Derivatives

6 Months Ended

Jun. 30, 2022

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, natural gas and NGL. On occasion, the Company has attempted to manage this risk on a portion of its forecasted oil, natural gas or NGL production sales through the use of commodity derivative contracts. There were no open commodity derivative contracts as of June 30, 2022.

The Company has not designated any of its derivative contracts as hedges for accounting purposes. As applicable, if the Company has open derivative contracts, the Company has recorded such contracts at fair value with changes in derivative contract fair values recognized as a gain or loss on derivative contracts in the condensed consolidated income statements. Commodity derivative contracts were settled on a monthly basis, and the commodity derivative contract valuations were adjusted to the mark-to-market valuation on a quarterly basis.

The following table summarizes derivative activity for the three and six-month periods ended June 30, 2022, and 2021 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Loss on commodity derivative contracts	$	—	$	—	$	1,064	$	—
Cash paid on settlements	$	—	$	—	$	(1,085)	$	—

Master Netting Agreements and the Right of Offset. As applicable, the Company has had 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. There were no open commodity derivatives contracts as of June 30, 2022. As of December 31, 2021, the Company’s open commodity derivative contracts were held with one counterparty.

There were no open derivative positions as of June 30, 2022. 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 as of December 31, 2021 were (in thousands):

	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Liabilities
Derivative contracts - current	$	200	$	179	$	21	$	—	$	21
Total	$	200	$	179	$	21	$	—	$	21

Because we did not designate any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts were recognized as gains and losses in current period earnings. As a result, and as applicable, our current period earnings could have been significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value were principally measured based on a comparison of future prices to the contract price at the end of the period.

Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts on a net basis with the same counterparty (in thousands):

Type of Contract	Balance Sheet Classification	December 31, 2021
Derivative liabilities
Natural Gas and NGL price swaps	Current liabilities - Derivative Contracts	$	21
Total net derivative contracts		$	21

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