Note 5 - Derivative Financial Instruments

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 5. Derivative Financial Instruments

The Company primarily utilizes commodity swap contracts to (i) reduce the effect of price volatility on the commodities the Company produces and sells, and (ii) support the Company’s capital budgeting and expenditure plans and (iii) support the payment of contractual obligations.

The following table summarizes the effect of derivatives on the Company’s condensed consolidated statements of operations:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
	Successor			Predecessor		Successor			Predecessor
Noncash derivative gain (loss), net	$	(12,558	)	$	-	$	(12,558	)	$	-
Cash payments on settled derivative instruments, net		(1,038	)		-		(1,038	)		-
Derivative gain (loss), net	$	(13,596	)	$	-	$	(13,596	)	$	-

Crude oil production derivatives. The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are correlated with, NYMEX WTI oil prices. As such, the Company uses NYMEX WTI derivative contracts to manage future oil price volatility.

The Company’s outstanding crude oil derivative contracts as of June 30, 2021 and the weighted average oil prices per barrel for those contracts are as follows:

	2021						2022
	Third Quarter		Fourth Quarter		Total		First Quarter		Second Quarter		Total
Oil Price Swaps
Volume (Bbls)		460,000		460,000		920,000		450,000		302,500		752,500
Price per Bbl	$	61.91	$	61.91	$	61.91	$	61.91	$	62.16	$	61.95

The Company uses credit and other financial criteria to evaluate the credit standings of, and to select, counterparties to its derivative financial instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative financial instruments, associated credit risk is mitigated by the Company’s credit risk policies and procedures.

Net derivative liabilities associated with the Company’s open commodity derivatives are all with Fifth Third Bank, National Association (“Fifth Third”) as of June 30, 2021.