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COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2021
Investments, All Other Investments [Abstract]  
COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS

7.       COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company uses derivative financial instruments to manage its exposure to commodity price fluctuations. Commodity derivative instruments are used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells. The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company’s derivative financial instruments consist of put options.

 

The Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its condensed consolidated statements of operations as they occur. Unrealized gains and losses related to the contracts are recognized and recorded as an asset or liability on the Company’s condensed consolidated balance sheets.

 

The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the three and nine months ended September 30, 2021 and 2020:

 

 

   Three months ended September 30,   Nine months ended September 30, 
   2021   2020   2021   2020 
Gain (loss) on derivatives:                    
Oil derivatives  $112,183   $(103,166)  $(427,766)   $2,003,505 
Natural gas derivatives   (144,454)   —    (144,454)   — 
Total  $(32,271)  $(103,166)  $(572,220)  $2,003,505 
                     

 

 

The following represents the Company’s net cash receipts from (payments on) derivatives for the three and nine months ended September 30, 2021 and 2020:

 

   Three months ended September 30,   Nine months ended September 30, 
   2021   2020   2021   2020 
Net cash received (payments made) on derivatives                    
Oil derivatives  $(177,736)  $279,533   $(541,709)  $1,323,426 
Natural gas derivatives   (144,454)   —    (144,454)   — 
Total  $(322,190)  $279,533   $(686,163)  $1,323,426 

 

 

The following table sets forth the Company’s outstanding derivative contracts at September 30, 2021.

 

   4th Quarter  
2021     
WTI Index Put Options:     
Quarterly volume (MBbl)   20.68 
Floor Price (Bbl)  $40.00 
      

 

 

   1st Quarter   2nd Quarter   3rd Quarter   4th Quarter 
2022                    
WTI Index Put Options:                    
Quarterly volume (MBbl)   20.56    20.43    20.32    15.72 
Floor Price (Bbl)  $40.00   $40.00   $40.00   $40.00 
                     

 

 

   1st Quarter   2nd  Quarter  
2023          
WTI Index Put Options:          
Quarterly volume (MBbl)   13.40    4.45 
Floor Price (Bbl)  $40.00   $40.00