The Company may enter into commodity derivative contracts to manage its exposure to oil and gas price volatility associated with its production. These derivatives are not entered into for trading or speculative purposes. While the use of these instruments limits the downside risk of adverse commodity price changes, their use may also limit future cash flows from favorable commodity price changes. Depending on acquisitions consummated, changes in oil and gas futures markets, and management’s view of underlying supply and demand trends, the Company may increase or decrease its derivative positions. The Company’s commodity derivative contracts have not been designated as hedges for accounting purposes; therefore, all gains and losses on commodity derivatives are recognized in the Company’s statement of income.

The Company may utilize fixed price swaps, basis swaps, and two- and three-way collars to manage commodity price risks. The Company has entered into these contracts when management believes that favorable future sales prices for the Company’s production can be secured and acquisitions consummated are accretive. Under fixed price swap agreements, when actual commodity prices upon settlement exceed the fixed price provided by the swap contracts, the Company pays the difference to the counterparty. When actual commodity prices upon settlement are less than the contractually provided fixed price, the Company receives the difference from the counterparty. The Company may also enter into basis swap contracts in order to hedge the difference between the New York Mercantile Exchange (“NYMEX”) index price and a local index price that is representative of the price received by many of our operators. Under the collars, the Company receives the difference between the published index price and a floor price if the index price is below the floor price or the Company pays the difference between the ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index is between the floor and the ceiling. By utilizing a collar, the Company has fixed the minimum and maximum prices received on the underlying production.

The Company’s oil and gas swap contracts as of June 30, 2022 are summarized below:


	Oil (NYMEX WTI)
Remaining Term	Bbl per Day		Weighted Average Price per Bbl
July 2022 - December 2022		2,200	$	106.31
January 2023 - December 2023		3,050	$	93.71
January 2024 - December 2024		3,300	$	82.66
January 2025 - June 2025		1,100	$	74.65


	Gas (NYMEX Henry Hub)
Remaining Term	MMBtu per Day		Weighted Average Price per MMBtu
July 2022 - December 2022		500	$	4.63
January 2023 - December 2023		500	$	3.83
January 2024 - December 2024		500	$	3.41

The Company’s oil and gas two-way commodity collar contracts as of June 30, 2022 are summarized below:


	Oil (NYMEX WTI)
Remaining Term	Bbl per Day		Weighted Average Floor Price per Bbl		Weighted Average Ceiling Price per Bbl
January 2025 – June 2025		2,000	$	60.00	$	93.20


	Gas (NYMEX Henry Hub)
Remaining Term	MMBtu per Day		Weighted Average Floor Price per MMBtu		Weighted Average Ceiling Price per MMBtu
July 2022 - December 2022		6,000	$	6.00	$	9.69
January 2023 - December 2023		8,500	$	4.82	$	7.93
January 2024 - December 2024		11,400	$	4.00	$	7.24
January 2025 – June 2025		11,600	$	3.31	$	10.34

The Company was not party to any basis swaps or three-way collar contracts as of June 30, 2022. The Company was not party to any derivative contracts as of December 31, 2021.

The following table presents a summary of the Company’s derivative instruments and where such values are recorded on the condensed consolidated balance sheet as of June 30, 2022 (in thousands):


	June 30, 2022
	Balance sheet location	Fair value
Asset derivatives not designated as hedges for accounting purposes:
Commodity contracts	Current assets	$	7,099
Commodity contracts	Long-term assets		12,217

Total asset derivatives		$	19,316

Liability derivatives not designated as hedges for accounting purposes:
Commodity contracts	Current liabilities	$	—
Commodity contracts	Long-term liabilities		—

Total liability derivatives		$	—

Net derivatives		$	19,316

The following table presents the gross fair values of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties, and the resulting net amounts presented on the condensed consolidated balances sheet (in thousands):


	June 30, 2022
	Gross Fair Value			Gross Amounts Offset			Net Fair Value
Commodity derivative assets	$	27,093		$	(7,777	)	$	19,316
Commodity derivative liabilities	$	(7,777	)	$	7,777		$	—

The following table is a summary of derivative gains and losses, and where such values are recorded in the condensed consolidated statements of income for the six months ended June 30, 2022 and 2021 (in thousands):


		Three Months Ended				Six Months Ended
	Statement of income location	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Commodity derivative gain	Other expense	$	20,010	$	—	$	18,895	$	—

The fair value of commodity derivative instruments was determined using Level 2 inputs.

The Company is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All commodity derivative counterparties are current lenders under our Revolving Credit Facility. Accordingly, the Company is not required to provide any credit support to its commodity derivative counterparties other than cross collateralization with the properties securing the Revolving Credit Facility. The Company’s commodity derivative contracts are documented with industry standard contracts known as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement (“ISDA”). Typical terms for each ISDA include credit support requirements, cross default provisions, termination events, and set-off provisions. The Company has set-off provisions with its lenders that, in the event of counterparty default, allow the Company to set-off amounts owed under the Revolving Credit Facility or other general obligations against amounts owed for commodity derivative contract liabilities.