QEP Resources Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

qep-20200930

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 September 30, 2020


☐			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: 001-34778

QEP RESOURCES, INC.

(Exact name of registrant as specified in its charter)


Delaware						87-0287750
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

1050 17th Street, Suite 800, Denver, Colorado 80265

(Address of principal executive offices)

Registrant's telephone number, including area code (303) 672-6900

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	QEP	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 (Section 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 ☒

At September 30, 2020, there were 242,221,121 shares of the registrant's common stock, $0.01 par value, outstanding.

QEP Resources, Inc.

Form 10-Q for the Quarter Ended September 30, 2020

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			2

	ITEM 1.	FINANCIAL STATEMENTS	2

		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	2

		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	3

		UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2020 AND DECEMBER 31, 2019	4

		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	5

		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	6

		UNAUDITED NOTES ACCOMPANYING THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7

	ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	48

	ITEM 4.	CONTROLS AND PROCEDURES	52

PART II. OTHER INFORMATION			52

	ITEM 1.	LEGAL PROCEEDINGS	52

	ITEM 1A.	RISK FACTORS	53

	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	58

	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	58

	ITEM 4.	MINE SAFETY DISCLOSURES	58

	ITEM 5.	OTHER INFORMATION	58

	ITEM 6.	EXHIBITS	59

SIGNATURES			60

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QEP RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
REVENUES	(in millions, except per share amounts)
Oil and condensate, gas and NGL sales	$	175.8	$	305.6	$	515.9	$	875.8
Other revenues	1.4		1.8		1.6		7.1
Purchased oil and gas sales	0.6		0.1		6.7		1.4
Total Revenues	177.8		307.5		524.2		884.3
OPERATING EXPENSES
Purchased oil and gas expense	0.8		0.1		8.2		1.5
Lease operating expense	35.5		38.3		104.5		135.5
Transportation and processing costs	12.4		18.0		38.2		38.8
Gathering and other expense	3.4		3.1		8.9		9.9
General and administrative	20.9		29.6		63.1		124.4
Production and property taxes	14.0		20.0		42.3		67.6
Depreciation, depletion and amortization	133.0		144.2		424.6		395.5
Impairment	—		—		—		5.0
Total Operating Expenses	220.0		253.3		689.8		778.2
Net gain (loss) from asset sales, inclusive of restructuring costs	0.1		(2.1)		3.8		2.5
OPERATING INCOME (LOSS)	(42.1)		52.1		(161.8)		108.6
Realized and unrealized gains (losses) on derivative contracts	(34.2)		87.4		317.0		(55.8)
Interest and other income (expense)	7.7		0.9		7.7		4.6
Gain (loss) from early extinguishment of debt	(7.4)		—		18.2		—
Interest expense	(28.4)		(32.8)		(89.8)		(100.0)
INCOME (LOSS) BEFORE INCOME TAXES	(104.4)		107.6		91.3		(42.6)
Income tax (provision) benefit	55.2		(26.6)		42.5		55.7
NET INCOME (LOSS)	$	(49.2)	$	81.0	$	133.8	$	13.1

Earnings (loss) per common share
Basic	$	(0.20)	$	0.34	$	0.55	$	0.06
Diluted	$	(0.20)	$	0.34	$	0.55	$	0.06

Weighted-average common shares outstanding
Used in basic calculation	242.3		237.9		241.2		237.7
Used in diluted calculation	242.3		237.9		241.2		237.7

Refer to Notes accompanying the Condensed Consolidated Financial Statements.

QEP RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)
Net income (loss)	$	(49.2)	$	81.0	$	133.8	$	13.1
Other comprehensive income (loss), net of tax:
Pension and other postretirement plans adjustments:
Amortization of prior service costs	—		0.1		—		0.2
Amortization of actuarial losses(1)	0.1		—		0.5		0.1
Net curtailment(2)	—		—		—		(0.3)
Other comprehensive income (loss)	0.1		0.1		0.5		—
Comprehensive income (loss)	$	(49.1)	$	81.1	$	134.3	$	13.1

____________________________

(1)Presented net of income tax benefit of $0.1 million and $0.2 million for the three and nine months ended September 30, 2020, respectively.

(2)Presented net of income tax benefit of $0.1 million for the nine months ended September 30, 2019.

Refer to Notes accompanying the Condensed Consolidated Financial Statements.

