v3.26.1
FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2026
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

NOTE 10 – FAIR VALUE MEASUREMENTS

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Authoritative guidance establishes a framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories:

 

 

·

Level 1 – Observable inputs based on quoted market prices for identical assets or liabilities in active markets.

 

 

 

 

·

Level 2 – Observable inputs other than Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

 

 

 

·

Level 3 – Unobservable inputs for the asset or liability due to little or no market activity that are significant to the fair value measurement. These inputs reflect assumptions that market participants would use in pricing the asset or liability.

 

Assets and liabilities measured at fair value are classified based on the lowest level input that is significant to the measurement. The determination of the significance of inputs requires judgment and may affect the classification within the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during any period presented.

 

The Company measures its derivative instruments at fair value on a recurring basis using a market approach. Fair value is estimated using observable commodity futures prices for the underlying commodities obtained from a third-party pricing source. These measurements are classified within Level 2 of the fair value hierarchy. The fair values of the Company’s derivatives are not based on quoted prices for identical instruments in active markets.

 

The Company applies fair value guidance on a non-recurring basis to certain non-financial assets and liabilities, which are not measured at fair value on an ongoing basis but are subject to adjustment if events or changes in circumstances indicate impairment or other adjustments may be necessary.

 

The following table sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value as of June 30, 2026 (in thousands).

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contract assets

 

$-

 

 

$8,663

 

 

$-

 

 

$8,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contract liabilities

 

$-

 

 

$12,754

 

 

$-

 

 

$12,754

 

 

Derivative contracts listed above as Level 2 include fixed-price swaps and costless put/call collars that are carried at fair value. The Company classifies the net change in fair value of these positions under the caption “Net income (loss) on derivative contracts” in the consolidated statements of operations.

 

Asset retirement obligations. The fair value of asset retirement obligation is estimated using discounted cash flow projections with primarily Level 3 inputs, using numerous estimates, assumptions and judgments regarding such factors as the existence of a legal obligation, estimated plugging and abandonment costs, timing of remediation, the credit adjusted risk-free rate and inflation rate.

 

Merger Acquisition. On October 31, 2025, the Company completed the Mergers with the Acquired Companies, recording assets and liabilities at fair value. Oil and gas properties and asset retirement obligations were valued using discounted cash flows with primarily Level 3 inputs, including estimated future production based upon the estimation of reserves, future operating and development costs, future commodity prices (adjusted for basis differentials), and discount rates (see Note 7—Merger Acquisition).