Note 5 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2022

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, (iii) protect the Company’s borrowing base under its Revolving Credit Facility, (iv) adhere to the hedge obligations included in the senior unsecured notes and (v) support the payment of contractual obligations.

The following table summarizes the effect of derivatives on the Company’s consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2022			2021
Noncash derivative gain (loss), net	$	(41,633	)	$	—
Derivative settlements, net		(24,761	)		—
Derivative gain (loss), net	$	(66,394	)	$	—

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

The Company’s outstanding crude oil derivative contracts as of March 31, 2022 and the weighted average crude oil prices per barrel for those contracts are as follows:

		Remainder of 2022							2023
	Second		Third		Fourth				First		Second
								Total						Total
	Quarter		Quarter		Quarter				Quarter		Quarter
Crude Oil Price Swaps - WTI:
Volume (MBbls)		1,039.8		456.4		487.4		1,983.6		441.0		200.2		641.2
Price per Bbl	$	71.96	$	75.15	$	70.14	$	72.25	$	70.05	$	57.22	$	66.04

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 by counterparty are as follows (in thousands): 

	As of March 31, 2022
Fifth Third Bank, National Association	$	(35,464	)
Bank of America, National Association		(11,765	)
Bank of Oklahoma, National Association		(7,939	)
Citizens Bank, National Association		(1,932	)
	$	(57,100	)