QEP RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2020		December 31, 2019
ASSETS	(in millions)
Current Assets
Cash and cash equivalents	$	9.5	$	166.3
Accounts receivable, net	84.1		108.4
Income tax receivable	50.5		37.4
Fair value of derivative contracts	77.5		1.5
Prepaid expenses and other current assets	8.5		11.6
Total Current Assets	230.1		325.2
Property, Plant and Equipment (successful efforts method for oil and gas properties)
Proved properties	9,812.9		9,574.9
Unproved properties	544.2		599.1
Gathering and other	165.5		164.2
Materials and supplies	16.9		15.6
Total Property, Plant and Equipment	10,539.5		10,353.8
Less Accumulated Depreciation, Depletion and Amortization
Exploration and production	5,603.6		5,250.5
Gathering and other	68.5		61.0
Total Accumulated Depreciation, Depletion and Amortization	5,672.1		5,311.5
Net Property, Plant and Equipment	4,867.4		5,042.3
Fair value of derivative contracts	0.8		0.2
Operating lease right-of-use assets, net	52.7		56.8
Other noncurrent assets	85.7		53.3
TOTAL ASSETS	$	5,236.7	$	5,477.8
LIABILITIES AND EQUITY
Current Liabilities
Checks outstanding in excess of cash balances	$	—	$	18.3
Accounts payable and accrued expenses	164.5		227.2
Production and property taxes	10.7		18.9

Interest payable	29.1		31.0
Fair value of derivative contracts	4.7		18.7
Current operating lease liabilities	22.6		18.0
Asset retirement obligations	7.1		6.0
Total Current Liabilities	238.7		338.1
Long-term debt	1,590.4		2,015.6
Deferred income taxes	440.0		274.5
Asset retirement obligations	94.8		94.9
Fair value of derivative contracts	6.7		0.5
Operating lease liabilities	35.4		44.8
Other long-term liabilities	32.1		48.8

Commitments and contingencies (Note 11)
EQUITY
Common stock – par value $0.01 per share; 500.0 million shares authorized; 247.2 million and 242.1 million shares issued, respectively	2.5		2.4
Treasury stock – 5.0 million and 4.4 million shares, respectively	(56.7)		(55.4)
Additional paid-in capital	1,466.2		1,456.5
Retained earnings	1,398.6		1,269.6
Accumulated other comprehensive income (loss)	(12.0)		(12.5)
Total Common Shareholders' Equity	2,798.6		2,660.6
TOTAL LIABILITIES AND EQUITY	$	5,236.7	$	5,477.8

Refer to Notes accompanying the Condensed Consolidated Financial Statements.

QEP RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount		Shares	Amount
	(in millions)
Balance at June 30, 2020	247.2	$	2.5	(4.9)	$	(56.6)	$	1,463.3	$	1,447.8	$	(12.1)	$	2,844.9
Net income (loss)	—	—		—	—		—		(49.2)		—		(49.2)
Share-based compensation	—	—		(0.1)	(0.1)		2.9		—		—		2.8
Change in pension and postretirement liability, net of tax	—	—		—	—		—		—		0.1		0.1
Balance at September 30, 2020	247.2	$	2.5	(5.0)	$	(56.7)	$	1,466.2	$	1,398.6	$	(12.0)	$	2,798.6


Balance at December 31, 2019	242.1	$	2.4	(4.4)	$	(55.4)	$	1,456.5	$	1,269.6	$	(12.5)	$	2,660.6
Net income (loss)	—	—		—	—		—		133.8		—		133.8
Cash dividends paid, $0.02 per share	—	—		—	—		—		(4.8)		—		(4.8)
Share-based compensation	5.1	0.1		(0.6)	(1.3)		9.7		—		—		8.5
Change in pension and postretirement liability, net of tax	—	—		—	—		—		—		0.5		0.5
Balance at September 30, 2020	247.2	$	2.5	(5.0)	$	(56.7)	$	1,466.2	$	1,398.6	$	(12.0)	$	2,798.6


Balance at June 30, 2019	242.0	$	2.4	(4.1)	$	(53.6)	$	1,446.3	$	1,308.6	$	(14.4)	$	2,689.3
Net income (loss)	—	—		—	—		—		81.0		—		81.0
Cash dividends paid, $0.02 per share	—	—		—	—		—		(4.8)		—		(4.8)
Share-based compensation	0.1	—		(0.2)	(1.2)		5.6		—		—		4.4
Change in pension and postretirement liability, net of tax	—	—		—	—		—		—		0.1		0.1
Balance at September 30, 2019	242.1	$	2.4	(4.3)	$	(54.8)	$	1,451.9	$	1,384.8	$	(14.3)	$	2,770.0


