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Note 10 - Derivatives and Fair Value | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Derivatives and Fair Value [Text Block] | 10. DERIVATIVES AND FAIR VALUE The Company uses derivative financial instruments from time to time to achieve a more predictable cash flow from crude oil production by reducing the exposure to price fluctuations. See Note 2 for further information. Commodity swaps On January 22, 2021, the Company entered into commodity swaps at a Dated Brent weighted average of $53.10 per barrel for the period from and including February 2021 through January 2022 for a quantity of 709,262 barrels. On May 6, 2021, the Company entered into commodity swaps at a Dated Brent weighted average price of $66.51 per barrel for the period from and including May 2021 through October 2021 for a quantity of 672,533 barrels. On August 6, 2021, the Company entered into additional commodity swaps at a Dated Brent weighted average price of $67.70 per barrel for the period from and including November 2021 through February 2022 for a quantity of 314,420 barrels. On September 24, 2021, the Company entered into additional commodity swaps at a Dated Brent weighted average price of $72.00 per barrel for the period from and including March 2022 to June 2022 for a quantity of 460,000 barrels. See the table below for the unexpired swaps as of December 31, 2022. On October 26, 2022, the Company entered into additional derivatives contracts for the first quarter of 2023. The details are in the chart below:
Settlement Period |  | Type of Contract |  | Index |  | Average Monthly Volumes |  |  | Weighted Average Put Price |  |  | Weighted Average Call Price |
|  |  |  |  |  | (Bbls) |  |  | (per Bbl) |  |  | (per Bbl) |
January 2023 to March 2023 |  | Collars |  | Dated Brent |  |  | 101,000 |  |  | $ | 65.00 |  |  | $ | 120.00 |
While these derivative instruments are intended to be an economic hedge to mitigate the impact of a decline in crude oil prices, the Company has not elected hedge accounting. The contracts are being measured at fair value each period, with changes in fair value recognized in net income. The Company does not enter into derivative instruments for speculative or trading proposes. In connection with the RBL facility entered in May 2022, the Company is required to hedge a portion of its anticipated oil production at the time the Company draws down on the borrowing base. The derivative instruments are measured at fair value using the Income Method. Level 2 observable inputs used in the valuation model include market information as of the reporting date, such as prevailing Brent crude futures prices, Brent crude futures commodity price volatility and interest rates. The determination of the derivative instrument contracts’ fair value includes the impact of the counterparty’s non-performance risk. To mitigate counterparty risk, the Company enters into such derivative contracts with creditworthy financial institutions deemed by management as competent and competitive market makers. At times, the Company’s counterparties require that it post collateral for changes in the net fair value of the derivative contracts. This cash collateral is reported in the line item "Restricted cash" on the condensed consolidated balance sheets. The following table sets forth the gain (loss) on derivative instruments on the Company’s consolidated statements of operations and comprehensive income (loss):
|  |  |  | Year Ended December 31, |
Derivative Item |  | Statement of Operations Line |  | 2022 |  |  | 2021 |  |  | 2020 |
|  |  |  | (in thousands) |
Commodity derivatives |  | Cash settlements paid on matured derivative contracts, net |  | $ | (42,935 | ) |  | $ | (18,020 | ) |  | $ | 7,216 |
|  | Unrealized gain (loss) |  |  | 5,123 |  |  |  | (4,806 | ) |  |  | (639 | )
|  | Derivative instruments gain (loss), net |  | $ | (37,812 | ) |  | $ | (22,826 | ) |  | $ | 6,577 |
Subsequent Event The Company entered into additional derivative contracts for the second and third quarters of 2023. The details are in the chart below:
Settlement Period | Type of Contract | Index |  | Average Monthly Volumes |  |  | Weighted Average Put Price |  |  | Weighted Average Call Price |
|  |  |  | (Bbls) |  |  | (per Bbl) |  |  | (per Bbl) |
April 2023 to June 2023 | Collars | Dated Brent |  |  | 95,500 |  |  | $ | 65.00 |  |  | $ | 100.00 |
July 2023 to September 2023 | Collars | Dated Brent |  |  | 95,500 |  |  | $ | 65.00 |  |  | $ | 96.00 |

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- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI https://asc.fasb.org/topic&trid=2155941 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 + Details
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