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Derivative Instruments
 6 Months Ended
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:
CommoditySettlement
Period		Derivative
Instrument		VolumesWeighted Average Prices
Fixed Price SwapsFloorCeiling
  
Crude oil2022Two-way collar2,208,000 Bbl$50.00 $66.90 
Crude oil2022Fixed price swaps3,496,000 Bbl$70.00 
Crude oil2023Two-way collar4,380,000 Bbl$45.00 $64.88 
Crude oil2023Fixed price swaps5,110,000 Bbl$50.00 
As of June 30, 2022, the estimated fair value of the Permian Basin Sale Contingent Consideration was $59.1 million, which was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. See Note 6—Fair Value Measurements for additional information.
The following table summarizes the location and amounts of gains and losses from the Company’s derivative instruments recorded in the Company’s Condensed Consolidated Statements of Operations for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
Derivative InstrumentStatements of Operations Location2022202120222021
 (In thousands)
Commodity derivativesNet loss on derivative instruments$(95,573)$(267,037)$(480,445)$(448,552)
Contingent considerationNet loss on derivative instruments$(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 InstrumentBalance Sheet LocationGross AmountGross Amount OffsetNet Amount
(In thousands)
Derivatives assets:
Contingent considerationDerivative instruments — non-current assets$59,080 $— $59,080 
Total derivatives assets$59,080 $— $59,080 
Derivatives liabilities:
Commodity derivativesDerivative instruments — current liabilities$342,330 $(4,182)$338,148 
Commodity derivativesDerivative instruments — non-current liabilities152,258 (6,956)145,302 
Total derivatives liabilities$494,588 $(11,138)$483,450 
December 31, 2021
Derivative InstrumentBalance Sheet LocationGross AmountGross Amount OffsetNet Amount
(In thousands)
Derivatives assets:
Commodity derivativeDerivative instruments — non-current assets$55 $— $55 
Contingent considerationDerivative instruments — non-current assets44,810 — 44,810 
Total derivatives assets$44,865 $— $44,865 
Derivatives liabilities:
Commodity derivativesDerivative instruments — current liabilities$96,172 $(6,725)$89,447 
Commodity derivativesDerivative instruments — non-current liabilities133,655 (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:
CommoditySettlement
Period		Derivative
Instrument		VolumesWeighted Average Prices
Fixed Price SwapsFloorCeiling
  
Crude oil2022Fixed price swaps1,840,000 Bbl$76.92 
Crude oil2022Two-way collar5,628,000 Bbl$47.20 $57.33 
Crude oil2023Fixed price swaps1,172,000 Bbl$76.79 
Crude oil2023Two-way collar3,443,500 Bbl$46.75 $58.87 
Natural gas2022Fixed price swaps4,140,000 MMBtu$3.97 
Natural gas2022Two-way collar10,074,000 MMBtu$2.68 $3.31 
Natural gas2023Fixed price swaps1,800,000 MMBtu$4.25 
Natural gas2023Two-way collar8,799,000 MMBtu$2.85 $3.57 
Natural gas basis (1)
2022Fixed price swaps620,000 MMBtu$1.17 
Natural gas basis (1)
2023Fixed price swaps5,920,000 MMBtu$0.40 
NGL - Propane (2)
2022Fixed price swaps7,728,000 Gallons$1.07 
NGL - Propane (3)
2022Fixed price swaps30,912,000 Gallons$1.04 
NGL - Propane (3)
2023Fixed price swaps7,560,000 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.