Note 5 - Derivative Financial Instruments

6 Months Ended

Jun. 30, 2025

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 5. Derivative Financial Instruments

The Company primarily utilizes commodity swap contracts, deferred premium put options, collars and enhanced collars to (i) reduce the effect of price volatility on the commodities the Company produces and sells, (ii) support the Company’s capital budgeting and expenditure plans, (iii) protect the Company’s commitments under the Term Loan Credit Agreement and Senior Credit Facility Agreement and (iv) support the payment of contractual obligations.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2025		2024			2025		2024
Noncash derivative gain (loss), net	$	19,034	$	2,606		$	14,178	$	(45,289	)
Cash receipts (payments) on settled derivatives, net		7,412		(5,308	)		4,341		(10,456	)
Derivative gain (loss), net	$	26,446	$	(2,702	)	$	18,519	$	(55,745	)

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 Cushing and Argus WTI Midland crude oil prices. As such, the Company primarily uses NYMEX WTI Cushing derivative contracts as well as Argus WTI Midland basis swaps from time to time to manage future crude oil price volatility. The Argus WTI Midland basis differential represents the amount of premium to NYMEX WTI Cushing.

The Company’s outstanding NYMEX WTI Cushing crude oil derivative instruments as of June 30, 2025 and the weighted average crude oil prices and premiums payable per barrel for those contracts are as follows:

					Swaps		Collars, Enhanced Collars & Deferred Premium Puts
Settlement Month	Settlement Year	Type of Contract	Bbls Per Day	Index		Price per Bbl		Floor or Strike Price per Bbl		Ceiling Price per Bbl		Deferred Premium Payable per Bbl
Crude Oil:
Jul - Sep	2025	Swap	3,000	WTI Cushing	$	75.85	$	—	$	—	$	—
Jul - Sep	2025	Collar	7,000	WTI Cushing	$	—	$	65.00	$	90.08	$	2.28
Jul - Sep	2025	Put	9,000	WTI Cushing	$	—	$	65.78	$	—	$	5.00
Oct - Dec	2025	Collar	13,000	WTI Cushing	$	—	$	60.62	$	70.32	$	—
Jan - Mar	2026	Collar	13,000	WTI Cushing	$	—	$	60.62	$	70.32	$	—
Apr - Jun	2026	Collar	6,000	WTI Cushing	$	—	$	59.67	$	68.33	$	—
Jul - Sep	2026	Collar	6,000	WTI Cushing	$	—	$	59.67	$	68.33	$	—
Oct - Dec	2026	Collar	2,000	WTI Cushing	$	—	$	59.00	$	65.00	$	—
Jan - Mar	2027	Collar	2,000	WTI Cushing	$	—	$	59.00	$	65.00	$	—

Natural gas production derivatives. The Company sells its natural gas production at the tailgate of the gas processing plants and the sales contracts governing such natural gas production are tied directly to, or are correlated with, HH natural gas prices. As such, the Company primarily uses HH derivative contracts to manage future natural gas price volatility.

The Company’s outstanding HH natural gas derivative instruments as of June 30, 2025 and the weighted average natural gas prices per MMBtu for those contracts are as follows:

Settlement Month	Settlement Year		Type of Contract		MMBtu Per Day		Index		Price per MMBtu
Natural Gas:
Jul – Sep		2025		Swap		30,000		HH	$	4.43
Oct – Dec		2025		Swap		30,000		HH	$	4.43
Jan – Mar		2026		Swap		30,000		HH	$	4.39
Apr – Jun		2026		Swap		30,000		HH	$	4.30
Jul – Sep		2026		Swap		30,000		HH	$	4.30
Oct – Dec		2026		Swap		30,000		HH	$	4.30
Jan – Mar		2027		Swap		19,667		HH	$	4.30

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 assets associated with the Company’s open commodity derivative instruments by counterparty are as follows (in thousands):

	As of June 30, 2025
Fifth Third Bank, National Association	$	10,182
Mercuria Energy Trading SA		3,761
Macquarie Bank Limited		1,953
Wells Fargo Bank, National Association		484
	$	16,380