sm-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-31539

SM ENERGY COMPANY

(Exact name of registrant as specified in its charter)

Delaware

41-0518430

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1775 Sherman Street, Suite 1200, Denver, Colorado

80203

(Address of principal executive offices)

(Zip Code)

(303) 861-8140

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	SM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of April 21, 2021, the registrant had 117,797,778 shares of common stock outstanding.

TABLE OF CONTENTS


Item		Page
	Cautionary Information about Forward-Looking Statements	3

	Part I	4

Item 1.	Financial Statements (unaudited)	4

	Condensed Consolidated Balance Sheets March 31, 2021, and December 31, 2020	4

	Condensed Consolidated Statements of Operations Three Months Ended March 31, 2021, and 2020	5

	Condensed Consolidated Statements of Comprehensive Loss Three Months Ended March 31, 2021, and 2020	6

	Condensed Consolidated Statements of Stockholders’ Equity Three Months Ended March 31, 2021, and 2020	7

	Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2021, and 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

	Part II	40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 6.	Exhibits	41

	Signatures	42

Cautionary Information about Forward-Looking Statements

This Report on Form 10-Q (“Form 10-Q” or “this report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements included in this report, other than statements of historical facts, that address activities, conditions, events, or developments with respect to our financial condition, results of operations, business prospects or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “could,” “estimate,” “expect,” “forecast,” “intend,” “pending,” “plan,” “potential,” “project,” “target,” “will,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear throughout this report, and include statements about such matters as:

•the impacts of the global COVID-19 pandemic (“Pandemic”) and the Texas Weather Event (as defined below) on us, our industry, our financial condition, and our results of operations;

•the amount and nature of future capital expenditures and the availability of liquidity and capital resources to fund capital expenditures;

•any changes to the borrowing base or aggregate lender commitments under our Sixth Amended and Restated Credit Agreement, as amended (“Credit Agreement”);

•our outlook on future crude oil, natural gas, and natural gas liquids (also referred to throughout this report as “oil,” “gas,” and “NGLs,” respectively) prices, well costs, service costs, production costs, and general and administrative costs;

•our drilling and completion activities and other exploration and development activities, our ability to obtain permits and governmental approvals, and plans by us, our joint development partners, and/or other third-party operators;

•possible or expected acquisitions and divestitures, including the possible divestiture or farmout of, or joint development of, certain properties;

•oil, gas, and NGL reserve estimates and estimates of both future net revenues and the present value of future net revenues associated with those reserve estimates;

•our expected future production volumes, identified drilling locations, as well as drilling prospects, inventories, projects and programs;

•cash flows, liquidity, interest and related debt service expenses, changes in our effective tax rate, and our ability to repay debt in the future;

•business strategies and other plans and objectives for future operations, including plans for expansion and growth of operations or to defer capital investment, plans with respect to future dividend payments, and our outlook on our future financial condition or results of operations; and

•other similar matters, such as those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this report.

Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that may cause our financial condition, results of operations, business prospects or economic performance to differ from expectations include the factors discussed in the Risk Factors section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

We caution you that forward-looking statements are not guarantees of future performance and actual results or performance may be materially different from those expressed or implied in forward-looking statements. The forward-looking statements in this report speak only as of the filing of this report. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by applicable securities laws.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	10
Accounts receivable	199,631		162,455
Derivative assets	20,859		31,203
Prepaid expenses and other	9,792		10,001
Total current assets	230,282		203,669
Property and equipment (successful efforts method):
Proved oil and gas properties	8,735,538		8,608,522
Accumulated depletion, depreciation, and amortization	(5,051,876)		(4,886,973)
Unproved oil and gas properties	705,822		714,602
Wells in progress	291,146		233,498

Other property and equipment, net of accumulated depreciation of $64,242 and $63,662, respectively	31,986		32,217
Total property and equipment, net	4,712,616		4,701,866
Noncurrent assets:
Derivative assets	13,567		23,150
Other noncurrent assets	59,180		47,746
Total noncurrent assets	72,747		70,896
Total assets	$	5,015,645	$	4,976,431
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	394,226	$	371,670

Derivative liabilities	371,802		200,189
Other current liabilities	10,591		11,880
Total current liabilities	776,619		583,739
Noncurrent liabilities:
Revolving credit facility	135,000		93,000
Senior Notes, net	2,125,651		2,121,319


Asset retirement obligations	84,206		83,325


Derivative liabilities	67,595		22,331
Other noncurrent liabilities	56,902		56,557
Total noncurrent liabilities	2,469,354		2,376,532

Commitments and contingencies (note 6)

Stockholders’ equity:
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 114,742,304 shares as of March 31, 2021, and December 31, 2020	1,147		1,147
Additional paid-in capital	1,833,651		1,827,914
Retained earnings (deficit)	(51,719)		200,697
Accumulated other comprehensive loss	(13,407)		(13,598)
Total stockholders’ equity	1,769,672		2,016,160
Total liabilities and stockholders’ equity	$	5,015,645	$	4,976,431

