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DERIVATIVE INSTRUMENTS | 12 Months Ended
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Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Natural Gas, Oil and NGL Derivative Instruments The Company seeks to mitigate risks related to unfavorable changes in natural gas, oil and NGL prices, which are subject to significant and often volatile fluctuation, by entering into over-the-counter fixed price swaps, basis swaps, collars and various types of option contracts. These contracts allow the Company to mitigate the impact of declines in future natural gas, oil and NGL prices by effectively locking in floor price for a certain level of the Company’s production. However, these hedge contracts also limit the benefit to the Company in periods of favorable price movements. The volume of production subject to commodity derivative instruments and the mix of the instruments are frequently evaluated and adjusted by management in response to changing market conditions. Gulfport may enter into commodity derivative contracts up to limitations set forth in its New Credit Facility, 90% of its forecasted annual production for 2022 and 2023. The Company generally enters into commodity derivative contracts for approximately 50% to 75% of its forecasted annual production by the end of the first quarter of each fiscal year. The Company typically enters into commodity derivative contracts for the next 12 to 24 months. Gulfport does not enter into commodity derivative contracts for speculative purposes. Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume. The prices contained in these fixed price swaps are based on the NYMEX Henry Hub for natural gas, the NYMEX WTI for oil and Mont Belvieu for propane. The Company does not currently have any commodity derivative transactions that have margin requirements or collateral provisions that would require payments prior to the scheduled settlement dates. The Company's commodity derivative contract counterparties are typically financial institutions and energy trading firms with investment-grade credit ratings. Gulfport routinely monitors and manages its exposure to counterparty risk by requiring specific minimum credit standards for all counterparties, actively monitoring counterparties' public credit ratings and avoiding the concentration of credit exposure by transacting with multiple counterparties. The Company has master netting agreements with some counterparties that allow the offsetting of receivables and payables in a default situation. Below is a summary of the Company's open fixed price swap positions as of December 31, 2021.
| Index |  | Daily Volume |  | Weighted Average Price
Natural Gas |  |  | (MMBtu/d) |  | ($/MMBtu)
2022 | NYMEX Henry Hub |  | 140,740 |  |  | $ | 2.88 |
2023 | NYMEX Henry Hub |  | 94,932 |  |  | $ | 3.41 |
Oil |  |  | (Bbl/d) |  | ($/Bbl)
2022 | NYMEX WTI |  | 2,104 |  |  | $ | 66.23 |
2023 | NYMEX WTI |  | 1,000 |  |  | $ | 66.00 |
NGL |  |  | (Bbl/d) |  | ($/Bbl)
2022 | Mont Belvieu C3 |  | 3,378 |  |  | $ | 35.09 |
2023 | Mont Belvieu C3 |  | 1,000 |  |  | $ | 33.77 |
The Company entered into costless collars based off the NYMEX WTI and Henry Hub oil and natural gas indices. Each two-way price collar has a set floor and ceiling price for the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, the Company will cash-settle the difference with the counterparty. Below is a summary of the Company's open collars as of December 31, 2021.
| Index |  | Daily Volume |  | Weighted Average Floor Price |  | Weighted Average Ceiling Price
Natural Gas |  |  | (MMBtu/d) |  | ($/MMBtu) |  | ($/MMBtu)
2022 | NYMEX Henry Hub |  | 476,664 |  |  | $ | 2.64 |  |  | $ | 3.22 |
2023 | NYMEX Henry Hub |  | 85,000 |  |  | $ | 2.75 |  |  | $ | 4.25 |
Oil |  |  | (Bbl/d) |  | ($/Bbl) |  | ($/Bbl)
2022 | NYMEX WTI |  | 1,500 |  |  | $ | 55.00 |  |  | $ | 60.00 |
In the third quarter of 2019, the Company sold call options in exchange for a premium, and used the associated premiums received to enhance the fixed price for a portion of the fixed price natural gas swaps primarily for 2020. Each short call option has an established ceiling price. When the referenced settlement price is above the price ceiling established by these short call options, the Company pays its counterparty an amount equal to the difference between the referenced settlement price and the price ceiling multiplied by the hedged contract volumes. No payment is due from either party if the referenced settlement price is below the price ceiling. Below is a summary of the Company's open sold call options as of December 31, 2021.
