Derivative Instruments

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Note 12— Derivative Instruments

Although we are a UK company, we define foreign currency as any non-US dollar denominated currency. Our functional currency is the US Dollar. We are exposed to risks on future cash flows to the extent that expenses denominated in a foreign currency are not equal to revenues denominated in the same foreign currency. The Company uses foreign currency forward contracts to manage our net exposure to fluctuations in currency exchange rates. Currencies of the Company’s derivative instruments include DKK, the Australian dollar (“AUD”) and the British pound sterling (“GBP”). Currency derivatives are mainly realized within one year. We did not enter into any derivative contracts during the three and six months ended June 30, 2022.

We have exposure related to changes in interest rates on borrowings under the 2023 Revolving Credit Facility and may be subject to similar exposure on future borrowing arrangements. We were subject to changes in interest rates on borrowings under the DSF Facility and the New DNB Credit Facility prior to repayment of these instruments. The Company may use interest rate swap contracts to manage our exposure to fluctuations in interest rates. The Company did not enter into any interest rate swap contracts during the six months ended June 30, 2023 or 2022.

Derivative financial instruments are recognized on the trading date and measured at fair value using generally accepted valuation techniques based on relevant observable inputs. The Company does not enter into derivative transactions for speculative purposes and for accounting purposes we have not elected to apply hedge accounting for these transactions. Realized gains and losses as well as changes in the fair values of derivative financial instruments are recognized in the income statement in “Interest income and other, net.”

The following table summarizes notional value of currency derivative contracts as of June 30, 2023:

	June 30, 2023
	Foreign Currency	USD Equivalent
DKK to USD	194,424	27,759
AUD to USD	22,494	15,432
GBP to USD	4,327	5,287

The following gains (losses) from derivative instruments were recognized on our Condensed Consolidated Statements of Operations:

Derivative Instrument	Description	Three Months Ended June 30, 2023	Six Months Ended June 30, 2023
Foreign currency forward contracts	Realized gain (loss)	581	464
Foreign currency forward contracts	Unrealized gain (loss)	(918)	(905)