Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Commodity Derivatives

The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. On occasion, the Company has attempted to manage this risk on a portion of its forecasted oil or natural gas production sales through the use of commodity derivative contracts. The Company has not designated any of its derivative contracts as hedges for accounting purposes. All derivative contracts are recorded at fair value with changes in derivative contract fair values recognized as gain or loss on derivative contracts in the condensed consolidated statements of operations. None of the Company’s commodity derivative contracts may be terminated prior to contractual maturity solely as a result of a downgrade in the credit rating of a party to the contract. Commodity derivative contracts are settled on a monthly basis, and the commodity derivative contract valuations are adjusted to the mark-to-market valuation on a quarterly basis.

The following table summarizes derivative activity for the years ended December 31, 2019, 2018 and 2017 (in thousands):


	Year Ended December 31,
	2019		2018		2017
(Gain) loss on commodity derivative contracts	$	(1,094)	$	17,155	$	(24,090)
Cash (received) paid on settlements	$	(6,266)	$	35,325	$	(7,260)

Master Netting Agreements and the Right of Offset. The Company has master netting agreements with all of its commodity derivative counterparties and has presented its derivative assets and liabilities with the same counterparty on a net basis by commodity type in the consolidated balance sheets. As a result of the netting provisions, the Company's maximum amount of loss under commodity derivative transactions due to credit risk is limited to the net amounts due from its counterparties. As of December 31, 2019, the counterparties to the Company’s open commodity derivative contracts consisted of three financial institutions, all of which are also lenders under the Company’s credit facility. The Company is not required to post additional collateral under its commodity derivative contracts as all of the counterparties to the Company’s commodity derivative contracts share in the collateral supporting the Company’s credit facility.

The following tables summarize (i) the Company's commodity derivative contracts on a gross basis, (ii) the effects of netting assets and liabilities for which the right of offset exists based on master netting arrangements and (iii) for the Company’s net derivative liability positions, the applicable portion of shared collateral under the credit facility as of December 31, 2019 and 2018 (in thousands):

December 31, 2019


	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Assets
Derivative contracts - current	$	114	$	—	$	114	$	—	$	114

Total	$	114	$	—	$	114	$	—	$	114

December 31, 2018


	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Assets
Derivative contracts - current	$	5,286	$	—	$	5,286	$	—	$	5,286

Total	$	5,286	$	—	$	5,286	$	—	$	5,286

At December 31, 2019, the Company’s open commodity derivative contracts consisted of the following:

Oil Price Swaps


	Notional (Bbl)	Weighted Average Fixed Price
January 2020 - March 2020	273,000	$	61.05

Fair Value of Derivatives

The following table presents the fair value of the Company’s derivative contracts on a gross basis without regard to same-counterparty netting (in thousands):


		December 31,		December 31,
Type of Contract	Balance Sheet Classification	2019		2018
Derivative assets
Oil price swaps	Derivative contracts - current	$	114	$	—
Natural gas price swaps	Derivative contracts - current	$	—	$	5,286







Total net derivative contracts		$	114	$	5,286

See Note 4 for additional discussion of the fair value measurement of the Company’s derivative contracts.