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	For the Three Months Ended March 31,
		2021		2020
Operating revenues and other income:
Oil, gas, and NGL production revenue		$	423,165	$	354,233

Other operating income		20,681		1,501
Total operating revenues and other income		443,846		355,734
Operating expenses:
Oil, gas, and NGL production expense		100,930		119,552
Depletion, depreciation, amortization, and asset retirement obligation liability accretion		166,960		233,489
Exploration		9,323		11,349

Impairment		8,750		989,763
General and administrative		24,714		27,447
Net derivative (gain) loss		344,689		(545,340)
Other operating expense, net		(599)		566
Total operating expenses		654,767		836,826
Loss from operations		(210,921)		(481,092)
Interest expense		(39,871)		(41,512)
Gain on extinguishment of debt		—		12,195
Other non-operating expense, net		(371)		(494)
Loss before income taxes		(251,163)		(510,903)
Income tax (expense) benefit		(106)		99,008
Net loss		$	(251,269)	$	(411,895)

Basic weighted-average common shares outstanding		114,759		113,009
Diluted weighted-average common shares outstanding		114,759		113,009
Basic net loss per common share		$	(2.19)	$	(3.64)
Diluted net loss per common share		$	(2.19)	$	(3.64)
Dividends per common share		$	0.01	$	0.01

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

(in thousands)


	For the Three Months Ended March 31,
		2021		2020
Net loss		$	(251,269)	$	(411,895)
Other comprehensive income, net of tax:
Pension liability adjustment		191		190
Total other comprehensive income, net of tax		191		190
Total comprehensive loss		$	(251,078)	$	(411,705)

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share data and dividends per share)


				Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Common Stock					Retained Earnings (Deficit)
	Shares	Amount
Balances, December 31, 2020	114,742,304	$	1,147	$	1,827,914	$	200,697	$	(13,598)	$	2,016,160
Net loss	—	—		—		(251,269)		—		(251,269)
Other comprehensive income	—	—		—		—		191		191
Cash dividends declared, $0.01 per share	—	—		—		(1,147)		—		(1,147)


Stock-based compensation expense	—	—		5,737		—		—		5,737


Balances, March 31, 2021	114,742,304	$	1,147	$	1,833,651	$	(51,719)	$	(13,407)	$	1,769,672


				Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Common Stock					Retained Earnings
	Shares	Amount
Balances, December 31, 2019	112,987,952	$	1,130	$	1,791,596	$	967,587	$	(11,319)	$	2,748,994
Net loss	—	—		—		(411,895)		—		(411,895)
Other comprehensive income	—	—		—		—		190		190
Cash dividends declared, $0.01 per share	—	—		—		(1,130)		—		(1,130)

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings	730	—		(3)		—		—		(3)
Stock-based compensation expense	—	—		5,561		—		—		5,561


Balances, March 31, 2020	112,988,682	$	1,130	$	1,797,154	$	554,562	$	(11,129)	$	2,341,717

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(251,269)	$	(411,895)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depletion, depreciation, amortization, and asset retirement obligation liability accretion	166,960		233,489
Impairment	8,750		989,763
Stock-based compensation expense	5,737		5,561
Net derivative (gain) loss	344,689		(545,340)
Derivative settlement gain (loss)	(107,885)		73,437
Amortization of debt discount and deferred financing costs	4,723		3,992
Gain on extinguishment of debt	—		(12,195)
Deferred income taxes	(52)		(99,347)
Other, net	(14,592)		(816)
Net change in working capital	(51,437)		(18,517)





Net cash provided by operating activities	105,624		218,132

Cash flows from investing activities:

Capital expenditures	(147,563)		(139,306)

Other	(71)		—
Net cash used in investing activities	(147,634)		(139,306)

Cash flows from financing activities:
Proceeds from revolving credit facility	440,000		425,500
Repayment of revolving credit facility	(398,000)		(476,000)


Cash paid to repurchase Senior Notes	—		(28,318)


Other	—		(3)
Net cash provided by (used in) financing activities	42,000		(78,821)

Net change in cash, cash equivalents, and restricted cash	(10)		5
Cash, cash equivalents, and restricted cash at beginning of period	10		10
Cash, cash equivalents, and restricted cash at end of period	$	—	$	15

Supplemental schedule of additional cash flow information and non-cash activities:
Operating activities:
Cash paid for interest, net of capitalized interest	$	(53,449)	$	(47,469)

Investing activities:
Increase in capital expenditure accruals and other	$	37,409	$	16,802

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Summary of Significant Accounting Policies

Description of Operations

SM Energy Company, together with its consolidated subsidiaries (“SM Energy” or the “Company”), is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. These financial statements do not include all information and notes required by GAAP for annual financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the 2020 Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. Operating results for the periods presented are not necessarily indicative of expected results for the full year. In connection with the preparation of the Company’s unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of March 31, 2021, and through the filing of this report. Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited condensed consolidated financial statements.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2020 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report. These unaudited condensed consolidated financial statements should be read in conjunction with the 2020 Form 10-K.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) followed by ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), issued in January 2021, to provide clarifying guidance regarding the scope of Topic 848. ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Generally, the guidance is to be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. As of March 31, 2021, the Company has not elected to use the optional guidance and continues to evaluate the options provided by ASU 2020-04 and ASU 2021-01. Please refer to Note 5 - Long-Term Debt for discussion of the use of the London Interbank Offered Rate (“LIBOR”) in connection with borrowings under the Credit Agreement.

