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 have been recorded at fair value with changes in derivative contract fair values recognized as a gain or loss on derivative contracts in the condensed consolidated statements of operations. Commodity derivative contracts were settled on a monthly basis, and the commodity derivative contract valuations were 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, 2021, and 2020 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
(Gain) loss on commodity derivative contracts	$	4,129	$	5,299	$	4,129	$	(7,168)
Cash (paid) received on settlements	$	—	$	619	$	—	$	11,197

Master Netting Agreements and the Right of Offset. As applicable, 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.

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 as of September 30, 2021 and no open positions as of December 31, 2020 (in thousands):


	Gross Amounts		Gross Amounts Offset		Amounts Net of Offset		Financial Collateral		Net Amount
Liabilities
Derivative contracts - current	$	4,129	$	—	$	4,129	$	—	$	4,129
Total	$	4,129	$	—	$	4,129	$	—	$	4,129

As of September 30, 2021, the Company's open derivative contracts consisted of natural gas and NGL 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	Units	Weighted Average Fixed Price per Unit
NGL Price Swaps: October 2021 - February 2022	2,605,000	Gallons	$	1.20
Natural Gas Price Swaps: October 2021 - February 2022	1,800,000	MMBtu	$	4.07

Because we did not designate any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts were recognized as gains and losses in current period earnings. As a result, and as applicable, our current period earnings could have been significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value were principally measured based on a comparison of future prices to the contract price at the end of the period.

The following table presents the fair value of the Company’s derivative contracts as of September 30, 2021 on a gross basis without regard to same counterparty netting (in thousands):

Type of Contract

Balance Sheet Classification

September 30, 2021

Derivative liabilities

NGL price swaps

Derivative Contracts - Current

819

Natural gas price swaps

Derivative Contracts - Current

3,310

Total net derivative contracts

4,129