Derivatives

3 Months Ended

Mar. 31, 2023

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. Our commodity derivative transactions consisted of the following types of hedges as of March 31, 2023:

•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.

We do not engage in derivative transactions for speculative purposes and have not designated any of our hedges for hedge accounting purposes. We are not required to post any cash collateral with our counterparties and no collateral has been posted as of March 31, 2023.

The following non-designated commodity hedges were outstanding as of March 31, 2023:

Remaining Term	Commodity	Contracted Volume	Weighted Average  Fixed Price for Swaps	Contracted Market
Apr'23 - Dec'23 (1)	Natural gas - swap	22,000 MMBtu/day	$2.46	IF - NYMEX (HH)
Apr'23 - Dec'23	Crude oil - swap	1,300 Bbl/day	$43.60	WTI - NYMEX

1.During April 2023, we entered into NYMEX (HH) natural gas - swap agreements averaging 22,000 MMBtu/day for October 2023, November 2023, and December 2023 at a weighted average fixed price of $3.14 per MMBtu which effectively locked in the settlement price of our outstanding positions for those periods.

Warrants

Prior to the determination of the initial exercise price, we recognized the fair value of the warrants as a derivative liability on our unaudited condensed consolidated balance sheets with changes in the liability reported as gain (loss) on change in fair value of warrants in our unaudited condensed consolidated statements of operations. 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. Accordingly, we recognized the change in the fair value of the warrant liability in our unaudited condensed consolidated statements of operations and reclassified the $49.1 million warrant liability to capital in excess of par value on the unaudited condensed consolidated balance sheets as of April 7, 2022. The warrants will continue to be reported as capital in excess of par value and are no longer subject to future fair value adjustments.

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

		Balances as of March 31, 2023
	Balance Sheet Classification	Presented Gross		Effects of Netting		Presented Net
		(In thousands)
Liabilities:
Current commodity derivatives	Current derivative liabilities	$	12,571	$	—	$	12,571
Total derivative liabilities		$	12,571	$	—	$	12,571

		Balances as of December 31, 2022
	Balance Sheet Classification	Presented Gross		Effects of Netting		Presented Net
		(In thousands)
Assets:
Current commodity derivatives	Current derivative assets	$	8,547	$	(8,547)	$	—
Total derivative assets		$	8,547	$	(8,547)	$	—
Liabilities:
Current commodity derivatives	Current derivative liabilities	$	32,113	$	(8,547)	$	23,566
Total derivative liabilities		$	32,113	$	(8,547)	$	23,566

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,
	2023		2022
	(In thousands)
Gain (loss) on derivatives, net	$	13,595	$	(64,076)
Gain (loss) on commodity derivatives settled	2,601		(21,239)
Gain (loss) on derivatives, net less gain (loss) on commodity derivatives settled	$	10,994	$	(42,837)
Loss on change in fair value of warrants	$	—	$	(36,612)