There are no other ASUs that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company as of March 31, 2021, or through the filing of this report.

Note 2 - Revenue from Contracts with Customers

The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs from its Midland Basin and South Texas assets. Oil, gas, and NGL production revenue presented within the accompanying unaudited condensed consolidated statements of operations (“accompanying statements of operations”) is reflective of the revenue generated from contracts with customers.

The table below presents oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the three months ended March 31, 2021, and 2020:


	Midland Basin						South Texas						Total
	Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,
	2021			2020			2021			2020			2021			2020
	(in thousands)
Oil production revenue	$	286,105		$	276,136		$	19,672		$	15,557		$	305,777		$	291,693
Gas production revenue	57,806			11,334			31,852			29,376			89,658			40,710
NGL production revenue	100			58			27,630			21,772			27,730			21,830
Total	$	344,011		$	287,528		$	79,154		$	66,705		$	423,165		$	354,233
Relative percentage	81		%	81		%	19		%	19		%	100		%	100		%

____________________________________________

Note: Amounts may not calculate due to rounding.

The Company recognizes oil, gas, and NGL production revenue at the point in time when custody and title (“control”) of the product transfers to the purchaser, which differs depending on the applicable contractual terms. Transfer of control drives the presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations. Fees and other deductions incurred by the Company prior to control transfer are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. When control is transferred at or near the wellhead, sales are based on a wellhead market price that is impacted by fees and other deductions incurred by the purchaser subsequent to the transfer of control. Please refer to Note 2 - Revenue from Contracts with Customers in the 2020 Form 10-K for more information regarding the types of contracts under which oil, gas, and NGL production revenue is generated.

Significant judgments made in applying the guidance in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, relate to the point in time when control transfers to purchasers in gas processing arrangements with midstream processors. The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with generally predictable differentials. Accordingly, the Company does not consider estimates of variable consideration to be constrained.

The Company’s performance obligations arise upon the production of hydrocarbons from wells in which the Company has an ownership interest. The performance obligations are considered satisfied upon control transferring to a purchaser at the wellhead, inlet, or tailgate of the midstream processor’s processing facility, or other contractually specified delivery point. The time period between production and satisfaction of performance obligations is generally less than one day, therefore there are no material unsatisfied or partially unsatisfied performance obligations at the end of the reporting period.

Revenue is recorded in the month when performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”) until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of March 31, 2021, and December 31, 2020, were $152.1 million and $108.9 million, respectively. To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser.

Note 3 - Equity

On June 17, 2020, the Company issued warrants to purchase up to an aggregate of approximately 5.9 million shares, or approximately five percent of its then outstanding common stock, at an exercise price of $0.01 per share.

The fair value of the warrants on the issuance date was determined using a stochastic Monte Carlo simulation using geometric Brownian motion (“GBM Model”). The Company evaluated the warrants under authoritative accounting guidance and determined that they should be classified as equity instruments. Upon issuance, the warrants were recorded in additional paid-in capital on the accompanying balance sheets at a fair value of $21.5 million, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the warrants since issuance.

The Warrant Agreement dated as of June 17, 2020 (“Warrant Agreement”), states that the warrants are exercisable any time from and after the Triggering Date, as subsequently defined, until June 30, 2023. The Triggering Date is defined by the Warrant Agreement as the first trading day following five consecutive trading days on which the product of the number of shares of common stock issued and outstanding on four of the five trading days multiplied by the closing price per share of common stock for each such trading day exceeds $1.0 billion (“Triggering Date”). The warrants issued are indexed to the Company’s common stock and are required to be settled through physical settlement or net share settlement, if exercised. The Triggering Date occurred on January 14, 2021, and the warrants became exercisable at the election of the holders. The warrants may be exercised either in full or from time to time in part, until their expiration on June 30, 2023.

Subsequent to March 31, 2021, the Company issued 3,083,403 shares of unregistered, restricted common stock as a result of the cashless exercise of 3,086,147 warrants at a weighted-average share price of $11.36 per share, as determined under the terms of the Warrant Agreement. No underwriters were involved in the sales, and the securities bear restrictive legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.

Note 4 - Income Taxes

The provision for income taxes for the three months ended March 31, 2021, and 2020, consisted of the following:


	For the Three Months Ended March 31,
		2021			2020
		(in thousands)
Current portion of income tax (expense) benefit:
Federal		$	—		$	—
State		(158)			(339)
Deferred portion of income tax benefit		52			99,347
Income tax (expense) benefit		$	(106)		$	99,008

Effective tax rate		—		%	19.4		%

Recorded income tax expense or benefit differs from the amount that would be provided by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences primarily relate to the effect of state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax limitations on the compensation of covered individuals, changes in valuation allowances, the cumulative impact of other smaller permanent differences, and can also reflect the cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balance. The quarterly rate can also be affected by the proportional impacts of forecasted net income or loss for each period presented, as reflected in the table above.

