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Derivatives | 12 Months Ended
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Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives We utilize derivatives, such as swaps, puts, calls and collars to hedge a portion of our forecasted oil and gas production and gas purchases to reduce exposure to fluctuations in oil and natural gas prices, which addresses our market risk. In addition to satisfying the oil hedging requirements in our 2021 RBL Facility, we target covering our operating expenses and a majority of our fixed charges, which includes capital needed to sustain production levels, as well as interest and fixed dividends as applicable, with the oil and gas sales hedges for a period of up to three years out. Additionally, we target fixing the price for a large portion of our natural gas purchases used in our steam operations for up to three years. We have also entered into Utah gas transportation contracts to help reduce the price fluctuation exposure, however these do not qualify as hedges. We also, from time to time, have entered into agreements to purchase a portion of the natural gas we require for our operations, which we do not record at fair value as derivatives because they qualify for normal purchases and normal sales exclusions. We had no such transactions in the periods presented. For fixed-price oil and gas sales swaps, we are the seller, so we make settlement payments for prices above the indicated weighted-average price per barrel and per mmbtu, respectively, and receive settlement payments for prices below the indicated weighted-average price per barrel and per mmbtu, respectively. For our long put spreads, in addition to any deferred premium payments, we would receive settlement payments for prices below the indicated highest price of the long put with the maximum payment received per bbl equal to the difference between the indicated prices of the long and short put. No payment would be made or received for prices above the highest indicated price of the long put. The short put spreads offset the long put spreads. A producer collar is used for the sale of our produced oil and is the combination of buying a put option and selling a call option. We would receive settlement payments for prices below the indicated weighted-average price per bbl of the put option and we would make settlement payments for prices above the indicated weighted-average price of the call option. No payment would be made or received for prices in between the indicated weighted-average price of the put and call. A consumer collar is used for the purchase of fuel gas and is the combination of buying a call option and selling a put option. We would receive settlement payments for prices above the indicated weighted-average price of the call option and we would make settlement payments for prices below the indicated weighted-average price of the put option. No payment would be made or received for prices in between the indicated weighted-average price of the put and call. For natural gas basis swaps, we make settlement payments if the difference between NWPL and Henry Hub is below the indicated weighted-average price of our contracts and receive settlement payments if the difference between NWPL and Henry Hub is above the indicated weighted-average price. For some of our options we paid or received a premium at the time the positions were created and for others, the premium payment or receipt is deferred until the time of settlement. As of December 31, 2022 we have net payable deferred premiums of approximately $5 million, which is reflected in the mark-to-market valuation and will be payable through December 31, 2024. As of December 31, 2022, we had the following crude oil production and gas purchases hedges.
| Q1 2023 |  | Q2 2023 |  | Q3 2023 |  | Q4 2023 |  | FY 2024 |  | FY 2025 |  |
Brent - Crude Oil Production |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged volume (bbls) | 1,385,278 |  |  | 1,387,750 |  |  | 1,211,717 |  |  | 1,196,000 |  |  | 3,392,048 |  |  | — |  |  |
Weighted-average price ($/bbl) | $ | 77.15 |  |  | $ | 77.01 |  |  | $ | 76.26 |  |  | $ | 76.18 |  |  | $ | 76.12 |  |  | $ | — |  |  |
Put Spreads |  |  |  |  |  |  |  |  |  |  |  |  |
Long $50/$40 Put Spread hedged volume (bbls) | 630,000 |  |  | 637,000 |  |  | 644,000 |  |  | 644,000 |  |  | 1,647,000 |  |  | — |  |  |
Short $50/$40 Put Spread hedged volume (bbls) | 90,000 |  |  | 91,000 |  |  | 92,000 |  |  | 92,000 |  |  | 366,000 |  |  | — |  |  |
Producer Collars |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged volume (bbls) | 360,000 |  |  | 364,000 |  |  | 368,000 |  |  | 368,000 |  |  | 1,098,000 |  |  | 2,212,500 |  |  |
Weighted-average price ($/bbl) | $40.00/$106.00 |  | $40.00/$106.00 |  | $40.00/$106.00 |  | $40.00/$106.00 |  | $40.00/$105.00 |  | $58.35/$91.45 |  |
Henry Hub - Natural Gas Purchases |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Collars |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged volume (mmbtu) | 2,110,000 |  |  | 1,820,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |
Weighted-average price ($/mmbtu) | $4.00/$2.75 |  | $4.00/$2.75 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
