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Derivative Instruments | 9 Months Ended
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Sep. 30, 2024
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 crude index price and its natural gas contracts settle monthly based on the average NYMEX Henry Hub natural gas index price. The Company utilizes derivative financial instruments including 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, 2024, the Company had the following outstanding commodity derivative contracts:
Commodity |  | Settlement Period |  | Derivative Instrument |  |  |  | Volumes |  | Weighted Average Prices |  |
|  |  |  |  | Fixed-Price Swaps |  | Sub-Floor |  | Floor |  | Ceiling |
Crude oil |  | 2024 |  | Two-way collars |  |  |  | 1,840,000 |  | Bbls |  |  |  |  |  | $ | 67.50 |  |  | $ | 81.68 |  |  |
Crude oil |  | 2024 |  | Three-way collars |  |  |  | 368,000 |  | Bbls |  |  |  | $ | 55.00 |  |  | $ | 71.25 |  |  | $ | 92.14 |  |  |
Crude oil |  | 2024 |  | Fixed-price swaps |  |  |  | 460,000 |  | Bbls |  | $ | 73.82 |  |  |  |  |  |  |  |  |
Crude oil |  | 2025 |  | Two-way collars |  |  |  | 4,378,000 |  | Bbls |  |  |  |  |  | $ | 63.96 |  |  | $ | 79.17 |  |  |
Crude oil |  | 2025 |  | Three-way collars |  |  |  | 2,371,000 |  | Bbls |  |  |  | $ | 52.69 |  |  | $ | 67.69 |  |  | $ | 82.14 |  |  |
Crude oil |  | 2025 |  | Fixed price swaps |  |  |  | 362,000 |  | Bbls |  | $ | 68.93 |  |  |  |  |  |  |  |  |
Crude oil |  | 2026 |  | Three-way collars |  |  |  | 2,540,000 |  | Bbls |  |  |  | $ | 51.78 |  |  | $ | 66.78 |  |  | $ | 79.89 |  |  |
Natural gas |  | 2025 |  | Two-way collars |  |  |  | 1,380,000 |  | MMBtu |  |  |  |  |  | $ | 3.00 |  |  | $ | 4.18 |  |  |
Natural gas |  | 2025 |  | Fixed-price swaps |  |  |  | 4,301,600 |  | MMBtu |  | $ | 3.75 |  |  |  |  |  |  |  |  |
Natural gas |  | 2026 |  | Two-way collars |  |  |  | 2,262,500 |  | MMBtu |  |  |  |  |  | $ | 3.00 |  |  | $ | 4.73 |  |  |
Subsequent to September 30, 2024, the Company entered into the following commodity derivative contracts:
|  |  |  |  |  |  |  |  |  |  |  | Weighted Average Prices
Commodity |  | Settlement Period |  | Derivative Instrument |  | Volumes |  |  |  | Fixed-Price Swaps |  | Floor |  | Ceiling
Crude oil |  | 2025 |  | Two-way collars |  | 730,000 |  |  | Bbls |  |  |  |  |  | $ | 65.00 |  |  | $ | 76.62 |
Crude oil |  | 2025 |  | Fixed-price swaps |  | 730,000 |  |  | Bbls |  |  |  | $ | 71.87 |  |  |  |  |
Crude oil |  | 2026 |  | Two-way collars |  | 730,000 |  |  | Bbls |  |  |  |  |  | $ | 65.00 |  |  | $ | 71.83 |
Transportation derivative contracts. The Company had contracts that provided for the transportation of crude oil through a buy/sell structure from North Dakota to either Cushing, Oklahoma or Guernsey, Wyoming. The contracts had required 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 June 30, 2024, the terms of these contracts expired. As of December 31, 2023, the estimated fair value of the remaining contract was $5.9 million, which was classified as a current derivative asset on the Company’s Condensed Consolidated Balance Sheet. The Company recorded the changes in fair value of these contracts to GPT expenses on the Company’s Condensed Consolidated Statements of Operations. Settlements on these contracts are reflected as operating activities on the Company’s Condensed 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 5—Fair Value Measurements for additional information. Contingent consideration. The Company bifurcated the Contingent Consideration from the host contract and accounted for it separately at fair value. The 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, 2024, the estimated fair value of the