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Note 8 - Fair Value
 12 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

8.

FAIR VALUE

 

The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements by level within the fair value hierarchy as defined in Note 1 as of September 30, 2024 and 2023, respectively. There have been no changes to the Company's valuation techniques during fiscal years ended September 30, 2024 and 2023.

 

      

Fair Value Measurements - September 30, 2024

 
      Quoted Prices in Active Markets  Significant Other Observable Inputs  Significant Unobservable Inputs 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Assets:

                

Interest rate swaps

 $2,062,551  $—  $2,062,551  $— 

Total

 $2,062,551  $—  $2,062,551  $— 
                 

Liabilities:

                

Natural gas purchases

 $761,020  $—  $761,020  $— 

Total

 $761,020  $—  $761,020  $— 

 

      

Fair Value Measurements - September 30, 2023

 
      

Quoted Prices in Active Markets

  

Significant Other Observable Inputs

  

Significant Unobservable Inputs

 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Assets:

                

Interest rate swaps

 $4,617,455  $—  $4,617,455  $— 

Total

 $4,617,455  $—  $4,617,455  $— 
                 

Liabilities:

                

Natural gas purchases

 $1,022,662  $—  $1,022,662  $— 

Total

 $1,022,662  $—  $1,022,662  $— 

 

The fair value of the interest rate swaps are determined by using the counterparty's proprietary models that include observable quoted market interest rates and interest rate futures as well as certain assumptions regarding past, present and future market conditions.

 

See Note 5 for discussion on the fair value assumptions of the Company's investment in the LLC. 

 

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 the weighted average first of the month index prices corresponding to the month of the scheduled payment. At September 30, 2024 and 2023, the Company had recorded in accounts payable the estimated fair value of the liability based on the corresponding first of month quoted index prices for which the liability was expected to be settled.

 

The Company’s non-financial assets and liabilities that are 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 to settle the obligation.

 

The carrying value of cash and cash equivalents, accounts receivable, borrowings under line-of-credit, accounts payable, 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 consolidated financial statements as of September 30, 2024 and 2023. 

 

      

Fair Value Measurements - September 30, 2024

 
  

Carrying

  Quoted Prices in Active Markets  Significant Other Observable Inputs  Significant Unobservable Inputs 
  

Amount

  

Level 1

  

Level 2

  

Level 3

 

Liabilities:

                

Current maturities of long-term debt

 $800,000  $—  $—  $800,000 

Notes payable

  136,955,000   —   —   135,471,275 

Total

 $137,755,000  $—  $—  $136,271,275 

 

      

Fair Value Measurements - September 30, 2023

 
  

Carrying

  Quoted Prices in Active Markets  Significant Other Observable Inputs  Significant Unobservable Inputs 
  

Amount

  

Level 1

  

Level 2

  

Level 3

 

Liabilities:

                

Current maturities of long-term debt

 $10,975,000  $—  $—  $10,975,000 

Notes payable

  126,100,000   —   —   120,298,658 

Total

 $137,075,000  $—  $—  $131,273,658 

 

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 instrument with a corresponding maturity period and estimated credit spread extrapolated based on market conditions since the issuance of the debt.

 

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. The Company maintains certain credit standards with its customers and requires a customer deposit if such evaluation warrants.