Note 4. Commodity Price Risk Activities

The Company enters into certain commodity derivative instruments to mitigate commodity price risk associated with a portion of its future oil, NGL and natural gas production and related cash flows. The oil, NGL and natural gas revenues and cash flows are affected by changes in commodity product prices, which are volatile and cannot be accurately predicted. The objective for holding these commodity derivatives is to protect the operating revenues and cash flows related to a portion of the future oil, NGL and natural gas sales from the risk of significant declines in commodity prices, which helps ensure the Company’s ability to fund the capital budget.

Inherent in the Company’s fixed price contracts, are certain business risks, including market risk and credit risk. Market risk is the risk that the price of oil and natural gas will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from non-performance by the Company’s counterparty to a contract. The Company does not currently require cash collateral from any of its counterparties nor does its counterparties require cash collateral from the Company. At March 31, 2018, the Company had no open physical delivery obligations.

The following table summarizes the Company’s commodity derivative contracts as of March 31, 2018:

	Contract		Volume Hedged	Weighted Average Price
Commodity	Type	Period	(Bbls/MMBtu per day)	Swap	Floor	Ceiling
Oil -WTI	Swaps	April-December 2018	5,134	$53.16	—	—
Oil -WTI	2-Way Collar	April-December 2018	500	—	$50.00	$59.45
Oil -WTI	Swaps	January-December 2019	4,930	51.28	—	—
Oil -WTI	Swaps	January-June 2020	3,378	53.02	—	—
Natural Gas - Henry Hub	Swaps	April-December 2018	5,000	3.09	—	—

During May 2018, the Company entered into additional WTI swaps for 253,400 Bbls at a strike prices of $69.15 per Bbl for the period of July through December 2018.

The Company has not designated any of the commodity derivatives as hedges under the applicable accounting standards. Consequently, all changes in fair value of these derivatives (realized and unrealized) are included in the Unaudited Condensed Consolidated Statements of Operations.

As of March 31, 2018, all of the Company’s economic derivative hedge positions were with large financial institutions, which are not known to the Company to be in default on their derivative positions. The Company is exposed to credit risk to the extent of non-performance by the counterparties in the derivative contracts discussed above; however, the Company does not anticipate non-performance by such counterparties. None of the Company’s derivative instruments contain credit-risk related contingent features.