Table of Contents (1) Includes $1 million in premiums paid related to certain natural gas call options recognized as a component of derivative assets within current assets on the consolidated balance sheets at December 31, 2017. The table below presents reconciliations for the change in net fair value of derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2018 and 2017. The fair values of Level 3 derivative instruments are estimated using proprietary valuation models that utilize both market observable and unobservable parameters. Level 3 instruments presented in the table consisted of net derivatives valued using pricing models incorporating assumptions that, in the Company’s judgment, reflected reasonable assumptions a marketplace participant would have used as of December 31, 2018 and 2017. (1) Includes $1 million and $5 million amortization of premiums paid related to certain natural gas call options for the years ended December 31, 2018 and 2017, respectively. (2) Commodity derivatives previously presented as Level 3 were transferred to Level 2 in the second quarter of 2018 as the Company moved from using proprietary volatility inputs and forward curves to more widely available published information, increasing market observability. See  Note 12  for a discussion of the fair value measurement of the Company’s pension plan assets. Assets and liabilities measured at fair value on a nonrecurring basis As further discussed in  Note 3 , the Company’s announcement of the Fayetteville Shale sale resulted in the reclassification of certain related assets and liabilities to held for sale on its balance sheet in the third quarter of 2018. Because the non-full cost pool assets met the criteria for held for sale accounting in the third quarter of 2018 due to their inclusion in the Fayetteville Shale sale, the Company determined the carrying value of certain non-full cost pool assets exceeded the carrying value less costs to sell. As a result, an impairment charge of $160 million was recorded for the year ended December 31, 2018, of which $145 million related to midstream gathering assets held for sale and $15 million related to E&P assets held for sale. Separately, the Company recorded an $11 million impairment of other non-core assets that were not included in the Fayetteville Shale sale, for the year ended December 31, 2018. The estimated fair value of the gathering assets was based on an estimated discounted cash flow model and market assumptions. The significant Level 3 assumptions used in the calculation of estimated discounted cash flows included in future rates of production, inflation factors and risk adjusted discount rates. These impairments are included in Net Income (Loss) from Operations in the accompanying consolidated statements of operations. On December 3, 2018, the Company closed on the Fayetteville Shale sale. Consequently, the 100 For the years ended December 31, (in millions) 2018 2017 Balance at beginning of year $ 22  $ (195) Total gains (losses): Included in earnings (17) 199  Settlements  (1) 1  18  Transfers into/out of Level 3  (2) (6) – Balance at end of period $ – $ 22  Change in gains (losses) included in earnings relating to derivatives still held as of December 31 $ – $ 217  Index to Financial Statements December 31, 2017 Fair Value Measurements Using: (in millions) Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets (Liabilities) at Fair Value Assets Fixed price swap – natural gas $ – $ 56  $ – $ 56  Two-way costless collar – natural gas – – 5  5  Three-way costless collar – natural gas – – 121  121  Purchased call option – natural gas  (1) – – 3  3  Basis swap – natural gas – – 2  2  Liabilities Fixed price swap – natural gas – (1) – (1) Two-way costless collar – natural gas – – (1) (1) Three-way costless collar – natural gas – – (66) (66) Basis swap – natural gas – – (23) (23) Sold call option – natural gas – – (18) (18) Interest rate swap – (1) – (1) Total $ – $ 54  $ 23  $ 77 