| Index |  | Daily Volume |  | Weighted Average Ceiling Price
Natural Gas |  |  | (MMBtu/d) |  | ($/MMBtu)
2022 | NYMEX Henry Hub |  | 152,675 |  |  | $ | 2.90 |
2023 | NYMEX Henry Hub |  | 507,925 |  |  | $ | 2.90 |
2024 | NYMEX Henry Hub |  | 162,000 |  |  | $ | 3.00 |
In addition, the Company entered into natural gas basis swap positions. As of December 31, 2021, the Company had the following natural gas basis swap positions open:
| Gulfport Pays |  | Gulfport Receives |  | Daily Volume |  | Weighted Average Fixed Spread
Natural Gas |  |  |  |  | (MMBtu/d) |  | ($/MMBtu)
2022 | Rex Zone 3 |  | NYMEX Plus Fixed Spread |  | 24,658 |  |  | $ | (0.10) |
2022 | ONG |  | NYMEX Plus Fixed Spread |  | 7,397 |  |  | $ | 0.50 |
2023 | Rex Zone 3 |  | NYMEX Plus Fixed Spread |  | 10,000 |  |  | $ | (0.22) |
Balance sheet presentation The Company reports the fair value of derivative instruments on the consolidated balance sheets as derivative instruments under current assets, noncurrent assets, current liabilities, and noncurrent liabilities on a gross basis. The Company determines the current and noncurrent classification based on the timing of expected future cash flows of individual trades. The following table presents the fair value of the Company's derivative instruments on a gross basis at December 31, 2021 and 2020 (in thousands):
| Successor |  |  | Predecessor
| December 31, 2021 |  |  | December 31, 2020
Total short-term derivative instruments – asset | $ | 4,695 |  |  |  | $ | 27,146 |
Total long-term derivative instruments – asset | $ | 18,664 |  |  |  | $ | 322 |
Total short-term derivative instruments – liability | $ | 240,735 |  |  |  | $ | 11,641 |
Total long-term derivative instruments – liability | $ | 184,580 |  |  |  | $ | 36,604 |
Gains and losses The following table presents the gain and loss recognized in net gain (loss) on natural gas, oil and NGL derivatives in the accompanying consolidated statements of operations for the Successor Period, Predecessor Period, and the years ended December 31, 2020, and 2019 (in thousands):
| Successor |  |  | Predecessor
| Period from May 18, 2021 through December 31, 2021 |  |  | Period from January 1, 2021 through May 17, 2021 |  | Year Ended December 31, 2020 |  | Year Ended December 31, 2019
Natural gas derivatives - fair value losses | $ | (223,512) |  |  |  | $ | (123,080) |  |  | $ | (89,310) |  |  | $ | 89,576 |
Natural gas derivatives - settlement (losses) gains | (300,172) |  |  |  | (3,362) |  |  | 113,075 |  |  | 104,874 |
Total (losses) gains on natural gas derivatives | (523,684) |  |  |  | (126,442) |  |  | 23,765 |  |  | 194,450 |
Oil and condensate derivatives - fair value losses | (5,128) |  |  |  | (6,126) |  |  | (2,952) |  |  | 2,952 |
Oil and condensate derivatives - settlement (losses) gains | (9,720) |  |  |  | — |  |  | 46,462 |  |  | 4,083 |
Total (losses) gains on oil and condensate derivatives | (14,848) |  |  |  | (6,126) |  |  | 43,510 |  |  | 7,035 |
NGL derivatives - fair value losses | (5,322) |  |  |  | (4,671) |  |  | (461) |  |  | (7,541) |
NGL derivatives - settlement (losses) gains | (12,965) |  |  |  | — |  |  | (142) |  |  | 14,173 |
Total losses on NGL derivatives | (18,287) |  |  |  | (4,671) |  |  | (603) |  |  | 6,632 |
Contingent consideration arrangement - fair value losses | — |  |  |  | — |  |  | (1,381) |  |  | 243 |
Total (losses) gains on natural gas, oil and NGL derivatives | $ | (556,819) |  |  |  | $ | (137,239) |  |  | $ | 65,291 |  |  | $ | 208,360 |
Offsetting of derivative assets and liabilities As noted above, the Company records the fair value of derivative instruments on a gross basis. The following table presents the gross amounts of recognized derivative assets and liabilities in the consolidated balance sheets and the amounts that are subject to offsetting under master netting arrangements with counterparties, all at fair value.
| Successor
| As of December 31, 2021
| Derivative instruments, gross |  | Netting adjustments |  | Derivative instruments, net
| (In thousands)
Derivative assets | $ | 23,359 |  |  | $ | (20,265) |  |  | $ | 3,094 |
Derivative liabilities | $ | (425,315) |  |  | $ | 20,265 |  |  | $ | (405,050) |
| Predecessor
| As of December 31, 2020
| Derivative instruments, gross |  | Netting adjustments |  | Derivative instruments, net
| (In thousands)
Derivative assets | $ | 27,468 |  |  | $ | (25,730) |  |  | $ | 1,738 |
Derivative liabilities | $ | (48,245) |  |  | $ | 25,730 |  |  | $ | (22,515) |
Concentration of Credit Risk By using derivative instruments that are not traded on an exchange, the Company is exposed to the credit risk of its counterparties. Credit risk is the risk of loss from counterparties not performing under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty is expected to owe the Company, which creates credit risk. To minimize the credit risk in derivative instruments, it is the Company's policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. The Company's derivative contracts are with multiple counterparties to lessen its exposure to any individual counterparty. Additionally, the Company uses master netting agreements to minimize credit risk exposure. The creditworthiness of the Company's counterparties is subject to periodic review. None of the Company's derivative instrument contracts contain credit-risk related contingent features. Other than as provided by the Company's revolving credit facility, the Company is not required to provide credit support or collateral to any of its counterparties under its derivative instruments, nor are the counterparties required to provide credit support to the Company.

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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 http://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 http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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