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Derivative Instruments | 6 Months Ended
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Jun. 30, 2025
Derivative Instruments |
Derivative Instruments | (11) Derivative Instruments The Company is exposed to certain risks relating to its ongoing business operations, and it may use derivative instruments to manage its commodity price risk. In addition, the Company periodically enters into contracts that contain embedded features that are required to be bifurcated and accounted for separately as derivatives.
(a) | Commodity Derivative Positions
The Company periodically enters into natural gas, NGLs and oil derivative contracts with counterparties to hedge the price risk associated with its production. These derivatives are not entered into for trading purposes. To the extent that changes occur in the market prices of natural gas, NGLs and oil, the Company is exposed to market risk on these open contracts. This market risk exposure is generally offset by the change in market prices of natural gas, NGLs and oil recognized upon the ultimate sale of the Company’s production. The Company was party to various commodity derivative contracts that settled during the three and six months ended June 30, 2024 and 2025. The Company enters derivative contracts when management believes that favorable future sales prices for the Company’s production can be secured. Under the Company’s swap agreements, when actual commodity prices upon settlement exceed the fixed price provided by the swap contracts, the Company pays the difference to the counterparty. When actual commodity prices upon settlement are less than the contractually provided fixed price, the Company receives the difference from the counterparty. Under the Company’s collar agreements, when actual commodity prices upon settlement are below the floor price provided by the contract, the Company receives the difference from the counterparty. When actual commodity prices upon settlement are above the ceiling price, the Company pays the difference to the counterparty. The Company’s derivative contracts have not been designated as hedges for accounting purposes; therefore, all gains and losses are recognized in the Company’s statements of operations and comprehensive income (loss). ​ As of June 30, 2025, the Company’s fixed price swap positions excluding Martica, the Company’s consolidated VIE, were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Weighted | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Average | ​
Commodity / Settlement Period |  | Index |  | Contracted Volume |  | Price |
Natural Gas | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
July-December 2025 | ​ | Henry Hub | ​ | 100,000 | MMBtu/day | ​ | $ | 3.12 | /MMBtu | ​
​ As of June 30, 2025, the Company’s collar contract positions excluding Martica, the Company’s consolidated VIE, were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Weighted | ​ | Weighted | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Average | ​ | Average | ​
Commodity / Settlement Period |  | Index |  | Contracted Volume |  | Ceiling Price |  | Floor Price | ​
Natural Gas | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
January-December 2026 | ​ | Henry Hub | ​ | 500,000 | MMBtu/day | ​ | $ | 6.31 | /MMBtu | ​ | $ | 3.14 | /MMBtu | ​
​ The Company has a call option and an embedded put option tied to NYMEX pricing for the production volumes associated with the Company’s retained interest in the volumetric production payment transaction (“VPP”) properties. The put option was embedded within another contract, and since the embedded put option was not clearly and closely related to its host contract, the Company bifurcated this derivative instrument and reflects it at fair value in the unaudited condensed consolidated financial statements. As of June 30, 2025, the Company’s call option and embedded put option arrangements were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Embedded | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Call Option | ​ | Put Option | ​
Commodity / Settlement Period |  | Index |  | Contracted Volume |  | Strike Price |  | Strike Price |
Natural Gas | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
July-December 2025 | ​ | Henry Hub | ​ | 44,000 | MMBtu/day | ​ | $ | 2.564 | /MMBtu | ​ | $ | 2.564 | /MMBtu | ​
January-December 2026 | ​ | Henry Hub | ​ | 32,000 | MMBtu/day | ​ | ​ | 2.629 | /MMBtu | ​ | ​ | 2.629 | /MMBtu | ​
​ During the three months ended March 31, 2025, all of Martica’s derivative contracts expired, and as a result, Martica had no derivative instruments as of March 31, 2025 or June 30, 2025. ​
(b) | Summary
The table below presents a summary of the fair values of the Company’s derivative instruments and where such values are recorded in the condensed consolidated balance sheets (in thousands).