Balance at December 31, 2018	239.8	$	2.4	(3.1)	$	(45.6)	$	1,431.9	$	1,376.5	(14.3)		$	2,750.9
Net income (loss)	—	—		—	—		—		13.1		—		13.1
Cash dividends paid, $0.02 per share	—	—		—	—		—		(4.8)		—		(4.8)
Share-based compensation	2.3	—		(1.2)	(9.2)		20.0		—		—		10.8
Change in pension and postretirement liability, net of tax	—	—		—	—		—		—		—		—
Balance at September 30, 2019	242.1	$	2.4	(4.3)	$	(54.8)	$	1,451.9	$	1,384.8	$	(14.3)	$	2,770.0

Refer to Notes accompanying the Condensed Consolidated Financial Statements.

QEP RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	September 30,
	2020		2019
OPERATING ACTIVITIES	(in millions)
Net income (loss)	$	133.8	$	13.1
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization	424.6		395.5
Deferred income taxes (benefit)	165.3		(61.2)
Impairment	—		5.0
Non-cash share-based compensation	9.3		16.2
Non-cash (gain) loss from warehouse inventory	0.7		—
Amortization of debt issuance costs and discounts	3.7		4.0
Net (gain) loss from asset sales, inclusive of restructuring costs	(3.8)		(2.5)
Gain from early extinguishment of debt	(18.2)		—
Unrealized (gains) losses on marketable securities	(1.1)		(2.8)
Unrealized (gains) losses on derivative contracts	(84.4)		29.0
Changes in operating assets and liabilities	(75.9)		(54.3)
Net Cash Provided by (Used in) Operating Activities	554.0		342.0
INVESTING ACTIVITIES
Property acquisitions	(4.1)		(3.6)
Expenditures for property, plant and equipment, including exploratory well expense	(284.5)		(465.2)
Proceeds from disposition of assets	13.4		676.5
Net Cash Provided by (Used in) Investing Activities	(275.2)		207.7
FINANCING ACTIVITIES
Checks outstanding in excess of cash balances	(18.3)		(13.9)
Long-term debt issuance costs paid	(0.5)		—
Repurchases and redemption of senior notes	(410.3)		—
Proceeds from credit facility	21.1		56.0
Repayments of credit facility	(21.1)		(486.0)
Treasury stock repurchases	(0.8)		(7.0)
Dividends paid	(4.8)		(4.8)
Net Cash Provided by (Used in) Financing Activities	(434.7)		(455.7)
Change in cash, cash equivalents and restricted cash(1)	(155.9)		94.0
Beginning cash, cash equivalents and restricted cash(1)	196.4		28.1
Ending cash, cash equivalents and restricted cash(1)	$	40.5	$	122.1

Supplemental Disclosures:
Cash paid for interest, net of capitalized interest	$	88.2	$	94.1
Cash paid (refunds received) for income taxes, net	$	(164.0)	$	5.0
Cash paid for amounts included in the measurement of lease liabilities	$	19.0	$	14.5
Other Non-cash Activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	9.3	$	11.1
Non-cash Investing Activities:
Capital expenditure accruals as of September 30, 2020 and 2019	$	32.3	$	55.3

____________________________

(1)Refer to Cash, Cash Equivalents and Restricted Cash in Note 1 – Basis of Presentation.

Refer to Notes accompanying the Condensed Consolidated Financial Statements.

QEP RESOURCES, INC.

NOTES ACCOMPANYING THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

Nature of Business

QEP Resources, Inc. (QEP or the Company) is an independent crude oil and natural gas exploration and production company with operations in two regions of the United States: the Southern Region (primarily in Texas) and the Northern Region (primarily in North Dakota). Unless otherwise specified or the context otherwise requires, all references to "QEP" or the "Company" are to QEP Resources, Inc. and its subsidiaries on a consolidated basis. QEP's corporate headquarters are located in Denver, Colorado and shares of QEP's common stock trade on the New York Stock Exchange (NYSE) under the ticker symbol "QEP".

Basis of Presentation

The interim Condensed Consolidated Financial Statements (financial statements) contain the accounts of QEP and its majority-owned or controlled subsidiaries. The financial statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States and with the instructions for Quarterly Reports on Form 10-Q and Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation.

