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Derivative Activities | 3 Months Ended
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Mar. 31, 2023
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 utilize commodity swaps, collars or three-way collars to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and investment 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 gain of $249.6 million at March 31, 2023. These contracts expire monthly through December 2024. The following table sets forth our commodity-based derivative volumes by year as of March 31, 2023, excluding our basis swaps and divestiture contingent consideration which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
|  |  |  |  |  | Swap |  | Sold Put |  | Floor |  | Ceiling
Natural Gas |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2023 |  | Swaps |  | 354,636 Mmbtu/day |  | $ | 3.48 |  |  |  |  |  |  |  |
2023 |  | Collars |  | 261,091 Mmbtu/day |  |  |  |  |  |  | $ | 3.40 |  | $ | 4.52
2023 |  | Three-way Collars |  | 176,400 Mmbtu/day |  |  |  | $ | 2.59 |  | $ | 3.62 |  | $ | 4.71
2024 |  | Swaps |  | 150,000 Mmbtu/day |  | $ | 4.46 |  |  |  |  |  |  |  |
2024 |  | Collars |  | 429,235 Mmbtu/day |  |  |  |  |  |  | $ | 3.51 |  | $ | 5.65
Crude Oil |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2023 |  | Swaps |  | 5,000 bbls/day |  | $ | 71.28 |  |  |  |  |  |  |  |
January-September 2024 |  | Collars |  | 832 bbls/day |  |  |  |  |  |  | $ | 80.00 |  | $ | 90.12
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 and collars described above, at March 31, 2023, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through December 2026 and include a total volume of 366,702,500 Mmbtu. The fair value of these contracts was a loss of $50.3 million at March 31, 2023. Divestiture Contingent Consideration In addition to the derivatives described above, our right to receive contingent consideration in conjunction with the sale of our North Louisiana assets in third quarter 2020 was determined to be a derivative financial instrument that is not designated as a hedging instrument. The remaining contingent consideration of up to $21.0 million is based on future achievement of natural gas and oil prices based on published indexes and realized NGLs prices of the buyer for 2023. All changes in the fair value are recognized as a gain or loss in earnings in the period they occur in derivative fair value income or loss in our consolidated statements of operations. For first three months 2023, this fair value has decreased $3.9 million for a fair value of $9.2 million as of March 31, 2023. We currently expect to receive $24.5 million for the year ended December 31, 2022 which is reflected in current assets in the accompanying consolidated balance sheet. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022 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):
|  |  | March 31, 2023 |
|  |  | 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 |  | $ | 115,921 |  |  | $ | (7,004 | ) |  | $ | 108,917 |
| –collars |  |  | 121,369 |  |  |  | (6,030 | ) |  |  | 115,339 |
| –three-way collars |  |  | 28,338 |  |  |  | — |  |  |  | 28,338 |
| –basis swaps |  |  | 5,162 |  |  |  | (33,474 | ) |  |  | (28,312 | )
Crude oil | –swaps |  |  | — |  |  |  | (4,525 | ) |  |  | (4,525 | )
| –collars |  |  | 2,464 |  |  |  | — |  |  |  | 2,464 |
Divestiture contingent consideration |  |  | 9,160 |  |  |  | — |  |  |  | 9,160 |
|  |  | $ | 282,414 |  |  | $ | (51,033 | ) |  | $ | 231,381 |
|  |  | March 31, 2023 |
|  |  | 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 |  | $ | (7,004 | ) |  | $ | 7,004 |  |  | $ | — |
| –collars |  |  | (6,950 | ) |  |  | 6,030 |  |  |  | (920 | )
| –basis swaps |  |  | (55,434 | ) |  |  | 33,474 |  |  |  | (21,960 | )
Crude oil | –swaps |  |  | (4,525 | ) |  |  | 4,525 |  |  |  | — |
|  |  | $ | (73,913 | ) |  | $ | 51,033 |  |  | $ | (22,880 | )
|  |  | December 31, 2022 |
|  |  | 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 | $ | 19,438 |  |  | $ | (6,236 | ) |  | $ | 13,202 |
|  | –collars |  | 54,222 |  |  |  | (45,452 | ) |  |  | 8,770 |
|  | –three-way collars |  | 12,424 |  |  |  | (12,424 | ) |  |  | — |
|  | –basis swaps |  | 25,493 |  |  |  | (20,437 | ) |  |  | 5,056 |
Crude oil |  | –collars |  | 1,807 |  |  |  | — |  |  |  | 1,807 |
Divestiture contingent consideration |  | 13,080 |  |  |  | — |  |  |  | 13,080 |
|  |  | $ | 126,464 |  |  | $ | (84,549 | ) |  | $ | 41,915 |
|  |  | December 31, 2022 |
|  |  | 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 |  | $ | (115,374 | ) |  | $ | 6,236 |  |  | $ | (109,138 | )
| –collars |  |  | (72,866 | ) |  |  | 45,452 |  |  |  | (27,414 | )
| –three-way collars |  |  | (24,341 | ) |  |  | 12,424 |  |  |  | (11,917 | )
| –basis swaps |  |  | (24,972 | ) |  |  | 20,437 |  |  |  | (4,535 | )
Crude oil | –swaps |  |  | (13,908 | ) |  |  | — |  |  |  | (13,908 | )
|  |  | $ | (251,461 | ) |  | $ | 84,549 |  |  | $ | (166,912 | )
The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):
|  | Derivative Fair Value Income (Loss) |
|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |
Commodity swaps |  | $ | 209,092 |  |  | $ | (521,355 | )
Swaptions |  |  | — |  |  |  | (34,723 | )
Three-way collars |  |  | 50,814 |  |  |  | (179,926 | )
Collars |  |  | 160,571 |  |  |  | (232,292 | )
Calls |  |  | — |  |  |  | (1,363 | )
Basis swaps |  |  | (48,590 | ) |  |  | 22,515 |
Freight swaps |  |  | — |  |  |  | (33 | )
Divestiture contingent consideration |  |  | (3,920 | ) |  |  | 8,120 |
Total |  | $ | 367,967 |  |  | $ | (939,057 | )

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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