v3.26.1
Risk Management and Derivative Instruments
 3 Months Ended
Mar. 31, 2026
Risk Management and Derivative Instruments  
Risk Management and Derivative Instruments

Note 6. Risk Management and Derivative Instruments

Derivative instruments are utilized to manage exposure to commodity price and interest rate fluctuations and to achieve a more predictable cash flow in connection with oil sales and borrowing related activities. These instruments limit exposure to declines in prices but also limit the benefits that would be realized if prices increase.

Certain inherent business risks are associated with commodity derivative contracts, including market risk and credit risk. Market risk is the risk that the price of oil will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from non-performance by the counterparty to a contract. It is the Company’s policy to enter into derivative contracts only with creditworthy counterparties, which are generally financial institutions, deemed by management as competent and competitive market makers. Some of the lenders, or certain of their affiliates, under the Company’s current credit agreements are counterparties to its derivative contracts. While collateral is generally not required to be posted by counterparties, credit risk associated with derivative instruments is minimized by limiting exposure to any single counterparty and entering into derivative instruments only with creditworthy counterparties that are generally large financial institutions. Additionally, master netting agreements are used to mitigate risk of loss due to default with counterparties on derivative instruments. The Company has also entered into International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) with each of its counterparties. The terms of the ISDA Agreements provide the Company and each of its counterparties with rights of set-off upon the occurrence of defined acts of default by either the Company or its counterparty to a derivative, whereby the party not in default may set-off all liabilities owed to the defaulting party against all net derivative asset receivables from the defaulting party. See Note 8 for additional information regarding the Company’s Revolving Credit Facility.

Commodity Derivatives

The Company may use a combination of commodity derivatives (e.g., floating-for-fixed swaps, put options and costless collars) to manage exposure to commodity price volatility. The Company recognizes all derivative instruments at fair value.

The Company also enters into oil derivative contracts indexed to NYMEX-WTI and ICE Brent.

At March 31, 2026, the Company had the following open commodity positions:

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Remaining

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2026

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2027

Crude Oil Derivative Contracts:

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Fixed price swap contracts (WTI):

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Average monthly volume (Bbls)

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151,333

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76,167

Weighted-average fixed price

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$

65.27

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$

64.02

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​

​

​

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Fixed price swap contracts (ICE Brent) :

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Average monthly volume (Bbls)

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6,667

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—

Weighted-average fixed price

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$

84.25

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$

—

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Collar contracts:

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Two-way collars (WTI)

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Average monthly volume (Bbls)

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—

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3,750

Weighted-average floor price

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$

—

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$

65.00

Weighted-average ceiling price

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$

—

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$

77.50

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Two-way collars (ICE Brent)

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Average monthly volume (Bbls)

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—

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30,000

Weighted-average floor price

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$

—

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$

74.00

Weighted-average ceiling price

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$

—

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$

83.35

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Balance Sheet Presentation

The following table summarizes both: (i) the gross fair value of derivative instruments by the appropriate balance sheet classification even when the derivative instruments are subject to netting arrangements and qualify for net presentation in the balance sheet and (ii) the net recorded fair value as reflected on the balance sheet at March 31, 2026 and December 31, 2025. There was no cash collateral received or pledged associated with the Company’s derivative instruments since most of its counterparties, or certain of its affiliates, to its derivative contracts are lenders under its Revolving Credit Facility.

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Asset 

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Liability

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Asset 

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Liability

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Derivatives

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Derivatives

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Derivatives

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Derivatives

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March 31, 

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March 31, 

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December 31, 

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December 31, 

Type

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Balance Sheet Location

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2026

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2026

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2025

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2025

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(In thousands)

Commodity contracts

 

Short-term derivative instruments

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$

1,344

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$

24,120

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$

15,429

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$

—

Interest rate swaps

 

Short-term derivative instruments

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—

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—

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—

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—

Gross fair value

 

​

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1,344

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24,120

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15,429

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—

Netting arrangements

 

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(1,344)

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(1,344)

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—

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—

Net recorded fair value

 

Short-term derivative instruments

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$

—

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$

22,776

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$

15,429

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$

—

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Commodity contracts

 

Long-term derivative instruments

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$

2,628

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$

4,446

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$

3,425

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$

—

Interest rate swaps

 

Long-term derivative instruments

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—

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—

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—

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—

Gross fair value

 

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2,628

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4,446

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3,425

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—

Netting arrangements

 

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(2,628)

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(2,628)

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—

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—

Net recorded fair value

 

Long-term derivative instruments

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$

—

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$

1,818

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$

3,425

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$

—

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Loss (Gain) on Derivative Instruments

The Company does not designate derivative instruments as hedging instruments for accounting and financial reporting purposes. Accordingly, all gains and losses, including changes in the derivative instruments’ fair values, have been recorded in the accompanying Unaudited Condensed Consolidated Statements of Operations. The following table details the gains and losses related to derivative instruments for the periods indicated (in thousands):

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For the Three Months Ended

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Statements of

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March 31, 

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Operations Location

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2026

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2025

Commodity derivative contracts

 

Loss (gain) on commodity derivatives

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$

45,822

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$

14,317

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