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | (Unaudited) | ​
​ | ​ | ​ | ​ | December 31, | ​ | June 30, | ​
​ |  | Balance Sheet Location |  | 2024 | ​ | 2025 | ​
Asset derivatives not designated as hedges for accounting purposes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity derivatives—current | ​ | Derivative instruments | ​ | $ | — | ​ | ​ | 387 | ​
Embedded derivatives—current | ​ | Derivative instruments | ​ | ​ | 1,050 | ​ | ​ | 750 | ​
Commodity derivatives—noncurrent | ​ | Derivative instruments | ​ | ​ | — | ​ | ​ | 371 | ​
Embedded derivatives—noncurrent | ​ | Derivative instruments | ​ | ​ | 1,296 | ​ | ​ | 576 | ​
Total asset derivatives (1) | ​ | ​ | ​ | ​ | 2,346 | ​ | ​ | 2,084 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liability derivatives not designated as hedges for accounting purposes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity derivatives—current (2) | ​ | Derivative instruments | ​ | ​ | 31,792 | ​ | ​ | 34,019 | ​
Commodity derivatives—noncurrent | ​ | Derivative instruments | ​ | ​ | 17,233 | ​ | ​ | 15,635 | ​
Total liability derivatives (1) | ​ | ​ | ​ | ​ | 49,025 | ​ | ​ | 49,654 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net derivatives liability (1) | ​ | ​ | ​ | $ | (46,679) | ​ | ​ | (47,570) | ​
(1) | The fair value of derivative instruments was determined using Level 2 inputs.
(2) | As of December 31, 2024, $2 million of current commodity derivative liabilities are attributable to the Company’s consolidated VIE, Martica.
The following table sets forth the gross values of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties, and the resulting net amounts presented in the condensed consolidated balance sheets as of the dates presented, all at fair value (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (Unaudited) | ​
​ | ​ | December 31, 2024 | ​ | June 30, 2025 | ​
​ | ​ | ​ | ​ | ​ | ​ | Net Amounts of | ​ | ​ | ​ | ​ | ​ | Net Amounts of | ​
​ | ​ | Gross | ​ | Gross | ​ | Assets | ​ | Gross | ​ | Gross | ​ | Assets | ​
​ | ​ | Amounts | ​ | Amounts Offset | ​ | (Liabilities) on | ​ | Amounts | ​ | Amounts Offset | ​ | (Liabilities) on | ​
​ |  | Recognized |  | Recognized |  | Balance Sheet |  | Recognized |  | Recognized |  | Balance Sheet | ​
Commodity derivative assets | ​ | $ | 3,482 | ​ | ​ | (3,482) | ​ | ​ | — | ​ | ​ | 36,917 | ​ | ​ | (36,159) | ​ | ​ | 758 | ​
Embedded derivative assets | ​ | ​ | 2,346 | ​ | ​ | — | ​ | ​ | 2,346 | ​ | ​ | 1,326 | ​ | ​ | — | ​ | ​ | 1,326 | ​
Commodity derivative liabilities | ​ | ​ | (52,507) | ​ | ​ | 3,482 | ​ | ​ | (49,025) | ​ | ​ | (85,813) | ​ | ​ | 36,159 | ​ | ​ | (49,654) | ​
​ The following table sets forth a summary of derivative fair value gains and losses and where such values are recorded in the unaudited condensed consolidated statements of operations and comprehensive income (loss) (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Statement of | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Operations | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30, | ​
​ |  | Location | ​ | 2024 | ​ | 2025 | ​ | 2024 | ​ | 2025 | ​
Commodity derivative fair value gains (losses) (1) | ​ | Revenue | ​ | $ | (3,545) | ​ | ​ | 53,220 | ​ | ​ | 4,721 | ​ | ​ | (17,241) | ​
Embedded derivative fair value gains (losses) (1) | ​ | Revenue | ​ | ​ | (2,040) | ​ | ​ | 189 | ​ | ​ | (860) | ​ | ​ | (1,021) | ​
(1) | The fair value of derivative instruments was determined using Level 2 inputs.
​

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