XML 28 R17.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Derivative Activities | 9 Months Ended
--- | ---
Sep. 30, 2017
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Activities | (12) 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 typically do not utilize complex derivatives, as we utilize commodity swaps, collars, options or combinations thereof 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. In third quarter 2017, we entered into combined natural gas derivative instruments containing a fixed price swap and a sold option to extend or double the volume (referred to as a swaption in the table below). The swap price is a fixed price determined at the time of the swaption contract. If the option is exercised, the contract will become a swap treated consistently with our fixed-price swaps. 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 loss of $14.6 million at September 30, 2017. These contracts expire monthly through December 2019. The following table sets forth our commodity-based derivative volumes by year as of September 30, 2017, excluding our basis and freight swaps which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
Natural Gas |  |  |  |  |  |  |  |
2017 |  | Swaps (1) |  | 878,370 Mmbtu/day |  |  | $ 3.21 |
2018 |  | Swaps |  | 477,534 Mmbtu/day |  |  | $ 3.22 |
January-March 2019 |  | Swaps |  | 50,000 Mmbtu/day |  |  | $ 3.01 |
2017 |  | Collars (1) |  | 122,609 Mmbtu/day |  |  | $ 3.45–$ 4.11 |
2018 |  | Collars |  | 60,000 Mmbtu/day |  |  | $ 3.40–$ 3.76 |
2017 |  | Purchased Puts (1) |  | 185,870 Mmbtu/day |  |  | $ 3.50 (2) |
2017 |  | Sold Calls |  | 17,935 Mmbtu/day |  |  | $ 3.75 (3) |
April-December 2018 |  | Swaptions |  | 320,000 Mmbtu/day (4) |  |  | $ 3.04 (4) |
2019 |  | Swaptions |  | 60,000 Mmbtu/day (4) |  |  | $ 3.00 (4) |
Crude Oil |  |  |  |  |  |  |  |
2017 |  | Swaps (1) |  | 9,511 bbls/day |  |  | $ 56.03 |
2018 |  | Swaps |  | 6,000 bbls/day |  |  | $ 52.96 |
2019 |  | Swaps |  | 1,000 bbls/day |  |  | $ 51.50 |
NGLs (C2-Ethane) |  |  |  |  |  |  |  |
2017 |  | Swaps |  | 3,000 bbls/day |  |  | $ 0.27/gallon |
2018 |  | Swaps |  | 250 bbls/day |  |  | $ 0.29/gallon |
NGLs (C3-Propane) |  |  |  |  |  |  |  |
2017 |  | Swaps |  | 17,576 bbls/day |  |  | $ 0.61/gallon |
2018 |  | Swaps |  | 8,935 bbls/day |  |  | $0.66/gallon |
NGLs (NC4-Normal Butane) |  |  |  |  |  |  |  |
2017 |  | Swaps |  | 9,000 bbls/day |  |  | $ 0.76/gallon |
2018 |  | Swaps |  | 4,558 bbls/day |  |  | $ 0.81/gallon |
NGLs (C5-Natural Gasoline) |  |  |  |  |  |  |  |
2017 |  | Swaps |  | 6,416 bbls/day |  |  | $ 1.08/gallon |
2018 |  | Swaps |  | 4,027 bbls/day |  |  | $ 1.17/gallon |
(1) | Includes derivative instruments assumed in connection with the MRD Merger.
(2) | Weighted average deferred premium is ($0.32).
(3) | Weighted average deferred premium is $0.31.
(4) | Contains a combined derivative instrument consisting of a fixed price swap and a sold option to extend or double the volume. For April through December of 2018, we have swaps in place for 160,000 Mmbtu per day on which the counterparty can elect to double the volume at a weighted average price of $3.02. We also have swaps in place for 160,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2019 at a weighted average price of $3.07. In 2019, if the counterparty elects to double the volume, we would have additional swaps covering 60,000 Mmbtu per day at a weighted average price of $3.00.
Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur. Basis Swap Contracts In addition to the swaps described above, at September 30, 2017, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices primarily in Appalachia. These contracts settle monthly through March 2019 and include a total volume of 130,120,000 Mmbtu. The fair value of these contracts was a loss of $4.7 million on September 30, 2017. At September 30, 2017, we also had propane basis swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly through December 2018 and include a total volume of 659,000 barrels in 2017 and 750,000 barrels in 2018. The fair value of these contracts was a gain of $1.1 million on September 30, 2017. Freight Swap Contracts In connection with our international propane basis swaps, at September 30, 2017, 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 2017 through December 2018 and cover 5,000 metric tons per month with a fair value gain of $45,000 on September 30, 2017. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of September 30, 2017 and December 31, 2016 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, 2017 |
