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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 12 Months Ended
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Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Objectives and Strategies The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production, as well as fluctuations in exchange rates in connection with transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company utilizes various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values. Counterparty Risk The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of December 31, 2022, the Company had derivative positions with eight counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, the Company may not realize the benefit of some of its derivative instruments resulting from lower commodity prices or changes in currency exchange rates. Derivative Instruments Commodity Derivative Instruments As of December 31, 2022, the Company had the following open natural gas financial basis swap contracts:
|  |  |  | Basis Swap Purchased |  | Basis Swap Sold
Production Period |  | Settlement Index |  | MMBtu (in 000’s) |  | Weighted Average Price Differential |  | MMBtu (in 000’s) |  | Weighted Average Price Differential
January—March 2023 |  | NYMEX Henry Hub/IF Waha |  | 3,150 |  |  | $(1.06) |  | — |  |  | —
January—March 2023 |  | NYMEX Henry Hub/IF HSC |  | — |  |  | — |  | 3,150 |  |  | $(0.03)
January—June 2023 |  | NYMEX Henry Hub/IF Waha |  | 4,525 |  |  | $(1.54) |  | — |  |  | —
January—June 2023 |  | NYMEX Henry Hub/IF HSC |  | — |  |  | — |  | 4,525 |  |  | $(0.11)
July—September 2023 |  | NYMEX Henry Hub/IF Waha |  | 1,840 |  |  | $(1.62) |  | — |  |  | —
July—September 2023 |  | NYMEX Henry Hub/IF HSC |  | — |  |  | — |  | 1,840 |  |  | $(0.19)
January—December 2023 |  | NYMEX Henry Hub/IF Waha |  | 73,000 |  |  | $(1.15) |  | — |  |  | —
January—December 2023 |  | NYMEX Henry Hub/IF HSC |  | — |  |  | — |  | 73,000 |  |  | $(0.08)
January—June 2024 |  | NYMEX Henry Hub/IF Waha |  | 16,380 |  |  | $(1.15) |  | — |  |  | —
January—June 2024 |  | NYMEX Henry Hub/IF HSC |  | — |  |  | — |  | 16,380 |  |  | $(0.10)
Embedded Derivatives Altus Preferred Units Embedded Derivative The Altus Preferred Units embedded derivative was deconsolidated as of March 31, 2022 as part of the BCP Business Combination. Refer to Note 2—Acquisitions and Divestitures for discussion of the BCP Business Combination and Note 12—Redeemable Noncontrolling Interest - Altus for a description of the Altus Preferred Units and associated embedded derivative. Pipeline Capacity Embedded Derivatives During the fourth quarter of 2019 and first quarter of 2020, the Company entered into agreements to assign a portion of its contracted capacity under an existing transportation agreement to third parties. Embedded in these agreements were arrangements under which the Company received payments calculated based on pricing differentials between Houston Ship Channel and Waha during the calendar years 2020 and 2021. This feature required bifurcation and measurement of the change in market value throughout 2020 and 2021. Unrealized gains and losses in the fair value of this feature were recorded as “Derivative instrument gains (losses), net” under “Revenues and Other” in the statement of consolidated operations, and the balance at the end of December 31, 2021 will be amortized into income over the original tenure of the host contract. Fair Value Measurements The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:
|  | Fair Value Measurements Using |  |  |  |  |  |
|  | Quoted Price in Active Markets (Level 1) |  | Significant Other Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value |  | Netting(1) |  | Carrying Amount
|  | (In millions)
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative instruments |  | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | 5 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative instruments |  | $ | — |  |  | $ | 50 |  |  | $ | — |  |  | $ | 50 |  |  | $ | — |  |  | $ | 50 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative instruments |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |
Pipeline capacity embedded derivatives |  | — |  |  | 46 |  |  | — |  |  | 46 |  |  | — |  |  | 46 |
Preferred Units embedded derivative |  | — |  |  | — |  |  | 57 |  |  | 57 |  |  | — |  |  | 57 |
(1)Derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties and reclassifications between long-term and short-term balances. The fair values of the Company’s derivative instruments are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of these derivatives on a recurring basis, utilizing futures pricing for the underlying positions provided by a reputable third party, a Level 2 fair value measurement. Derivative Activity Recorded in the Consolidated Balance Sheet All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:
|  | For the Year Ended December 31,
|  | 2022 |  | 2021
|  | (In millions)
Current Assets: Other current assets |  | $ | — |  |  | $ | — |
Other Assets: Deferred charges and other |  | 5 |  |  | — |
Total derivative assets |  | $ | 5 |  |  | $ | — |
Current Liabilities: Other current liabilities |  | $ | 50 |  |  | $ | 4 |
Deferred Credits and Other Noncurrent Liabilities: Other |  | — |  |  | 109 |
Total derivative liabilities |  | $ | 50 |  |  | $ | 113 |
Derivative Activity Recorded in the Statement of Consolidated Operations The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:
|  | For the Year Ended December 31,
2022 |  | 2021 |  | 2020
|  | (In millions)
Realized: |  |  |  |  |  |
Commodity derivative instruments |  | $ | (34) |  |  | $ | 25 |  |  | $ | (135) |
Foreign currency derivative instruments |  | (13) |  |  | — |  |  | (1) |
Realized gain (loss), net |  | (47) |  |  | 25 |  |  | (136) |
Unrealized: |  |  |  |  |  |
Commodity derivative instruments |  | (36) |  |  | (20) |  |  | 11 |
Pipeline capacity embedded derivatives |  | — |  |  | 7 |  |  | (61) |
Foreign currency derivative instruments |  | — |  |  | — |  |  | (1) |
Preferred Units embedded derivative |  | (31) |  |  | 82 |  |  | (36) |
Unrealized gain (loss), net |  | (67) |  |  | 69 |  |  | (87) |
Derivative instrument gains (losses), net |  | $ | (114) |  |  | $ | 94 |  |  | $ | (223) |
Derivative instrument gains and losses are recorded in “Derivative instrument gains (losses), net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains (losses) for derivative activity recorded in the statement of consolidated operations are reflected in the statement of consolidated cash flows separately as “Unrealized derivative instrument losses (gains), net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.” The Company seeks to maintain a balance between “first of month” and “gas daily pricing” for its U.S. natural gas portfolio and sales activities in a given month as part of its ordinary course of business. This is typically implemented through a combination of physical and financial contracts that settle monthly.

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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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