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DERIVATIVES | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows. All contracts are entered into for other-than-trading purposes. The Company’s derivatives include swaps, collars, and puts for oil and natural gas, and none of the derivative instruments qualify as having hedging relationships. In a typical commodity fixed-price swap agreement, if the agreed upon published third-party index price is lower than the swap strike price, the Company receives the difference between the index price and the agreed upon swap strike price. If the index price is higher than the swap strike price, the Company pays the difference. A swaption allows the counterparty, on a specific date, to extend an existing fixed-price swap for a certain period of time or to increase the notional volumes of an existing fixed-price swap. A basis swap arrangement guarantees a price differential from a specified delivery point to an agreed upon reference point. The Company receives the difference between the price differential and the stated terms, if the price differential is greater than the stated terms. The Company pays the difference between the price differential and the stated terms, if the stated terms are greater than the price differential. Certain NYMEX calendar month average (“CMA”) settlement contracts contain a “CMA Roll Adjustment,” the calculation of which includes futures prices for contracts deliverable in, at the time, two forward months. The physical trade month average is compared to the prompt month futures contracts and weighted to reflect the amount of time during the delivery month that the forward months traded as the prompt month. The weighted adjustment values are added to the basic calendar month average to arrive at the Roll Adjusted settlement price for the month. “Oil roll swaps” fix the value of the roll adjustment. If the futures curve becomes more backwardated after entering the oil roll swap, we will pay the difference between the CMA Roll Adjustment and the oil roll swap price. If the futures curve becomes more in contango, we will receive the difference between the CMA Roll Adjustment and the oil roll swap price. A cashless collar arrangement establishes a floor and ceiling price on future oil and gas production. When the settlement price is above the ceiling price, the Company pays the difference between the settlement price and the ceiling price. When the settlement price is below the floor price, the Company receives the difference between the settlement price and floor price. In the event that the settlement price is between the ceiling and the floor, no payment or receipt occurs. A put gives the owner the right to sell the underlying commodity at a set price over the term of the contract. If the index settlement price is higher than the put fixed price, the put will expire worthless. If the settlement price is lower than the put fixed price, the Company will exercise the put and receive the difference between the settlement price and the put fixed price. As of September 30, 2021 and the filing date of this report, the Company had entered into the following commodity derivative contracts:
|  | Crude Oil (NYMEX WTI) |  | Natural Gas (NYMEX Henry Hub) |  | Natural Gas (CIG Basis) |  | Natural Gas (CIG)
|  | Bbls/day |  | Weighted Avg. Price per Bbl |  | MMBtu/day |  | Weighted Avg. Price per MMBtu |  | MMBtu/day |  | Weighted Avg. Basis Differential to CIG Price per MMBtu |  | MMBtu/day |  | Weighted Avg. Price per MMBtu
4Q21 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cashless Collar |  | 10,500 |  |  | $48.81/$67.63 |  | 20,000 |  |  | $2.25/$2.52 |  | — |  |  | — |  | 20,000 |  |  | $2.15/$2.75
Swap |  | 8,000 |  |  | $54.49 |  | — |  |  | — |  | 20,000 |  |  | $0.43 |  | 13,370 |  |  | $2.13
Oil Roll Swap(1) |  | 4,500 |  |  | $0.16 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
1Q22 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cashless Collar |  | 6,500 |  |  | $35.10/$59.44 |  | — |  |  | — |  | — |  |  | — |  | 20,000 |  |  | $2.15/$2.75
Swap |  | 1,000 |  |  | $50.15 |  | — |  |  | — |  | — |  |  | — |  | 10,000 |  |  | $2.13
Oil Roll Swap(1) |  | 2,000 |  |  | $0.22 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
Swaptions |  | 4,000 |  |  | $55.06 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
2Q22 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cashless Collar |  | 5,000 |  |  | $36.64/$63.52 |  | — |  |  | — |  | — |  |  | — |  | 20,000 |  |  | $2.15/$2.75
Swap |  | 1,000 |  |  | $50.15 |  | — |  |  | — |  | — |  |  | — |  | 10,000 |  |  | $2.13
Oil Roll Swap(1) |  | 2,000 |  |  | $0.22 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
Swaptions |  | 4,000 |  |  | $55.06 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
3Q22 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cashless Collar |  | 4,200 |  |  | $40.64/$67.74 |  | 20,000 |  |  | $2.80/$4.20 |  | — |  |  | — |  | — |  |  | —
Swap |  | 1,000 |  |  | $50.15 |  | — |  |  | — |  | — |  |  | — |  | 10,000 |  |  | $2.13
Oil Roll Swap(1) |  | 2,000 |  |  | $0.22 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
Swaptions |  | 2,000 |  |  | $55.13 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
4Q22 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cashless Collar |  | 3,700 |  |  | $41.40/$69.50 |  | 20,000 |  |  | $2.80/$4.20 |  | — |  |  | — |  | — |  |  | —
Swap |  | 1,000 |  |  | $50.15 |  | — |  |  | — |  | — |  |  | — |  | 10,000 |  |  | $2.13
Oil Roll Swap(1) |  | 2,000 |  |  | $0.22 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
Swaptions |  | 2,000 |  |  | $55.13 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | —
_______________________________ (1) The weighted average differential represents the amount of reduction to NYMEX WTI prices for the notional volumes covered by the swap contracts. Derivative Assets and Liabilities Fair Value The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities. The following table contains a summary of all the Company’s derivative positions reported on the accompanying balance sheets as of the dates indicated in the table below (in thousands):
|  | September 30, 2021 |  | December 31, 2020
Derivative Assets: |  |  |  |
Commodity contracts – current |  | $ | — |  |  | $ | 7,482 |
Commodity contracts – noncurrent |  | — |  |  | — |
Derivative Liabilities: |  |  |  |
Commodity contracts – current |  | (92,784) |  |  | (6,402) |
Commodity contracts – noncurrent |  | (9,044) |  |  | (1,330) |
Total derivative assets (liabilities), net |  | $ | (101,828) |  |  | $ | (250) |
The following table summarizes the components of the derivative gain (loss) presented on the accompanying statements of operations for the periods below (in thousands):
| Three Months Ended September 30, |  | Nine months ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Derivative cash settlement gain (loss): |  |  |  |  |  |  |
Oil contracts | $ | (19,838) |  |  | $ | 9,165 |  |  | $ | (41,454) |  |  | $ | 42,088 |
Gas contracts | (6,708) |  |  | (538) |  |  | (9,082) |  |  | 406 |
Total derivative cash settlement gain (loss)(1) | (26,546) |  |  | 8,627 |  |  | (50,536) |  |  | 42,494 |
Change in fair value gain (loss) | (9,678) |  |  | (19,297) |  |  | (83,077) |  |  | 22,109 |
Total derivative gain (loss)(1) | $ | (36,224) |  |  | $ | (10,670) |  |  | $ | (133,613) |  |  | $ | 64,603 |
_______________________________ (1)Total derivative gain (loss) and total derivative cash settlement gain (loss) for the nine months ended September 30, 2021 and 2020 are reported in the derivative (gain) loss line item and derivative cash settlement gain (loss) line item in the accompanying statements of cash flows, within the cash flows from operating activities.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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