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Derivative Instruments | 6 Months Ended
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Jun. 30, 2022
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 settle monthly based on the average NYMEX WTI, and its natural gas contracts settle monthly based on the average NYMEX Henry Hub natural gas index price (“NYMEX HH”). The Company primarily utilizes fixed price swaps and collars to reduce the volatility of crude oil and natural gas prices on future expected production. Swaps are designed to establish a fixed price for the volumes under contract, while collars are designed to establish a minimum price (floor) and a maximum price (ceiling) for the volumes under contract. The Company may, from time to time, restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts. All derivative instruments are recorded on the Company’s Condensed Consolidated Balance Sheets as either assets or liabilities measured at 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. Derivative settlements are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows and represent net cash payments to or receipts from counterparties upon the maturity of a derivative contract. At June 30, 2022, the Company had the following outstanding commodity derivative instruments:
Commodity |  | Settlement Period |  | Derivative Instrument |  |  |  | Volumes |  | Weighted Average Prices |  |
|  |  |  |  | Fixed Price Swaps |  |  |  | Floor |  | Ceiling |
Crude oil |  | 2022 |  | Two-way collar |  |  |  | 2,208,000 |  | Bbl |  |  |  |  |  | $ | 50.00 |  |  | $ | 66.90 |  |  |
Crude oil |  | 2022 |  | Fixed price swaps |  |  |  | 3,496,000 |  | Bbl |  | $ | 70.00 |  |  |  |  |  |  |  |  |
Crude oil |  | 2023 |  | Two-way collar |  |  |  | 4,380,000 |  | Bbl |  |  |  |  |  | $ | 45.00 |  |  | $ | 64.88 |  |  |
Crude oil |  | 2023 |  | Fixed price swaps |  |  |  | 5,110,000 |  | Bbl |  | $ | 50.00 |  |  |  |  |  |  |  |  |
As of June 30, 2022, the estimated fair value of the Permian Basin Sale Contingent Consideration was $59.1 million, which was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. See Note 6—Fair Value Measurements for additional information. The following table summarizes the location and amounts of gains and losses from the Company’s derivative instruments recorded in the Company’s Condensed Consolidated Statements of Operations for the periods presented:
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivative Instrument |  | Statements of Operations Location |  | 2022 |  | 2021 |  | 2022 |  | 2021
|  |  |  | (In thousands)
Commodity derivatives |  | Net loss on derivative instruments |  | $ | (95,573) |  |  | $ | (267,037) |  |  | $ | (480,445) |  |  | $ | (448,552) |
Contingent consideration |  | Net loss on derivative instruments |  | $ | (2,680) |  |  | $ | — |  |  | $ | 14,270 |  |  | $ | — |
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. For additional information, see “Item 3.—Quantitative and Qualitative Disclosures about Market Risk—Counterparty and customer credit risk.” The following table summarizes the location and fair value of all outstanding derivative instruments recorded in the Company’s Condensed Consolidated Balance Sheets:
|  |  |  | June 30, 2022
Derivative Instrument |  | Balance Sheet Location |  | Gross Amount |  | Gross Amount Offset |  | Net Amount
|  |  |  | (In thousands)
Derivatives assets: |  |  |  |  |  |  |  |
Contingent consideration |  | Derivative instruments — non-current assets |  | $ | 59,080 |  |  | $ | — |  |  | $ | 59,080 |
Total derivatives assets |  | $ | 59,080 |  |  | $ | — |  |  | $ | 59,080 |
Derivatives liabilities: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current liabilities |  | $ | 342,330 |  |  | $ | (4,182) |  |  | $ | 338,148 |
