Derivatives

12 Months Ended

Jun. 30, 2025

Derivatives

Derivatives

Note 7. Derivatives

The Company is exposed to certain risks relating to its ongoing business operations, including commodity price risk and interest rate risk. In accordance with the Company’s strategy and the requirements under the Senior Secured Credit Facility (as discussed in Note 5, “Senior Secured Credit Facility”), it may hedge or may be required to hedge a varying portion of anticipated oil and natural gas production for future periods. Derivatives are carried at fair value on the consolidated balance sheets as assets or liabilities, with the changes in the fair value included in the consolidated statements of operations for the period in which the change occurs. The Company’s hedge strategies and objectives may change significantly as its operational profile changes or as required under the Senior Secured Credit Facility. The Company does not enter into derivative contracts for speculative trading purposes.

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial or commodity hedging institutions deemed by management as competent and competitive market makers. As of June 30, 2025, the Company did not post collateral under any of its derivative contracts during the periods in which contracts were open as they were secured under the Company’s Senior Secured Credit Facility.

When the Company utilizes commodity derivative contracts, it expects to enter into deferred premium puts, costless put/call collars including two-way and three-way collars, fixed-price swaps, and/or basis swaps to hedge a portion of its anticipated future production. A two-way costless collar consists of a sold call, which establishes a maximum price the

Company will receive for the volumes under contract, and a purchased put that establishes a minimum price. Three-way collars are designed to establish a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be the index price plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) for the volumes under contract. Fixed-price swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for the volumes under contract. Basis swaps effectively lock in a price differential between regional prices (i.e., Inside FERC’s Northwest Pipeline Corp Rocky Mountains) where the product is sold and the relevant pricing index under which the natural gas production is hedged (i.e., NYMEX Henry Hub).  The Company may, from time to time, restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts. The Company has elected not to designate its open derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of the derivative contracts and all payments and receipts on settled derivative contracts in “Net gain (loss) on derivative contracts” on the consolidated statements of operations.

All derivative contracts are recorded at fair market value in accordance with ASC 815 and ASC 820, Fair Value Measurement (“ASC 820”) and included in the consolidated balance sheets as assets or liabilities. The “Derivative contract assets” and “Derivative contract liabilities” represent the difference between the market commodity prices and the hedged prices for the remaining volumes of production hedges as of June 30, 2024 (the “mark-to-market valuation”). The following table summarizes the location and fair value amounts of all derivative contracts in the consolidated balance sheets as of June 30, 2025 and 2024 (in thousands):

Derivatives not designated
as hedging contracts	Balance sheet	Derivative Contract Assets				Balance sheet	Derivative Contract Liabilities
under ASC 815	location	June 30, 2025		June 30, 2024		location	June 30, 2025		June 30, 2024
Commodity contracts	Current assets - derivative contract assets	$	1,777	$	596	Current liabilities - derivative contract liabilities	$	1,577	$	1,192
Commodity contracts	Other assets - derivative contract assets		198		171	Long term liabilities - derivative contract liabilities		1,783		468
Total derivatives not designated as hedging contracts under ASC 815		$	1,975	$	767		$	3,360	$	1,660

The following table summarizes the location and amounts of the Company’s realized and unrealized gains and losses on derivative contracts in the Company’s consolidated statements of operations for the years ended June 30, 2025 and 2024 (in thousands). “Realized gain (loss) on derivative contracts” represents all receipts (payments) on derivative contracts settled during the period. “Unrealized gain (loss) on derivative contracts” represents the net change in the mark-to-market valuation of the derivative contracts.

Derivatives not designated	Location of gain (loss)
as hedging contracts	recognized in income on	Years Ended June 30,
under ASC 815	derivative contracts	2025		2024
Commodity contracts:
Realized gain (loss) on derivative contracts	Other income and expenses - net gain (loss) on derivative contracts	$	965	$	(399)
Unrealized gain (loss) on derivative contracts	Other income and expenses - net gain (loss) on derivative contracts		(492)		(893)
Total net gain (loss) on derivative contracts		$	473	$	(1,292)

As of June 30, 2025, the Company had the following open crude oil and natural gas derivative contracts:

			Volumes in	Swap Price per		Floor Price per		Ceiling Price per
Period	Commodity	Instrument	MMBTU/BBL	MMBTU/BBL		MMBTU/BBL		MMBTU/BBL
July 2025 - September 2025	Crude Oil	Fixed-Price Swap	9,591	$	60.50
July 2025 - December 2025	Crude Oil	Fixed-Price Swap	11,880		72.00
July 2025 - December 2025	Crude Oil	Fixed-Price Swap	81,335		71.40
July 2025 - December 2025	Crude Oil	Fixed-Price Swap	18,748		61.02
October 2025 - June 2026	Crude Oil	Fixed-Price Swap	43,656		61.00
January 2026 - March 2026	Crude Oil	Two-Way Collar	43,493			$	60.00	$	75.80
April 2026 - June 2026	Crude Oil	Fixed-Price Swap	17,106		60.40
April 2026 - September 2026	Crude Oil	Fixed-Price Swap	25,412		62.00
July 2025 - December 2025	Natural Gas	Two-Way Collar	450,550				4.00		4.95
July 2025 - December 2026	Natural Gas	Fixed-Price Swap	2,546,138		3.60
January 2026 - March 2026	Natural Gas	Two-Way Collar	213,251				4.00		5.39
January 2026 - March 2026	Natural Gas	Two-Way Collar	375,481				3.60		5.00
April 2026 - October 2026	Natural Gas	Two-Way Collar	952,588				3.50		4.55
July 2025 - December 2027	Natural Gas	Fixed-Price Swap	3,323,035		3.57

Subsequent to June 30, 2025, the Company entered into the following new crude oil and natural gas derivative contracts:

			Volumes in	Swap Price per		Sub Floor Price per		Floor Price per		Ceiling Price per
Period	Commodity	Instrument	MMBTU/BBL	MMBTU/BBL		MMBTU/BBL		MMBTU/BBL		MMBTU/BBL
August 2025 - August 2026	Crude Oil	Two-Way Collar	83,458					$	60.00	$	65.55
September 2025 - December 2025	Crude Oil	Two-Way Collar	13,742						60.00		63.00
September 2025 - December 2025	Crude Oil	Two-Way Collar	3,798						60.00		63.50
September 2026 - December 2026	Crude Oil	Three-Way Collar	40,872			$	50.00		60.00		70.45
September 2025 - December 2025	Natural Gas	Two-Way Collar	34,224						2.90		3.50
January 2026 - March 2026	Natural Gas	Two-Way Collar	76,177						3.50		4.66
July 2026 - December 2026	Natural Gas	Fixed-Price Swap	207,366	$	3.98
September 2026 - December 2026	Natural Gas	Two-Way Collar	318,964						3.75		4.94

The Company presents the fair value of its derivative contracts at the gross amounts in the consolidated balance sheets. The following table shows the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts as of June 30, 2025 and 2024 (in thousands):

	Derivative Contract Assets				Derivative Contract Liabilities
Offsetting of Derivative Assets and Liabilities	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Gross amounts presented in the Consolidated Balance Sheet	$	1,975	$	767	$	3,360	$	1,660
Amounts not offset in the Consolidated Balance Sheet		(1,774)		(497)		(1,774)		(497)
Net amount	$	201	$	270	$	1,586	$	1,163

The Company enters into an ISDA with each counterparty prior to a derivative contract with such counterparty. The ISDA is a standard contract that governs all derivative contracts entered into between the Company and the respective counterparty. The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date and in the same currency.