|  |  | 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 |  | $ | 37,288 |  |  | $ | (12,385 | ) |  | $ | 24,903 |
| –swaptions |  |  | 9,092 |  |  |  | (8,711 | ) |  |  | 381 |
| –basis swaps |  |  | 3,782 |  |  |  | (2,774 | ) |  |  | 1,008 |
| –collars |  |  | 6,214 |  |  |  | (2,101 | ) |  |  | 4,113 |
| –puts |  |  | 8,547 |  |  |  | (4,238 | ) |  |  | 4,309 |
Crude oil | –swaps |  |  | 7,133 |  |  |  | (2,918 | ) |  |  | 4,215 |
NGLs | –C2 ethane swaps |  |  | 82 |  |  |  | (82 | ) |  |  | — |
| –C3 propane swaps |  |  | — |  |  |  | (2,956 | ) |  |  | (2,956 | )
| –C3 propane basis swaps |  |  | 18,169 |  |  |  | (18,169 | ) |  |  | — |
| –NC4 butane swaps |  |  | 34 |  |  |  | (4,340 | ) |  |  | (4,306 | )
| –C5 natural gasoline swaps |  |  | 115 |  |  |  | (1,094 | ) |  |  | (979 | )
Freight | –swaps |  |  | 47 |  |  |  | (47 | ) |  |  | — |
|  |  | $ | 90,503 |  |  | $ | (59,815 | ) |  | $ | 30,688 |
|  |  | September 30, 2017 |
|  |  | 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 |  | $ | (10,805 | ) |  | $ | 12,385 |  |  | $ | 1,580 |
| –swaptions |  |  | (16,694 | ) |  |  | 8,711 |  |  |  | (7,983 | )
| –basis swaps |  |  | (8,458 | ) |  |  | 2,774 |  |  |  | (5,684 | )
| –collars |  |  | — |  |  |  | 2,101 |  |  |  | 2,101 |
| –puts |  |  | — |  |  |  | 4,238 |  |  |  | 4,238 |
| –calls |  |  | (29 | ) |  |  | — |  |  |  | (29 | )
Crude oil | –swaps |  |  | (1,031 | ) |  |  | 2,918 |  |  |  | 1,887 |
NGLs | –C2 ethane swaps |  |  | (125 | ) |  |  | 82 |  |  |  | (43 | )
| –C3 propane swaps |  |  | (36,046 | ) |  |  | 2,956 |  |  |  | (33,090 | )
| –C3 propane basis swaps |  |  | (17,072 | ) |  |  | 18,169 |  |  |  | 1,097 |
| –NC4 butane swaps |  |  | (13,700 | ) |  |  | 4,340 |  |  |  | (9,360 | )
| –C5 natural gasoline swaps |  |  | (4,678 | ) |  |  | 1,094 |  |  |  | (3,584 | )
Freight | –swaps |  |  | (2 | ) |  |  | 47 |  |  |  | 45 |
|  |  | $ | (108,640 | ) |  | $ | 59,815 |  |  | $ | (48,825 | )
|  |  | December 31, 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 |  | $ | 13,213 |  |  | $ | (11,425 | ) |  | $ | 1,788 |
| –basis swaps |  |  | 12,535 |  |  |  | (9,437 | ) |  |  | 3,098 |
| –collars |  |  | 6,298 |  |  |  | (6,298 | ) |  |  | — |
| –puts |  |  | 18,159 |  |  |  | (15,429 | ) |  |  | 2,730 |
Crude oil | –swaps |  |  | 9,356 |  |  |  | (3,489 | ) |  |  | 5,867 |
NGLs | –C2 ethane swaps |  |  | 53 |  |  |  | (53 | ) |  |  | — |
| –C3 propane basis swaps |  |  | 17,396 |  |  |  | (17,396 | ) |  |  | — |
| –NC4 butane swaps |  |  | 4 |  |  |  | (4 | ) |  |  | — |
Freight | –swaps |  |  | 65 |  |  |  | (65 | ) |  |  | — |
|  |  | $ | 77,079 |  |  | $ | (63,596 | ) |  | $ | 13,483 |
|  |  | December 31, 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 |  | $ | (158,359 | ) |  | $ | 11,425 |  |  | $ | (146,934 | )
| –basis swaps |  |  | (687 | ) |  |  | 9,437 |  |  |  | 8,750 |
| –collars |  |  | (2,625 | ) |  |  | 6,298 |  |  |  | 3,673 |
| –puts |  |  | — |  |  |  | 15,429 |  |  |  | 15,429 |
| –calls |  |  | (1,041 | ) |  |  | — |  |  |  | (1,041 | )
Crude oil | –swaps |  |  | (13,206 | ) |  |  | 3,489 |  |  |  | (9,717 | )
NGLs | –C2 ethane swaps |  |  | (1,008 | ) |  |  | 53 |  |  |  | (955 | )
| –C3 propane swaps |  |  | (32,437 | ) |  |  | — |  |  |  | (32,437 | )
| –C3 propane basis swaps |  |  | (18,138 | ) |  |  | 17,396 |  |  |  | (742 | )
| –NC4 butane swaps |  |  | (13,419 | ) |  |  | 4 |  |  |  | (13,415 | )
| –C5 natural gasoline swaps |  |  | (12,176 | ) |  |  | — |  |  |  | (12,176 | )
Freight | –swaps |  |  | — |  |  |  | 65 |  |  |  | 65 |
|  |  | $ | (253,096 | ) |  | $ | 63,596 |  |  | $ | (189,500 | )
The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):
| Derivative Fair Value (Loss) Income |
|  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |
| 2017 |  |  |  | 2016 |  |  |  | 2017 |  |  |  | 2016 |
Commodity swaps | $ | (87,861 | ) |  | $ | 38,662 |  |  | $ | 172,457 |  |  | $ | (40,270 | )
Swaptions |  | (7,602 | ) |  |  | — |  |  |  | (7,602 | ) |  |  | — |
Collars |  | 956 |  |  |  | 1,320 |  |  |  | 15,221 |  |  |  | 1,320 |
Puts |  | (73 | ) |  |  | 2,842 |  |  |  | 9,646 |  |  |  | 2,842 |
Calls |  | 104 |  |  |  | — |  |  |  | 1,144 |  |  |  | — |
Basis swaps |  | 6,113 |  |  |  | 21,853 |  |  |  | (2,554 | ) |  |  | 24,929 |
Freight swaps |  | (63 | ) |  |  | (121 | ) |  |  | 14 |  |  |  | (155 | )
Total | $ | (88,426 | ) |  | $ | 64,556 |  |  | $ | 188,326 |  |  | $ | (11,334 | )

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration