| DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT |
DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT The Company utilizes various commodity price derivative instruments to (i) reduce the effects of volatility in price changes on the crude oil and natural gas commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending. In addition, from time to time the Company utilizes interest rate swaps to mitigate exposure to changes in interest rates on the Company’s variable-rate indebtedness.
All derivative instruments are recorded in the Company’s condensed consolidated balance sheets as either assets or liabilities measured at their fair value (see Note 9). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value are recognized in the Company’s condensed consolidated statements of operations as a gain or loss on derivative instruments. Mark-to-market gains and losses represent changes in fair values of derivative instruments that have not been settled. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making or receiving a payment to or from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.
The Company has master netting agreements on individual derivative instruments with certain counterparties and therefore the current asset and liability are netted in the condensed consolidated balance sheets and the non-current asset and liability are netted in the condensed consolidated balance sheets for contracts with these counterparties.
Commodity Derivative Instruments
The following table presents settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented which is recorded in the revenue section of our condensed consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended
June 30, | | Six Months Ended
June 30, | | (In thousands) | 2026 | | 2025 | | 2026 | | 2025 | | Cash Received (Paid) on Settled Commodity Derivatives, Net | $ | (86,320) | | | $ | 60,931 | | | $ | (103,953) | | | $ | 72,993 | | | Non-Cash Mark-to-Market Gain (Loss) on Derivatives, Net | 156,502 | | | 67,888 | | | (364,921) | | | 77,588 | | | Gain (Loss) on Commodity Derivatives, Net | $ | 70,182 | | | $ | 128,819 | | | $ | (468,874) | | | $ | 150,581 | |
The following table summarizes open commodity derivative positions as of June 30, 2026, for commodity derivatives that were entered into through June 30, 2026, for the settlement periods presented: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | Oil: | | | | | | | | | | | NYMEX WTI - Swaps: | | | | | | | | | | | Volume (Bbl) | 3,173,134 | | | 2,414,750 | | | 183,000 | | | 182,500 | | | — | | | Weighted Average Price ($/Bbl) | $ | 67.58 | | | $ | 69.90 | | | $ | 70.04 | | | $ | 70.04 | | | $ | — | | NYMEX WTI - Short Swaptions(1): | | | | | | | | | | | Volume (Bbl) | 920,000 | | | 8,034,900 | | | 17,101,350 | | | 14,715,250 | | | 3,438,300 | | | Weighted Average Price ($/Bbl) | $ | 65.00 | | | $ | 68.76 | | | $ | 65.03 | | | $ | 66.94 | | | $ | 65.24 | | NYMEX WTI - Long Swaptions(1): | | | | | | | | | | | Volume (Bbl) | 920,000 | | | 1,620,500 | | | — | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 65.00 | | | $ | 64.45 | | | $ | — | | | $ | — | | | $ | — | | | NYMEX WTI - Roll Swaps: | | | | | | | | | | | Volume (Bbl) | 1,836,000 | | | — | | | — | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 4.13 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Argus WTI Midland CMA Diff - Basis Swaps: | | | | | | | | | | | Volume (Bbl) | 4,324,000 | | | 4,927,500 | | | 732,000 | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 0.91 | | | $ | 0.82 | | | $ | 0.79 | | | $ | — | | | $ | — | | | Argus WTI Midland TMA Diff - Basis Swaps: | | | | | | | | | | | Volume (Bbl) | 720,858 | | | 668,000 | | | — | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 1.16 | | | $ | 1.49 | | | $ | — | | | $ | — | | | $ | — | | NYMEX WTI - Short Call Options(1): | | | | | | | | | | | Volume (Bbl) | 2,141,944 | | | 5,739,265 | | | 4,609,810 | | | 1,719,150 | | | — | | | Weighted Average Price ($/Bbl) | $ | 76.96 | | | $ | 80.51 | | | $ | 77.32 | | | $ | 85.00 | | | $ | — | | NYMEX WTI - Long Call Options(1): | | | | | | | | | | | Volume (Bbl) | 717,784 | | | 405,515 | | | — | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 66.43 | | | $ | 75.00 | | | $ | — | | | $ | — | | | $ | — | | ICE Brent - Call Options (1): | | | | | | | | | | | Volume (Bbl) | — | | | — | | | 316,590 | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | — | | | $ | — | | | $ | 80.00 | | | $ | — | | | $ | — | | | NYMEX WTI CMA - Two Way Collars: | | | | | | | | | | | Collar Put Volume (Bbl) | 3,116,326 | | | 1,360,000 | | | — | | | — | | | — | | | Collar Call Volume (Bbl) | 4,495,174 | | | 1,360,000 | | | — | | | — | | | — | | | Weighted Average Floor Price ($/Bbl) | $ | 62.65 | | | $ | 63.05 | | | $ | — | | | $ | — | | | $ | — | | | Weighted Average Ceiling Price ($/Bbl) | $ | 71.43 | | | $ | 75.18 | | | $ | — | | | $ | — | | | $ | — | | | NYMEX WTI - Three Way Collars: | | | | | | | | | | | Collar Sub Floor Volume (Bbl) | 414,000 | | | 491,250 | | | — | | | — | | | — | | | Collar Floor Volume (Bbl) | 414,000 | | | 491,250 | | | — | | | — | | | — | | | Collar Ceiling Volume (Bbl) | 414,000 | | | 491,250 | | | — | | | — | | | — | | | Weighted Average Sub Floor Price ($/Bbl) | $ | 47.22 | | | $ | 45.00 | | | $ | — | | | $ | — | | | $ | — | | | Weighted Average Floor Price ($/Bbl) | $ | 60.00 | | | $ | 58.85 | | | $ | — | | | $ | — | | | $ | — | | | Weighted Average Ceiling Price ($/Bbl) | $ | 71.56 | | | $ | 72.39 | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | Natural Gas: | | | | | | | | | | | NYMEX Henry Hub - Swaps: | | | | | | | | | | | Volume (MMBtu) | 22,245,000 | | | 29,320,000 | | | 7,610,000 | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | 4.13 | | | $ | 4.06 | | | $ | 3.85 | | | $ | — | | | $ | — | | | Waha Gas Daily - Swaps: | | | | | | | | | | | Volume (MMBtu) | 915,000 | | | 1,825,000 | | | 155,000 | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | 3.20 | | | $ | 2.98 | | | $ | 2.96 | | | $ | — | | | $ | — | | NYMEX Henry Hub - Short Swaptions (1): | | | | | | | | | | | Volume (MMBtu) | 920,000 | | | 35,945,000 | | | 37,530,000 | | | 30,280,000 | | | — | | | Weighted Average Price ($/MMBtu) | $ | 3.89 | | | $ | 4.30 | | | $ | 4.07 | | | $ | 3.83 | | | $ | — | | NYMEX Henry Hub - Long Swaptions (1): | | | | | | | | | | | Volume (MMBtu) | — | | | — | | | 7,320,000 | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | — | | | $ | — | | | $ | 4.00 | | | $ | — | | | $ | — | | | Waha - Basis Swaps: | | | | | | | | | | | Volume (MMBtu) | 9,200,000 | | | 7,300,000 | | | — | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | (0.84) | | | $ | (0.87) | | | $ | — | | | $ | — | | | $ | — | | | Waha Gas Daily Average vs Henry Hub Last Day | | | | | | | | | | | Volume (MMBtu) | — | | | 10,020,000 | | | 930,000 | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | — | | | $ | (1.01) | | | $ | (1.01) | | | $ | — | | | $ | — | | | Waha Index - Swaps | | | | | | | | | | | Volume (MMBtu) | 9,150,000 | | | 4,890,000 | | | 310,000 | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | — | | | $ | (0.01) | | | $ | (0.02) | | | $ | — | | | $ | — | | | TETCO M2 - Basis - Swaps: | | | | | | | | | | | Volume (MMBtu) | 14,720,000 | | | 27,530,000 | | | 8,870,000 | | | 7,300,000 | | | — | | | Weighted Average Price ($/MMBtu) | $ | (1.14) | | | $ | (0.87) | | | $ | (0.86) | | | $ | (0.75) | | | $ | — | | | TCO Basis - Swaps: | | | | | | | | | | | Volume (MMBtu) | — | | | — | | | — | | | — | | | — | | | Weighted Average Price ($/MMBtu) | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | REX Zone 3 Basis - Swap: | | | | | | | | | | | Volume (MMBtu) | 8,280,000 | | | 20,075,000 | | | 7,320,000 | | | 3,650,000 | | | — | | | Weighted Average Price ($/MMBtu) | (0.26) | | | (0.21) | | | (0.18) | | | (0.16) | | | — | | NYMEX Henry Hub - Short Call Options (1): | | | | | | | | | | | Volume (MMBtu) | 920,000 | | | 2,325,000 | | | 27,450,000 | | | 26,755,000 | | | 18,370,000 | | | Weighted Average Price ($/MMBtu) | $ | 5.00 | | | $ | 5.23 | | | $ | 5.27 | | | $ | 5.62 | | | $ | 5.50 | | NYMEX Henry Hub - Long Call Options (1): | | | | | | | | | | | Volume (MMBtu) | — | | | — | | | — | | | — | | | — | | | Weighted Average Price ($/MMBtu) | — | | | — | | | — | | | — | | | — | | | NYMEX Henry Hub - Two Way Collars: | | | | | | | | | | | Collar Put Volume (MMBtu) | 27,654,348 | | | 23,200,000 | | | 3,660,000 | | | 3,340,000 | | | — | | | Collar Call Volume (MMBtu) | 27,654,348 | | | 23,200,000 | | | 3,660,000 | | | 3,340,000 | | | — | | | Weighted Average Floor Price ($/MMBtu) | $ | 3.46 | | | $ | 3.45 | | | $ | 3.50 | | | $ | 3.50 | | | $ | — | | | Weighted Average Ceiling Price ($/MMBtu) | $ | 4.97 | | | $ | 4.53 | | | $ | 4.15 | | | $ | 3.88 | | | $ | — | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | NGL: | | | | | | | | | | | OPIS - Swaps: | | | | | | | | | | | Volume (Bbl) | 177,100 | | | 234,800 | | | — | | | — | | | — | | | Weighted Average Price ($/Bbl) | $ | 33.16 | | | $ | 31.19 | | | $ | — | | | $ | — | | | $ | — | |
______________ (1)Swaptions are crude oil and natural gas derivative contracts that give counterparties the option to extend certain derivative contracts for additional periods. Call Options are crude oil and natural gas derivative contracts sold by the Company that give counterparties the option to exercise certain derivative contracts. The volumes and prices reflected as Swaptions and Call Options in this table (i) will only be effective if the options are exercised by the applicable counterparties and (ii) are shown in the periods in which such volumes would be settled, in the event that the applicable counterparties exercise their options.