The financial statements reflect all normal recurring adjustments and accruals that are, in the opinion of management, necessary for a fair statement of financial position and results of operations for the interim periods presented. Interim financial statements do not include all of the information and notes required by GAAP for annual consolidated financial statements. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of the financial statements and Notes in conformity with GAAP requires that management make estimates and assumptions that affect revenues, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. Actual results could differ from estimates. Further, these estimates and other factors, including those outside the Company's control, such as the impact of sustained lower commodity prices, could have a significant adverse impact to the Company's financial condition, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Certain prior period balances on the Condensed Consolidated Balance Sheets (balance sheets) and Condensed Consolidated Statements of Cash Flows (statements of cash flows) have been reclassified to conform to the current year presentation. Such reclassifications had no effect on the Company's net income (loss), earnings (loss) per share or retained earnings previously reported.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents primarily consist of highly liquid investments in securities with original maturities of three months or less made through commercial bank accounts that result in available funds the next business day. Restricted cash are funds that are legally or contractually reserved for a specific purpose and therefore not available for immediate or general business use.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets to the amounts shown in the statements of cash flows:


	September 30,
	2020		2019
	(in millions)
Cash and cash equivalents	$	9.5	$	92.4
Restricted cash(1)	31.0		29.7
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	40.5	$	122.1

_______________________

(1) As of September 30, 2020 and 2019, the restricted cash balance is cash held in an escrow account related to a title dispute between outside parties in the Williston Basin. The restricted cash balance is recorded within "Other noncurrent assets" on the balance sheets.

Income Tax

The tax legislation enacted in December 2017 reduced our federal corporate tax rate from 35% to 21% and eliminated the corporate Alternative Minimum Tax (AMT), allowing the Company to claim AMT refunds for AMT credits carried forward from prior tax years. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted in March 2020 permitted the Company to carry back its net operating loss (NOL) generated in 2018 and 2019, creating additional AMT credits, and accelerate all of its AMT refunds. The Company received $170.7 million of AMT credit refunds, inclusive of $5.6 million in interest income, during the three months ended September 30, 2020 and $73.9 million of AMT credit refunds in 2019. As of September 30, 2020, the Company expects to receive an additional $81.0 million in AMT credit refunds due to additional NOL carrybacks relating to the 2018 and 2019 tax years. The NOLs that were generated are primarily due to the issuance of final regulations by the U.S Department of Treasury in July 2020 that relate to the deductibility of interest expense. Of the $81.0 million in AMT credit refunds to be received, $50.1 million is included in "Income taxes receivable" and $30.9 million is included in "Other noncurrent assets" on the balance sheets as of September 30, 2020.

QEP’s effective federal and state income tax rate was 52.9% during the third quarter of 2020 compared to a rate of 24.7% during the third quarter of 2019. The increase in the federal and state income tax rate was primarily driven by the impact of discrete items (unusual or infrequent items impacting the tax provision) and permanent differences recognized during the third quarter of 2020 and 2019. During the third quarter 2020 the effective rate was above the statutory rate due to discrete items recognized in the third quarter of 2020, including the remeasurement of deferred taxes due to NOL carrybacks under the CARES Act to a year with a higher federal tax rate, partially offset by a state tax payment. During the third quarter 2019 the rate was driven higher than the statutory rate by the recognition of a discrete item related to share-based compensation and a permanent difference related to the change in the estimated amount of non-deductible executive compensation.

QEP’s effective federal and state income tax rate was negative 46.5% during the nine months ended September 30, 2020 compared to a rate of 130.8% during the nine months ended September 30, 2019. The decrease in the federal and state income tax rate was primarily driven by the impact of discrete items and permanent differences recognized during the nine months ended September 30, 2020 and 2019. During the first three quarters of 2020 the primary discrete item lowering the effective tax rate was the remeasurement of deferred taxes due to NOL carrybacks under the CARES Act to a year with a higher federal tax rate. The primary discrete items recognized during the nine months ended September 30, 2019 related to the remeasurement of deferred taxes associated with the sale of QEP's Haynesville/Cotton Valley assets in January 2019, share-based compensation adjustments and a permanent difference related to the estimated amount of non-deductible executive compensation.

Impairment of Long-Lived Assets

During the nine months ended September 30, 2020, there were no impairment charges. During the nine months ended September 30, 2019, QEP recorded impairment charges of $5.0 million related to an office building lease.

Employee Benefits

QEP provides pension and other postretirement benefits to certain employees through three retiree benefit plans: the QEP Resources, Inc. Retirement Plan (the Pension Plan), the Supplemental Executive Retirement Plan (the SERP), and a postretirement medical plan (the Medical Plan). The Pension Plan is a closed, qualified, defined-benefit pension plan that is funded and provides pension benefits to certain QEP employees. The Pension Plan was amended in June 2015 and was frozen, such that active participants do not earn any additional accrued benefits on or after January 1, 2016. The SERP is a nonqualified retirement plan that is unfunded and provides postretirement benefits to certain QEP employees. The Medical Plan is a self-insured plan. It is unfunded and provides other postretirement benefits including certain health care and life insurance benefits for certain retired QEP employees.

