v3.26.1
Commodity Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Commodity Derivative Financial Instruments

Note 4. Commodity Derivative Financial Instruments

The Company’s ongoing operations expose it to changes in the market price for natural gas assets. To mitigate the inherent commodity price risk associated with its operations, the Company periodically uses natural gas commodity derivative instruments. From time to time, such instruments may include variable-to-fixed-price swaps, costless collars, fixed-price contracts, and other contractual arrangements. The Company enters into natural gas derivative contracts that contain netting arrangements with each counterparty. The Company does not enter into derivative instruments for speculative purposes.

As of June 30, 2026, the Company’s open derivative contracts consisted of fixed-price swap natural gas contracts and oil contracts as well as natural gas costless collar contracts. A fixed-price swap contract between the Company and a counterparty specifies a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. A costless collar contract between the Company and the counterparty specifies a floor and a ceiling commodity price over a specified period for a contracted volume. The Company has not designated any of its contracts as fair value or cash flow derivatives. Accordingly, the changes in fair value of the contracts are included in the consolidated statements of operations in the period of the change. All derivative gains and losses from the Company’s derivative contracts have been recognized in revenue in the Company’s accompanying consolidated statements of operations. Derivative instruments that have not yet been settled in cash are reflected as either derivative assets or liabilities in the Company’s accompanying consolidated balance sheets as of June 30, 2026 and December 31, 2025.

The Company’s oil transactions are settled based upon the average daily prices for the calendar month of the contract period and its natural gas contracts are settled based upon the last day settlement of the first nearby month futures contract of the contract period. Settlement for oil derivative contracts occurs in the succeeding month and natural gas derivative contracts are settled in the production month.

The Company’s derivative contracts expose it to credit risk in the event of nonperformance by counterparties that may adversely impact the fair value of the Company’s commodity derivative assets. While the Company does not require contract counterparties to post collateral, the Company does evaluate the credit standing on each counterparty as deemed appropriate. The evaluation includes reviewing a counterparty’s credit rating and latest financial information.

The Company utilizes the market approach in determining the fair value of its derivative positions by using either Henry Hub, Texas Eastern Transmission Company Market Zone 2 (“TETCO M2”) or West Texas Intermediate (“WTI”) published market prices, independent broker pricing data or broker/dealer valuations. Over-the-counter derivatives with Henry Hub, TETCO M2 or WTI based prices are considered Level 2 due to the impact of counterparty credit risk. The Company’s derivatives are classified within Level 2.

The table below summarizes the fair values and classifications of the Company’s derivative instruments as of June 30, 2026, and December 31, 2025 (in thousands):

 

 

 

 

 

As of June 30, 2026

 

Classification

 

Balance Sheet Location

 

Gross Fair
Value

 

 

Effect of
Netting

 

 

Net Carrying
Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Current asset

 

Other current assets

 

$

13,413

 

 

$

(4,881

)

 

$

8,532

 

Long-term asset

 

Other assets

 

 

7,385

 

 

 

(7,385

)

 

 

-

 

Total assets

 

 

 

$

20,798

 

 

$

(12,266

)

 

$

8,532

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current liability

 

Other current liabilities

 

$

4,881

 

 

$

(4,881

)

 

$

-

 

Long-term liability

 

Other non-current liabilities

 

 

8,186

 

 

 

(7,385

)

 

 

801

 

Total liabilities

 

 

 

$

13,067

 

 

$

(12,266

)

 

$

801

 

 

 

 

 

 

As of December 31, 2025

 

Classification

 

Balance Sheet
Location

 

Gross Fair
Value

 

 

Effect of
Netting

 

 

Net Carrying
Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Current asset

 

Other current assets

 

$

9,557

 

 

$

(4,208

)

 

$

5,349

 

Long-term asset

 

Other assets

 

 

5,990

 

 

 

(5,990

)

 

 

-

 

Total assets

 

 

 

$

15,547

 

 

$

(10,198

)

 

$

5,349

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current liability

 

Other current liabilities

 

$

4,208

 

 

$

(4,208

)

 

$

-

 

Long-term liability

 

Other non-current liabilities

 

 

10,659

 

 

 

(5,990

)

 

 

4,669

 

Total liabilities

 

 

 

$

14,867

 

 

$

(10,198

)

 

$

4,669

 

 

Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations and consolidated statements of cash flows and consist of the following for the three and six months ended June 30, 2026, and 2025 (in thousands):

 

 

 

Three Months

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Unrealized gain (loss) of open non-hedge derivative
   instruments

