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Derivative Activities | 9 Months Ended
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Sep. 30, 2016
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Activities | (11) DERIVATIVE ACTIVITIES We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives, as we typically utilize commodity swaps or options to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net asset of $150.9 million at September 30, 2016. These contracts expire monthly through December 2018. The following table sets forth our commodity-based derivative volumes by year as of September 30, 2016, excluding our basis and freight swaps which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
Natural Gas |  |  |  |  |  |
2016 |  | Swaps (1) |  | 901,739 Mmbtu/day |  | $ 3.32
2017 |  | Swaps (1) |  | 478,192 Mmbtu/day |  | $ 3.14
2018 |  | Swaps |  | 70,000 Mmbtu/day |  | $ 2.92
2016 |  | Collar (1) |  | 32,609 Mmbtu/day |  | $ 4.00-$ 4.71
2017 |  | Collar (1) |  | 34,521 Mmbtu/day |  | $ 4.00-$ 5.06
2016 |  | Purchased Put (1) |  | 218,478 Mmbtu/day |  | $ 3.54 (2)
2017 |  | Purchased Put (1) |  | 175,890 Mmbtu/day |  | $ 3.48 (3)
Crude Oil |  |  |  |  |  |
2016 |  | Swaps (1) |  | 8,640 bbls/day |  | $ 69.49
2017 |  | Swaps (1) |  | 5,416 bbls/day |  | $ 57.18
2018 |  | Swaps |  | 500 bbls/day |  | $ 54.25
2016 |  | Collar (1) |  | 848 bbls/day |  | $ 80.00-$ 99.70
NGLs (C2-Ethane) |  |  |  |  |  |
2016 |  | Swaps (1) |  | 5,839 bbls/day |  | $ 0.46/gallon
2017 |  | Swaps |  | 3,000 bbls/day |  | $ 0.27/gallon
NGLs (C3-Propane) |  |  |  |  |  |
2016 |  | Swaps (1) |  | 11,142 bbls/day |  | $ 0.75/gallon
2017 |  | Swaps |  | 6,966 bbls/day |  | $ 0.52/gallon
NGLs (iC4-isobutane) |  |  |  |  |  |
2016 |  | Swaps (1) |  | 1,969 bbls/day |  | $ 1.21/gallon
NGLs (NC4-Normal Butane) |  |  |  |  |  |
2016 |  | Swaps (1) |  | 6,071 bbls/day |  | $ 0.72/gallon
2017 |  | Swaps |  | 1,500 bbls/day |  | $ 0.65/gallon
NGLs (C5-Natural Gasoline) |  |  |  |  |  |
2016 |  | Swaps (1) |  | 8,142 bbls/day |  | $ 1.36/gallon
2017 |  | Swaps |  | 2,000 bbls/day |  | $ 0.98/gallon
(1) Includes derivative instruments assumed in connection with the Memorial Merger. (2) Weighted average deferred premium is ($0.34). (3) Weighted average deferred premium is ($0.32). Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. If the derivative does not qualify as a hedge or is not designated as a hedge, changes in fair value of these non-hedge derivatives are recognized in earnings as derivative fair value income or loss. Basis Swap Contracts In addition to the swaps above, at September 30, 2016, we had natural gas basis swap contracts which lock in the differential between NYMEX and certain of our physical pricing indices primarily in Appalachia. These contracts settle monthly through December 2017 and include a total volume of 59,385,000 Mmbtu. The fair value of these contracts was a gain of $13.8 million on September 30, 2016. At September 30, 2016, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly through December 2017 and include a total volume of 525,000 barrels in 2016 and 1,837,500 barrels in 2017. The fair value of these contracts was a gain of $4.1 million on September 30, 2016. Freight Swap Contracts In connection with our international propane spread swaps, at September 30, 2016, we had freight swap contracts which lock in the freight rate for a specific trade route on the Baltic Exchange. These contracts settle monthly in fourth quarter 2016 and fourth quarter 2017 and cover 5,000 metric tons per month with a fair value loss of $155,000 on September 30, 2016. These contracts use observable third-party pricing inputs that we consider to be a Level 2 fair value classification. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of September 30, 2016 and December 31, 2015 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):
|  |  | September 30, 2016 |
