Derivatives

12 Months Ended

Dec. 31, 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 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 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 years ended December 31, 2022, 2021 and 2020 (in thousands):

	Year Ended December 31,
	2022		2021		2020
(Gain) loss on derivative contracts	$	(5,975)	$	2,251	$	(5,765)
Cash paid (received) on settlements	$	(1,525)	$	2,230	$	(5,879)

Master Netting Agreements and the Right of Offset. As applicable, 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 by commodity type in the 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 December 31, 2022, the counterparty to the Company’s open commodity derivative contracts consisted of one financial institution.

The following tables summarize (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 positions as of December 31, 2022 and 2021 (in thousands):

December 31, 2022

	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Assets
Derivative contracts - current	$	4,429	$	—	$	4,429	$	—	$	4,429
Total	$	4,429	$	—	$	4,429	$	—	$	4,429

December 31, 2021

	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

As of December 31, 2022, the Company's open derivative contracts consisted of natural gas commodity derivative contracts under which we will receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume. These commodity derivative contracts consisted of the following:

	Notional	Units	Weighted Average Fixed Price per Unit
Natural Gas Price Swaps: January 2023 - March 2023	1,044,000	MMBtu	$	8.39

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 same counterparty netting (in thousands):

		December 31,
Type of Contract	Balance Sheet Classification	2022
Derivative assets
Natural Gas	Current assets - Derivative Contracts	$	4,429

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

See Note 4 for additional discussion of the fair value measurement of the Company’s derivative contracts.