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Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s assets and liabilities that are measured at fair value on a recurring basis include the following as of March 31, 2025 and December 31, 2024, set forth by level, within the fair value hierarchy:

 

March 31, 2025

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Interest rate swap derivative asset

$

—

 

$

555

 

$

—

 

$

555

 

Asset retirement obligations

 

—

 

 

—

 

 

(6,456

)

 

(6,456

)

Pico earn-out liability

 

—

 

 

—

 

 

(2,981

)

 

(2,981

)

$

—

 

$

555

 

$

(9,437

)

$

(8,882

)

 

 

December 31, 2024

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Interest rate swap derivative asset

$

—

 

$

769

 

$

—

 

$

769

 

Asset retirement obligations

 

—

 

 

—

 

 

(6,338

)

 

(6,338

)

Pico earn-out liability

 

—

 

 

—

 

 

(3,406

)

 

(3,406

)

$

—

 

$

769

 

$

(9,744

)

$

(8,975

)

The three levels of the fair value hierarchy under authoritative guidance are described as follows:

Level 1: Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2: Inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices for similar assets or liabilities in inactive markets and other observable information that can be corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data, but significant to the fair value measurement.

A summary of changes in the fair value of the Company’s Level 3 instrument, attributable to asset retirement obligations, for the three months ended March 31, 2025 and the year ended December 31, 2024 is included in Note 8. The Company’s earn-out fair value liability at its Idaho agricultural digester site is determined by calculating the estimated present value of the future obligation. The present value is assessed quarterly and is based on macro-economic factors such as inflation and risk free US Treasury rates. Company specific estimates utilized include current and future interest rates, digester inlet gas flow and projected EBITDA. A weighted average probability approach is utilized for the variables discussed above. The undiscounted maximum payout of the earn-out ranges between 5% and 20% of EBITDA based on average inlet gas production ranging from 641 standard cubic feet per minute ("scfm") to greater

than 944 scfm for each semiannual period in the remaining term, as defined in the underlying agreement. The contractual term ends in 2038. The earn-out is classified as a Level 3 financial instrument and changes in the balance are recorded in Accrued liabilities and Other liabilities within the Consolidated Balance Sheets and in Royalties, transportation, gathering and production fuel within the Consolidated Statements of Operations. Interest rate swap derivatives are classified as Level 2 financial instruments and are valued utilizing Secured Overnight Financing Rates. In addition, certain assets are measured at fair value on a non-recurring basis when an indicator of impairment is identified and the assets’ fair values are determined to be less than its carrying value. See Note 3 for additional information.

There were no transfer of assets or liabilities between Levels 1, 2 or 3 of the fair value hierarchy as of March 31, 2025 and December 31, 2024.