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Derivative Activities | 12 Months Ended
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Dec. 31, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Activities |
(10) | 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 swap, calls, swaptions or collar contracts 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. Every derivative instrument is required to be recorded on our consolidated balance sheets as either an asset or a liability measured at its fair value. Their fair value, which is represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price (generally NYMEX for natural gas and crude oil or Mont Belvieu for NGLs), approximated a net derivative asset of $126.7 million at December 31, 2019. These contracts expire monthly through December 2021. The following table sets forth the derivative volumes by year as of December 31, 2019, excluding our basis and freight swaps which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
Natural Gas |  |  |  |  |  |
2020 |  | Swaps |  | 1,000,984 Mmbtu/day |  | $ 2.64 (1)
2021 |  | Swaps |  | 50,000 Mmbtu/day |  | $ 2.62 (1)
Crude Oil |  |  |  |  |  |
2020 |  | Swaps |  | 7,995 bbls/day |  | $ 58.27 (1)
2021 |  | Swaps |  | 1,000 bbls/day |  | $ 55.00 (1)
April-September, 2020 |  | Calls |  | 500 bbls/day |  | $ 59.00
NGLs (NC4-Normal Butane) |  |  |  |  |  |
January-March, 2020 |  | Swaps |  | 659 bbls/day |  | $ 0.73/gallon
NGLs (C5-Natural Gasoline) |  |  |  |  |  |
January-March, 2020 |  | Swaps |  | 4,297 bbls/day |  | $ 1.21/gallon
(1) We also sold natural gas call swaptions of 140,000 Mmbtu/day for March-December 2020 at a weighted average price of $2.53 and 100,000 Mmbtu per day for 2021 at a weighted average price of $2.69. In addition, we sold call swaptions of 3,000 bbls per day for 2021 at a weighted average price of $56.50. Basis Swap Contracts In addition to the swaps, collars and swaptions above, at December 31, 2019, we had natural gas basis swap contracts which lock in the differential between NYMEX and certain of our physical pricing points in Appalachia. These contracts settle monthly through December 2021 and include a total volume of 114,882,500 Mmbtu. The fair value of these contracts was a net derivative asset of $9.4 million on December 31, 2019. At December 31, 2019, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indexes. The contracts settle monthly in 2020. The fair value of these contracts was a net derivative liability of $14.1 million on December 31, 2019. Freight Swap Contracts In connection with our international propane sales, we utilize propane swaps. To further hedge our propane price, at December 31, 2019, we had freight swap contracts which lock in the freight rate for a specific trade route on the Baltic Exchange. These contracts settle monthly and cover 4,000 metric tons per month in first quarter 2020, increasing to 14,000 metric tons per month for the remainder of 2020 and 10,000 metric tons per month in 2021 with a fair value net derivative asset of $1.5 million on December 31, 2019. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of December 31, 2019 and 2018 is summarized below (in thousands). As of December 31, 2019, we are conducting derivative activities with twenty counterparties, of which all but three are secured lenders in our bank credit facility. We believe all of these counterparties are acceptable credit risks. At times, such risks may be concentrated with certain counterparties. The credit worthiness of our counterparties is subject to periodic review. 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.
