Derivative Instruments

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS:

CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.

In March 2020, CNX entered into interest rate swaps related to $175,000 of borrowings under the Cardinal States Facility and CSG Holdings Facility (See Note 12 - Long-Term Debt). In order to manage exposure to interest rate volatility, each respective entity entered into an interest rate swap for the full outstanding principal amounts inclusive of a put option at 25 basis points. The underlying notional for each swap and put option reduces over time based upon an expected amortization profile for each respective credit facility. In addition, CSG Holdings entered into a call option commencing March 31, 2023.

In June 2019, CNX entered into an interest rate swap agreement related to $160,000 of borrowings under CNX’s Credit Facility (See Note 10 - Revolving Credit Facilities) which has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-year period. In March 2020, this swap was terminated and replaced via a new interest rate swap, effective April 3, 2020, into a new four-year interest rate swap inclusive of a put option at zero basis points. Also executed in March 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at zero basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, the $250,000 interest rate swap was entered into to manage CNX's exposure to interest rate volatility.

CNX enters into financial derivative instruments (over-the-counter swaps) to manage its exposure to commodity price volatility. Typically, CNX “sells” swaps under which it receives a fixed price from counterparties and pays a floating market price. During the second quarter of 2020, CNX purchased, rather than sold, financial swaps for the period May through November of 2020 under which CNX will pay a fixed price to and receive a floating price from its hedge counterparties. Swaps purchased have the effect of reducing total hedged volumes for the period of the swap. Natural gas commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.

CNX is exposed to credit risk in the event of non-performance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.

None of the Company's counterparty master agreements currently require CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX's obligations with any of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would have to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis.

Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.

The total notional amounts of production of CNX's derivative instruments were as follows:


	December 31,				Forecasted to
	2020		2019		Settle Through
Natural Gas Commodity Swaps (Bcf)	1,256.9		1,460.6		2025
Natural Gas Basis Swaps (Bcf)	1,294.1		1,290.4		2026
Interest Rate Swaps	$	569,972	$	160,000	2028

The gross fair value of CNX's derivative instruments was as follows:


	December 31,
	2020		2019
Current Assets:
Commodity Derivative Instruments:
Commodity Swaps	$	53,668	$	234,238
Basis Only Swaps	30,848		13,556
Interest Rate Swaps	141		—
Total Current Assets	$	84,657	$	247,794

Other Non-Current Assets:
Commodity Derivative Instruments:
Commodity Swaps	$	134,661	$	288,543
Basis Only Swaps	52,903		25,553
Interest Rate Swaps	673		—
Total Other Non-Current Assets	$	188,237	$	314,096

Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps	$	23,506	$	345
Basis Only Swaps	14,491		40,626
Interest Rate Swaps	4,332		495
Total Current Liabilities	$	42,329	$	41,466

Non-Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps	$	59,388	$	9,693
Basis Only Swaps	57,150		105,445
Interest Rate Swaps	10,752		724
Total Non-Current Liabilities	$	127,290	$	115,862

The effect of derivative instruments on the Company's Consolidated Statements of Income was as follows:


	For the Years Ended December 31,
	2020		2019		2018
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	$	390,547	$	82,899	$	(41,098)
Basis Swaps	70,670		(13,119)		(28,622)
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments	461,217		69,780		(69,720)

Unrealized (Loss) Gain on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	(407,308)		406,472		33,026
Basis Swaps	119,073		(100,147)		6,482


Total Unrealized (Loss) Gain on Commodity Derivative Instruments	(288,235)		306,325		39,508

Gain (Loss) on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps	(16,761)		489,371		(8,072)
Basis Swaps	189,743		(113,266)		(22,140)


Total Gain (Loss) on Commodity Derivative Instruments	$	172,982	$	376,105	$	(30,212)

The effect of interest rate swaps on Interest Expense in the Company's Consolidated Statements of Income was as follows:


	For the Years Ended December 31,
	2020		2019
Cash (Paid) Received in Settlement of Interest Rate Swaps	$	(3,141)	$	223
Unrealized Loss on Interest Rate Swaps	(13,051)		(1,219)
Loss on Interest Rate Swaps	$	(16,192)	$	(996)

Cash Received (Paid) in Settlement of Commodity Derivative Instruments for the year ended December 31, 2020 includes $54,982 related to the monetization of certain NYMEX commodity swaps. The monetization resulted from reducing the contract swap prices of certain 2022, 2023 and 2024 NYMEX natural gas swap contracts. The notional quantities of the contracts were not changed by this monetization. Net proceeds received from the monetization are classified as operating cash flows in the Consolidated Statements of Cash Flows.

The Company also enters into fixed price natural gas sales agreements that are satisfied by physical delivery. These physical commodity contracts qualify for the normal purchases and normal sales exception and are not subject to derivative instrument accounting.