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DERIVATIVE FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
6. DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to manage its exposure to commodity price fluctuations.  Commodity derivative instruments are used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells.  The Company's derivative financial instruments consist of oil and natural gas swaps.

 

The Company does not enter into derivative financial instruments for speculative or trading purposes.

 

The Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its consolidated statements of operations as they occur. Unrealized gains and losses related to the swap contracts are recognized and recorded as an asset or liability on the Company's balance sheet.

 

The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the six months ended June 30, 2019 and 2018:

 

    Three months ended June 30,     Six months ended June 30,  
    2019     2018     2019     2018  
Gain on derivatives:                      
Oil derivatives   $ 492,548     $ —     $ 424,952     $ —  
Natural gas derivatives     8,180       —       7,417       —  
Total   $ 500,728     $ —     $ 432,369     $ —  

 

 

The following represents the Company's net cash receipts from derivatives for the six months ended June 30, 2019 and 2018:

 

    Three months ended June 30,     Six months ended June 30,  
    2019     2018     2019     2018  
Net cash received from payments on derivatives                      
Oil derivatives   $ 74,154     $ —     $ 93,503     $ —  
Natural gas derivatives     4,305       —       4,711       —  
Total   $ 78,459     $ —     $ 98,214     $ —  

 

 

The following table sets forth the Company's outstanding derivative contracts at June 30, 2019.  All of the Company's derivatives are expected to settle by November 30, 2020:

 

    1st Quarter     2nd Quarter     3rd Quarter     4th Quarter  
2019                        
Oil Swaps:                        
Volume (MBbl)                 28.05       24.58  
Price per Bbl               $ 62.09     $ 61.37  
                             
Natural Gas Swaps:                            
Volume (MMcf)                 1.14          
Price per Mcf                   $ 2.875          
                                 
                                 
2020                                
Oil Swaps:                                
Volume (MBbl)     23.41       23.17       22.94       13.77  
Price per Bbl   $ 60.32     $ 59.53     $ 58.26     $ 58.13