|  |  | December 31, 2019 |
|  |  | 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 |  | $ | 134,364 |  |  | $ | (2,913 | ) |  | $ | 131,451 |
| –swaptions |  |  | — |  |  |  | (1,325 | ) |  |  | (1,325 | )
| –basis swaps |  |  | 10,766 |  |  |  | (1,092 | ) |  |  | 9,674 |
Crude oil | –swaps |  |  | 3,893 |  |  |  | (4,794 | ) |  |  | (901 | )
| –swaptions |  |  | — |  |  |  | (1,597 | ) |  |  | (1,597 | )
| –calls |  |  | — |  |  |  | (349 | ) |  |  | (349 | )
NGLs | –C3 propane spread swaps |  |  | 1,913 |  |  |  | (1,913 | ) |  |  | — |
| –NC4 butane swaps |  |  | 167 |  |  |  | — |  |  |  | 167 |
| –C5 natural gasoline swaps |  |  | 60 |  |  |  | (127 | ) |  |  | (67 | )
Freight | –swaps |  |  | 1,529 |  |  |  | (1,028 | ) |  |  | 501 |
|  |  | $ | 152,692 |  |  | $ | (15,138 | ) |  | $ | 137,554 |
|  |  | December 31, 2019 |
|  |  | 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 |  | $ | (1,657 | ) |  | $ | 2,913 |  |  | $ | 1,256 |
| –swaptions |  |  | (2,594 | ) |  |  | 1,325 |  |  |  | (1,269 | )
| –basis swaps |  |  | (1,371 | ) |  |  | 1,092 |  |  |  | (279 | )
Crude oil | –swaps |  |  | (4,814 | ) |  |  | 4,794 |  |  |  | (20 | )
| –swaptions |  |  | (2,254 | ) |  |  | 1,597 |  |  |  | (657 | )
| –calls |  |  | (349 | ) |  |  | 349 |  |  |  | — |
NGLs | –C3 propane spread swaps |  |  | (16,040 | ) |  |  | 1,913 |  |  |  | (14,127 | )
| –C5 natural gasoline swaps |  |  | (127 | ) |  |  | 127 |  |  |  | — |
Freight | –swaps |  |  | — |  |  |  | 1,028 |  |  |  | 1,028 |
|  |  | $ | (29,206 | ) |  | $ | 15,138 |  |  | $ | (14,068 | )
|  |  | December 31, 2018 |
|  |  | 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 |  | $ | 20,834 |  |  | $ | (11,748 | ) |  | $ | 9,086 |
| –swaptions |  |  | 5,200 |  |  |  | (3,883 | ) |  |  | 1,317 |
| –basis swaps |  |  | 6,468 |  |  |  | (2,822 | ) |  |  | 3,646 |
Crude oil | –swaps |  |  | 26,481 |  |  |  | (651 | ) |  |  | 25,830 |
| –collars |  |  | 5,945 |  |  |  | (707 | ) |  |  | 5,238 |
NGLs | –C3 propane swaps |  |  | 18,719 |  |  |  | (589 | ) |  |  | 18,130 |
| –C3 propane collars |  |  | 8,538 |  |  |  | — |  |  |  | 8,538 |
| –C3 propane spread swaps |  |  | 8,984 |  |  |  | (8,868 | ) |  |  | 116 |
| –NC4 butane swaps |  |  | 4,084 |  |  |  | — |  |  |  | 4,084 |
| –C5 natural gasoline swaps |  |  | 17,371 |  |  |  | — |  |  |  | 17,371 |
Freight | –swaps |  |  | — |  |  |  | (561 | ) |  |  | (561 | )
|  |  | $ | 122,624 |  |  | $ | (29,829 | ) |  | $ | 92,795 |
|  |  | December 31, 2018 |
|  |  | 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 |  | $ | (18,332 | ) |  | $ | 11,748 |  |  | $ | (6,584 | )
| –swaptions |  |  | (7,972 | ) |  |  | 3,883 |  |  |  | (4,089 | )
| –basis swaps |  |  | (1,702 | ) |  |  | 2,822 |  |  |  | 1,120 |
Crude oil | –swaps |  |  | — |  |  |  | 651 |  |  |  | 651 |
| –collars |  |  | — |  |  |  | 707 |  |  |  | 707 |
NGLs | –C3 propane swaps |  |  | — |  |  |  | 589 |  |  |  | 589 |
| –C3 propane spread swaps |  |  | (8,868 | ) |  |  | 8,868 |  |  |  | — |
Freight | –swaps |  |  | (561 | ) |  |  | 561 |  |  |  | — |
|  |  | $ | (37,435 | ) |  | $ | 29,829 |  |  | $ | (7,606 | )
The effects of our derivatives on our consolidated statements of operations for the last three years are summarized below (in thousands).
|  | Year Ended December 31, |
|  | Derivative Fair Value (Loss) Income |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Commodity swaps |  | $ | 219,968 |  |  | $ | (57,950 | ) |  | $ | 181,095 |
Swaptions |  |  | 333 |  |  |  | (6,556 | ) |  |  | 6,534 |
Collars |  |  | (3,903 | ) |  |  | 17,583 |  |  |  | 18,132 |
Basis swaps |  |  | 6,661 |  |  |  | (1,104 | ) |  |  | (4,647 | )
Puts |  |  | — |  |  |  | — |  |  |  | 10,929 |
Calls |  |  | (349 | ) |  |  | (2,653 | ) |  |  | 987 |
Freight swaps |  |  | 3,971 |  |  |  | (512 | ) |  |  | 320 |
Total |  | $ | 226,681 |  |  | $ | (51,192 | ) |  | $ | 213,350 |

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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 + Details
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