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FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 31, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company follows authoritative accounting guidance for measuring the fair value of assets and liabilities in its financial statements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further, this guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is broken down into three levels based on the reliability of the inputs as follows: Level 1: Quoted prices in active markets for identical assets or liabilities Level 2: Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable Level 3: Significant inputs to the valuation model are unobservable Financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy. Derivatives The Company uses Level 2 inputs to measure the fair value of oil and natural gas commodity price derivatives. The fair value of the Company’s commodity price derivatives is estimated using industry-standard models that contemplate various inputs including, but not limited to, the contractual price of the underlying position, current market prices, forward commodity price curves, volatility factors, time value of money, and the credit risk of both the Company and its counterparties. We validate our fair value estimate by corroborating the original source of inputs, monitoring changes in valuation methods and assumptions, and reviewing counterparty mark-to-market statements and other supporting documentation. Refer to Note 9 - Derivatives for more information regarding the Company’s derivative instruments. The following tables present the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 and their classification within the fair value hierarchy (in thousands):
| As of March 31, 2023
| Level 1 |  | Level 2 |  | Level 3
Derivative assets | $ | — |  |  | $ | 5,782 |  |  | $ | — |
Derivative liabilities | $ | — |  |  | $ | 30,320 |  |  | $ | — |
| As of December 31, 2022
| Level 1 |  | Level 2 |  | Level 3
Derivative assets | $ | — |  |  | $ | 3,284 |  |  | $ | — |
Derivative liabilities | $ | — |  |  | $ | 63,533 |  |  | $ | — |
Long-Term Debt The 5.0% Senior Notes are recorded at cost, net of any unamortized deferred financing costs. As of March 31, 2023, the fair value of the 5.0% Senior Notes was $380.6 million. This fair value is based on quoted market prices, and as such, is designated as Level 1 within the fair value hierarchy. The recorded value of the Credit Facility, if any, approximates its fair value as it bears interest at a floating rate that approximates a current market rate. Please refer to Note 5 - Long-Term Debt for additional information. Warrants Warrants issued are indexed to the Company’s common stock and required to be net share settled via a cashless exercise. Accordingly, they are classified as equity instruments. The Company’s share price traded below the exercise price of the warrants and therefore were not exercisable during the three months ended March 31, 2023 and 2022. The fair value of the warrants on the issuance date was determined using Level 3 inputs including, but not limited to, volatility, risk-free rate, and dividend yield under the Cox-Ross-Rubinstein binomial option pricing model. The warrants are recorded within additional paid-in capital on the accompanying balance sheets at a fair value of $77.5 million, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the warrants since issuance. Acquisitions and Impairments of Proved and Unproved Properties We measure acquired assets or businesses at fair value on a nonrecurring basis and review our proved and unproved oil and natural gas properties for impairment using inputs that are not observable in the market, and are therefore designated as Level 3 within the valuation hierarchy. During the three months ended March 31, 2023 and 2022, the Company recorded no impairments of proved properties and incurred zero and $18.0 million, respectively, of abandonment and impairment of unproved properties. Please refer to Note 1 – Summary of Significant Accounting Policies for information on the Company’s policies for determining fair value of its proved and unproved properties and related impairment expense.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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