NWPL - Natural Gas Purchases |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged volume (mmbtu) | 1,800,000 |  |  | 3,640,000 |  |  | 3,680,000 |  |  | 3,680,000 |  |  | 7,320,000 |  |  | 6,080,000 |  |  |
Weighted-average price ($/mmbtu) | $ | 6.40 |  |  | $ | 5.34 |  |  | $ | 5.34 |  |  | $ | 5.34 |  |  | $ | 4.27 |  |  | $ | 4.27 |  |  |
Gas Basis Differentials |  |  |  |  |  |  |  |  |  |  |  |  |
NWPL/HH - basis swaps |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged volume (mmbtu) | 1,800,000 |  |  | 1,820,000 |  |  | 1,840,000 |  |  | 1,840,000 |  |  | — |  |  | — |  |  |
Weighted-average price ($/mmbtu) | $ | 1.12 |  |  | $ | 1.12 |  |  | $ | 1.12 |  |  | $ | 1.12 |  |  | $ | — |  |  | $ | — |  |  |
In addition to the table above, in January 2023, we terminated the following basis swaps (NWPL/HH): 4,900,000 mmbtu (20,000 mmbtu/d) at $1.12 beginning March 2023 through October 2023, and 610,000 mmbtu (10,000 mmbtu/d) at $1.12 beginning November 2023 through December 2023. In January 2023 we also added the following Producer Collars (Brent): 3,627 bbl (117 bbl/d) at $60.00/$88.50 for January 2025, 270,000 bbl (3,000 bbl/d) at $60.00/$88.35 for January 2025 through March of 2025, and 472,500 bbl (5,250 bbl/d) at $60.00/$82.21 for January 2026 through March of 2026, which are in addition to the table above. These Producer Collars (Brent) were cashless. Our commodity derivatives are measured at fair value using industry-standard models with various inputs including publicly available underlying commodity prices and forward curves, and all are classified as Level 2 in the required fair value hierarchy for the periods presented. These commodity derivatives are subject to counterparty netting. The following tables present the fair values (gross and net) of our outstanding derivatives as of December 31, 2022 and 2021. The following tables present the fair values (gross and net) of our outstanding derivatives as of December 31, 2022 and 2021.
| December 31, 2022
| Balance Sheet Classification |  | Gross Amounts Recognized at Fair Value |  | Gross Amounts Offset in the Balance Sheet |  | Net Fair Value Presented in the Balance Sheet
| (in thousands)
Assets: |  |  |  |  |  |  |
Commodity Contracts | Current assets |  | $ | 66,974 |  |  | $ | (30,607) |  |  | $ | 36,367 |
Commodity Contracts | Non-current assets |  | 39,886 |  |  | (39,810) |  |  | 76 |
Liabilities: |  |  |  |  |  |  |
Commodity Contracts | Current liabilities |  | (61,713) |  |  | 30,607 |  |  | (31,106) |
Commodity Contracts | Non-current liabilities |  | (53,452) |  |  | 39,810 |  |  | (13,642) |
Total derivatives |  |  | $ | (8,305) |  |  | $ | — |  |  | $ | (8,305) |
| December 31, 2021
| Balance Sheet Classification |  | Gross Amounts Recognized at Fair Value |  | Gross Amounts Offset in the Balance Sheet |  | Net Fair Value Presented in the Balance Sheet
| (in thousands)
Assets: |  |  |  |  |  |  |
Commodity Contracts | Current assets |  | $ | 5,360 |  |  | $ | (5,360) |  |  | $ | — |
Commodity Contracts | Non-current assets |  | 29,828 |  |  | (28,758) |  |  | 1,070 |
Liabilities: |  |  |  |  |  |  |
Commodity Contracts | Current liabilities |  | (34,985) |  |  | 5,360 |  |  | (29,625) |
Commodity Contracts | Non-current liabilities |  | (47,335) |  |  | 28,758 |  |  | (18,577) |
Total derivatives |  |  | $ | (47,132) |  |  | $ | — |  |  | $ | (47,132) |
By using derivative instruments to economically hedge exposure to changes in commodity prices, we expose ourselves to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk. We do not receive collateral from our counterparties. We minimize the credit risk in derivative instruments by limiting our exposure to any single counterparty. In addition, our 2021 RBL Facility prevents us from entering into hedging arrangements that are secured, except with our lenders and their affiliates that have margin call requirements, that otherwise require us to provide collateral or with a non-lender counterparty that does not have an A or A2 credit rating or better from Standards & Poor’s or Moody’s, respectively. In accordance with our standard practice, our commodity derivatives are subject to counterparty netting under agreements governing such derivatives which partially mitigates the counterparty nonperformance risk. (Losses) Gains on Derivatives A summary of gains and losses on the derivatives included on the statements of operations is presented below:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (in thousands)
(Losses) gains on oil and gas sales derivatives | $ | (137,109) |  |  | $ | (156,399) |  |  | $ | 117,781 |
Gains (losses) on natural gas purchase derivatives | 88,795 |  |  | 38,577 |  |  | (1,035) |
Total (losses) gains on derivatives | $ | (48,314) |  |  | $ | (117,822) |  |  | $ | 116,746 |
For the years ended December 31, 2022 and 2021 we paid net cash settlements of approximately $88 million and $92 million, respectively. For the year ended December 31, 2020, we received net cash scheduled settlements of approximately $142 million.

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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