DERIVATIVES

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We continue to maintain a commodity hedging program primarily focused on crude oil to help protect our cash flows, margins and capital program from the volatility of commodity prices. Our Revolving Credit Facility and Second Lien Term Loan require that we hedge a significant amount of crude oil production as described in Note 8 Debt. We have met our hedging obligation under our Revolving Credit Facility and Second Lien Term Loan.

Commodity-Price Risk

We did not have any commodity derivatives designated as accounting hedges as of and during the years ended December 31, 2020, 2019 and 2018. As part of our hedging program, we held the following Brent-based crude oil contracts as of December 31, 2020:


	Q1 2021		Q2 2021		Q3 2021		Q4 2021		2022		January - October 2023
Sold Calls:
Barrels per day	19,028		33,372		35,202		10,645		30,783		17,758
Weighted-average price per barrel	$	47.88	$	48.64	$	49.83	$	56.00	$	59.37	$	58.01





Purchased Puts
Barrels per day	39,148		37,872		36,617		35,483		30,783		17,758
Weighted-average price per barrel	$	41.88	$	40.00	$	40.00	$	40.00	$	40.00	$	40.00

Sold Puts
Barrels per day	15,659		15,149		14,647		14,193		3,042		—
Weighted-average price per barrel	$	35.97	$	31.41	$	30.00	$	32.00	$	32.00	$	—

Swaps
Barrels per day	7,830		7,574		7,323		7,097		6,576		5,919
Weighted-average price per barrel	$	43.74	$	44.13	$	43.82	$	45.30	$	46.29	$	47.57

The BSP JV holds crude oil derivatives and natural gas swaps for insignificant volumes through 2021 that are included in our consolidated results. The hedges entered into by the BSP JV could affect the timing of the redemption of BSP's preferred interest.

The outcomes of the derivative positions are as follows:

•Sold call options – we make settlement payments for prices above the indicated weighted-average price per barrel.

•Purchased put options – we receive settlement payments for prices below the indicated weighted-average price per barrel.

•Sold put options – we make settlement payments for prices below the indicated weighted-average price per barrel.

•Swaps – we make settlement payments for prices above the indicated weighted-average price per barrel and receive settlement payments for prices below the indicated weighted-average price per barrel.

From time to time, we may use combinations of these positions to increase the efficacy of our hedging program.

We mark our derivative contracts to market at the end of each reporting period. These noncash derivative gains and losses, along with settlement payments, are reported in net derivative (loss) gain from commodity contracts on our consolidated statements of operations as shown in the table below:


	Successor		Predecessor
	November 1, 2020 - December 31, 2020		January 1, 2020 - October 31, 2020		Year ended December 31, 2019		Year ended December 31, 2018
(in millions)
Non-cash derivative (loss) gain	$	(140)	$	(17)	$	(170)	$	229
Net (payments) proceeds on settled commodity derivatives	(1)		108		111		(228)
Net derivative (loss) gain from commodity contracts	$	(141)	$	91	$	(59)	$	1

Interest-Rate Risk

In May 2018, we entered into derivative contracts that limit our interest rate exposure with respect to $1.3 billion of our variable-rate indebtedness. These interest-rate contracts reset monthly and require the counterparties to pay any excess interest owed on such amount in the event the one-month LIBOR exceeds 2.75% for any monthly period prior to May 4, 2021.

For the Successor and Predecessor periods in 2020, we did not report gains or losses on these contracts. For the year ended December 31, 2019, we reported a loss on these contracts, included in other non-operating expenses on our consolidated statement of operations, of $4 million. No payments from these contracts were received in either 2020 or 2019.

Fair Value of Derivatives

Our derivative contracts are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are classified as Level 2 in the required fair value hierarchy for the periods presented.

Commodity Contracts

The following tables present the fair values (at gross and net) of our outstanding derivatives:


December 31, 2020 (Successor)
Classification	Gross Amounts at Fair Value		Netting		Net Fair Value
Assets:	(in millions)
Other current assets	$	21	$	(21)	$	—
Other assets	63		(63)		—

Liabilities:
Accrued liabilities	(71)		21		(50)
Other long-term liabilities	(69)		63		(6)
	$	(56)	$	—	$	(56)



December 31, 2019 (Predecessor)
Classification	Gross Amounts at Fair Value		Netting		Net Fair Value
Assets:	(in millions)
Other current assets	$	49	$	(10)	$	39
Other assets	1		—		1

Liabilities:
Accrued liabilities	(15)		10		(5)
Other long-term liabilities	—		—		—
	$	35	$	—	$	35

Interest-Rate Contracts

The fair value of our interest-rate derivatives contracts was not significant for all periods presented.

Counterparty Credit Risk

As of December 31, 2020, all of our derivative financial instruments were with investment-grade counterparties. We believe exposure to credit-related losses at December 31, 2020 was not material and losses associated with credit risk have been insignificant for all years presented.

All of our derivative instruments are covered by International Swap Dealers Association Master Agreements

with counterparties. At December 31, 2020, and 2019, we had insignificant collateral posted.