During the nine months ended September 30, 2020, the Company made contributions of $11.5 million to its retiree benefit plans (including $4.0 million to the Pension Plan and $7.5 million to the SERP) and expects to contribute an additional $2.3 million during the remainder of 2020 (including $2.2 million to the SERP and $0.1 million to the Medical Plan). Contributions to the Pension Plan increase plan assets whereas contributions to the SERP and Medical Plan are used to fund current benefit payments.

The Company recognizes service costs related to SERP and Medical Plan benefits on the Condensed Consolidated Statements of Operations (statements of operations) within "General and administrative" expense. All other expenses related to the Pension Plan, SERP and Medical Plan are recognized on the statements of operations within "Interest and other income (expense)".

QEP also offers a nonqualified, unfunded deferred compensation wrap plan (Wrap Plan) to certain individuals. The Wrap Plan provides participants with certain tax planning benefits as well as supplemental funds for retirement and allows participants to defer the receipt of various types of compensation. Participants are able to select from a variety of investment options, including mutual funds and phantom QEP shares. As of September 30, 2020 and December 31, 2019, the Wrap Plan obligations for participants' future benefits were $25.0 million and $26.8 million, respectively, and are included in "Other long-term liabilities" on the balance sheets. The Company established a trust (Rabbi Trust) to hold the investments associated with the Wrap Plan (other than phantom QEP shares) and to pay Wrap Plan obligations as they arise. As of September 30, 2020 and December 31, 2019, the marketable securities held in the Rabbi Trust were $23.6 million and $23.1 million, respectively, and are included in "Other noncurrent assets" on the balance sheets.

Changes in the fair value of Wrap Plan obligations and marketable securities are recorded as "Deferred compensation mark-to-market adjustments" and "Unrealized gain/loss on marketable securities" within "General and administrative" and "Interest and other income (expense)", respectively, on the statements of operations. "Deferred compensation mark-to-market adjustments" and "Unrealized gain/loss on marketable securities" for the three and nine months ended September 30, 2020 and 2019, respectively, are summarized in the table below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019			2020		2019
	(in millions)
Deferred compensation mark-to-market adjustments	$	0.5	$	(3.1)		$	(2.7)	$	0.6
Unrealized (gain)/loss on marketable securities	(1.1)		(0.1)			(1.1)		(2.8)

Refer to Note 6 – Fair Value Measurements for information on the fair value measurement of the marketable securities held in the Rabbi Trust and the Wrap Plan obligations.

Recent Accounting Developments

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of credit losses on financial instruments, which requires a company immediately recognize management's current estimated credit losses ("CECL") for all financial instruments that are not accounted for at fair value through net income. Previously, credit losses on financial assets were only required to be recognized when they were incurred. The Company adopted ASU 2016-13 on January 1, 2020. The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair value measurement (Topic 820) - Disclosure framework - Changes to the disclosure requirements for fair value measurement, which modifies the disclosure requirements on fair value

measurements in Topic 820. The Company adopted ASU 2018-13 on January 1, 2020. The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (LIBOR). The amendment provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This amendment is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company's financial statements.

Note 2 – Revenue

Revenue Recognition

QEP recognizes revenue from the sale of oil and condensate, gas and NGL in the period that the performance obligations are satisfied. QEP's performance obligations are satisfied when the customer obtains control of product, when QEP has no further obligations to perform related to the sale, when the transaction price has been determined and when collectability is probable. The sale of oil and condensate, gas and NGL are made under contracts with customers, which typically include consideration that is based on pricing tied to local indices and volumes delivered in the current month. Reported revenues include estimates for the two most recent months using published commodity price indices and volumes supplied by field operators. Performance obligations under our contracts with customers are typically satisfied at a point in time through monthly delivery of oil and condensate, gas and/or NGL. Our contracts with customers typically require payment for oil and condensate, gas and NGL sales within 30 days following the calendar month of delivery.

