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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, restricted cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses and other current liabilities included in the unaudited condensed consolidated balance sheets approximated fair value at September 30, 2024 and December 31, 2023.

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Assets and liabilities that are measured at fair value 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, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company’s financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets and liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company had assets classified in Level 2 of the hierarchy as of September 30, 2024, as described below, and no assets or liabilities classified in Level 2 of the hierarchy as of December 31, 2023.

Level 2 Fair Value Measurements

Commodity Derivative Contracts. As applicable, the fair values of the Company’s oil, natural gas and NGL fixed price swaps are based upon inputs that are either readily available in the public market, such as oil, natural gas and NGL futures prices, volatility factors and discount rates, or can be corroborated from active markets. Historically, if the Company has a commodity derivative contract in place, the fair value is determined through the use of a discounted cash flow model or option pricing model using the applicable inputs discussed above. The Company applies a weighted average credit default risk rating factor for its counterparties or gives effect to its credit default risk rating, as applicable, in determining the fair value of these derivative contracts. Credit default risk ratings are based on current published credit default swap rates.

Level 3 Fair Value Measurements

Acquisitions. The Company applies the provisions of the fair value measurement standard on a non-recurring basis to its oil and gas properties acquired. The Company recognized the assets acquired in our acquisitions at cost at a relative fair value basis (See “Note 5 — Acquisitions” to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report for additional information). Fair value was determined using a discounted cash flow model. The underlying future commodity prices included in the Company’s estimated future cash flows of its oil and gas properties were determined using NYMEX forward strip prices as of the closing date of each acquisition. The estimated future cash flows also included assumptions independently prepared by Cawley, Gillespie & Associates for the estimates of production from the oil and natural gas properties, future operating, development costs and income taxes of the acquired properties and risk adjusted discount rates.
Fair Value - Recurring Measurement Basis

As of September 30, 2024 the following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis by the fair value hierarchy (in thousands):

September 30, 2024

Fair Value Measurements
Netting (1)
Assets at Fair Value
Level 1
Level 2
Level 3
Assets
Commodity derivative contracts$— $2,190 $— $523 $1,667 
Total
$— $2,190 $— $523 $1,667 
(1)    Represents the effect of netting assets and liabilities for counterparties with which the right of offset exists.