Fair Value Measurements

3 Months Ended

Mar. 31, 2026

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 5 – Fair Value Measurements

Certain of the Company’s assets and liabilities are carried at fair value and measured on either a recurring or non-recurring basis. Per ASC Topic 820, Fair Value Measurements and Disclosures, fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market–based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The GAAP fair value valuation hierarchy categorizes assets and liabilities measured at fair value into one of three levels depending on the observability of the inputs used in determining fair value. The three levels of the fair value hierarchy are as follows:

● Level 1 valuations – Consist of observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date.

● Level 2 valuations – Consist of observable market–based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable as of the reporting date.

● Level 3 valuations – Consist of unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

The classification of an asset or liability within the fair value hierarchy is based on the lowest level input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement of an asset or liability requires judgment and may affect the valuation of the fair value asset or liability and its placement within the fair value hierarchy. There have been no transfers between fair value hierarchy levels.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other current liabilities on the condensed consolidated balance sheets approximate fair value because of their short–term nature. Additionally, the carrying value of the Company’s Credit Facility approximates fair value as it is subject to short–term floating interest rates that reflect market rates available to the Company at the time of borrowing.

Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize the Company’s liabilities which were measured at fair value on a recurring basis as of the periods presented and their classification within the fair value hierarchy:

	Fair Value Measurement as of March 31, 2026
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities:
Commodity derivative contracts	$	109,445	$	—	$	109,445	$	—
Subordinated note warrants – related party	$	725	$	—	$	—	$	725
Series F Preferred Stock embedded derivatives	$	15,806	$	—	$	—	$	15,806
Series F Preferred Stock warrants	$	114,433	$	—	$	—	$	114,433

	Fair Value Measurement as of December 31, 2025
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Commodity derivative contracts	$	53,439	$	—	$	53,439	$	—
Liabilities:
Subordinated note warrants – related party	$	316	$	—	$	—	$	316
Series F Preferred Stock embedded derivatives	$	15,853	$	—	$	—	$	15,853
Series F Preferred Stock warrants	$	90,134	$	—	$	—	$	90,134

Commodity derivative contracts. The fair values of the Company’s derivative instruments are measured on a recurring basis using a discounted cash flow model which considers various inputs such as quoted forward commodity prices, discount rates, and current market and contractual prices and terms for the underlying instruments, as well as other relevant data. These significant inputs are observable in the current market or can be corroborated by observable active market data and are therefore considered Level 2 inputs within the fair value hierarchy. As of March 31, 2026, the fair value of the Company’s commodity derivative contracts was a liability of $109.4 million, of which $69.0 million was considered a current liability. As of December 31, 2025, the fair value of the Company’s commodity derivative contracts was an asset of $53.4 million, $28.8 million of which was considered a current asset.

The Company has several financial instruments which were evaluated for embedded derivatives and bifurcation in accordance with ASC 815 at the time of issuance. As a result, the Company reflects these financial instrument liabilities at their fair value on its condensed consolidated balance sheet and reflects the changes in the fair values of the liabilities as loss on adjustment to fair value – embedded derivatives, debt, and warrants on its condensed consolidated statements of operations. The following table presents the changes in the Company’s financial instruments presented at fair value for the periods indicated:

	March 31, 2026			December 31, 2025
	(In thousands)
Subordinated note warrants – related party, at the beginning of the period	$	316		$	4,159
Loss (gain) on adjustment to fair value		409			(3,843	)
Subordinated note warrants – related party, at the end of the period	$	725		$	316
Series F Preferred Stock embedded derivatives, at the beginning of the period	$	15,853		$	—
Embedded derivatives recognized at issuance of Series F Preferred Stock		—			25,479
Gain on adjustment to fair value		(47	)		(9,626	)
Series F Preferred Stock embedded derivatives, at the end of the period	$	15,806		$	15,853
Series F Preferred Stock warrants, at the beginning of the period	$	90,134		$	—
Issuance of Series F Preferred Stock		—			22,115
Loss on adjustment to fair value		24,299			68,019
Series F Preferred Stock warrants, at the end of the period	$	114,433		$	90,134

