DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2020

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 three months ended March 31, 2020 and 2019:

	Three months ended March 31,
	2020		2019
Gain (loss) on derivatives:
Oil derivatives	$	2,509,045	$	(67,596	)
Natural gas derivatives		—		(763	)
Total	$	2,509,045	$	(68,359	)

The following represents the Company’s net cash receipts from derivatives for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
	2020		2019
Net cash received from payments on derivatives
Oil derivatives	$	533,285	$	19,349
Natural gas derivatives		—		406
Total	$	533,285	$	19,755

The following table sets forth the Company’s outstanding derivative contracts at March 31, 2020. The Company has no outstanding natural gas derivatives. All of the Company’s derivatives are expected to settle by June 21, 2021:

	1^stQuarter		2^ndQuarter		3^rdQuarter		4^thQuarter
2020
Oil Swaps:
Volume (MBbl)		—		16.06		16.02		15.78
Price per Bbl		—	$	59.62	$	58.39	$	55.18


2021
Oil Swaps:
Volume (MBbl)		15.52		15.18		—		—
Price per Bbl	$	49.40	$	50.87		—		—