Contingent Consideration was $45.3 million, of which $24.6 million was classified as a current derivative asset, and $20.7 million was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. As of December 31, 2023, the estimated fair value of the Contingent Consideration was $42.7 million, of which $22.6 million was classified as a current derivative asset and $20.1 million was classified as a non-current derivative asset on the Condensed Consolidated Balance Sheet. See Note 5—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 Instrument |  | Statements of Operations Location |  | 2024 |  | 2023 |  | 2024 |  | 2023
|  |  |  | (In thousands)
Commodity derivatives |  | Net gain (loss) on derivative instruments |  | $ | 54,143 |  |  | $ | (91,483) |  |  | $ | 27,147 |  |  | $ | 4,097 |
Commodity derivatives (buy/sell transportation contracts) |  | Gathering, processing and transportation expenses(1) |  | — |  |  | (1,432) |  |  | (5,877) |  |  | 16,847 |
Contingent consideration |  | Net gain (loss) on derivative instruments |  | (1,422) |  |  | 6,278 |  |  | 2,606 |  |  | 7,150 |
__________________ (1)The change in the fair value of the transportation derivative contracts was recorded in GPT expenses as a loss for the nine months ended September 30, 2024 and 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, 2024
Derivative Instrument |  | Balance Sheet Location |  | Gross Amount |  | Gross Amount Offset |  | Net Amount
|  |  |  | (In thousands)
Derivatives assets: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current assets |  | $ | 44,508 |  |  | $ | (13,414) |  |  | $ | 31,094 |
Contingent consideration |  | Derivative instruments — current assets |  | 24,573 |  |  | — |  |  | 24,573 |
Commodity derivatives |  | Derivative instruments — non-current assets |  | 33,877 |  |  | (23,629) |  |  | 10,248 |
Contingent consideration |  | Derivative instruments — non-current assets |  | 20,739 |  |  | — |  |  | 20,739 |
Total derivatives assets |  | $ | 123,697 |  |  | $ | (37,043) |  |  | $ | 86,654 |
Derivatives liabilities: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current liabilities |  | $ | 13,417 |  |  | $ | (13,414) |  |  | $ | 3 |
Commodity derivatives |  | Derivative instruments — non-current liabilities |  | 23,674 |  |  | (23,629) |  |  | 45 |
Total derivatives liabilities |  | $ | 37,091 |  |  | $ | (37,043) |  |  | $ | 48 |
|  |  |  | December 31, 2023
Derivative Instrument |  | Balance Sheet Location |  | Gross Amount |  | Gross Amount Offset |  | Net Amount
|  |  |  | (In thousands)
Derivatives assets: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current assets |  | $ | 20,647 |  |  | $ | (11,769) |  |  | $ | 8,878 |
Contingent consideration |  | Derivative instruments — current assets |  | 22,614 |  |  | — |  |  | 22,614 |
Commodity derivatives (buy/sell transportation contracts) |  | Derivative instruments — current assets |  | 5,877 |  |  | — |  |  | 5,877 |
Commodity contracts |  | Derivative instruments — non-current assets |  | 16,760 |  |  | (14,326) |  |  | 2,434 |
Contingent consideration |  | Derivative instruments — non-current assets |  | 20,092 |  |  | — |  |  | 20,092 |
Total derivatives assets |  | $ | 85,990 |  |  | $ | (26,095) |  |  | $ | 59,895 |
Derivatives liabilities: |  |  |  |  |  |  |  |
Commodity derivatives |  | Derivative instruments — current liabilities |  | $ | 25,978 |  |  | $ | (11,769) |  |  | $ | 14,209 |
Commodity derivatives |  | Derivative instruments — non-current liabilities |  | 15,043 |  |  | (14,326) |  |  | 717 |
Total derivatives liabilities |  | $ | 41,021 |  |  | $ | (26,095) |  |  | $ | 14,926 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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