COMMODITY DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company utilizes derivative instruments to manage its exposure to fluctuations in the underlying commodity prices of its inventory. The Company’s management sets and implements hedging policies, including volumes, types of instruments and counterparties, to support oil prices at targeted levels and manage its exposure to fluctuating prices.

The Company’s derivative instruments consist of option and futures arrangements for oil. For option and futures arrangements, the Company receives the difference positive or negative between an agreed-upon strike price and the market price.

The mark-to-market effects of these contracts as of March 31, 2022 and December 31, 2021, are summarized in the following table. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of the crude oil futures agreements is based on the difference between the strike price and the New York Mercantile Exchange and Brent Complex futures price for the applicable trading months.


As of March 31, 2022
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value


Options	Mar 2022 - May 2022	$	4.83	20,000	$	230,200
Futures	Mar 2022 - Jun 2022	$	28.27	136,000	$	133,390


As of December 31, 2021
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value

Options	Dec. 2021-Mar. 2022	$	3.18	18,000	$	136,440
Futures	Dec. 2021-Mar. 2022	$	31.59	20,000	$	71,000
Futures	Dec. 2021-Mar. 2022	$	32.48	50,000	$	(111,460)

The carrying values of the Company’s derivatives positions and their locations on the consolidated balance sheets as of March 31, 2022 and December 31, 2021 are presented in the table below.


Balance Sheet Classification	Contract Type	2022		2021

	Crude oil options	$	230,200	$	136,440
	Crude oil futures	$	133,390	$	(40,460)
Derivative commodity asset		$	363,590	$	95,980

For the three months ended March 31, 2022 and 2021, we recognized $257,516 of gain and $721,531 of loss, respectively, on commodity derivative contracts on the consolidated statements of operations as part of our cost of revenues.