For all years before 2017, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities.

Note 5 - Long-Term Debt

The following table summarizes the Company’s total outstanding balance on its revolving credit facility, Senior Secured Notes net of unamortized discount and deferred financing costs, and Senior Unsecured Notes, net of unamortized deferred financing costs, as of March 31, 2021, and December 31, 2020:


	As of March 31, 2021		As of December 31, 2020
	(in thousands)
Revolving credit facility	$	135,000	$	93,000
Senior Secured Notes (1)	464,222		460,656
Senior Unsecured Notes (1)	1,661,429		1,660,663
Total	$	2,260,651	$	2,214,319

____________________________________________

(1) Senior Secured Notes and Senior Unsecured Notes are defined below.

Credit Agreement

The Company’s Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $2.5 billion. As of March 31, 2021, the borrowing base and aggregate lender commitments under the Credit Agreement were $1.1 billion. The next scheduled borrowing base redetermination date is October 1, 2021.

The Credit Agreement is scheduled to mature on September 28, 2023. The maturity date could, however, occur earlier on August 16, 2022, if the Company has not completed certain repurchase, redemption, or refinancing activities associated with its 6.125% Senior Notes due 2022 (“2022 Senior Notes”), and does not have certain unused availability for borrowing under the Credit Agreement, as outlined in the Credit Agreement.

Interest and commitment fees associated with the revolving credit facility are accrued based on a borrowing base utilization grid set forth in the Credit Agreement as presented in Note 5 - Long-Term Debt in the 2020 Form 10-K. At the Company’s election, borrowings under the Credit Agreement may be in the form of Eurodollar, Alternate Base Rate (“ABR”), or Swingline loans. Eurodollar loans accrue interest at LIBOR, plus the applicable margin from the utilization grid, and ABR and Swingline loans accrue interest at a market-based floating rate, plus the applicable margin from the utilization grid. Commitment fees are accrued on the unused portion of the aggregate lender commitment amount at rates from the utilization grid and are included in the interest expense line item on the accompanying statements of operations.

The Credit Agreement specifies that if LIBOR is no longer a widely used benchmark rate, or if it is no longer used for determining interest rates for loans in the United States, a replacement interest rate that fairly reflects the cost to the lenders of funding loans shall be established by the Administrative Agent, as defined in the Credit Agreement, in consultation with the Company. Please refer to Note 1 - Summary of Significant Accounting Policies for discussion of FASB ASU 2020-04, which provides guidance related to reference rate reform.

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of April 21, 2021, March 31, 2021, and December 31, 2020:


	As of April 21, 2021		As of March 31, 2021		As of December 31, 2020
	(in thousands)
Revolving credit facility (1)	$	76,500	$	135,000	$	93,000
Letters of credit (2)	—		—		42,000
Available borrowing capacity	1,023,500		965,000		965,000
Total aggregate lender commitment amount	$	1,100,000	$	1,100,000	$	1,100,000

____________________________________________

(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $3.9 million and $4.3 million as of March 31, 2021, and December 31, 2020, respectively. These costs are being amortized over the term of the revolving credit facility on a straight-line basis.

(2) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis.

Senior Notes

Senior Secured Notes. Senior Secured Notes, net of unamortized discount and deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of March 31, 2021, and December 31, 2020, consisted of the following:


	As of March 31, 2021
	Principal Amount		Unamortized Debt Discount		Unamortized Deferred Financing Costs		Net
	(in thousands)
1.50% Senior Secured Convertible Notes due 2021	$	65,485	$	914	$	87	$	64,484
10.0% Senior Secured Notes due 2025	446,675		36,085		10,852		399,738
Total	$	512,160	$	36,999	$	10,939	$	464,222

	As of December 31, 2020
	Principal Amount		Unamortized Debt Discount		Unamortized Deferred Financing Costs		Net
	(in thousands)
1.50% Senior Secured Convertible Notes due 2021	$	65,485	$	1,828	$	175	$	63,482
10.0% Senior Secured Notes due 2025	446,675		37,943		11,558		397,174
Total	$	512,160	$	39,771	$	11,733	$	460,656

The 1.50% Senior Secured Convertible Notes due 2021 (“2021 Senior Secured Convertible Notes”) and the 10.0% Senior Secured Notes due 2025 (“2025 Senior Secured Notes,” and together with the 2021 Senior Secured Convertible Notes, the “Senior Secured Notes”) are senior obligations of the Company, secured on a second-priority basis, ranking junior to the Company’s obligations under the Credit Agreement and equal in priority to one another. The Senior Secured Notes rank senior in right of payment with all of the Company’s existing and any future unsecured senior or subordinated debt.

