Commodity Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

COMMODITY DERIVATIVES

Note 14 - Commodity Derivatives

We historically use commodity-based derivative contracts to manage exposures to commodity price on a portion of our oil and natural gas production. We do not hold or issue derivative financial instruments for speculative or trading purposes. We also have entered into, on occasion, oil and natural gas physical delivery contracts to effectively provide commodity price hedges. Because these contracts are not expected to be net cash settled, they are considered to be normal sales contracts and not derivatives. These contracts are not recorded at fair value in the consolidated financial statements.

We have entered into swap and costless collar derivative agreements to hedge a portion of our oil and natural gas production through 2022. As of December 31, 2019, these derivative agreements consisted of the following:

	Natural Gas Swaps				Natural Gas Collars
			Weighted Average				Weighted Average Price
Year	MMBtu		Price (a)		MMBtu		Range (a)
2020		12,433,000	$	2.73		3,430,000		$2.10 – $2.75
2021		6,448,000	$	2.58		1,745,000		$2.25 – $2.75

	Oil Swaps*								Oil Collars*
Year	WTI Bbl		Weighted Average Price (b)		Brent Bbl		Weighted Average Price (c)		WTI Bbl		Weighted Average Price (b)		Brent Bbl		Weighted Average Price (c)
2019	17,523		$53.30		13,805		$64.87		1,700		$47.50 - $57.35		4,500		$47.00 - $75.00
2020		121,147	$	55.37		207,182	$	64.62		28,200		$47.00 - $60.15		57,900	$47.00 - $75.00
2021		-	$	-		86,341	$	67.12		66,200		$47.00 - $60.15		190,000	$47.00 - $75.00
2022		-	$	-		-	$	-		-	$	-		199,900	$50.00 - $61.00

*	Includes 100% of Carbon California’s outstanding derivative hedges at December 31, 2019, and not our proportionate share.
(a)	NYMEX Henry Hub Natural Gas futures contracts for the respective period.
(b)	NYMEX Light Sweet Crude West Texas Intermediate futures contracts for the respective period.
(c)	Brent future contracts for the respective period.

For our swap instruments, we receive a fixed price for the hedged commodity and pay a floating 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. Costless collars are designed to establish floor and ceiling prices on anticipated future oil and gas production. The ceiling establishes a maximum price that the Company will receive for the volumes under contract, while the floor establishes a minimum price.

The following table summarizes the fair value of the derivatives recorded in the consolidated balance sheets. These derivative instruments are not designated as cash flow hedging instruments for accounting purposes.

	As of December 31,
(in thousands)	2019		2018
Commodity derivative contracts:
Commodity derivative asset	$	5,915	$	3,517
Commodity derivative asset – non-current	$	1,164	$	3,505
Commodity derivative liability	$	469	$	-
Commodity derivative liability – non-current	$	87	$	-

The following table summarizes the commodity derivative gain presented in the accompanying consolidated statements of operations:

	Year Ended December 31,
(in thousands)	2019			2018
Commodity derivative contracts:
Settlement gain (loss)	$	3,543		$	(3,848	)
Unrealized (loss) gain		(499	)		8,742
Total commodity derivative gain	$	3,044		$	4,894

We net our derivative instrument fair value amounts pursuant to ISDA Master Agreements, which provide for the net settlement over the term of the contracts and in the event of default or termination of the contracts. The following table summarizes the effect of netting arrangements for recognized derivative assets and liabilities that are subject to master netting arrangements or similar arrangements in the consolidated balance sheet as of December 31, 2019:

							Net
	Gross						Recognized
	Recognized			Gross			Fair Value
	Assets/			Amounts			Assets/
Balance Sheet Classification (in thousands)	Liabilities			Offset			Liabilities
Commodity derivative assets:
Commodity derivative asset	$	6,917		$	(1,002	)	$	5,915
Commodity derivative asset – non-current		3,478			(2,314	)		1,164
Total derivative assets	$	10,395		$	(3,316	)	$	7,079
Commodity derivative liabilities:
Commodity derivative liability	$	(1,471	)	$	1,002		$	(469	)
Commodity derivative liability – non-current		(2,401	)		2,314			(87	)
Total derivative liabilities	$	(3,872	)	$	3,316		$	(556	)

Due to the volatility of oil and natural gas prices, the estimated fair values of our derivatives are subject to fluctuations from period to period.