Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Note 6. Fair Value Measurements

The Company's derivative instruments are reported at fair value on a recurring basis. In determining the fair values of swap contracts, a discounted cash flow method is used due to the unavailability of relevant comparable market data for the Company’s exact contracts. The discounted cash flow method estimates future cash flows based on quoted market prices for forward commodity prices and a risk-adjusted discount rate. The fair values of swap contracts are calculated mainly using significant observable inputs (Level 2). Calculation of the fair values of collars requires the use of an industry-standard option pricing model that considers various inputs including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. These assumptions are observable in the marketplace or can be corroborated by active markets or broker quotes and are therefore designated as Level 2 within the valuation hierarchy. The Company’s calculation of fair value for each of its derivative positions is compared to the counterparty valuation for reasonableness.

The following tables summarize the valuation of derivative instruments by pricing levels that were accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023.


	Fair value measurements at March 31, 2024 using:
In thousands	Level 1		Level 2			Level 3		Total
Derivative assets (liabilities):
Crude oil fixed price swaps	$	—	$	(54,805	)	$	—	$	(54,805	)
Crude oil NYMEX roll swaps		—		(3,366	)		—		(3,366	)
Natural gas WAHA swaps		—		21,194			—		21,194
Natural gas fixed price swaps		—		336,515			—		336,515
Total	$	—	$	299,538		$	—	$	299,538


	Fair value measurements at December 31, 2023 using:
In thousands	Level 1		Level 2		Level 3		Total
Derivative assets (liabilities):
Crude oil fixed price swaps	$	—	$	146,243	$	—	$	146,243
Crude oil NYMEX roll swaps		—		6,888		—		6,888
Natural gas WAHA swaps		—		21,523		—		21,523
Natural gas fixed price swaps		—		321,350		—		321,350
Natural gas collars		—		11,923		—		11,923
Total	$	—	$	507,927	$	—	$	507,927

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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