As of March 31, 2022 and December 31, 2021, the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the short-term nature of these instruments.

Debt Instruments

The following table presents the carrying amounts, net of discount and deferred financing costs, and estimated fair values of the Company’s debt instruments (in thousands):


	March 31, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
12.00% Second-Priority Senior Secured Notes – due January 2026	$	591,639	$	703,625	$	588,838	$	685,945
7.50% Senior Notes – due May 2022	$	6,060	$	5,696	$	6,060	$	6,145
Bank Credit Facility – matures November 2024	$	333,442	$	340,000	$	367,829	$	375,000

The carrying value of the senior notes are presented net of the original issue discount and deferred financing costs. Fair value is estimated (representing a Level 1 fair value measurement) using quoted secondary market trading prices.

The carrying amount of the Company’s bank credit facility, as amended and restated (the “Bank Credit Facility”), is presented net of deferred financing costs. The fair value of the Bank Credit Facility is estimated based on the outstanding borrowings under the Bank Credit Facility since it is secured by the Company’s reserves and the interest rates are variable and reflective of market rates (representing a Level 2 fair value measurement).

The Company attempts to mitigate a portion of its commodity price risk and stabilize cash flows associated with sales of oil and natural gas production through the use of oil and natural gas swaps and costless collars. Swaps are contracts where the Company either receives or pays depending on whether the oil or natural gas floating market price is above or below the contracted fixed price. Costless collars consist of a purchased put option and a sold call option with no net premiums paid to or received from counterparties. Collar contracts typically require payments by the Company if the NYMEX average closing price is above the ceiling price or payments to the Company if the NYMEX average closing price is below the floor price.

The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, commodity derivatives are recorded on the Condensed Consolidated Balance Sheets at fair value with settlements of such contracts, and changes in the unrealized fair value, recorded as “Price risk management activities income (expense)” on the Condensed Consolidated Statements of Operations in each period.

The following table presents the impact that derivatives, not designated as hedging instruments, had on its Condensed Consolidated Statements of Operations (in thousands):


	Three Months Ended March 31,
	2022			2021
Net cash paid on settled derivative instruments	$	(127,086	)	$	(48,381	)
Unrealized loss		(154,133	)		(89,127	)
Price risk management activities expense	$	(281,219	)	$	(137,508	)

The following table reflects the contracted volumes and weighted average prices under the terms of the Company's derivative contracts as of March 31, 2022:


Swap Contracts
Production Period	Settlement Index	Average Daily Volumes		Weighted Average Swap Price
Crude oil:		(Bbls)		(per Bbl)
April 2022 – December 2022	NYMEX WTI CMA		21,535	$	53.13
January 2023 – December 2023	NYMEX WTI CMA		12,192	$	68.21
January 2024 – June 2024	NYMEX WTI CMA		3,000	$	71.66
Natural gas:		(MMBtu)		(per MMBtu)
April 2022 – December 2022	NYMEX Henry Hub		40,393	$	2.82
January 2023 – December 2023	NYMEX Henry Hub		22,627	$	3.55
January 2024 – June 2024	NYMEX Henry Hub		10,000	$	3.25

The following tables provide additional information related to financial instruments measured at fair value on a recurring basis (in thousands):


	March 31, 2022
	Level 1		Level 2			Level 3		Total
Assets:
Oil and natural gas swaps	$	—	$	—		$	—	$	—
Liabilities:
Oil and natural gas swaps		—		(350,860	)		—		(350,860	)
Total net liability	$	—	$	(350,860	)	$	—	$	(350,860	)


	December 31, 2021
	Level 1		Level 2			Level 3		Total
Assets:
Oil and natural gas swaps	$	—	$	3,737		$	—	$	3,737
Liabilities:
Oil and natural gas swaps		—		(200,464	)		—		(200,464	)
Total net liability	$	—	$	(196,727	)	$	—	$	(196,727	)

Derivatives are classified as either current or non-current assets or liabilities based on their anticipated settlement dates. Although the Company has master netting arrangements with its counterparties, the Company presents its derivative financial instruments on a gross basis in its Condensed Consolidated Balance Sheets. On derivative contracts recorded as assets in the table below, the Company is exposed to the risk the counterparties may not perform. The following table presents the fair value of derivative financial instruments as well as the potential effect of netting arrangements on the Company's recognized derivative asset and liability amounts (in thousands):


	March 31, 2022				December 31, 2021
	Assets		Liabilities		Assets		Liabilities
Oil and natural gas derivatives:
Current	$	—	$	308,402	$	967	$	186,526
Non-current		—		42,458		2,770		13,938
Total gross amounts presented on balance sheet		—		350,860		3,737		200,464
Less: Gross amounts not offset on the balance sheet		—		—		3,737		3,737
Net amounts	$	—	$	350,860	$	—	$	196,727

The Company is subject to the risk of loss on its financial instruments as a result of nonperformance by counterparties pursuant to the terms of their contractual obligations. The Company has entered into International Swaps and Derivative Association agreements with counterparties to mitigate this risk. The Company also maintains credit policies with regard to its counterparties to minimize overall credit risk. These policies require (i) the evaluation of potential counterparties’ financial condition to determine their credit worthiness; (ii) the regular monitoring of counterparties’ credit exposures; (iii) the use of contract language that affords the Company netting or set off opportunities to mitigate exposure risk; and (iv) potentially requiring counterparties to post cash collateral, parent guarantees, or letters of credit to minimize credit risk. The Company’s assets and liabilities from commodity price risk management activities at March 31, 2022 represent derivative instruments from eight counterparties; all of which are registered swap dealers that have an “investment grade” (minimum Standard & Poor’s rating of BBB- or better) credit rating, and all of which are parties under the Company’s Bank Credit Facility. The Company enters into derivatives directly with these counterparties and, subject to the terms of the Company’s Bank Credit Facility, is not required to post collateral or other securities for credit risk in relation to the derivative activities.