The following table presents the face value and fair value of each financial instrument presented at fair value on the Company’s condensed consolidated balance sheets as of the periods presented:

	March 31, 2026				December 31, 2025
	Face Value		Fair Value		Face Value		Fair Value
	(In thousands)
Subordinated note warrants – related party	$	—	$	725	$	—	$	316
Series F Preferred Stock embedded derivatives		—		15,806		—	$	15,853
Series F Preferred Stock warrants	$	—	$	114,433	$	—	$	90,134

Subordinated Note Warrants. As discussed in Note 9 – Debt below, pursuant to the terms of the Subordinated Note (defined herein), the Company issued to the Noteholders (defined herein) warrants (the “Subordinated Note Warrants”) to purchase up to 1,141,552 shares of Common Stock, vesting in tranches based on the date of repayment of the Subordinated Note. The Company has determined that the Subordinated Note Warrants should be accounted for as a liability pursuant to ASC 480. In accordance with ASC 815, the Company recorded the Subordinated Note Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Subordinated Note Warrants as of March 31, 2026 and December 31, 2025. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

	Key Inputs
Subordinated Note Warrants – Monte Carlo Simulation Model	March 31, 2026			December 31, 2025
Time to termination (years)		3.50			3.75
Stock price – as of period indicated	$	2.03		$	1.69
Exercise price	$	8.89		$	8.89
Risk–free rate		3.77	%		3.55	%
Equity volatility rate		120.0	%		85.0	%

As of March 31, 2026, the fair value of the Subordinated Note Warrants was $0.7 million compared to $0.3 million as of December 31, 2025. The Company recognized the change in fair value of $0.4 million as a component of the loss on adjustment to fair value – embedded derivatives, debt, and warrants on its condensed consolidated statement of operations for the three months ended March 31, 2026. Refer to Note 14 – Common Stock Options and Warrants for a further discussion of the Subordinated Note Warrants.

Series F Preferred Stock. On March 24, 2025, the Company entered into a securities purchase agreement (the “Series F Preferred Securities Purchase Agreement”) with an investor (the “Series F Preferred Stockholder”), pursuant to which the Series F Preferred Stockholder agreed to purchase for an aggregate of $148.3 million (i) 148,250 shares of Series F Preferred Stock, with a stated value of $1,000 per share (the “Stated Value”), convertible into shares of Common Stock and (ii) upon the one–year anniversary of the issue date of the Series F Preferred Stock, which was subsequently amended on July 8, 2026 (“Anniversary Warrant Issuance Date”), subject to the satisfaction of certain conditions, warrants to purchase shares of Common Stock (the “Series F Preferred Stock Warrants”) (collectively, the “Series F Preferred Offering”). On March 26, 2025, the Series F Preferred Stock Offering closed, and the Company issued the Series F Preferred Stock to the Series F Preferred Stockholder. The Company has determined that the Series F Preferred Stock should be classified as mezzanine equity because it is currently redeemable at the Series F Preferred Stockholder’s option. Additionally, the Company determined that certain features of the Series F Preferred Stock require bifurcation and separate accounting as embedded derivatives. Therefore, in accordance with ASC 815, the Company has recorded the embedded derivatives associated with the Series F Preferred Stock at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third-party valuation expert to assist in preparing the fair value of the Series F Preferred Stock embedded derivatives as of March 31, 2026 and December 31, 2025. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

	Key Inputs
Series F Preferred Stock Embedded Derivatives – Monte Carlo Simulation Model	March 31, 2026			December 31, 2025
Time to termination (years)		3.49			3.16
Stock price – as of period indicated	$	2.03		$	1.69
Conversion rate		202.02			202.02
Stated dividend rate		12.0	%		12.0	%
Transaction discount		30.4	%		32.5	%
Risk-free rate		3.77	%		3.50	%
Preferred equity volatility rate		72.0	%		54.0	%

