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Derivatives

3 Months Ended

Sep. 30, 2025

Derivatives

Derivatives

Note 7. Derivatives

The Company is exposed to certain risks relating to its ongoing business operations, including commodity price risk and interest rate risk. In accordance with the Company’s strategy and the requirements under the Senior Secured Credit Facility (as discussed in Note 5, “Senior Secured Credit Facility”), it may hedge or may be required to hedge a varying portion of anticipated oil and natural gas production for future periods. Derivatives are carried at fair value on the unaudited condensed consolidated balance sheets as assets or liabilities, with the changes in the fair value included in the unaudited condensed consolidated statements of operations for the period in which the change occurs. The Company’s hedge strategies and objectives may change significantly as its operational profile changes or as required under the Senior Secured Credit Facility. The Company does not enter into derivative contracts for speculative trading purposes.

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial or commodity hedging institutions deemed by management as competent and competitive market makers. As of September 30, 2025, the Company did not post collateral under any of its derivative contracts during the periods in which contracts were open as they were secured under the Company’s Senior Secured Credit Facility.

When the Company utilizes commodity derivative contracts, it expects to enter into deferred premium puts, costless put/call collars including two-way and three-way collars, fixed-price swaps, and/or basis swaps to hedge a portion of its anticipated future production. A two-way costless collar consists of a sold call, which establishes a maximum price the Company will receive for the volumes under contract, and a purchased put that establishes a minimum price. Three-way collars are designed to establish a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be the index price plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) for the volumes under contract. Fixed-price swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for the volumes under contract. Basis swaps effectively lock in a price differential between regional prices (i.e., Inside FERC’s Northwest Pipeline Corp Rocky Mountains) where the product is sold and the relevant pricing index under which the natural gas production is hedged (i.e., NYMEX Henry Hub). The Company may, from time to time, restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts. The Company has elected not to designate its open derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of the derivative contracts and all payments and receipts on settled derivative contracts in “Net gain (loss) on derivative contracts” on the unaudited condensed consolidated statements of operations.

All derivative contracts are recorded at fair market value in accordance with ASC 815, Derivatives and Hedging (“ASC 815”) and ASC 820, Fair Value Measurement (“ASC 820”) and included in the unaudited condensed consolidated balance sheets as assets or liabilities. The “Derivative contract assets” and “Derivative contract liabilities” represent the difference between the market commodity prices and the hedged prices for the remaining volumes of production hedges as of September 30, 2025 and June 30, 2025 (the “mark-to-market valuation”).

The following table summarizes the location and fair value amounts of all derivative contracts in the unaudited condensed consolidated balance sheets as of September 30, 2025 and June 30, 2025 (in thousands):


Derivatives not designated
as hedging contracts		Balance sheet		Derivative Contract Assets						Balance sheet		Derivative Contract Liabilities
under ASC 815		location		September 30, 2025			June 30, 2025			location		September 30, 2025			June 30, 2025
Commodity contracts		Current assets - derivative contract assets		$	2,075		$	1,777		Current liabilities - derivative contract liabilities		$	1,216		$	1,577
Commodity contracts		Other noncurrent assets - derivative contract assets			402			198		Long term liabilities - derivative contract liabilities			1,343			1,783
Total derivatives not designated as hedging contracts under ASC 815				$	2,477		$	1,975				$	2,559		$	3,360

The following table summarizes the location and amounts of the Company’s realized and unrealized gains and losses on derivative contracts in the Company’s unaudited condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024 (in thousands). “Realized gain (loss) on derivative contracts” represents all receipts (payments) on derivative contracts settled during the period. “Unrealized gain (loss) on derivative contracts” represents the net change in the mark-to-market valuation of the derivative contracts.


