Derivatives

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Commodity Derivatives 

The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. On occasion, the Company has attempted to manage this risk on a portion of its forecasted oil or natural gas production sales through the use of commodity derivative contracts. The Company has not designated any of its derivative contracts as hedges for accounting purposes. All derivative contracts are recorded at fair value with changes in derivative contract fair values recognized as gain or loss on derivative contracts in the condensed consolidated statements of operations. None of the Company’s commodity derivative contracts may be terminated prior to contractual maturity solely as a result of a downgrade in the credit rating of a party to the contract. Commodity derivative contracts are settled on a monthly basis, and the commodity derivative contract valuations are adjusted to the mark-to-market valuation on a quarterly basis.

The following table summarizes derivative activity for the three-month periods ended March 31, 2020, and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
(Gain) loss on commodity derivative contracts	$	(10,226)	$	209
Cash received on settlements	$	(4,087)	$	(5,078)

Master Netting Agreements and the Right of Offset. The Company has master netting agreements with all of its commodity derivative counterparties and has presented its derivative assets and liabilities with the same counterparty on a net basis in the unaudited condensed consolidated balance sheets. As a result of the netting provisions, the Company's maximum amount of loss under commodity derivative transactions due to credit risk is limited to the net amounts due from its counterparties. As of

March 31, 2020, the counterparties to the Company's open commodity derivative contracts consisted of two financial institutions, both of which are also lenders under the Company's credit facility. The Company is not required to post additional collateral under its commodity derivative contracts as all of the counterparties to the Company’s commodity derivative contracts share in the collateral supporting the Company’s credit facility.

The following table summarizes (i) the Company's commodity derivative contracts on a gross basis, (ii) the effects of netting assets and liabilities for which the right of offset exists based on master netting arrangements and (iii) for the Company’s net derivative liability positions, the applicable portion of shared collateral under the credit facility as of March 31, 2020 and December 31, 2019 (in thousands):

March 31, 2020

	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Assets
Derivative contracts - current	$	6,253	$	—	$	6,253	$	—	$	6,253
Total	$	6,253	$	—	$	6,253	$	—	$	6,253

December 31, 2019

	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Assets
Derivative contracts - current	$	114	$	—	$	114	$	—	$	114
Total	$	114	$	—	$	114	$	—	$	114

At March 31, 2020, the Company's open derivative contracts consisted of the following:

Oil Price Swaps

	Notional (MBbls)	Weighted Average Fixed Price
April 2020 - June 2020	182	$	60.00

Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts as of March 31, 2020 and December 31, 2019, on a gross basis without regard to same-counterparty netting (in thousands):

Type of Contract	Balance Sheet Classification	March 31, 2020		December 31, 2019
Derivative assets
Oil price swaps	Derivative contracts-current	$	6,253	$	114
Total net derivative contracts		$	6,253	$	114

See Note 2 for additional discussion of the fair value measurement of the Company’s derivative contracts.