Derivative Instruments

9 Months Ended

Sep. 30, 2023

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 is 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 an interest rate swap agreement, inclusive of a put option at zero basis points, related to $160,000 of borrowings under the CNX Credit Facility which has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a four-year period.

In March 2020, CNX entered into a four-year interest rate swap related to an additional $250,000 of borrowings under the CNX Credit Facility, inclusive of a put option at zero basis points, effective April 3, 2020. In December 2020, CNX executed an offsetting $250,000 interest rate swap, effective immediately, which expires in April 2024. Consistent with the previous interest rate swap agreements, the $250,000 interest rate swaps were 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 natural gas and NGL price fluctuations. Typically, CNX "sells" swaps under which it receives a fixed price from counterparties and pays a floating market price. In order to lock in certain margins while balancing its basis hedges, during the first quarter of 2022, CNX purchased, rather than sold, financial natural gas swaps for the period April through October of 2022. Under these purchased financial swaps, CNX pays a fixed price to, and receives a floating price from, its hedge counterparties. Purchased swaps have the effect of reducing total hedged volumes for the period of the swap. 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 applicable counterparty master agreements, if CNX's obligations with one 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 CNX's derivative instruments were as follows:


	September 30,		December 31,		Forecasted to
	2023		2022		Settle Through
Natural Gas Commodity Swaps (Bcf)	1,448.2		1,607.9		2027
Natural Gas Basis Swaps (Bcf)	839.9		1,023.7		2027
Propane Commodity Swaps (Mbbls)	163.8		—		2024
Interest Rate Swaps	$	410,000	$	410,000	2024

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


	September 30,		December 31,
	2023		2022
Current Assets:
Commodity Derivative Instruments:
Commodity Swaps	$	64,900	$	21,759
Propane Swaps	950		—
Basis Only Swaps	90,688		118,115
Interest Rate Swaps	9,948		14,600
Total Current Assets	$	166,486	$	154,474

Other Non-Current Assets:
Commodity Derivative Instruments:
Commodity Swaps	$	136,820	$	42,786
Basis Only Swaps	150,209		197,280
Interest Rate Swaps	—		4,865
Total Other Non-Current Assets	$	287,029	$	244,931

Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps	$	183,585	$	732,717

Basis Only Swaps	24,601		38,559
Interest Rate Swaps	7,617		11,377
Total Current Liabilities	$	215,803	$	782,653

Non-Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps	$	759,708	$	1,466,124
Basis Only Swaps	46,583		47,370
Interest Rate Swaps	—		3,527
Total Non-Current Liabilities	$	806,291	$	1,517,021

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023			2022
Realized Gain (Loss) on Commodity Derivative Instruments:
Natural Gas Commodity Swaps	$	35,762	$	(690,685)	$	69,232		$	(1,520,879)
Natural Gas Basis Swaps	65,514		39,486		49,952			68,447
Propane Swaps	595		—		1,214			—
Total Realized Gain (Loss) on Commodity Derivative Instruments	101,871		(651,199)		120,398		*	(1,452,432)		**

Unrealized Gain (Loss) on Commodity Derivative Instruments:
Natural Gas Commodity Swaps	1,289		(300,013)		1,308,252			(2,151,435)
Natural Gas Basis Swaps	(53,462)		(111,141)		(77,026)			162,478
Propane Swaps	(1,895)		—		818			—
Total Unrealized (Loss) Gain on Commodity Derivative Instruments	(54,068)		(411,154)		1,232,044			(1,988,957)

Gain (Loss) on Commodity Derivative Instruments:
Natural Gas Commodity Swaps	37,051		(990,698)		1,377,484			(3,672,314)
Natural Gas Basis Swaps	12,052		(71,655)		(27,074)			230,925
Propane Swaps	(1,300)		—		2,032			—
Total Gain (Loss) on Commodity Derivative Instruments	$	47,803	$	(1,062,353)	$	1,352,442		$	(3,441,389)

*Includes $24,215 of gas derivatives that have been settled but not received at September 30, 2023 and excludes $77,662 of gas derivatives that were settled but not paid at December 31, 2022.

**Includes $213 of gas derivatives that have been settled but not paid at September 30, 2022.

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Cash Received (Paid) in Settlement of Interest Rate Swaps	$	1,173	$	(234)	$	2,989	$	(1,934)
Unrealized (Loss) Gain on Interest Rate Swaps	(1,094)		2,694		(2,231)		10,047
Gain on Interest Rate Swaps	$	79	$	2,460	$	758	$	8,113

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.