Beginning January 1, 2021, until the maturity date, holders may convert their 2021 Senior Secured Convertible Notes at any time based on a conversion rate of 24.6914 shares of the Company’s common stock per $1,000 principal amount of the 2021 Senior Secured Convertible Notes, which is equal to an initial conversion price of approximately $40.50 per share, subject to adjustment. The if-converted value of the 2021 Senior Secured Convertible Notes did not exceed the principal amount as of March 31, 2021, or through the filing of this report. The Company has elected to settle the 2021 Senior Secured Convertible Notes obligation, due July 1, 2021, in cash and intends to settle the obligation using borrowings under its revolving credit facility. The remaining debt discount and debt-related issuance costs are being amortized to the principal value of the 2021 Senior Secured Convertible Notes as interest expense through the maturity date. Interest expense recognized on the 2021 Senior Secured Convertible Notes related to the stated interest rate and amortization of the debt discount totaled $1.2 million and $2.9 million for the three months ended March 31, 2021, and 2020, respectively. The Company may not redeem the 2021 Senior Secured Convertible Notes prior to the maturity date.

The Company may redeem some or all of its 2025 Senior Secured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest as described in the indenture governing the 2025 Senior Secured Notes.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional detail on the Company’s Senior Secured Notes and capped call transactions associated with the 2021 Senior Secured Convertible Notes.

Senior Unsecured Notes. Senior Unsecured Notes, net of unamortized deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of March 31, 2021, and December 31, 2020, consisted of the following:


	As of March 31, 2021						As of December 31, 2020
	Principal Amount		Unamortized Deferred Financing Costs		Principal Amount, Net		Principal Amount		Unamortized Deferred Financing Costs		Principal Amount, Net
	(in thousands)
6.125% Senior Notes due 2022	$	212,403	$	743	$	211,660	$	212,403	$	855	$	211,548
5.0% Senior Notes due 2024	277,034		1,448		275,586		277,034		1,576		275,458
5.625% Senior Notes due 2025	349,118		2,634		346,484		349,118		2,792		346,326
6.75% Senior Notes due 2026	419,235		3,795		415,440		419,235		3,970		415,265
6.625% Senior Notes due 2027	416,791		4,532		412,259		416,791		4,725		412,066
Total	$	1,674,581	$	13,152	$	1,661,429	$	1,674,581	$	13,918	$	1,660,663

The senior unsecured notes listed above (collectively referred to as “Senior Unsecured Notes,” and together with the Senior Secured Notes, “Senior Notes”) are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt. The Company may redeem some or all of its Senior Unsecured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Unsecured Notes.

During the three months ended March 31, 2020, the Company repurchased a total of $40.7 million in aggregate principal amount of its 2022 Senior Notes in open market transactions for a total settlement amount, excluding accrued interest, of $28.3 million. In connection with the repurchase, the Company recorded a gain on extinguishment of debt of $12.2 million for the three months ended March 31, 2020. This amount included discounts realized upon repurchase of $12.4 million partially offset by approximately $235,000 of accelerated unamortized deferred financing costs. The Company canceled all repurchased 2022 Senior Notes upon settlement.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional detail on the Company’s Senior Unsecured Notes.

Covenants

The Company is subject to certain financial and non-financial covenants under the Credit Agreement and the indentures governing the Senior Notes that, among other terms, limit the Company’s ability to incur additional indebtedness, make restricted payments including dividends, sell assets, with respect to the Company’s restricted subsidiaries, permit the consensual restriction on the ability of such restricted subsidiaries to pay dividends or indebtedness owing to the Company or to any other restricted subsidiaries, create liens that secure debt, enter into transactions with affiliates, and merge or consolidate with another company. The Company was in compliance with all covenants under the Credit Agreement and the indentures governing the Senior Notes as of March 31, 2021, and through the filing of this report.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional detail on the Company’s covenants under the Credit Agreement and indentures governing the Senior Notes.

Capitalized Interest

Capitalized interest costs totaled $4.3 million and $2.7 million for the three months ended March 31, 2021, and 2020, respectively. The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and the timing and amount of costs associated with capital projects that are considered in progress. Capitalized interest costs are included in total costs incurred.

Note 6 - Commitments and Contingencies

Commitments

Other than those items discussed below, there have been no changes in commitments through the filing of this report that differ materially from those disclosed in the 2020 Form 10-K. Please refer to Note 6 - Commitments and Contingencies in the 2020 Form 10-K for additional discussion of the Company’s commitments.

Drilling Rig Service Contracts. During the three months ended March 31, 2021, the Company amended certain of its drilling rig contracts resulting in the extension of contract terms. As of March 31, 2021, the Company’s drilling rig commitments totaled

$23.5 million under contract terms extending through the second quarter of 2022. If all of these contracts were terminated as of March 31, 2021, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $14.0 million in early termination fees. No material expenses related to early termination or standby fees were incurred by the Company during the three months ended March 31, 2021, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2021.

Drilling and Completion Commitments. During the three months ended March 31, 2021, the Company amended an agreement that included minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2022, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements. As of March 31, 2021, the liquidated damages could range from zero to a maximum of $51.3 million, with the maximum exposure assuming no additional development activity occurred prior to March 31, 2022. As of the filing of this report, the Company expects to meet its obligations under this agreement.

