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DERIVATIVES | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company periodically enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices for its expected future oil and natural gas production and the associated impact on cash flows. The Company’s commodity derivative contracts consist of swaps, collars, basis protection swaps, and puts. As of September 30, 2023, all derivative counterparties were members of the Credit Facility lender group and all commodity derivative contracts are entered into for other-than-trading purposes. The Company does not designate its commodity derivative contracts as hedging instruments. A typical swap arrangement guarantees a fixed price on contracted volumes. If the agreed upon published third-party index price (“index price”) is lower than the fixed contract price at the time of settlement, the Company receives the difference between the index price and the fixed contract price. If the index price is higher than the fixed contact price at the time of settlement, the Company pays the difference between the index price and the fixed contract price. A typical collar arrangement establishes a floor and ceiling price on contracted volumes through the use of a short call and a long put (“two-way collar”). When the index price is above the ceiling price at the time of settlement, the Company pays the difference between the index price and the ceiling price. When the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and floor price. When the index price is between the floor price and ceiling price, no payment or receipt occurs. A minority of our collar arrangements combine a two-way collar with a short put that holds an exercise price below the floor price (“three-way collar”). In these arrangements, when the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and the floor price, capped at the difference between the floor price and the exercise price of the short put. Basis protection swaps are arrangements that guarantee a price differential for natural gas from a specified delivery point. For basis protection swaps, the Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract. A put arrangement gives the Company the right to sell the underlying commodity at a strike price over the term of the contract. If the index price is higher than the strike price, no payment or receipt occurs. If the index price is lower than the strike price, the Company receives the difference between the index price and the strike price. As of September 30, 2023, the Company had entered into the following commodity price derivative contracts:
|  | Contract Period
|  | Q4 2023 |  | Q1 2024 |  | Q2 2024 |  | Q3 2024 |  | Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) |  |  |  |  |  |  |  |  |  |
Swaps |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  | 29,161 |  | 12,727 |  | 11,991 |  | 10,536 |  | 8,997
Weighted-Average Contract Price |  | $ | 71.83 |  |  | $ | 70.39 |  |  | $ | 68.75 |  |  | $ | 68.87 |  |  | $ | 69.46 |
Two-Way Collars |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  | 9,392 |  | 11,913 |  | 10,430 |  | 9,324 |  | 8,504
Weighted-Average Ceiling Price |  | $ | 82.28 |  |  | $ | 81.51 |  |  | $ | 80.83 |  |  | $ | 80.27 |  |  | $ | 79.85 |
Weighted-Average Floor Price |  | $ | 60.00 |  |  | $ | 58.00 |  |  | $ | 58.00 |  |  | $ | 58.00 |  |  | $ | 58.00 |
Three-Way Collars |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  | 1,172 |  | 573 |  | — |  | — |  | —
Weighted-Average Ceiling Price |  | $ | 56.49 |  |  | $ | 56.25 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Weighted-Average Floor Price |  | $ | 49.04 |  |  | $ | 45.00 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Weighted-Average Sold Put Price |  | $ | 39.04 |  |  | $ | 35.00 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Bought Puts |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  | — |  | 7,942 |  | 6,953 |  | 6,216 |  | 5,669
Weighted-Average Contract Price |  | $ | — |  |  | $ | 55.00 |  |  | $ | 55.00 |  |  | $ | 55.00 |  |  | $ | 55.00 |
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) |  |  |  |  |  |  |  |  |  |
Swaps |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  | 45,947 |  | 31,790 |  | 31,686 |  | 31,578 |  | 1,701
Weighted-Average Contract Price |  | $ | 2.60 |  |  | $ | 2.69 |  |  | $ | 2.68 |  |  | $ | 2.66 |  |  | $ | 4.23 |
Two-Way Collars |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  | 1,756 |  | 736 |  | 1,732 |  | 1,668 |  | —
Weighted-Average Ceiling Price |  | $ | 2.96 |  |  | $ | 3.16 |  |  | $ | 2.89 |  |  | $ | 3.16 |  |  | $ | — |
Weighted-Average Floor Price |  | $ | 2.38 |  |  | $ | 2.50 |  |  | $ | 2.20 |  |  | $ | 2.50 |  |  | $ | — |
Three-Way Collars |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  | — |  | 1,166 |  | 55 |  | — |  | —
Weighted-Average Ceiling Price |  | $ | — |  |  | $ | 3.50 |  |  | $ | 3.42 |  |  | $ | — |  |  | $ | — |
Weighted-Average Floor Price |  | $ | — |  |  | $ | 2.50 |  |  | $ | 2.50 |  |  | $ | — |  |  | $ | — |
Weighted-Average Sold Put Price |  | $ | — |  |  | $ | 2.00 |  |  | $ | 2.00 |  |  | $ | — |  |  | $ | — |
