Derivative Instruments
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Note 7—Derivative Instruments
The Company is exposed to certain risks relating to its ongoing business operations and may use derivative instruments to manage its exposure to commodity price risk from time to time.
Commodity Derivative Contracts
Historically, prices received for crude oil and natural gas production have been volatile because of supply and demand factors, worldwide political factors, general economic conditions and seasonal weather patterns. The Company may periodically use derivative instruments, such as swaps, costless collars and basis swaps, to mitigate its exposure to declines in commodity prices and to the corresponding negative impacts such declines can have on its cash flows from operations, returns on capital and other financial results. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. The Company does not enter into derivative contracts for speculative or trading purposes.
Commodity Swap and Collar Contracts. The Company may use commodity derivative instruments known as fixed price swaps to realize a known price for a specific volume of production, basis swaps to hedge the difference between the index price and a local or future index price, or costless collars to establish fixed price floors and ceilings. All transactions are settled in cash with one party paying the other for the resulting difference in price multiplied by the contract volume.
The following table summarizes the approximate volumes and average contract prices of derivative contracts the Company had in place as of June 30, 2023:
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Crude Price
($/Bbl)(1)
Crude oil swaps
July 2023 - September 20231,748,000 19,000 $85.04
October 2023 - December 20231,748,000 19,000 82.93
January 2024 - March 20241,547,000 17,000 77.14
April 2024 - June 20241,547,000 17,000 75.99
July 2024 - September 20241,564,000 17,000 74.89
October 2024 - December 20241,564,000 17,000 73.94
January 2025 - March 2025450,000 5,000 69.56
April 2025 - June 2025455,000 5,000 68.49
July 2025 - September 2025460,000 5,000 67.46
October 2025 - December 2025460,000 5,000 66.54
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Collar Price Ranges
($/Bbl)(2)
Crude oil collarsJuly 2023 - September 2023644,000 7,000 $76.43-$92.70
October 2023 - December 2023644,000 7,000 76.43-92.70

PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Differential
($/Bbl)(3)
Crude oil basis differential swaps
July 2023 - September 20231,025,000 11,141 $0.63
October 2023 - December 20231,025,002 11,141 0.63
January 2024 - March 20241,092,000 12,000 0.66
April 2024 - June 20241,092,000 12,000 0.66
July 2024 - September 20241,104,000 12,000 0.66
October 2024 - December 20241,104,000 12,000 0.66
January 2025 - March 2025450,000 5,000 0.95
April 2025 - June 2025455,000 5,000 0.95
July 2025 - September 2025460,000 5,000 0.95
October 2025 - December 2025460,000 5,000 0.95

PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Differential
($/Bbl)(4)
Crude oil roll differential swaps
July 2023 - September 20231,656,000 18,000 $1.16
October 2023 - December 20231,656,000 18,000 1.16
January 2024 - March 20241,092,000 12,000 0.68
April 2024 - June 20241,092,000 12,000 0.67
July 2024 - September 20241,104,000 12,000 0.66
October 2024 - December 20241,104,000 12,000 0.66
January 2025 - March 2025180,000 2,000 0.37
April 2025 - June 2025182,000 2,000 0.37
July 2025 - September 2025184,000 2,000 0.37
October 2025 - December 2025184,000 2,000 0.37
(1)    These crude oil swap transactions are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
(2)    These crude oil collars are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
(3)    These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices during each applicable monthly settlement period.
(4)    These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price.

PeriodVolume (MMBtu)Volume (MMBtu/d)
Wtd. Avg. Gas Price
($/MMBtu)(1)
Natural gas swaps
July 2023 - September 20231,486,925 16,162 $4.70
October 2023 - December 20231,413,628 15,366 4.90
January 2024 - March 20244,104,919 45,109 3.77
April 2024 - June 2024446,321 4,905 3.93
July 2024 - September 2024429,388 4,667 4.01
October 2024 - December 2024413,899 4,499 4.32

PeriodVolume (MMBtu)Volume (MMBtu/d)
Wtd. Avg. Differential
($/MMBtu)(2)
Natural gas basis differential swaps
July 2023 - September 20236,210,000 67,500 $(1.30)
October 2023 - December 20236,210,000 67,500 (1.30)
January 2024 - March 20243,640,000 40,000 (0.52)
April 2024 - June 20241,820,000 20,000 (0.67)
July 2024 - September 20241,840,000 20,000 (0.66)
October 2024 - December 20241,840,000 20,000 (0.64)