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.

Note 7 - Compensation Plans

Equity Incentive Compensation Plan

As of March 31, 2021, 3.8 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”).

Performance Share Units

The Company generally grants performance share units (“PSUs”) to eligible employees as part of its Equity Plan. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to two times the number of PSUs awarded and is determined based on certain criteria over a three-year performance period. PSUs generally vest on the third anniversary of the date of the grant or upon other triggering events as set forth in the Equity Plan.

For PSUs granted in 2018 and 2019, the settlement criteria include a combination of the Company’s Total Shareholder Return (“TSR”) relative to the TSR of certain peer companies and the Company’s cash return on total capital invested (“CRTCI”) relative to the CRTCI of certain peer companies over the associated three-year performance period. In addition to these performance criteria, the award agreements for these grants also stipulate that if the Company’s absolute TSR is negative over the three-year performance period, the maximum number of shares of common stock that can be issued to settle outstanding PSUs is capped at one times the number of PSUs granted on the award date, regardless of the Company’s TSR and CRTCI performance relative to its peer group. The fair values of the PSUs granted in 2018 and 2019 were measured on the applicable grant dates using the GBM Model, with the assumption that the associated CRTCI performance condition will be met at the target amount at the end of the respective performance periods. Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. As these awards depend on a combination of performance-based settlement criteria and market-based settlement criteria, compensation expense may be adjusted in future periods as the number of units expected to vest increases or decreases based on the Company’s expected CRTCI performance relative to the applicable peer companies. No PSUs were granted in 2020.

The Company records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the date of grant. Total compensation expense recorded for PSUs was $3.2 million and $2.6 million for the three months ended March 31, 2021, and 2020, respectively. As of March 31, 2021, there was $4.5 million of total unrecognized compensation expense related to non-vested PSU awards, which is being amortized through 2022. There were no material changes to the outstanding and non-vested PSUs during the three months ended March 31, 2021.

Employee Restricted Stock Units

The Company grants restricted stock units (“RSUs”) to eligible persons as part of its Equity Plan. Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period. RSUs generally vest one-third of the total grant on each anniversary date of the grant over the applicable vesting period or upon other triggering events as set forth in the Equity Plan.

The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the date of grant. The fair value of an RSU is equal to the closing price of the Company’s common stock on the day of the grant.

Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. Total compensation expense recorded for employee RSUs was $2.2 million and $2.6 million for the three months ended March 31, 2021, and 2020, respectively. As of March 31, 2021, there was $12.5 million of total unrecognized compensation expense related to non-vested RSU awards, which is being amortized through 2023. There were no material changes to the outstanding and non-vested RSUs during the three months ended March 31, 2021.

Please refer to Note 7 - Compensation Plans in the 2020 Form 10-K for additional detail on the Company’s Equity Plan.

Note 8 - Fair Value Measurements

The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs:

•Level 1 – quoted prices in active markets for identical assets or liabilities

•Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable

•Level 3 – significant inputs to the valuation model are unobservable.

The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of March 31, 2021:


	Level 1		Level 2		Level 3
	(in thousands)
Assets:
Derivatives (1)	$	—	$	34,426	$	—

Liabilities:
Derivatives (1)	$	—	$	439,397	$	—

__________________________________________

(1) This represents a financial asset or liability that is measured at fair value on a recurring basis.


	Level 1		Level 2		Level 3
	(in thousands)
Assets:
Derivatives (1)	$	—	$	54,353	$	—
Liabilities:
Derivatives (1)	$	—	$	222,520	$	—

____________________________________________

(1) This represents a financial asset or liability that is measured at fair value on a recurring basis.

Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy.

Derivatives

The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivatives. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments

utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active.

Please refer to Note 10 - Derivative Financial Instruments and to Note 11 - Fair Value Measurements in the 2020 Form 10-K for more information regarding the Company’s derivative instruments.

Oil and Gas Properties and Other Property and Equipment

The Company had no assets included in total property and equipment, net, measured at fair value as of March 31, 2021, or December 31, 2020.

No proved property impairment expense was recorded during the three months ended March 31, 2021. For the three months ended March 31, 2020, the Company recorded impairment expense of $956.7 million related to its South Texas proved oil and gas properties and related support facilities as a result of the decrease in commodity price forecasts at the end of the first quarter of 2020, specifically decreases in oil and NGL prices. The Company used a discount rate of 11 percent in its calculation of the present value of expected future net cash flows based on the prevailing market-based weighted average cost of capital as of March 31, 2020.

For the three months ended March 31, 2021, and 2020, the Company recorded impairment expense related to the abandonment and impairment of unproved properties of $8.8 million, and $33.1 million, respectively. These impairments related to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks. The balances in the unproved oil and gas properties line item on the accompanying balance sheets as of March 31, 2021, and December 31, 2020, are recorded at carrying value.

Please refer to Note 1 - Summary of Significant Accounting Policies and Note 11 - Fair Value Measurements in the 2020 Form 10-K for more information regarding the Company’s approach in determining the fair value of its properties.