As of March 31, 2026, the fair value of the Series F Preferred Stock embedded derivatives was $15.8 million compared to $15.9 million as of December 31, 2025, which is presented on the Company’s condensed consolidated balance sheets as a liability with a corresponding amount recognized as Series F Preferred Stock in mezzanine equity. The Company recognized the change in fair value as a component of the loss on adjustment to fair value – embedded derivatives, debt, and warrants on its condensed consolidated statement of operations for the three months ended March 31, 2026. The Company did not recognize an adjustment to fair value – embedded derivatives, debt, and warrants for the Series F Preferred Stock embedded derivatives during the three months ended March 31, 2025. Refer to Note 12 – Mezzanine Equity for a further discussion of the Series F Preferred Stock.

Series F Preferred Stock Warrants. As discussed above, subject to the satisfaction of certain conditions, the Series F Preferred Stockholder will receive warrants to purchase shares of Common Stock. On March 25, 2026, the Company and the Series F Preferred Stockholder entered into an Amendment to the Securities Purchase Agreement and Form of Anniversary Warrant (the “First Series F Preferred Stock Warrant Amendment”), which, among other things, extended the issuance date of the Series F Preferred Stock Warrant from March 26 to April 7, 2026 (which was subsequently further extended to July 8, 2026). The Company and the Series F Preferred Stockholder further amended the Series F Preferred Securities Purchase Agreement on April 6, 2026 and April 8, 2026, refer to Note 18 – Subsequent Events for a further discussion.

The Company has determined that the Series F Preferred Stock Warrants are not considered indexed to the Company’s own stock because the potential number of common shares to be issued upon the exercise of such warrants will vary based on the amount of Series F Preferred Stock outstanding on the Anniversary Warrant Issuance Date. As such, the Company has determined that the Series F Preferred Stock Warrants should be accounted for as liabilities pursuant to ASC 480. In accordance with ASC 815, the Company recorded the Series F Preferred Stock Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third-party valuation expert to assist in preparing the fair value of the Series F Preferred Stock Warrants as of March 31, 2026 and December 31, 2025. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

	Key Inputs
Series F Preferred Stock Warrants – Monte Carlo Simulation Model	March 31, 2026			December 31, 2025
Time to termination (years)		4.99			5.23
Stock price – as of period indicated	$	2.03		$	1.69
Exercise price	$	1.894		$	2.047
Future value of one Series F Preferred Stock Warrant share	$	1.64		$	0.31
Risk-free rate		3.84	%		3.69	%
Equity volatility rate		110.0	%		85.0	%

As of March 31, 2026, the fair value of the Series F Preferred Stock Warrants was $114.4 million compared to $90.1 million as of December 31, 2025, which is presented on the Company’s condensed consolidated balance sheets as a liability with a corresponding amount recognized as Series F Preferred Stock in mezzanine equity. The Company recognized the change in fair value of $24.3 million as a component of loss on adjustment to fair value – embedded derivatives, debt, and warrants on its condensed consolidated statement of operations for the three months ended March 31, 2026. The Company did not recognize an adjustment to fair value – embedded derivatives, debt, and warrants for the Series F Preferred Stock Warrants during the three months ended March 31, 2025. Refer to Note 14 – Common Stock Options and Warrants for a further discussion of the Series F Preferred Stock Warrants.

Assets and Liabilities Measured at Fair Value on a Non–Recurring Basis

Acquisition assets and liabilities. The fair values of assets acquired and liabilities assumed in an acquisition are measured on a non–recurring basis on the acquisition date. If the assets acquired and liabilities assumed are current and short–term in nature, the Company uses their approximate carrying values as their fair values, which is considered a Level 1 input in the fair value hierarchy. If the assets acquired are not short–term in nature, then the fair value is determined using the estimated replacement values of the same or similar assets and, as such, are considered Level 3 inputs in the fair value hierarchy. Refer to Note 3 – Acquisitions for a further discussion of the Company’s acquisitions.