Derivatives not designated		Location of gain (loss)		Three Months Ended
as hedging contracts		recognized in income on		September 30,
under ASC 815		derivative contracts		2025			2024
Commodity contracts:
Realized gain (loss) on derivative contracts		Other income and expenses - net gain (loss) on derivative contracts		$	878		$	(70)
Unrealized gain (loss) on derivative contracts		Other income and expenses - net gain (loss) on derivative contracts			1,303			1,868
Total net gain (loss) on derivative contracts				$	2,181		$	1,798

As of September 30, 2025, the Company had the following open crude oil and natural gas derivative contracts:


								Swap Price			Sub Floor			Floor Price			Ceiling Price
						Volumes in			per		Price per			per			per
Period		Commodity		Instrument		MMBTU/BBL		MMBTU/BBL			MMBTU/BBL			MMBTU/BBL			MMBTU/BBL
October 2025 - December 2025		Crude Oil		Fixed-Price Swap		5,895		$	72.00
October 2025 - December 2025		Crude Oil		Fixed-Price Swap		39,893			71.40
October 2025 - December 2025		Crude Oil		Fixed-Price Swap		9,157			61.02
October 2025 - June 2026		Crude Oil		Fixed-Price Swap		43,656			61.00
April 2026 - June 2026		Crude Oil		Fixed-Price Swap		17,106			60.40
April 2026 - September 2026		Crude Oil		Fixed-Price Swap		25,412			62.00
October 2025 - December 2025		Crude Oil		Two-Way Collar		10,258								$	60.00		$	63.00
October 2025 - December 2025		Crude Oil		Two-Way Collar		2,404									60.00			63.50
October 2025 - August 2026		Crude Oil		Two-Way Collar		69,646									60.00			65.55
January 2026 - March 2026		Crude Oil		Two-Way Collar		43,493									60.00			75.80
September 2026 - December 2026		Crude Oil		Three-Way Collar		40,872					$	50.00			60.00			70.45
October 2025 - December 2026		Natural Gas		Fixed-Price Swap		2,090,828			3.60
October 2025 - December 2027		Natural Gas		Fixed-Price Swap		2,921,728			3.57
July 2026 - December 2026		Natural Gas		Fixed-Price Swap		207,366			3.98
October 2025 - December 2025		Natural Gas		Two-Way Collar		222,725									4.00			4.95
October 2025 - December 2025		Natural Gas		Two-Way Collar		25,028									2.90			3.50
January 2026 - March 2026		Natural Gas		Two-Way Collar		213,251									4.00			5.39
January 2026 - March 2026		Natural Gas		Two-Way Collar		375,481									3.60			5.00
January 2026 - March 2026		Natural Gas		Two-Way Collar		76,177									3.50			4.66
April 2026 - October 2026		Natural Gas		Two-Way Collar		952,588									3.50			4.55
September 2026 - December 2026		Natural Gas		Two-Way Collar		318,964									3.75			4.94

Subsequent to September 30, 2025, the Company entered into the following new crude oil and natural gas derivative contracts:

Swap Price

Sub Floor

Floor Price

Ceiling Price

Volumes in

per

Price per

per

per

Period

Commodity

Instrument

MMBTU/BBL

MMBTU/BBL

MMBTU/BBL

MMBTU/BBL

MMBTU/BBL

January 2026 - September 2026

Crude Oil

Fixed-Price Swap

83,498

$

60.00

April 2026 - December 2026

Crude Oil

Two-Way Collar

49,215

$

55.00

$

63.65

July 2026 - December 2026

Crude Oil

Two-Way Collar

35,427

55.00

63.50

October 2026 - December 2026

Crude Oil

Three-Way Collar

26,130

$

50.00

57.00

70.22

January 2026 - December 2026

Natural Gas

Two-Way Collar

578,214

3.50

4.44

The Company presents the fair value of its derivative contracts at the gross amounts in the unaudited condensed consolidated balance sheets. The following table shows the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts for the periods presented (in thousands):


		Derivative Contracts Assets						Derivative Contracts Liabilities
Offsetting of Derivative Assets and Liabilities		September 30, 2025			June 30, 2025			September 30, 2025			June 30, 2025
Gross amounts presented in the Consolidated Balance Sheet		$	2,477		$	1,975		$	2,559		$	3,360
Amounts not offset in the Consolidated Balance Sheet			(1,619)			(1,774)			(1,619)			(1,774)
Net amount		$	858		$	201		$	940		$	1,586

The Company enters into an International Swap Dealers Association Master Agreements (“ISDA”) with each counterparty prior to a derivative contract with such counterparty. The ISDA is a standard contract that governs all derivative contracts entered into between the Company and the respective counterparty. The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date and in the same currency.