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Derivative Instruments
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
Commodity derivative contracts. The Company utilizes derivative financial instruments to manage risks related to changes in commodity prices. The Company’s crude oil contracts settle monthly based on the average NYMEX WTI and its natural gas contracts settle monthly based on the average NYMEX Henry Hub natural gas index price.
The Company utilizes fixed-price swaps and two-way and three-way collars to manage risks related to changes in commodity prices. The Company’s fixed-price swaps are designed to establish a fixed price for the volumes under contract. Two-way collars are designed to establish a minimum price (floor) and a maximum price (ceiling) for the volumes under contract. Three-way collars are designed to establish a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be the index price plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) for the volumes under contract. The Company may, from time to time, restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts.
At September 30, 2023, the Company had the following outstanding commodity derivative contracts:
CommoditySettlement
Period		Derivative
Instrument		VolumesWeighted Average Prices
Fixed-Price SwapsSub-FloorFloorCeiling
  
Crude oil2023Two-way collars2,162,000 Bbls$56.06 $76.65 
Crude oil2023Fixed-price swaps1,288,000 Bbls$50.00 
Crude oil2024Two-way collars3,928,000 Bbls$64.18 $85.40 
Crude oil2024Three-way collars736,000 Bbls$55.00 $71.25 $92.14 
Crude oil2025Two-way collars1,181,000 Bbls$60.00 $79.05 
Crude oil2025Three-way collars181,000 Bbls$55.00 $70.00 $91.55 
Natural gas2025Fixed-price swaps651,600 MMBtu$3.93 
Transportation derivative contracts. The Company is a party to two contracts that provide for the transportation of crude oil through a buy/sell structure from North Dakota to either Cushing, Oklahoma or Guernsey, Wyoming. The contracts require the purchase and sale of fixed volumes of crude oil through July 2024 as specified in the agreements. The Company determined that these contracts qualified as derivatives and did not elect the “normal purchase normal sale” exclusion. As of September 30, 2023, the estimated fair value of these contracts was a $2.2 million asset, which was classified as a current derivative asset on the Company’s Condensed Consolidated Balance Sheet. As of December 31, 2022, the estimated fair value of these contracts was a $14.7 million liability, of which $11.9 million was classified as a current derivative liability and $2.8 million was classified as a non-current derivative liability on the Company’s Condensed Consolidated Balance Sheet. The Company records the changes in fair value of these contracts to gathering, processing and transportation (“GPT”) expenses on the Company’s Condensed Consolidated Statement of Operations. Settlements on these contracts are reflected as operating activities on the Company’s Consolidated Statements of Cash Flows and represent cash payments to the counterparties for transportation of crude oil or the net settlement of contract liabilities if the transportation was not utilized, as applicable. See Note 6—Fair Value Measurements for additional information.
Contingent consideration. The Company bifurcated the Permian Basin Sale Contingent Consideration from the host contract and accounted for it separately at fair value. The Permian Basin Sale Contingent Consideration is marked-to-market each reporting period, with changes in fair value recorded in the other income (expense) section of the Company’s Condensed Consolidated Statements of Operations as a net gain or loss on derivative instruments. As of September 30, 2023, the estimated fair value of the Permian Basin Sale Contingent Consideration was $68.1 million, of which $24.5 million was classified as a current derivative asset and $43.6 million was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. As of December 31, 2022, the estimated fair value of the Permian Basin Sale Contingent Consideration was $60.9 million, of which $23.0 million was classified as a current derivative asset and $38.0 million was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. See Note 6—Fair Value Measurements for additional information.
The following table summarizes the location and amounts of gains and losses from the Company’s derivative instruments recorded in the Company’s Condensed Consolidated Statements of Operations for the periods presented:

Three Months Ended September 30,Nine Months Ended September 30,
Derivative InstrumentStatements of Operations Location2023202220232022
 (In thousands)
Commodity derivativesNet gain (loss) on derivative instruments$(91,483)$344,379 $4,097 $(136,066)
Commodity derivatives (buy/sell transportation contracts)(1)
Gathering, processing and transportation expenses(1,432)6,939 16,847 6,939 
Contingent considerationNet gain (loss) on derivative instruments6,278 (6,970)7,150 7,300 
__________________ 
(1)    The change in the fair value of the transportation derivative contracts was recorded in GPT expenses as a loss for the three months ended September 30, 2023 and as a gain for the nine months ended September 30, 2023.
In accordance with the FASB’s authoritative guidance on disclosures about offsetting assets and liabilities, the Company is required to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting agreement. The Company’s derivative instruments are presented as assets and liabilities on a net basis by counterparty, as all counterparty contracts provide for net settlement. No margin or collateral balances are deposited with counterparties, and as such, gross amounts are offset to determine the net amounts presented in the Company’s Condensed Consolidated Balance Sheets.
The following table summarizes the location and fair value of all outstanding derivative instruments recorded in the Company’s Condensed Consolidated Balance Sheets:
September 30, 2023
Derivative InstrumentBalance Sheet LocationGross AmountGross Amount OffsetNet Amount
(In thousands)
Derivatives assets:
Commodity derivativesDerivative instruments — current assets$9,502 $(9,463)$39 
Contingent considerationDerivative instruments — current assets24,496 — 24,496 
Commodity derivatives (buy/sell transportation contracts)Derivative instruments — current assets2,241 — 2,241 
Commodity derivativesDerivative instruments — non-current assets11,410 (11,374)36 
Contingent considerationDerivative instruments — non-current assets43,574 — 43,574 
Total derivatives assets$91,223 $(20,837)$70,386 
Derivatives liabilities:
Commodity derivativesDerivative instruments — current liabilities$123,973 $(9,463)$114,510 
Commodity derivatives (buy/sell transportation contracts)Derivative instruments — current liabilities88 — 88 
Commodity derivativesDerivative instruments — non-current liabilities18,499 (11,374)7,125 
Total derivatives liabilities$142,560 $(20,837)$121,723 
December 31, 2022
Derivative InstrumentBalance Sheet LocationGross AmountGross Amount OffsetNet Amount
(In thousands)
Derivatives assets:
Commodity derivativesDerivative instruments — current assets$10,194 $(9,414)$780 
Contingent considerationDerivative instruments — current assets22,955 — 22,955 
Contingent considerationDerivative instruments — non-current assets37,965 — 37,965 
Total derivatives assets$71,114 $(9,414)$61,700 
Derivatives liabilities:
Commodity derivativesDerivative instruments — current liabilities$339,090 $(9,414)$329,676 
Commodity derivatives (buy/sell transportation contracts)Derivative instruments — current liabilities11,865 — 11,865 
Commodity derivatives (buy/sell transportation contracts)Derivative instruments — non-current liabilities2,829 — 2,829 
Total derivatives liabilities$353,784 $(9,414)$344,370