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Basis of Presentation and Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2026
Accounting Policies [Abstract]  
Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to
such rules and regulations, certain disclosures have been condensed or omitted.
Consolidation Intercompany accounts and balances
have been eliminated.
Reclassification Reclassification
Certain reclassifications have been made to prior period financial statements and related disclosures to conform to current period
presentation. These reclassifications have no impact on previously reported total assets, total liabilities, net income or total operating
cash flows.
Segment Reporting Segment Reporting
In accordance with ASC 280, Segment Reporting, the Company determines its operating segments based on the components of the
business regularly reviewed by the chief executive officer, who serves as the chief operating decision maker (“CODM”), for purposes
of resource allocation and performance assessment. The CODM evaluates the Company’s operations in a consolidated manner.
Accordingly, the Company has one reportable segment.
The CODM uses consolidated income (loss) before income taxes to allocate resources and assess operating performance, and is also
regularly provided information on lease operating expense, transportation expense, production taxes, and general and administrative
expense, which represent significant segment expenses. Other segment items primarily consist of depreciation, depletion and
amortization, interest expense, and income tax expense (benefit). These amounts are derived from, and can be found within, the
Company’s Condensed Consolidated Statements of Comprehensive Income (Loss).
Segment profit or loss reconciles directly to consolidated income (loss) before income taxes, with no reconciling items.
The Company’s reportable segment, CODM, segment performance measures, and segment assets remain materially unchanged from
those reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Cash and Cash Equivalents Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less. The Company
maintains cash balances at financial institutions, which at times may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it faces no significant credit risk related to cash and cash equivalents.
Restricted Cash Restricted Cash
The Company classifies cash as restricted when contractual or regulatory requirements limit its withdrawal or use for general
corporate purposes. The Company presents restricted cash as either a current or noncurrent asset based on the expected timing of the
related obligations.
Restricted cash primarily consists of:
•Amounts the Company holds as collateral for surety bonds or that state agencies require for well abandonment obligations; and
•Cash reserves the Company maintains for interest payments and fees related to its asset-backed securitization arrangements,
which an independent indenture trustee administers.
Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted Recently Adopted Accounting Standards
In the current year, the Company adopted the following accounting standards:
ASU Number
Description
Effective Date
ASU 2024-04
Debt—Debt with Conversion and Other Options
January 1, 2026
ASU 2025-05
Measurement of credit losses for accounts receivable and contract assets from transactions
accounted for under Topic 606
January 1, 2026
The adoption of these standards did not significantly impact the Company’s Condensed Consolidated Financial Statements.
Recently Issued Accounting Standards Not Yet Adopted
The following accounting standard has been issued but is not yet effective and has not been applied in the Condensed Consolidated
Financial Statements:
ASU Number
Description
Effective Date
Impact on Financial Statements
ASU 2026-02
Environmental Credits and Environmental Credit
Obligations (Topic 818)
January 1, 2028
The Company is assessing the impact, but does
not expect a material effect.
The Company will adopt this standard on the effective date. Based on preliminary assessment, the Company does not expect the
adoption of this standard to have a material impact on its consolidated financial statements.
Asset Retirement Obligations The Company records a liability for the present value of the estimated future retirement costs associated with its natural gas and oil
properties. Additionally, the Company records a liability for the future retirement costs of its production facilities and pipelines when
required by contract, statute, or legal obligation. For the six months ended June 30, 2026, no state contractual agreements or statutes
related to production facilities and pipelines are expected to impose material obligations on the Company.
In estimating the present value of future retirement costs for its natural gas and oil properties, the Company considers several factors,
including the number and state jurisdictions of wells, current retirement costs by state and well type, and the Company’s retirement
plan, which is based on state requirements and the Company’s capacity to retire wells over their productive lives. The Company’s
assumptions are grounded in the current economic environment and are believed to provide a reasonable basis for estimating the future
liability. However, actual retirement costs will ultimately depend on future market prices at the time the retirement services are
performed. Additionally, the timing of retirement will vary based on when the fields cease to produce economically, which is
influenced by future natural gas and oil prices and the retirement schedule. These factors are inherently uncertain.
The Company incorporates annual inflationary cost increases into its current cost expectations and then discounts the resulting cash
flows using a credit-adjusted risk-free discount rate.
Fair Value The fair value of an asset or liability is defined as the price that would be received for an asset or paid to transfer a liability in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use
of unobservable inputs. To determine fair value, the Company applies a hierarchy that consists of three input levels. The first and
second levels are regarded as observable, while the third is categorized as unobservable. These input levels may be utilized in the
measurement of fair value as outlined below:
Level 1:
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2:
Inputs (other than quoted prices included in Level 1) can include the following:
(1) Observable prices in active markets for similar assets or liabilities;
(2) Prices for identical assets or liabilities in markets that are not active;
(3) Directly observable market inputs for substantially the full term of the asset or liability; and
(4) Market inputs that are not directly observable but are derived from or corroborated by observable market data.
Level 3:
Unobservable inputs which reflect the Company’s best estimates of what market participants would use in pricing the
asset or liability at the measurement date.
Recurring Fair Value Measurements
Derivatives
The Company measures the fair value of its derivatives in accordance with ASC 820, Fair Value Measurement, utilizing valuation
models that incorporate observable market inputs whenever available. These inputs typically include contractual terms, current market
prices, forward price curves for natural gas, liquids, and oil, relevant interest rate yield curves (such as U.S. Treasury and SOFR), and
volatility factors.
Derivatives are classified within the fair value hierarchy based on the observability of the inputs used in the valuation. The Company’s
fixed price swaps are classified as Level 2 and are valued using third-party discounted cash flow models, which rely on NYMEX
futures for natural gas and oil derivatives and OPIS forward curves for NGL derivatives. Interest rate derivatives, also classified as
Level 2, are valued using discounted cash flow models that incorporate contracted notional amounts, market-quoted SOFR yield
curves, and credit-adjusted risk-free rates.
Options, including call options, put options, and collars, are classified as Level 2 and valued using the Black-Scholes option pricing
model. This model incorporates contract terms such as maturity, market parameters including NYMEX and OPIS futures, interest
rates, volatility, and counterparty credit risk. Volatility and other significant inputs are obtained from independent third-party pricing
sources and are subject to monthly verification.
Basis swaps are classified as Level 2 and are valued using third-party models based on forward commodity price curves.
Changes in key inputs, such as volatility, may result in changes to the fair value measurement of the Company’s derivatives.
Nonrecurring Fair Value Measurements
Impairment of Proved Natural Gas & Oil Properties
When impairment occurs, the Company estimates the fair value of the impaired proved natural gas and oil properties through a
discounted cash flow method, which incorporates Level 3 inputs that are not directly observable.
Business combinations
The Company assesses the value of acquired proved properties using an income-based approach as of the acquisition date. This
method is classified as a Level 3 fair value estimate due to its reliance on key assumptions, such as anticipated production volumes,
future commodity pricing, operating costs, weighted average cost of capital (the discount rate) and risk adjustments tailored to the
reserve classification.