PeriodVolume (MMBtu)Volume (MMBtu/d)
Wtd. Avg. Differential
($/MMBtu)(3)
Natural gas basis differential swaps
July 2023 - September 20231,840,000 20,000 $(0.30)
October 2023 - December 20231,840,000 20,000 (0.30)
January 2024 - March 20242,730,000 30,000 (0.02)
PeriodVolume (MMBtu)Volume
(MMBtu/d)
Wtd. Avg. Collar Price Ranges
($/MMBtu)(4)
Natural gas collars
July 2023 - September 20236,563,075 71,338 $3.64-$7.52
October 2023 - December 20236,636,37272,134 3.66-8.22
January 2024 - March 20243,175,08134,891 3.36-9.44
April 2024 - June 20241,373,67915,095 3.00-6.45
July 2024 - September 20241,410,61215,333 3.00-6.52
October 2024 - December 20241,426,10115,501 3.25-7.30
(1)    These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
(2)    These natural gas basis swap contracts are settled based on the difference between the Inside FERC’s West Texas WAHA price and the NYMEX price of natural gas, during each applicable monthly settlement period.
(3)    These natural gas basis swap contracts are settled based on the difference between the Houston Ship Channel (“HSC”) price and the NYMEX price of natural gas, during each applicable monthly settlement period.
(4)    These natural gas collars are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
Derivative Instrument Reporting. The Company’s oil and natural gas derivative instruments have not been designated as hedges for accounting purposes. Therefore, all gains and losses are recognized in the Company’s consolidated statements of operations. All derivative instruments are recorded at fair value in the consolidated balance sheets, other than derivative instruments that meet the “normal purchase normal sale” exclusion, and any fair value gains and losses are recognized in current period earnings.
The following table presents the impact of the Company’s derivative instruments in its consolidated statements of operations for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)
2023202220232022
Net gain (loss) on derivative instruments
$20,601 $(34,134)$75,113 $(163,657)
Offsetting of Derivative Assets and Liabilities. The Company’s commodity derivatives are included in the accompanying consolidated balance sheets as derivative assets and liabilities. The Company nets its financial derivative instrument fair value amounts executed with the same counterparty pursuant to ISDA master netting agreements, which provide for net settlement over the term of the contract and in the event of default or termination of the contract. The tables below summarize the fair value amounts and the classification in the consolidated balance sheets of the Company’s derivative contracts outstanding at the respective balance dates, as well as the gross recognized derivative assets, liabilities and offset amounts:
Balance Sheet ClassificationGross Fair Value Asset/Liability Amounts
Gross Amounts Offset(1)
Net Recognized Fair Value Assets/Liabilities
(in thousands)
June 30, 2023
Derivative Assets
Commodity contracts
Derivative instruments$103,121 $(15,384)$87,737 
Other noncurrent assets26,082 (2,805)23,277 
Derivative Liabilities
Commodity contracts
Derivative instruments$15,738 $(15,384)$354 
Other noncurrent liabilities2,900 (2,805)95 
December 31, 2022
Derivative Assets
Commodity contracts
Derivative instruments$125,120 $(24,323)$100,797 
Other noncurrent assets22,016 (3,691)18,325 
Derivative Liabilities
Commodity contracts
Derivative instruments$26,321 $(24,323)$1,998 
Other noncurrent liabilities6,349 (3,691)2,658 
(1)     The Company has agreements in place with each of its counterparties that allow for the financial right of offset for derivative assets against derivative liabilities at settlement or in the event of a default under the agreements or if contracts are terminated.
Contingent Features in Financial Derivative Instruments. None of the Company’s derivative instruments contain credit-risk-related contingent features. Counterparties to the Company’s financial derivative contracts are high credit-quality financial institutions that are primarily lenders under OpCo’s Credit Agreement. The Company enters into new hedge arrangements only with participants under its Credit Agreement, since these institutions are secured equally with the holders of any OpCo bank debt, which eliminates the potential need to post collateral when the Company is in a derivative liability position. As a result, the Company is not required to post letters of credit or corporate guarantees for its derivative counterparties in order to secure contract performance obligations.
In addition, the Company is exposed to credit risk associated with its derivative contracts from non-performance by its counterparties. The Company mitigates its exposure to any single counterparty by contracting with a number of financial institutions, each of which has a high credit rating and is a lender under OpCo’s Credit Agreement as referenced above.