Long-Term Debt

The following table reflects the fair value of the Company’s Senior Note obligations measured using Level 1 inputs based on quoted secondary market trading prices. These notes were not presented at fair value on the accompanying balance sheets as of March 31, 2021, or December 31, 2020, as they were recorded at carrying value, net of any unamortized discounts and deferred financing costs. Please refer to Note 5 - Long-Term Debt for additional discussion.


	As of March 31, 2021				As of December 31, 2020
	Principal Amount		Fair Value		Principal Amount		Fair Value
	(in thousands)
1.50% Senior Secured Convertible Notes due 2021	$	65,485	$	63,864	$	65,485	$	61,449
10.0% Senior Secured Notes due 2025	$	446,675	$	502,858	$	446,675	$	482,887
6.125% Senior Unsecured Notes due 2022	$	212,403	$	209,633	$	212,403	$	205,379
5.0% Senior Unsecured Notes due 2024	$	277,034	$	261,936	$	277,034	$	240,072
5.625% Senior Unsecured Notes due 2025	$	349,118	$	323,007	$	349,118	$	289,401
6.75% Senior Unsecured Notes due 2026	$	419,235	$	387,373	$	419,235	$	342,385
6.625% Senior Unsecured Notes due 2027	$	416,791	$	384,323	$	416,791	$	331,220

The carrying value of the Company’s revolving credit facility approximates its fair value, as the applicable interest rates are floating, based on prevailing market rates.

Note 9 - Earnings Per Share

Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. Diluted net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities.

As of March 31, 2021, potentially dilutive securities for this calculation consist primarily of non-vested RSUs, contingent PSUs, and warrants, which were measured using the treasury stock method. The warrants became exercisable at the election of the holders on January 14, 2021, and as a result, they were included as potentially dilutive securities beginning January 1, 2021. Please refer to Note 3 - Equity and Note 7 - Compensation Plans in this report, and Note 9 - Earnings Per Share in the 2020 Form 10-K for additional detail on these potentially dilutive securities.

As of March 31, 2020, potentially dilutive securities for this calculation consisted primarily of non-vested RSUs, contingent PSUs, and shares into which the 2021 Senior Convertible Notes were convertible, which were measured using the treasury stock method. Shares of the Company’s common stock traded at an average closing price below the $40.50 conversion price applicable to the 2021 Senior Convertible Notes for the three months ended March 31, 2020, therefore, the 2021 Senior Convertible Notes had no dilutive impact. The Company has elected to satisfy any conversion obligation with respect to the 2021 Senior Convertible Notes solely in cash. As a result, the Company’s 2021 Senior Secured Convertible Notes are no longer convertible into shares of the Company’s common stock and thus, were not considered to be a potentially dilutive instrument as of March 31, 2021.

When the Company recognizes a net loss from continuing operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per common share. The following table details the weighted-average number of anti-dilutive securities for the periods presented:


	For the Three Months Ended March 31,
		2021	2020
		(in thousands)
Anti-dilutive		8,106	1,219

The following table sets forth the calculations of basic and diluted net loss per common share:


	For the Three Months Ended March 31,
		2021		2020
		(in thousands, except per share data)
Net loss		$	(251,269)	$	(411,895)

Basic weighted-average common shares outstanding		114,759		113,009
Dilutive effect of non-vested RSUs and contingent PSUs		—		—
Dilutive effect of warrants		—		—
Diluted weighted-average common shares outstanding		114,759		113,009

Basic net loss per common share		$	(2.19)	$	(3.64)
Diluted net loss per common share		$	(2.19)	$	(3.64)

Note 10 - Derivative Financial Instruments

Summary of Oil, Gas, and NGL Derivative Contracts in Place

The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows. As of March 31, 2021, all derivative counterparties were members of the Company’s Credit Agreement lender group and all contracts were entered into for other-than-trading purposes. The Company’s commodity derivative contracts consist of swap and collar arrangements for oil production and NGL production, and swap arrangements for gas production. In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the agreed upon swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For collar arrangements, the Company receives the difference between an agreed upon index price and the floor price if the index price is below the floor price. The Company pays the difference between the agreed upon ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index price is between the floor and ceiling prices.

The Company has entered into fixed price oil basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production volumes are sold. Currently, the Company has basis swap contracts with fixed price differentials between NYMEX WTI and WTI Midland for a portion of its Midland Basin production with sales contracts that settle at WTI Midland prices, NYMEX WTI and Intercontinental Exchange Brent Crude (“ICE Brent”) for a portion of its Midland Basin oil production with sales contracts that settle at ICE Brent prices, and between NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal (“MEH”) for a portion of its South Texas oil production with sales contracts that settle at Argus WTI Houston MEH prices. The Company has also entered into crude oil swap contracts to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month (“Roll Differential”) in which the Company pays the periodic variable Roll Differential and receives a weighted-average fixed price differential. The weighted-average fixed price differential represents the amount of net addition (reduction) to delivery month prices for the notional volumes covered by the swap contracts.

