Derivatives

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

Commodity Derivatives

We have entered into various types of derivative transactions covering some of our projected natural gas, NGLs, and oil production. These transactions are intended to reduce our exposure to market price volatility by setting the price(s) we will receive for that production. Our decisions on the price(s), type, and quantity of our production subject to a derivative contract are based, in part, on our view of current and future market conditions as well as certain requirements stipulated in the Exit credit agreement. As of March 31, 2022, our commodity derivative transactions consisted of the following types of hedges:

•Swaps. We receive or pay a fixed price for the commodity and pay or receive a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

•Collars. A collar contains a fixed floor price (put) and a ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the call and the put strike price, no payments are due from either party. 

We do not engage in derivative transactions for speculative purposes. We are not required to post any cash collateral with our counterparties and no collateral has been posted as of March 31, 2022.

The following non-designated commodity hedges were outstanding as of March 31, 2022:

Term	Commodity	Contracted Volume	Weighted Average  Fixed Price for Swaps	Contracted Market
Apr'22 - Dec'22	Natural gas - swap	5,000 MMBtu/day	$2.61	IF - NYMEX (HH)
Jan'23 - Dec'23	Natural gas - swap	22,000 MMBtu/day	$2.46	IF - NYMEX (HH)
Apr'22 - Dec'22	Natural gas - collar	35,000 MMBtu/day	$2.50 - $2.68	IF - NYMEX (HH)
Apr'22 - Jun'22	Crude oil - swap	824 Bbl/day	$70.30	WTI - NYMEX
Apr'22 - Dec'22	Crude oil - swap	2,300 Bbl/day	$42.25	WTI - NYMEX
Jan'23 - Dec'23	Crude oil - swap	1,300 Bbl/day	$43.60	WTI - NYMEX

Warrants

We recognize the fair value of the warrants as a derivative liability on our consolidated balance sheets with changes in the liability reported as loss on change in fair value of warrants in our consolidated statements of operations. The liability will continue to be adjusted to fair value at each reporting period until the warrants meet the definition of an equity instrument, at which time they will be reported as shareholders' equity and no longer subject to future fair value adjustments.

On April 7, 2022, the company delivered notice of the initial $63.74 exercise price resulting in the warrants meeting the definition of an equity instrument. We will estimate the fair value of the warrants as of April 7, 2022 and they will be reported as shareholders' equity in future periods.

The following tables present the recognized derivative assets and liabilities on our unaudited condensed consolidated balance sheets:

		Balances as of March 31, 2022
	Balance Sheet Classification	Presented Gross		Effects of Netting		Presented Net
		(In thousands)
Liabilities:
Current Commodity Derivatives	Current derivative liabilities	$	78,868	$	—	$	78,868
Long-term Commodity Derivatives	Non-current derivative liabilities	22,699		—		22,699
Warrant Liability	Warrant liability	56,434		—		56,434
Total derivative liabilities		$	158,001	$	—	$	158,001

		Balances as of December 31, 2021
	Balance Sheet Classification	Presented Gross		Effects of Netting		Presented Net
		(In thousands)
Liabilities:
Current Commodity Derivatives	Current derivative liabilities	$	40,876	$	—	$	40,876
Long-term Commodity Derivatives	Non-current derivative liabilities	17,855		—		17,855
Warrant Liability	Warrant liability	19,822		—		19,822
Total derivative liabilities		$	78,553	$	—	$	78,553

The following table shows the activity related to derivative instruments in the unaudited condensed consolidated statements of operations for the periods indicated:

	Three Months Ended March 31,
	2022		2021
	(In thousands)
Loss on derivatives	$	(64,076)	$	(22,831)
Cash settlements paid on commodity derivatives	(21,239)		(3,304)
Loss on derivatives less cash settlements paid on commodity derivatives	$	(42,837)	$	(19,527)
Loss on change in fair value of warrants	$	(36,612)	$	—