Commodity derivatives |  | Derivative instruments — non-current liabilities |  | 152,258 |  |  | (6,956) |  |  | 145,302 |
Total derivatives liabilities |  | $ | 494,588 |  |  | $ | (11,138) |  |  | $ | 483,450 |
|  |  |  | December 31, 2021
Derivative Instrument |  | Balance Sheet Location |  | Gross Amount |  | Gross Amount Offset |  | Net Amount
|  |  |  | (In thousands)
Derivatives assets: |  |  |  |  |  |  |  |
Commodity derivative |  | Derivative instruments — non-current assets |  | $ | 55 |  |  | $ | — |  |  | $ | 55 |
Contingent consideration |  | Derivative instruments — non-current assets |  | 44,810 |  |  | — |  |  | 44,810 |
Total derivatives assets |  | $ | 44,865 |  |  | $ | — |  |  | $ | 44,865 |
Derivatives liabilities: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current liabilities |  | $ | 96,172 |  |  | $ | (6,725) |  |  | $ | 89,447 |
Commodity derivatives |  | Derivative instruments — non-current liabilities |  | 133,655 |  |  | (18,373) |  |  | 115,282 |
Total derivatives liabilities |  | $ | 229,827 |  |  | $ | (25,098) |  |  | $ | 204,729 |
In connection with the completion of the Merger, the following outstanding commodity derivative instruments were novated to the Company on July 1, 2022:
Commodity |  | Settlement Period |  | Derivative Instrument |  |  |  | Volumes |  | Weighted Average Prices
|  |  |  |  | Fixed Price Swaps |  |  |  | Floor |  | Ceiling
Crude oil |  | 2022 |  | Fixed price swaps |  |  |  | 1,840,000 |  | Bbl |  | $ | 76.92 |  |  |  |  |  |  |
Crude oil |  | 2022 |  | Two-way collar |  |  |  | 5,628,000 |  | Bbl |  |  |  |  |  | $ | 47.20 |  |  | $ | 57.33 |
Crude oil |  | 2023 |  | Fixed price swaps |  |  |  | 1,172,000 |  | Bbl |  | $ | 76.79 |  |  |  |  |  |  |
Crude oil |  | 2023 |  | Two-way collar |  |  |  | 3,443,500 |  | Bbl |  |  |  |  |  | $ | 46.75 |  |  | $ | 58.87 |
Natural gas |  | 2022 |  | Fixed price swaps |  |  |  | 4,140,000 |  | MMBtu |  | $ | 3.97 |  |  |  |  |  |  |
Natural gas |  | 2022 |  | Two-way collar |  |  |  | 10,074,000 |  | MMBtu |  |  |  |  |  | $ | 2.68 |  |  | $ | 3.31 |
Natural gas |  | 2023 |  | Fixed price swaps |  |  |  | 1,800,000 |  | MMBtu |  | $ | 4.25 |  |  |  |  |  |  |
Natural gas |  | 2023 |  | Two-way collar |  |  |  | 8,799,000 |  | MMBtu |  |  |  |  |  | $ | 2.85 |  |  | $ | 3.57 |
Natural gas basis (1) |  | 2022 |  | Fixed price swaps |  |  |  | 620,000 |  | MMBtu |  | $ | 1.17 |  |  |  |  |  |  |
Natural gas basis (1) |  | 2023 |  | Fixed price swaps |  |  |  | 5,920,000 |  | MMBtu |  | $ | 0.40 |  |  |  |  |  |  |
NGL - Propane (2) |  | 2022 |  | Fixed price swaps |  |  |  | 7,728,000 |  | Gallons |  | $ | 1.07 |  |  |  |  |  |  |
NGL - Propane (3) |  | 2022 |  | Fixed price swaps |  |  |  | 30,912,000 |  | Gallons |  | $ | 1.04 |  |  |  |  |  |  |
NGL - Propane (3) |  | 2023 |  | Fixed price swaps |  |  |  | 7,560,000 |  | Gallons |  | $ | 1.16 |  |  |  |  |  |  |
__________________ (1) The weighted average price associated with the natural gas basis swaps shown in the table above represents the average fixed differential to NYMEX as stated in the related contracts, which is compared to the Northern Natural Gas Ventura Index (“NNG Ventura”) for each period. If NYMEX combined with the fixed differential as stated in each contract is higher than the NNG Ventura index price at any settlement date, the Company receives the difference. Conversely, if the NNG Ventura index price is higher than NYMEX combined with the fixed differential, the Company pays the difference. (2) Settled based on the Mont Belvieu propane price. (3) Settled based on the Conway propane price.

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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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