Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

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 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 summarized the amounts reported in earnings, as a component of revenue, related to the commodity derivative instruments for the years ended December 31, 2019 and 2018:

	As of December 31,
	2019		2018
Gain (loss) on derivatives:
Oil derivatives		25,894		109,273
Natural gas derivatives		7,749		3,808
Total		33,643		113,081

The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December 31, 2019 and 2018:

	As of December 31,
	2019		2018
Net cash receipts from (payments on) derivatives:
Oil derivatives		358,799		16,629
Natural gas derivatives		11,557		(11,913	)
Total		370,356		4,716

The following table sets forth the Company’s outstanding oil derivative contracts at December 31, 2019. The Company has no outstanding natural gas derivatives. All of the Company’s derivatives are expected to settle by November 30, 2021:

	First quarter	Second quarter	Third quarter	Fourth quarter
Oil Swaps:
2020 Volume (Bbl)	23,413	23,172	22,944	20,944
Price per Bbl	$60.32	$59.53	$58.26	$55.09

2021 Volume (Bbl)	20,106	15,683	6,665	4,372
Price per Bbl	$49.43	$50.47	$49.30	$50.87