SEC Filings

10-Q
RANGE RESOURCES CORP filed this Form 10-Q on 10/23/2018
Entire Document
 

(11) DERIVATIVE ACTIVITIES

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We utilize commodity swaps, collars, calls or swaptions to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net loss of $104.8 million at September 30, 2018. These contracts expire monthly through December 2020. The following table sets forth our commodity-based derivative volumes by year as of September 30, 2018, excluding our basis and freight swaps which are discussed separately below:

 

Period

  

Contract Type

  

Volume Hedged

  

Weighted
Average Hedge Price

Natural Gas

  

 

  

 

  

 

 

 

2018

 

Swaps

 

1,193,370 Mmbtu/day

 

 

$ 2.96

 

2019

 

Swaps

 

594,589 Mmbtu/day

 

 

$ 2.82

 

2018

 

Calls

 

70,000 Mmbtu/day

 

 

$ 3.10 (1)

 

2018

 

Swaptions

 

160,000 Mmbtu/day

 

 

$ 3.07 (2)

 

2019

 

Swaptions

 

298,014 Mmbtu/day

 

 

$ 2.86 (2)

 

2020

 

Swaptions

 

10,000 Mmbtu/day

 

 

$ 2.75 (2)

 

 

 

 

 

 

 

 

 

 

Crude Oil

  

 

  

 

  

 

 

 

2018

 

Swaps

 

8,500 bbls/day

 

 

$ 53.20

 

2019

 

Swaps

 

7,000 bbls/day

 

 

$ 55.26

 

2020

 

Swaps

 

1,500 bbls/day

 

 

$ 60.63

 

2019

 

Collars

 

1,000 bbls/day

 

 

$ 63.00 − $ 73.03

 

 

 

 

 

 

 

 

 

 

NGLs (C3-Propane)

  

 

  

 

  

 

 

 

2018

 

Swaps

 

11,668 bbls/day

 

 

$ 0.74/gallon

 

January – June 2019

 

Swaps

 

7,500 bbls/day

 

 

$ 0.92/gallon

 

2018

 

Collars

 

5,000 bbls/day

 

 

$ 0.95 − $ 1.04

 

January – March 2019

 

Collars

 

6,500 bbls/day

 

 

$ 0.92 − $1.02

 

 

 

 

 

 

 

 

 

 

NGLs (NC4-Normal Butane)

  

 

  

 

  

 

 

 

2018

 

Swaps

 

5,500 bbls/day

 

 

$ 0.91/gallon

 

January – March 2019

 

Swaps

 

2,250 bbls/day

 

 

$ 1.22/gallon

 

 

 

 

 

 

 

 

 

 

NGLs (C5-Natural Gasoline)

  

 

  

 

  

 

 

 

2018

 

Swaps

 

5,402 bbls/day

 

 

$ 1.24/gallon

 

2019

 

Swaps

 

2,178 bbls/day

 

 

$ 1.42/gallon

 

 

(1)

Weighted average deferred premium of $0.16.

(2)

Contains a combined derivative instrument consisting of a fixed price swap and a sold option to extend or double the volume. For October through December of 2018, we have swaps in place for 160,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2019 at a weighted average price of $3.07. We have swaps in place for 2019 for 185,000 Mmbtu/day on which the counterparty can elect to double the volume at a weighted average price of $2.89. We also have swaps in place for 2019 for 150,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2020 at a weighted average price of $2.81. For 2020, we have swaps in place for 10,000 Mmbtu/day on which the counterparty can elect to double the volume at a weighted average price of $2.75.

Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur.

Basis Swap Contracts

In addition to the swaps, collars, calls and swaptions described above, at September 30, 2018, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through September 2021 and include a total volume of 73,660,000 Mmbtu. The fair value of these contracts was a loss of $1.3 million at September 30, 2018.

At September 30, 2018, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly through December 2019 and include a total volume of 1,943,000 barrels. The fair value of these contracts was a loss of $2.0 million at September 30, 2018.

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