Interest Rate Derivative Instruments
At times, the Company uses interest rate swaps to effectively convert a portion of its variable rate indebtedness to fixed rate indebtedness. The settlement of derivative instruments is recognized as a component of interest expense in the condensed consolidated statements of operations. The mark-to-market component of these derivative instruments is recognized in gain (loss) on unsettled interest rate derivatives, net in the condensed consolidated statements of operations. The following table summarizes our open interest rate derivative contracts as of June 30, 2026.
| | | | | | | | | | | | | | | | | | | | | | Fixed Rate Swap Agreements (in thousands) | | | Swaps | | Contract Period | | Notional Amount | | Fixed Rate | | Floating Benchmark | | October 1, 2024 - October 1, 2026 | | $ | 25,000 | | | 3.423 | % | | USD-SOFR CME | | May 1, 2025 - May 1, 2027 | | $ | 50,000 | | | 3.423 | % | | USD-SOFR CME | | September 19, 2025 - October 1, 2027 | | $ | 50,000 | | | 3.300 | % | | USD-SOFR CME | | October 20, 2025 - November 1, 2027 | | $ | 100,000 | | | 3.187 | % | | USD-SOFR CME | | December 10, 2025 - December 1, 2027 | | $ | 50,000 | | | 3.393 | % | | USD-SOFR CME | | December 10, 2025 - December 1, 2028 | | $ | 50,000 | | | 3.392 | % | | USD-SOFR CME |
Other Information Regarding Derivative Instruments
The following table sets forth the amounts, on a gross basis, and classification of the Company’s outstanding derivative financial instruments at June 30, 2026 and December 31, 2025, respectively. Certain amounts may be presented on a net basis in the condensed consolidated financial statements when such amounts are with the same counterparty and subject to a master netting arrangement. | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | | | | | | | Type of Commodity | | Balance Sheet Location | | June 30, 2026 Estimated Fair Value | | December 31, 2025 Estimated Fair Value | | Derivative Assets: | | | | | | | | Commodity Price Swap Contracts | | Current Assets | | $ | 41,301 | | | $ | 103,943 | | | Commodity Basis Swap Contracts | | Current Assets | | 20,286 | | | 41,142 | | | Commodity Price Swaptions Contracts | | Current Assets | | 12,127 | | | 1,428 | | | Commodity Price Collar Contracts | | Current Assets | | 31,312 | | | 71,571 | | | Commodity Price Call Option Contracts | | Current Assets | | 4,916 | | | 413 | | | Commodity Price Index Swap Contracts | | Current Assets | | 401 | | | 6,230 | | | Interest Rate Swap Contracts | | Current Assets | | 1,963 | | | 52 | | | Commodity Price Swap Contracts | | Noncurrent Assets | | 16,357 | | | 12,975 | | | Commodity Basis Swap Contracts | | Noncurrent Assets | | 12,356 | | | 5,330 | | | Commodity Price Swaptions Contracts | | Noncurrent Assets | | 3,148 | | | — | | | Commodity Price Collar Contracts | | Noncurrent Assets | | 12,687 | | | 12,680 | | | Commodity Price Call Option Contracts | | Noncurrent Assets | | 895 | | | — | | | Commodity Price Index Swap Contracts | | Noncurrent Assets | | — | | | — | | | Interest Rate Swap Contracts | | Noncurrent Assets | | 774 | | | — | | | Total Derivative Assets | | | | $ | 158,523 | | | $ | 255,764 | | | | | | | | | | Derivative Liabilities: | | | | | | | | Commodity Price Swap Contracts | | Current Liabilities | | $ | (9,197) | | | $ | (4,596) | | | Commodity Basis Swap Contracts | | Current Liabilities | | (10,320) | | | (6,137) | | | Commodity Price Swaptions Contracts | | Current Liabilities | | (37,560) | | | (25,987) | | | Commodity Price Collar Contracts | | Current Liabilities | | (29,529) | | | (17,229) | | | Commodity Price Call Option Contracts | | Current Liabilities | | (14,853) | | | (3,973) | | | Commodity Price Index Swap Contracts | | Current Liabilities | | (4,974) | | | (178) | | | Interest Rate Swap Contracts | | Current Liabilities | | — | | | — | | | Commodity Price Swap Contracts | | Noncurrent Liabilities | | (2,485) | | | (4,097) | | | Commodity Basis Swap Contracts | | Noncurrent Liabilities | | (5,841) | | | (10,177) | | | Commodity Price Swaptions Contracts | | Noncurrent Liabilities | | (222,279) | | | (25,111) | | | Commodity Price Collar Contracts | | Noncurrent Liabilities | | (8,794) | | | (11,332) | | | Commodity Price Call Option Contracts | | Noncurrent Liabilities | | (52,869) | | | (24,627) | | | Commodity Price Index Swap Contracts | | Noncurrent Liabilities | | (91) | | | (354) | | | Interest Rate Swap Contracts | | Noncurrent Liabilities | | — | | | (355) | | | Total Derivative Liabilities | | | | $ | (398,792) | | | $ | (134,152) | | | | | | | | |
The use of derivative transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions. When the Company has netting arrangements with its counterparties that provide for offsetting payables against receivables from separate derivative instruments these assets and liabilities are netted in the condensed consolidated balance sheets. The tables presented below provide a reconciliation between the gross assets and liabilities and the amounts reflected in the condensed consolidated balance sheets. The amounts presented exclude derivative settlement receivables and payables as of the condensed consolidated balance sheet dates. | | | | | | | | | | | | | | | | | | | Estimated Fair Value at June 30, 2026 | | (In thousands) | Gross Amounts of
Recognized Assets (Liabilities) | | Gross Amounts Offset
on the Balance Sheet | | Net Amounts of Assets (Liabilities) Presented on the Balance Sheet | | Offsetting of Derivative Assets: | | | | Current Assets | $ | 112,306 | | | $ | (81,392) | | | $ | 30,914 | | | Non-Current Assets | 46,217 | | | $ | (36,491) | | | 9,726 | | | Total Derivative Assets | $ | 158,523 | | | $ | (117,883) | | | $ | 40,640 | | | | | | | | | Offsetting of Derivative Liabilities: | | | | Current Liabilities | $ | (106,433) | | | $ | 81,392 | | | $ | (25,041) | | | Non-Current Liabilities | (292,359) | | | 36,491 | | | (255,868) | | | Total Derivative Liabilities | $ | (398,792) | | | $ | 117,883 | | | $ | (280,909) | |
| | | | | | | | | | | | | | | | | | | Estimated Fair Value at December 31, 2025 | | (In thousands) | Gross Amounts of
Recognized Assets (Liabilities) | | Gross Amounts Offset
on the Balance Sheet | | Net Amounts of Assets (Liabilities) Presented on the Balance Sheet | | Offsetting of Derivative Assets: | | | | Current Assets | $ | 224,778 | | | $ | (58,100) | | | $ | 166,678 | | | Non-Current Assets | 30,986 | | | $ | (27,950) | | | 3,036 | | | Total Derivative Assets | $ | 255,764 | | | $ | (86,050) | | | $ | 169,714 | | | | | | | | | Offsetting of Derivative Liabilities: | | | | Current Liabilities | $ | (58,100) | | | $ | 58,100 | | | $ | — | | | Non-Current Liabilities | (76,052) | | | 27,950 | | | (48,102) | | | Total Derivative Liabilities | $ | (134,152) | | | $ | 86,050 | | | $ | (48,102) | |
All of the Company’s outstanding derivative instruments are covered by International Swap Dealers Association Master Agreements (“ISDAs”) entered into with parties that are also lenders under the Company’s Revolving Credit Facility. The Company’s obligations under the derivative instruments are secured pursuant to the Revolving Credit Facility, and no additional collateral had been posted by the Company as of June 30, 2026. The ISDAs may provide that as a result of certain circumstances, such as cross-defaults, a counterparty may require all outstanding derivative instruments under an ISDA to be settled immediately. See Note 9 for the aggregate fair value of all derivative instruments at June 30, 2026 and December 31, 2025.
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