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Derivative Instruments | 3 Months Ended
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Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments The Company utilizes derivative financial instruments to manage risks related to changes in crude oil and natural gas prices. The Company’s crude oil contracts will settle monthly based on the average NYMEX West Texas Intermediate crude oil index price (“NYMEX WTI”), and its natural gas contracts will settle monthly based on the average NYMEX Henry Hub natural gas index price (“NYMEX HH”). At March 31, 2020, the Company utilized fixed price swaps and two-way and three-way costless collars to reduce the volatility of crude oil prices on a significant portion of its future expected crude oil production. The Company’s fixed price swaps are comprised of a sold call and a purchased put established at the same price (both ceiling and floor), which the Company will receive for the volumes under contract. A two-way collar is a combination of options: a sold call and a purchased put. The purchased put establishes a minimum price (floor) and the sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. A three-way collar is a combination of options: a sold call, a purchased put and a sold put. The purchased put establishes a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be the index price plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. All derivative instruments are recorded on the Company’s Condensed Consolidated Balance Sheets as either assets or liabilities measured at their fair value (see Note 6 — Fair Value Measurements). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in fair value are recognized in the other income (expense) section of the Company’s Condensed Consolidated Statements of Operations as a net gain or loss on derivative instruments. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making a payment to or receiving a payment from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled. Cash settlements are reflected as investing activities in the Company’s Condensed Consolidated Statements of Cash Flows. At March 31, 2020, the Company had the following outstanding commodity derivative instruments:
Commodity |  | Settlement Period |  | Derivative Instrument |  |  |  | Volumes |  |  | Weighted Average Prices |  |  |  |  |  | Fair Value Assets
|  |  |  |  |  |  |  |  |  |  | Fixed Price Swaps |  | Sub-Floor | Floor | Ceiling |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (In thousands)
Crude oil |  | 2020 |  | Fixed price swaps |  |  |  | 4,733,000 |  | Bbl |  | $ | 57.02 |  |  |  |  |  |  | $ | 134,306 |
Crude oil |  | 2020 |  | Two-way collar |  |  |  | 2,322,000 |  | Bbl |  |  |  |  |  | $ | 51.12 |  | $ | 59.79 |  |  | 50,178 |
Crude oil |  | 2020 |  | Three-way collar |  |  |  | 4,859,000 |  | Bbl |  |  |  |  | $ | 40.75 |  | $ | 53.16 |  | $ | 63.61 |  |  | 55,604 |
Crude oil |  | 2021 |  | Fixed price swaps |  |  |  | 310,000 |  | Bbl |  | $ | 56.01 |  |  |  |  |  |  | 6,661 |
Crude oil |  | 2021 |  | Two-way collar |  |  |  | 248,000 |  | Bbl |  |  |  |  | $ | 51.38 |  | $ | 59.33 |  |  | 4,274 |
Crude oil |  | 2021 |  | Three-way collar |  |  |  | 1,313,000 |  | Bbl |  |  |  | $ | 40.00 |  | $ | 50.79 |  | $ | 62.46 |  |  | 10,638 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 261,661 |
The following table summarizes the location and amounts of gains and losses from the Company’s commodity derivative instruments recorded in the Company’s Condensed Consolidated Statements of Operations for the periods presented:
|  | Three Months Ended March 31, |  |  |  |  |  |
Statements of Operations Location |  | 2020 |  | 2019 |  |  |  |
|  | (In thousands) |  |  |  |  |  |
Net gain (loss) on derivative instruments |  | $ | 285,322 |  |  | $ | (117,611) |  |  |  |  |
In accordance with the FASB’s authoritative guidance on disclosures about offsetting assets and liabilities, the Company is required to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting agreement. The Company’s derivative instruments are presented as assets and liabilities on a net basis by counterparty, as all counterparty contracts provide for net settlement. No margin or collateral balances are deposited with counterparties, and as such, gross amounts are offset to determine the net amounts presented in the Company’s Condensed Consolidated Balance Sheets. The following table summarizes the location and fair value of all outstanding commodity derivative instruments recorded in the Company’s Condensed Consolidated Balance Sheets:
|  |  |  | March 31, 2020 |  |  |  |
Commodity |  | Balance Sheet Location |  | Gross Recognized Assets |  | Gross Amount Offset |  | Net Recognized Fair Value Assets
|  |  |  | (In thousands) |  |  |  |
Derivatives assets: |  |  |  |  |  |  |  |
Commodity contracts |  | Derivative instruments — current assets |  |  | $ | 322,529 |  |  | $ | (64,239) |  |  | $ | 258,290 |
Commodity contracts |  | Derivative instruments — non-current assets |  |  | 7,186 |  |  | (3,815) |  |  | 3,371 |
Total derivatives assets |  |  |  | $ | 329,715 |  |  | $ | (68,054) |  |  | $ | 261,661 |
|  |  |  | December 31, 2019 |  |  |  |
Commodity |  | Balance Sheet Location |  | Gross Recognized Assets/Liabilities |  | Gross Amount Offset |  | Net Recognized Fair Value Assets/Liabilities
|  |  |  | (In thousands) |  |  |  |
Derivatives assets: |  |  |  |  |  |  |  |
Commodity contracts |  | Derivative instruments — current assets |  |  | $ | 633 |  |  | $ | (98) |  |  | $ | 535 |
Commodity contracts |  | Derivative instruments — non-current assets |  |  | 3,295 |  |  | (2,656) |  |  | 639 |
Total derivatives assets |  |  |  | $ | 3,928 |  |  | $ | (2,754) |  |  | $ | 1,174 |
Derivatives liabilities: |  |  |  |  |  |  |  |
Commodity contracts |  | Derivative instruments — current liabilities |  |  | $ | 33,812 |  |  | $ | (14,117) |  |  | $ | 19,695 |
Commodity contracts |  | Derivative instruments — non-current liabilities |  |  | 686 |  |  | (566) |  |  | 120 |
Total derivatives liabilities |  |  |  | $ | 34,498 |  |  | $ | (14,683) |  |  | $ | 19,815 |

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- References No definition available. + Details
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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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