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Note 12 - Fair Value Measurements

3 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Fair Value Disclosures [Text Block]

12.

Fair Value Measurements

FASB ASC No. 820, Fair Value Measurements and Disclosures, established a fair value hierarchy that prioritizes each input to the valuation method used to measure fair value of financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis into one of the following three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices in Level 1 that are either for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Unobservable inputs for the asset or liability where there is little, if any, market activity for the asset or liability at the measurement date.

The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3).

The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as required by existing guidance and the fair value measurements by level within the fair value hierarchy:

		Fair Value Measurements - December 31, 2021
						Quoted				Significant
						Prices				Other				Significant
						in Active				Observable				Unobservable
		Fair				Markets				Inputs				Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
Assets:
Interest rate swap			163,378				—				163,378				—
Total		$	163,378			$	—			$	163,378			$	—

Liabilities:
Natural gas purchases		$	2,082,631			$	—			$	2,082,631			$	—
Interest rate swaps			871,615				—				871,615				—
Total		$	2,954,246			$	—			$	2,954,246			$	—

		Fair Value Measurements - September 30, 2021
						Quoted				Significant
						Prices				Other				Significant
						in Active				Observable				Unobservable
		Fair				Markets				Inputs				Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Natural gas purchases		$	2,728,935			$	—			$	2,728,935			$	—
Interest rate swaps			1,196,083				—				1,196,083				—
Total		$	3,925,018			$	—			$	3,925,018			$	—

The fair value of the interest rate swaps are determined by using the counterparty's proprietary models and certain assumptions regarding past, present and future market conditions.

Under the asset management contract, a timing difference can exist between the payment for natural gas purchases and the actual receipt of such purchases. Payments are made based on a predetermined monthly volume with the price based on weighted average first of the month index prices corresponding to the month of the scheduled payment. At December 31, 2021 and September 30, 2021, the Company had recorded in accounts payable the estimated fair value of the liability valued at the corresponding first of month index prices for which the liability is expected to be settled.

The Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis consist of its AROs. The AROs are measured at fair value at initial recognition based on expected future cash flows required to settle the obligation.

The carrying value of cash and cash equivalents, accounts receivable, borrowings under line-of-credit, accounts payable (with the exception of the timing difference under the asset management contract), customer credit balances and customer deposits is a reasonable estimate of fair value due to the short-term nature of these financial instruments. In addition, the carrying amount of the variable rate line-of-credit is a reasonable approximation of its fair value.

The following table summarizes the fair value of the Company’s financial assets and liabilities that are not adjusted to fair value in the financial statements:

		Fair Value Measurements - December 31, 2021
						Quoted				Significant
						Prices				Other				Significant
						in Active				Observable				Unobservable
		Carrying				Markets				Inputs				Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Current maturities of long-term debt		$	28,540,200				—				—			$	28,680,537
Notes payable			105,500,000			$	—			$	—				112,866,499
Total		$	134,040,200			$	—			$	—			$	141,547,036

		Fair Value Measurements - September 30, 2021
						Quoted				Significant
						Prices				Other				Significant
						in Active				Observable				Unobservable
		Carrying				Markets				Inputs				Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Current maturities of long-term debt		$	7,000,000				—				—			$	7,000,000
Notes payable		$	116,110,200			$	—			$	—			$	124,691,896
Total		$	123,110,200			$	—			$	—			$	131,691,896

The fair value of long-term debt is estimated by discounting the future cash flows of the fixed rate debt based on the underlying Treasury rate or other Treasury instruments with a corresponding maturity period and estimated credit spread extrapolated based on market conditions since the issuance of the debt.

FASB ASC 825, Financial Instruments, requires disclosures regarding concentrations of credit risk from financial instruments. Cash equivalents are investments in high-grade, short-term securities (original maturity less than three months), placed with financially sound institutions. Accounts receivable are from a diverse group of customers including individuals and small and large companies in various industries. As of December 31, 2021 and September 30, 2021, no single customer accounted for more than 5% of the total accounts receivable balance. The Company maintains certain credit standards with its customers and requires a customer deposit if such evaluation warrants.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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