|  |  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | 68,069 |  |  | $ | (24,934 | ) |  | $ | 43,135 |
| –basis swaps |  |  | 15,066 |  |  |  | (1,191 | ) |  |  | 13,875 |
| –collars |  |  | 15,086 |  |  |  | ¾ |  |  |  | 15,086 |
| –puts |  |  | 50,792 |  |  |  | (145 | ) |  |  | 50,647 |
Crude oil | –swaps |  |  | 29,696 |  |  |  | (1,292 | ) |  |  | 28,404 |
| –collars |  |  | 2,416 |  |  |  | ¾ |  |  |  | 2,416 |
NGLs | –C2 ethane swaps |  |  | 6,332 |  |  |  | (185 | ) |  |  | 6,147 |
| –C3 propane swaps |  |  | 8,535 |  |  |  | (3,719 | ) |  |  | 4,816 |
| –C3 propane spread swaps |  |  | 12,585 |  |  |  | (8,506 | ) |  |  | 4,079 |
| –NC4 butane swaps |  |  | 1,282 |  |  |  | (371 | ) |  |  | 911 |
| –iC4 isobutane swaps |  |  | 3,557 |  |  |  | ¾ |  |  |  | 3,557 |
| –C5 natural gasoline swaps |  |  | 9,722 |  |  |  | (2,820 | ) |  |  | 6,902 |
Freight | –swaps |  |  | 2 |  |  |  | (157 | ) |  |  | (155 | )
|  |  | $ | 223,140 |  |  | $ | (43,320 | ) |  | $ | 179,820 |
|  |  | September 30, 2016 |
|  |  | Gross Amounts of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | (31,557 | ) |  | $ | 24,934 |  |  | $ | (6,623 | )
| –basis swaps |  |  | (1,278 | ) |  |  | 1,191 |  |  |  | (87 | )
| –puts |  |  | ¾ |  |  |  | 145 |  |  |  | 145 |
Crude oil | –swaps |  |  | (2,456 | ) |  |  | 1,292 |  |  |  | (1,164 | )
NGLs | –C2 ethane swaps |  |  | (185 | ) |  |  | 185 |  |  |  | ¾ |
| –C3 propane swaps |  |  | (3,538 | ) |  |  | 3,719 |  |  |  | 181 |
| –C3 propane spread swaps |  |  | (8,506 | ) |  |  | 8,506 |  |  |  | ¾ |
| –NC4 butane swaps |  |  | (2,407 | ) |  |  | 371 |  |  |  | (2,036 | )
| –C5 natural gasoline swaps |  |  | (4,447 | ) |  |  | 2,820 |  |  |  | (1,627 | )
Freight | –swaps |  |  | (157 | ) |  |  | 157 |  |  |  | ¾ |
|  |  | $ | (54,531 | ) |  | $ | 43,320 |  |  | $ | (11,211 | )
|  | December 31, 2015
|  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet
Derivative assets: |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps | $ | 219,357 |  |  | $ | (10,245 | ) |  | $ | 209,112
| –basis swaps |  | 8,251 |  |  |  | (2,765 | ) |  |  | 5,486
Crude oil | –swaps |  | 38,699 |  |  |  | ¾ |  |  |  | 38,699
NGLs | –C3 propane swaps |  | 15,884 |  |  |  | ¾ |  |  |  | 15,884
| –C3 propane spread swaps |  | 2,497 |  |  |  | (2,497 | ) |  |  | ¾
| –NC4 butane swaps |  | 6,968 |  |  |  | ¾ |  |  |  | 6,968
| –C5 natural gasoline swaps |  | 12,694 |  |  |  | (81 | ) |  |  | 12,613
|  | $ | 304,350 |  |  | $ | (15,588 | ) |  | $ | 288,762
|  | December 31, 2015 |
|  | Gross Amounts of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps | $ | (10,245 | ) |  | $ | 10,245 |  |  | $ | ¾ |
| –basis swaps |  | (2,786 | ) |  |  | 2,765 |  |  |  | (21 | )
NGLs | –C3 propane spread swap |  | (3,633 | ) |  |  | 2,497 |  |  |  | (1,136 | )
| –C5 natural gasoline swaps |  | (81 | ) |  |  | 81 |  |  |  | ¾ |
|  | $ | (16,745 | ) |  | $ | 15,588 |  |  | $ | (1,157 | )
The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):
|  | Three Months Ended September 30, |  |
|  | Derivative Fair Value Income (Loss) |  |
| 2016 |  |  |  | 2015 |  |
Commodity swaps | $ | 38,662 |  |  | $ | 198,245 |  |
Re-purchased swaps |  | ¾ |  |  |  | 1,683 |  |
Collars |  | 1,3 2 0 |  |  |  | 5,626 |  |
Puts |  | 2,842 |  |  |  | ¾ |  |
Basis swaps |  | 21,853 |  |  |  | (3,550 | ) |
Freight swaps |  | (121 | ) |  |  | ¾ |  |
Total | $ | 64,556 |  |  | $ | 202,004 |  |
\
|  | Nine Months Ended September 30, |  |
|  | Derivative Fair Value Income (Loss) |  |
| 2016 |  |  |  | 2015 |  |
Commodity swaps | $ | (40,270 | ) |  | $ | 281,921 |  |
Re-purchased swaps |  | ¾ |  |  |  | 1,683 |  |
Collars |  | 1,3 2 0 |  |  |  | 12,391 |  |
Puts |  | 2,842 |  |  |  | ¾ |  |
Basis swaps |  | 24,929 |  |  |  | (5,943 | ) |
Freight swaps |  | (155 | ) |  |  | ¾ |  |
Total | $ | (11,334 | ) |  | $ | 290,052 |  |

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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