QEP's oil and condensate is typically sold at specific delivery points under contract terms that are common in the industry. QEP's gas and NGL are also sold under contract types that are common in the industry; however, under these contracts, the gas and its components, including NGL, may be sold to a single purchaser or the residue gas and NGL may be sold to separate purchasers. Regardless of the contract type, the terms of these contracts compensate QEP for the value of the residue gas and NGL constituent components at market prices for each product. QEP also purchases and resells oil and gas primarily to fulfill volume commitments when production does not fulfill contractual commitments and to capture additional margin from subsequent sales of third party purchases. QEP recognizes revenue from these resale activities in the period that the performance obligations are satisfied.

The following tables present QEP's revenues that are disaggregated by revenue source and by geographic area. Transportation and processing costs in the following table are not all of the transportation and processing costs that QEP incurs, only the costs that are netted against revenues pursuant to ASC Topic 606, Revenue Recognition.


	Oil and condensate sales		Gas sales		NGL sales		Transportation and processing costs included in revenue		Oil and condensate, gas and NGL sales, as reported
	(in millions)
	Three Months Ended September 30, 2020
Northern Region
Williston Basin	$	58.6	$	3.3	$	4.1	$	(9.4)	$	56.6
Other Northern	—		—		—		—		—
Southern Region
Permian Basin	110.7		6.0		9.1		(6.6)		119.2
Other Southern	—

Price	4.36	EPS	-3
Shares	238	P/E	-2
MCap	1,037	P/FCF	3
Net Debt	1,907	EBIT	-721
TEV	2,945	TEV/EBIT	-4
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-10-28
10-Q	2020-06-30	Filed 2020-07-29
10-Q	2020-03-31	Filed 2020-04-29
10-K	2019-12-31	Filed 2020-02-26
10-Q	2019-09-30	Filed 2019-10-23
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-04-24
10-K	2018-12-31	Filed 2019-02-20
10-Q	2018-09-30	Filed 2018-11-07
10-Q	2018-06-30	Filed 2018-07-25
10-Q	2018-03-31	Filed 2018-04-25
10-K	2017-12-31	Filed 2018-02-28
10-Q	2017-09-30	Filed 2017-10-25
10-Q	2017-06-30	Filed 2017-07-26
10-Q	2017-03-31	Filed 2017-04-26
10-K	2016-12-31	Filed 2017-02-22
10-Q	2016-09-30	Filed 2016-10-26
10-Q	2016-06-30	Filed 2016-07-27
10-Q	2016-03-31	Filed 2016-04-27
10-K	2015-12-31	Filed 2016-02-24
10-Q	2015-09-30	Filed 2015-10-28
10-Q	2015-06-30	Filed 2015-08-03
10-Q	2015-03-31	Filed 2015-04-29
10-K	2014-12-31	Filed 2015-02-24
10-Q	2014-09-30	Filed 2014-11-05
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-07
10-K	2013-12-31	Filed 2014-02-25
10-Q	2013-09-30	Filed 2013-11-05
10-Q	2013-06-30	Filed 2013-07-31
10-Q	2013-03-31	Filed 2013-04-30
10-K	2012-12-31	Filed 2013-02-22
10-Q	2012-06-30	Filed 2012-07-31
10-Q	2012-03-31	Filed 2012-04-26
10-K	2011-12-31	Filed 2012-02-24
10-Q	2011-09-30	Filed 2011-10-28
10-Q	2011-06-30	Filed 2011-07-29
10-Q	2011-03-31	Filed 2011-04-28
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-11-02
10-Q	2010-06-30	Filed 2010-07-30
10-Q	2010-03-31	Filed 2010-05-06
10-K	2009-12-31	Filed 2010-03-08

8-K	2020-10-28
8-K	2020-10-28
8-K	2020-07-29
8-K	2020-06-04
8-K	2020-05-12
8-K	2020-04-29
8-K	2020-04-10
8-K	2020-03-12
8-K	2020-03-03
8-K	2020-02-26
8-K	2019-10-21
8-K	2019-10-17
8-K	2019-08-07
8-K	2019-05-14
8-K	2019-04-24
8-K	2019-02-20
8-K	2019-01-11
8-K	2019-01-10
8-K	2018-12-05
8-K	2018-11-17
8-K	2018-11-16
8-K	2018-11-07
8-K	2018-11-06
8-K	2018-07-25
8-K	2018-05-15
8-K	2018-04-25
8-K	2018-03-01
8-K	2018-02-28

EX-3.2	qep-20200930ex32.htm
EX-31.1	qep-20200930ex311.htm
EX-31.2	qep-20200930ex312.htm
EX-32.1	qep-20200930ex321.htm

QEP 10Q Quarterly Report

QEP Resources Earnings 2020-09-30