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Derivatives | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives 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 three and nine-month periods ended September 30, 2020, and 2019 (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |  |  |
(Gain) loss on commodity derivative contracts | $ | 5,299 |  |  | $ | (1,756) |  |  | $ | (7,168) |  |  | $ | (1,547) |  |  |  |  |
Cash received on settlements | $ | 619 |  |  | $ | 622 |  |  | $ | 11,197 |  |  | $ | 5,700 |  |  |  |  |
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 in the unaudited condensed 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 September 30, 2020, 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 table summarizes (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 September 30, 2020 and December 31, 2019 (in thousands): September 30, 2020
|  | Gross Amounts |  | Gross Amounts Offset |  | Amounts Net of Offset |  | Financial Collateral |  | Net Amount
Liabilities |  |  |  |  |  |  |  |  |  |
Derivative contracts - current |  | $ | 3,915 |  |  | $ | — |  |  | $ | 3,915 |  |  | $ | — |  |  | $ | 3,915 |
Total |  | $ | 3,915 |  |  | $ | — |  |  | $ | 3,915 |  |  | $ | — |  |  | $ | 3,915 |
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 |
At September 30, 2020, the Company's open derivative contracts consisted of natural gas commodity derivative contracts under which we will receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume. These commodity derivative contracts consisted of the following:
|  | Notional (MMBtu) |  | Weighted Average Fixed Price per Unit
Natural Gas Price Swaps: October 2020 |  | 1,240,000 |  |  | $ | 2.14 |
Natural Gas Price Swaps: November 2020 - December 2020 |  | 2,135,000 |  |  | $ | 2.54 |
Natural Gas Price Swaps: January 2021 - December 2021 |  | 10,950,000 |  |  | $ | 2.61 |
Because we have not designated any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts are recognized as gains and losses in current period earnings. As a result, our current period earnings may be significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value are principally measured based on a comparison of future prices to the contract price at the period-end. Fair Value of Derivatives The following table presents the fair value of the Company’s derivative contracts as of September 30, 2020 and December 31, 2019, on a gross basis without regard to same counterparty netting (in thousands):
Type of Contract |  | Balance Sheet Classification |  | September 30, 2020 |  | December 31, 2019
Derivative assets |  |  |  |  |  |
Oil price swaps |  | Derivative contracts-current |  | $ | — |  |  | $ | 114 |
Derivative liabilities |  |  |  |  |  |
Natural gas price swaps |  | Derivative contracts-current |  | (3,088) |  |  | — |
Natural gas price swaps |  | Derivative contracts-noncurrent |  | (827) |  |  | — |
Total net derivative contracts |  | $ | (3,915) |  |  | $ | 114 |
See Note 2 for additional discussion of the fair value measurement of the Company’s derivative contracts.

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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 + Details
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