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BASIS OF PRESENTATION | 9 Months Ended
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Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
BASIS OF PRESENTATION | BASIS OF PRESENTATION These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments as necessary for a fair presentation of our financial position and results of operations. The financial information as of December 31, 2020, has been derived from the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”), but does not include all disclosures, including notes required by GAAP. As such, this quarterly report should be read in conjunction with the consolidated financial statements and related notes included in our 2020 Form 10-K. The Company follows the same accounting principles for preparing quarterly and annual reports. Certain prior period amounts have been reclassified to conform to the current period presentation. In connection with the preparation of the condensed consolidated financial statements, the Company evaluated subsequent events after the balance sheet date of September 30, 2021, through the filing date of this report. Principles of Consolidation The condensed consolidated balance sheets (“balance sheets”) include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities, and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Further these estimates and other factors, including those outside of the Company's control, such as the impact of commodity prices, may impact the Company's business, financial condition, results of operations and cash flows. Industry Segment and Geographic Information The Company operates in one industry segment, which is the development and production of oil, natural gas, and natural gas liquids (“NGLs”), and all of the Company's operations are conducted in the continental United States. Revenue Recognition Sales of oil, natural gas, and NGLs are recognized when performance obligations are satisfied at the point control of the product is transferred to the customer. The Company's contracts' pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the price of the oil, natural gas, and NGLs fluctuates to remain competitive with other available oil, natural gas, and NGLs supplies. As further described in Note 6 - Commitments and Contingencies, one contract with NGL Crude Logistics, LLP (“NGL Crude”, known as the “NGL Crude agreement”) has an additional aspect of variable consideration related to the minimum volume commitments (“MVCs”) as specified in the agreement. On an on-going basis, the Company performs an analysis of expected risk adjusted production applicable to the NGL Crude agreement based on approved production plans to determine if liquidated damages to NGL Crude are probable. As of September 30, 2021, the Company believes that the volumes delivered to NGL Crude will be in excess of the MVCs required based on our approved future production plan. As a result of this analysis, to date, no variable consideration related to potential liquidated damages has been considered in the transaction price for the NGL Crude agreement. Under the oil sales contracts, the Company sells oil production at the wellhead, or other contractually agreed-upon delivery points, and collects an agreed-upon index price, net of pricing differentials. In this scenario, the Company recognizes revenue when control transfers to the purchaser at the wellhead, or other contractually agreed-upon delivery point, at the net contracted price received. Under the natural gas processing contracts, the Company delivers natural gas to an agreed-upon delivery point. The delivery points are specified within each contract, and the transfer of control varies between the inlet and outlet of the midstream processing facility. The midstream processing entity gathers and processes the natural gas and remits proceeds to the Company for the resulting sales of NGLs and residue gas. For the contracts where the Company maintains control through the outlet of the midstream processing facility, the Company recognizes revenue on a gross basis, with gathering, transportation, and processing fees presented as an expense in the Company's accompanying condensed consolidated statements of operations and comprehensive income (loss) (“statements of operations”). Alternatively, for those contracts where the Company relinquishes control at the inlet of the midstream processing facility, the Company recognizes natural gas and NGLs revenues based on the contracted amount of the proceeds received from the midstream processing entity and, as a result, the Company recognizes revenue on a net basis. Under the product sales contracts, the Company invoices customers once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company's product sales contracts do not give rise to contract assets or liabilities under this guidance. At September 30, 2021 and December 31, 2020, the Company's receivables from contracts with customers were $86.4 million and $32.7 million, respectively. Payment is generally received within 30 to 60 days after the date of production. The Company records revenue in the month production is delivered to the purchaser. However, as stated above, settlement statements for certain natural gas and NGLs sales may not be received for 30 to 60 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between its estimates and the actual amounts received for product sales in the month in which payment is received from the purchaser. For the period from January 1, 2021 through September 30, 2021, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was insignificant. Revenue attributable to each identified revenue stream is disaggregated below (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Operating Revenues: |  |  |  |  |  |  |
Crude oil sales | $ | 131,360 |  |  | $ | 47,251 |  |  | $ | 297,515 |  |  | $ | 127,331 |
Natural gas sales | 24,764 |  |  | 5,742 |  |  | 53,064 |  |  | 16,472 |
Natural gas liquids sales | 33,839 |  |  | 5,865 |  |  | 69,578 |  |  | 11,652 |
Oil and gas sales | $ | 189,963 |  |  | $ | 58,858 |  |  | $ | 420,157 |  |  | $ | 155,455 |
Restricted Cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets, which sums to the total of such amounts shown in the accompanying condensed consolidated statements of cash flows (“statements of cash flows”) (in thousands):
| As of September 30,
| 2021 |  | 2020
Cash and cash equivalents | $ | 40,410 |  |  | $ | 3,777 |
Restricted cash(1) | 102 |  |  | 95 |
Total cash, cash equivalents, and restricted cash | $ | 40,512 |  |  | $ | 3,872 |
__________________________ (1) Included in other noncurrent assets and consists of funds for road maintenance and repairs. Unproved Property Unproved oil and gas property costs are evaluated for impairment when there is an indication that the carrying costs may not be fully recoverable. During the three and nine months ended September 30, 2021, the Company incurred zero and $2.2 million, respectively, in abandonment and impairment of unproved properties compared to $0.2 million and $30.6 million during the three and nine months ended September 30, 2020, respectively, due to the reassessment of estimated probable and possible reserve locations based primarily upon economic viability and the expiration of non-core leases. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses contain the following (in thousands):
| As of September 30, 2021 |  | As of December 31, 2020
Accrued drilling and completion costs | $ | 22,628 |  |  | $ | 453 |
Accounts payable trade | 11,740 |  |  | 1,931 |
Accrued general and administrative expense | 6,667 |  |  | 4,942 |
Accrued merger transaction costs | 991 |  |  | 2,587 |
Accrued lease operating expense | 2,893 |  |  | 1,793 |
Accrued interest expense | 4,359 |  |  | 322 |
Accrued oil and gas hedging | 6,767 |  |  | — |
Accrued production and ad valorem taxes and other | 39,006 |  |  | 25,397 |
Total accounts payable and accrued expenses | $ | 95,051 |  |  | $ | 37,425 |
Accounting Pronouncements Recently Adopted and Issued In March 2020, the FASB issued Update No. 2020-04, Reference Rate Reform (Topic 848), which provides temporary optional guidance to companies impacted by the transition away from the LIBOR. The amendment provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. Further, in January 2021, the FASB issued Update No. 2021-01, Reference Rate Reform (Topic 848), which clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. These amendments are effective upon issuance and expire on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition on the Company's condensed consolidated financial statements. There are no other accounting standards applicable to the Company that would have a material effect on the Company's condensed consolidated financial statements and disclosures that have been issued but not yet adopted by the Company as of September 30, 2021, and through the filing date of this report.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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