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DERIVATIVE FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 7 — DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to fluctuations in crude oil and natural gas prices on its production. It utilizes derivative strategies that consist of either a single derivative instrument or a combination of instruments to manage the variability in cash flows
associated with the forecasted sale of our future domestic oil and natural gas production. While the use of derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements, their use also may limit future income from favorable commodity price movements.
From time to time, the Company enters into derivative contracts to protect the Company’s cash flow from price fluctuation and maintain its capital programs. The Company has historically used costless collars, deferred premium puts, or swaps for this purpose. Oil derivative contracts are based on WTI crude oil prices and natural gas contacts are based on the Henry Hub. A “costless collar” is the combination of two options, a put option (floor) and call option (ceiling) with the options structured so that the premium paid for the put option will be offset by the premium received from selling the call option. Similar to costless collars, there is no cost to enter into the swap contracts. A deferred premium put contract has the premium established upon entering the contract, and due upon settlement of the contract.
The use of derivative transactions involves the risk that the counterparties, which generally are financial institutions, will be unable to meet the financial terms of such transactions. All of our derivative contracts are with lenders under our Credit Facility. Non-performance risk is incorporated in the discount rate by adding the quoted bank (counterparty) credit default swap (CDS) rates to the risk free rate. Although the counterparties hold the right to offset (i.e. netting) the settlement amounts with the Company, in accordance with ASC 815-10-50-4B, the Company classifies the fair value of all its derivative positions on a gross basis in its Balance Sheets.
The Company’s derivative financial instruments are recorded at fair value and included as either assets or liabilities in the accompanying Balance Sheets. The Company has not designated its derivative instruments as hedges for accounting purposes, and, as a result, any gains or losses resulting from changes in fair value of outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included as a component of "Other Income (Expense)" under the heading "Gain (loss) on derivative contracts" in the accompanying Statements of Operations.
The following presents the impact of the Company’s contracts on its Balance Sheets for the periods indicated.
As of December 31,
20242023
Commodity derivative instruments, marked to market:
Derivative assets, current5,497,057 7,768,697 
Discounted deferred premiums— (1,553,323)
Derivatives assets, current, net of premiums$5,497,057 $6,215,374 
Derivative assets, noncurrent$5,473,375 $11,634,714 
Derivative liabilities, current$6,410,547 $7,520,336 
Derivative liabilities, noncurrent$2,912,745 $11,510,368 
The components of “Gain (loss) on derivative contracts” from the Statements of Operations are as follows for the respective periods:
For the years ended December 31,
202420232022
Oil derivatives:
Realized gain (loss) on oil derivatives$(10,264,202)$(11,364,484)$(61,875,870)
Unrealized gain (loss) on oil derivatives6,859,929 9,462,374 40,546,123 
Gain (loss) on oil derivatives$(3,404,273)$(1,902,110)$(21,329,747)
Natural gas derivatives:
Realized gain (loss) on natural gas derivatives5,070,529 2,279,564 (650,084)
Unrealized gain (loss) on natural gas derivatives(4,032,173)2,389,708 447,172 
Gain (loss) on natural gas derivatives$1,038,356 $4,669,272 $(202,912)
Gain (loss) on derivative contracts$(2,365,917)$2,767,162 $(21,532,659)
The components of “Cash received (paid) for derivative settlements, net” within the Statements of Cash Flows are as follows for the respective periods:
For the years ended December 31,
202420232022
Cash flows from operating activities
Cash received (paid) for oil derivatives$(10,264,202)$(11,364,484)$(61,875,870)
Cash received (paid) for natural gas derivatives5,070,529 2,279,564 (650,084)
Cash received (paid) for derivative settlements, net$(5,193,673)$(9,084,920)$(62,525,954)

The following tables reflect the details of current derivative contracts as of December 31, 2024 (Quantities are in barrels (Bbl) for the oil derivative contracts and in million British thermal units (MMBtu) for the natural gas derivative contracts):
Oil Hedges (WTI)
Q1 2025Q2 2025Q3 2025Q4 2025Q1 2026Q2 2026Q3 2026Q4 2026
Swaps:
Hedged volume (Bbl)193,397 151,763 351,917 141,755 477,350 457,101 59,400 423,000 
Weighted average swap price$68.68 $68.53 $71.41 $69.13 $70.16 $69.38 $66.70 $66.70 
Two-way collars:
Hedged volume (Bbl)474,750 464,100 225,400 404,800 — — 379,685 — 
Weighted average put price$57.06 $60.00 $65.00 $60.00 $— $— $60.00 $— 
Weighted average call price$75.82 $69.85 $78.91 $75.68 $— $— $72.50 $— 
Gas Hedges (Henry Hub)
Q1 2025Q2 2025Q3 2025Q4 2025Q1 2026Q2 2026Q3 2026Q4 2026
NYMEX Swaps:
Hedged volume (MMBtu)451,884 647,200 330,250 11,400 26,600 555,300 17,400 513,300 
Weighted average swap price$3.77 $3.46 $3.72 $3.74 $3.74 $3.39 $3.74 $3.74 
Two-way collars:
Hedged volume (MMBtu)22,016 27,300 308,200 598,000 553,500 — 515,728 — 
Weighted average put price$3.00 $3.00 $3.00 $3.00 $3.50 $— $3.00 $— 
Weighted average call price$4.40 $4.15 $4.75 $4.15 $5.03 $— $3.93 $— 
Oil Hedges (basis differential)
Q1 2025Q2 2025Q3 2025Q4 2025Q1 2026Q2 2026Q3 2026Q4 2026
Argus basis swaps:
Hedged volume (Bbl)
177,000 273,000 276,000 276,000 — — — — 
Weighted average spread price (1)
$1.00 $1.00 $1.00 $1.00 $— $— $— $— 

(1) The oil basis swap hedges are calculated as the fixed price (weighted average spread price above) less the difference between WTI Midland and WTI Cushing, in the issue of Argus Americas Crude.