Basis Protection Swaps |  |  |  |  |  |  |  |  |  |
CIG-NYMEX HH Volumes |  | 47,703 |  | 33,691 |  | 33,473 |  | 33,246 |  | —
Weighted-Average Contract Price |  | $ | (0.46) |  |  | $ | (0.27) |  |  | $ | (0.27) |  |  | $ | (0.27) |  |  | $ | — |
As of November 3, 2023, the Company had entered into the following commodity price derivative contracts:
|  |  |  | Contract Period
|  |  |  | Q4 2023 |  | Q1 2024 |  | Q2 2024 |  | Q3 2024 |  | Q4 2024 - Q2 2025
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  |  |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  |  |  | 29,161 |  | 12,727 |  | 11,991 |  | 10,536 |  | 3,032
Weighted-Average Contract Price |  |  |  | $ | 71.83 |  |  | $ | 70.39 |  |  | $ | 68.75 |  |  | $ | 68.87 |  |  | $ | 69.46 |
Two-Way Collars |  |  |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  |  |  | 9,392 |  | 25,913 |  | 22,930 |  | 18,324 |  | 10,708
Weighted-Average Ceiling Price |  |  |  | $ | 82.28 |  |  | $ | 88.38 |  |  | $ | 85.91 |  |  | $ | 83.26 |  |  | $ | 80.99 |
Weighted-Average Floor Price |  |  |  | $ | 60.00 |  |  | $ | 64.48 |  |  | $ | 64.54 |  |  | $ | 63.89 |  |  | $ | 66.79 |
Three-Way Collars |  |  |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  |  |  | 1,172 |  | 573 |  | — |  | — |  | —
Weighted-Average Ceiling Price |  |  |  | $ | 56.49 |  |  | $ | 56.25 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Weighted-Average Floor Price |  |  |  | $ | 49.04 |  |  | $ | 45.00 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Weighted-Average Sold Put Price |  |  |  | $ | 39.04 |  |  | $ | 35.00 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Puts |  |  |  |  |  |  |  |  |  |  |  |
NYMEX WTI Volumes |  |  |  | — |  | 7,942 |  | 6,953 |  | 6,216 |  | 1,911
Weighted-Average Strike Price |  |  |  | $ | — |  |  | $ | 55.00 |  |  | $ | 55.00 |  |  | $ | 55.00 |  |  | $ | 55.00 |
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/MMBtu) |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  |  |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  |  |  | 45,947 |  | 31,790 |  | 31,686 |  | 31,578 |  | 573
Weighted-Average Contract Price |  |  |  | $ | 2.60 |  |  | $ | 2.69 |  |  | $ | 2.68 |  |  | $ | 2.66 |  |  | $ | 4.23 |
Two-Way Collars |  |  |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  |  |  | 1,756 |  | 736 |  | 1,732 |  | 1,668 |  | —
Weighted-Average Ceiling Price |  |  |  | $ | 2.96 |  |  | $ | 3.16 |  |  | $ | 2.89 |  |  | $ | 3.16 |  |  | $ | — |
Weighted-Average Floor Price |  |  |  | $ | 2.38 |  |  | $ | 2.50 |  |  | $ | 2.20 |  |  | $ | 2.50 |  |  | $ | — |
Three-Way Collars |  |  |  |  |  |  |  |  |  |  |  |
NYMEX HH Volumes |  |  |  | — |  | 1,166 |  | 55 |  | — |  | —
Weighted-Average Ceiling Price |  |  |  | $ | — |  |  | $ | 3.50 |  |  | $ | 3.42 |  |  | $ | — |  |  | $ | — |
Weighted-Average Floor Price |  |  |  | $ | — |  |  | $ | 2.50 |  |  | $ | 2.50 |  |  | $ | — |  |  | $ | — |
Weighted-Average Sold Put Price |  |  |  | $ | — |  |  | $ | 2.00 |  |  | $ | 2.00 |  |  | $ | — |  |  | $ | — |
Basis Protection Swaps |  |  |  |  |  |  |  |  |  |  |  |
CIG-NYMEX HH Volumes |  |  |  | 47,703 |  | 33,691 |  | 33,473 |  | 33,246 |  | —
Weighted-Average Contract Price |  |  |  | $ | (0.46) |  |  | $ | (0.27) |  |  | $ | (0.27) |  |  | $ | (0.27) |  |  | $ | — |
Derivative Assets and Liabilities Fair Value The Company’s commodity price 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 well as a reconciliation between the gross assets and liabilities and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts as of September 30, 2023 and December 31, 2022 (in thousands):
|  | September 30, 2023 |  | December 31, 2022
Derivative Assets: |  |  |  |
Commodity contracts - current |  | $ | 7,058 |  |  | $ | 2,490 |
Commodity contracts - noncurrent |  | 1,872 |  |  | 794 |
Total derivative assets |  | 8,930 |  |  | 3,284 |
Amounts not offset in the accompanying balance sheets |  | (906) |  |  | — |
Total derivative assets, net |  | $ | 8,024 |  |  | $ | 3,284 |
Derivative Liabilities: |  |  |  |
Commodity contracts - current |  | $ | (126,053) |  |  | $ | (46,334) |
Commodity contracts - long-term |  | (10,768) |  |  | (17,199) |
Total derivative liabilities |  | (136,821) |  |  | (63,533) |
Amounts not offset in the accompanying balance sheets |  | 906 |  |  | — |
Total derivative liabilities, net |  | $ | (135,915) |  |  | $ | (63,533) |
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,
| 2023 |  | 2022 |  | 2023 |  | 2022
Derivative cash settlement loss: |  |  |  |  |  |  |
Oil contracts | $ | (32,397) |  |  | $ | (67,623) |  |  | $ | (38,010) |  |  | $ | (307,563) |
Natural gas contracts | (625) |  |  | (66,610) |  |  | (6,897) |  |  | (149,485) |
NGL contracts | — |  |  | (9,678) |  |  | — |  |  | (35,072) |
Total derivative cash settlement loss | (33,022) |  |  | (143,911) |  |  | (44,907) |  |  | (492,120) |
Change in fair value gain (loss) | (117,639) |  |  | 153,192 |  |  | (75,667) |  |  | 133,258 |
Total derivative gain (loss) | $ | (150,661) |  |  | $ | 9,281 |  |  | $ | (120,574) |  |  | $ | (358,862) |

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