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Financial Instruments
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Financial Instruments
(9) Financial Instruments
Fair Value Measurements:
Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements. The Company follows a three-level hierarchy, prioritizing and defining the types of inputs used to measure fair value. The fair values of the Company’s interest rate swaps, natural gas and crude oil price collars and swaps are designated as Level 3. The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022:
 
                     
                     
                     
                     
June 30, 2023
  
Quoted Prices in
Active Markets
For Identical
Assets (Level 1)
 
  
Significant
Other
Observable
Inputs (Level 2)
 
  
Significant
Unobservable
Inputs (Level 3)
 
  
Balance at
June 30,
2023
 
(Thousands of dollars)
                            
Assets
                                    
Commodity derivative contracts
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                                    
Commodity derivative contracts
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
  
 
                    
                    
                    
                    
December 31, 2022
  
Quoted Prices in
Active Markets
For Identical
Assets (Level 1)
 
  
Significant
Other
Observable
Inputs (Level 2)
 
  
Significant
Unobservable
Inputs (Level 3)
 
  
Balance at
December 31,
2022
 
(Thousands of dollars)
                            
Assets
                                    
Commodity derivative contracts
   
$
—  
 
   
$
—  
 
   
$
210
 
   
$
210
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
   
$
—  
 
   
$
—  
 
   
$
210
 
   
$
210
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                                    
Commodity derivative contracts
   
$
—  
 
   
$
—  
 
   
$
(1,190
) 
   
$
(1,190
) 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities
   
$
—  
 
   
$
—  
 
   
$
(1,190
) 
   
$
(980
) 
    
 
 
     
 
 
     
 
 
     
 
 
  
The derivative contracts were measured based on quotes from the Company’s counterparties. Such quotes have been derived using valuation models that consider various inputs including current market and contractual prices for the underlying instruments, quoted forward prices for natural gas and crude oil, volatility factors and interest rates, such as a LIBOR curve for a similar length of time as the derivative contract term as applicable. These estimates are verified using comparable NYMEX futures contracts or are compared to multiple quotes obtained from counterparties for reasonableness.
The significant unobservable inputs for Level 3 derivative contracts include basis differentials and volatility factors. An increase (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively. The Company does not have access to the specific assumptions used in its counterparties’ valuation models. Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.
The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2023.
 
(Thousands of dollars)
       
Net Liabilities – December 31, 2022
    $ (980 ) 
Total realized and unrealized gains (losses):
         
Included in earnings (a)
      414  
Purchases, sales, issuances and settlements
      566  
    
 
 
  
Net Liabilities — June 30, 2023
    $ —    
    
 
 
  
 
(a)
Derivative instruments are reported in revenues as realized gain/loss and on a separately reported line item captioned unrealized gain/loss on derivative instruments.
 
Derivative Instruments:
The Company is exposed to commodity price and interest rate risk, and management considers periodically the Company’s exposure to cash flow variability resulting from the commodity price changes and interest rate fluctuations. Futures, swaps and options are used to manage the Company’s exposure to commodity price risk inherent in the Company’s oil and gas production operations. The Company does not apply hedge accounting to any of its commodity-based derivatives. Both realized and unrealized gains and losses associated with commodity derivative instruments are recognized in earnings.
The following table sets forth the effect of derivative instruments on the consolidated balance sheets at June 30, 2023 and December 31, 2022:

 
  
 
 
  
Fair Value
 
(Thousands of dollars)
  
Balance Sheet Location
 
  
June 30,
2023
 
  
December 31,
2022
 
Asset Derivatives:
                           
Derivatives not designated as cash-flow hedging instruments:
                           
Crude oil commodity contract
      Derivative asset      $ —        $ 162  
Natural gas commodity contract
      Derivative asset        —          48  
             
 
 
     
 
 
  
Total
             $ —        $ 210  
             
 
 
     
 
 
  
Liability Derivatives:
                           
Derivatives not designated as cash-flow hedging instruments:
                           
Crude oil commodity contracts
      Derivative liability      $ —        $ (931 ) 
Natural gas commodity contracts
      Derivative liability        —          (259 ) 
             
 
 
     
 
 
  
Total
             $ —        $ (1,190 ) 
             
 
 
     
 
 
  
Total derivative instruments
             $ —        $ (980 ) 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tab
l
e sets forth the effect of derivative instruments on the consolidated statements of operations for the six months ended June 30, 2023 and 2022:
 
 
  
 
  
Amount of gain/loss
recognized in income
 
(Thousands of dollars)
  
Location of gain/loss recognized in income
  
2023
 
  
2022
 
Derivatives not designated as cash-flow hedge instruments:
                       
Natural gas commodity contracts
    Unrealized gain (loss) on derivative instruments,
net		      211        (966 ) 
Crude oil commodity contracts
    Unrealized gain (loss) on derivative instruments,
net		      769        (3,240 ) 
Natural gas commodity contracts
   
Realized gain (loss) on derivative instruments,
net
      24        (1,986 ) 
Crude oil commodity contracts
    Realized loss on derivative instruments, net      (590 )       (7,721 ) 
         
 
 
     
 
 
  
          $ 414      $ (13,913 )