
Q1-Q4 2022 |  |  | 3,452 |  |  | $ | 2.85 |  |  |  | 100,000 |  |  | $ | 2.70 |  |  |  | 145,507 |  |  | $ | 2.69 |  |  | $ | 3.40 |  |  |  | — |  |  | $ | — |
Q1-Q4 2023 |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | — |  |  |  | 10,603 |  |  | $ | 3.11 |  |  | $ | 4.56 |  |  |  | — |  |  | $ | — |
| (1) | Related to the 2021 open positions, 14,000 MMBtu/d settle against the Inside FERC first of month Henry Hub index at an average price of $2.85 and 240,000 MMBtu/d settle against the end of month NYMEX index at an average price of $2.62. All 2022 open positions settle against the Inside FERC first of month Henry Hub index.
| (2) | Price swaptions and call options settle against end of month NYMEX index. Price collars settle against the Inside FERC first of month Henry Hub Index.
|  | Natural Gas Basis Swaps |
Period |  | Index |  | Volume (MMBtu/d) |  |  | Weighted Average Differential to Henry Hub ($/MMBtu) |
Q4 2021 |  | El Paso Natural Gas |  |  | 35,000 |  |  | $ | (0.92 | )
Q4 2021 |  | WAHA |  |  | 80,000 |  |  | $ | (0.65 | )
Q1-Q4 2022 |  | WAHA |  |  | 70,000 |  |  | $ | (0.57 | )
Q1-Q4 2023 |  | WAHA |  |  | 70,000 |  |  | $ | (0.51 | )
Q1-Q4 2024 |  | WAHA |  |  | 40,000 |  |  | $ | (0.51 | )
As of September 30, 2021, Devon had the following open NGL derivative positions. Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.
|  |  |  | Price Swaps |
Period |  | Product |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |
Q4 2021 |  | Natural Gasoline |  |  | 1,000 |  |  | $ | 47.57 |
Q4 2021 |  | Normal Butane |  |  | 1,000 |  |  | $ | 31.40 |
Q4 2021 |  | Propane |  |  | 1,000 |  |  | $ | 27.88 |
Financial Statement Presentation All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the consolidated balance sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis in the consolidated balance sheets. The tables below present a summary of these positions as of September 30, 2021 and December 31, 2020.
| September 30, 2021 |  |  | December 31, 2020 |  |  |
| Gross Fair Value |  |  | Amounts Netted |  |  | Net Fair Value |  |  | Gross Fair Value |  |  | Amounts Netted |  |  | Net Fair Value |  |  | Balance Sheet Classification
Commodity derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term derivative asset | $ | 3 |  |  | $ | (1 | ) |  | $ | 2 |  |  | $ | 23 |  |  | $ | (18 | ) |  | $ | 5 |  |  | Other current assets
Long-term derivative asset |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |  |  | Other long-term assets
Short-term derivative liability |  | (984 | ) |  |  | 1 |  |  |  | (983 | ) |  |  | (161 | ) |  |  | 18 |  |  |  | (143 | ) |  | Other current liabilities
Long-term derivative liability |  | (103 | ) |  |  | — |  |  |  | (103 | ) |  |  | (5 | ) |  |  | — |  |  |  | (5 | ) |  | Other long-term liabilities
Total derivative liability | $ | (1,084 | ) |  | $ | — |  |  | $ | (1,084 | ) |  | $ | (142 | ) |  | $ | — |  |  | $ | (142 | ) |  |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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