As of March 31, 2021, the Company had commodity derivative contracts outstanding through the fourth quarter of 2023 as summarized in the tables below.

Oil Swaps


Contract Period	NYMEX WTI Volumes	Weighted-Average Contract Price
	(MBbl)	(per Bbl)
Second quarter 2021	5,508	$	40.88
Third quarter 2021	5,363	$	41.16
Fourth quarter 2021	4,744	$	39.85
2022	7,823	$	44.69
2023	1,190	$	45.20
Total	24,628

Oil Collars


Contract Period	NYMEX WTI Volumes	Weighted-Average Floor Price		Weighted-Average Ceiling Price
	(MBbl)	(per Bbl)		(per Bbl)



2022	1,224	$	50.00	$	54.89

Oil Basis Swaps


Contract Period	WTI Midland-NYMEX WTI Volumes	Weighted-Average Contract Price (1)		NYMEX WTI-ICE Brent Volumes	Weighted-Average Contract Price (2)		WTI Houston MEH-NYMEX WTI Volumes	Weighted-Average Contract Price (3)
	(MBbl)	(per Bbl)		(MBbl)	(per Bbl)		(MBbl)	(per Bbl)
Second quarter 2021	4,172	$	0.81	910	$	(7.86)	493	$	0.60
Third quarter 2021	3,756	$	0.75	920	$	(7.86)	356	$	0.60
Fourth quarter 2021	3,824	$	0.71	920	$	(7.86)	466	$	0.60
2022	9,500	$	1.15	3,650	$	(7.78)	1,329	$	1.25


Total	21,252			6,400			2,644

____________________________________________

(1) Represents the price differential between WTI Midland (Midland, Texas) and NYMEX WTI (Cushing, Oklahoma).

(2) Represents the price differential between NYMEX WTI (Cushing, Oklahoma) and ICE Brent (North Sea).

(3) Represents the price differential between Argus WTI Houston MEH (Houston, Texas) and NYMEX WTI (Cushing, Oklahoma).

Oil Roll Differential Swaps


Contract Period	NYMEX WTI Volumes	Weighted-Average Contract Price
	(MBbl)	(per Bbl)
Second quarter 2021	4,743	$	(0.16)
Third quarter 2021	4,326	$	(0.18)
Fourth quarter 2021	3,831	$	(0.16)
2022	11,278	$	0.11
Total	24,178

Gas Swaps


Contract Period	IF HSC Volumes	Weighted-Average Contract Price		WAHA Volumes	Weighted-Average Contract Price
	(BBtu)	(per MMBtu)		(BBtu)	(per MMBtu)
Second quarter 2021	13,672	$	2.45	7,230	$	1.76
Third quarter 2021	12,575	$	2.40	8,086	$	1.88
Fourth quarter 2021	12,412	$	2.41	7,627	$	1.82
2022	28,932	$	2.52	13,716	$	2.30

Total (1)	67,591			36,659

____________________________________________

(1) The Company has natural gas swaps in place that settle against Inside FERC Houston Ship Channel (“IF HSC”), Inside FERC West Texas (“IF WAHA”), and Platt’s Gas Daily West Texas (“GD WAHA”). As of March 31, 2021, WAHA volumes were comprised of 65 percent IF WAHA and 35 percent GD WAHA.

NGL Swaps


	OPIS Propane Mont Belvieu Non-TET		OPIS Normal Butane Mont Belvieu Non-TET
Contract Period		Volumes	Weighted-Average Contract Price		Volumes	Weighted-Average Contract Price
		(MBbl)	(per Bbl)		(MBbl)	(per Bbl)
Second quarter 2021		818	$	22.14	37	$	30.87
Third quarter 2021		854	$	22.16	37	$	30.87
Fourth quarter 2021		824	$	22.15	36	$	30.87
2022		231	$	22.99	—	$	—

Total		2,727			110

NGL Collars


Contract Period	OPIS Propane Mont Belvieu Non-TET	Weighted-Average Floor Price		Weighted-Average Ceiling Price
	(MBbl)	(per Bbl)		(per Bbl)



2022	234	$	22.05	$	27.30

Commodity Derivative Contracts Entered Into Subsequent to March 31, 2021

Subsequent to March 31, 2021, the Company entered into a NYMEX WTI costless collar contract for the first quarter of 2022 for a total of 180 MBbl of oil production with a contract floor price of $50.00 per Bbl and a contract ceiling price of $65.00 per Bbl.

Derivative Assets and Liabilities Fair Value

The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. The fair value of the commodity derivative contracts was a net liability of $405.0 million and $168.2 million as of March 31, 2021, and December 31, 2020, respectively.

The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category:


	As of March 31, 2021		As of December 31, 2020
	(in thousands)
Derivative assets:
Current assets	$	20,859	$	31,203
Noncurrent assets	13,567		23,150
Total derivative assets	$	34,426	$	54,353
Derivative liabilities:
Current liabilities	$	371,802	$	200,189
Noncurrent liabilities	67,595		22,331
Total derivative liabilities	$	439,397	$	222,520