 

$

6,655

 

 

$

8,783

 

 

$

7,051

 

 

$

370

 

Realized gain (loss) on settlement of non-hedge
   derivative instruments

 

 

4,329

 

 

 

1,943

 

 

 

(1,376

)

 

 

1,482

 

Gain (loss) on commodity derivative instruments

 

$

10,984

 

 

$

10,726

 

 

$

5,675

 

 

$

1,852

 

 

The Company had the following open derivative contracts for as of June 30, 2026:

Period and Type of Contract

 

Volume (MMBtu)

 

 

Weighted
Average Price
(Per MMBtu)

 

Natural Gas Fixed Price Swaps:

 

 

 

 

 

 

2026

 

 

 

 

 

 

Third Quarter

 

 

5,087,000

 

 

$

4.05

 

Fourth Quarter

 

 

5,494,000

 

 

$

4.06

 

2027

 

 

 

 

 

 

First Quarter

 

 

5,197,000

 

 

$

3.98

 

Second Quarter

 

 

5,035,000

 

 

$

3.85

 

Third Quarter

 

 

5,088,000

 

 

$

3.85

 

Fourth Quarter

 

 

5,130,000

 

 

$

3.85

 

2028

 

 

 

 

 

 

First Quarter

 

 

4,597,000

 

 

$

3.75

 

Second Quarter

 

 

3,524,000

 

 

$

3.74

 

Third Quarter

 

 

3,517,000

 

 

$

3.65

 

Fourth Quarter

 

 

3,492,000

 

 

$

3.66

 

2029

 

 

 

 

 

 

First Quarter

 

 

2,536,000

 

 

$

3.64

 

Second Quarter

 

 

533,000

 

 

$

3.38

 

 

 

Period and Type of Contract

 

Volume (MMBtu)

 

 

Weighted
Average Price
(Per MMBtu)

 

Natural Gas TETCO M2 Fixed
   Price Swaps:

 

 

 

 

 

 

2026

 

 

 

 

 

 

Third Quarter

 

 

1,962,000

 

 

$

(1.07

)

Fourth Quarter

 

 

1,979,000

 

 

$

(1.07

)

2027

 

 

 

 

 

 

First Quarter

 

 

2,035,000

 

 

$

(1.03

)

Second Quarter

 

 

1,857,000

 

 

$

(1.04

)

Third Quarter

 

 

1,872,000

 

 

$

(1.03

)

Fourth Quarter

 

 

1,886,000

 

 

$

(1.04

)

2028

 

 

 

 

 

 

First Quarter

 

 

1,551,000

 

 

$

(0.91

)

Second Quarter

 

 

667,000

 

 

$

(0.94

)

Third Quarter

 

 

667,000

 

 

$

(0.96

)

Fourth Quarter

 

 

675,000

 

 

$

(0.94

)

2029

 

 

 

 

 

 

First Quarter

 

 

547,000

 

 

$

(0.96

)

Second Quarter

 

 

291,000

 

 

$

(1.03

)

 

Period and Type of Contract

 

Volume (Bbls)

 

 

Weighted
Average Price
(Per Bbl)

 

WTI Fixed Price Swaps:

 

 

 

 

 

 

2026

 

 

 

 

 

 

Third Quarter

 

 

44,000

 

 

$

63.00

 

Fourth Quarter

 

 

41,000

 

 

$

62.04

 

2027

 

 

 

 

 

 

First Quarter

 

 

40,000

 

 

$

61.74

 

Second Quarter

 

 

34,000

 

 

$

61.30

 

Third Quarter

 

 

33,000

 

 

$

61.36

 

Fourth Quarter

 

 

34,000

 

 

$

61.46

 

2028

 

 

 

 

 

 

First Quarter

 

 

32,000

 

 

$

61.37

 

Second Quarter

 

 

19,000

 

 

$

62.75

 

Third Quarter

 

 

20,000

 

 

$

62.75

 

Fourth Quarter

 

 

20,000

 

 

$

62.75

 

2029

 

 

 

 

 

 

First Quarter

 

 

7,000

 

 

$

62.75

 

 

 

 

 

 

 

Weighted
Average

 

 

Weighted
Average

 

Period and Type of Contract

 

Volume (MMBtu)

 

 

Floor Price
(Per MMBtu)

 

 

Ceiling Price
(Per MMBtu)

 

Natural Gas Collar Contracts:

 

 

 

 

 

 

 

 

 

2026

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

300,000

 

 

$

3.00

 

 

$

3.60