DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2021

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 does not enter into derivative financial instruments for speculative or trading purposes. The Company’s derivative financial instruments consist of oil swaps.

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 condensed 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 condensed consolidated balance sheets.

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, 2021 and 2020:

	Three months ended March 31,
	2021			2020
Gain (loss) on derivatives:
Oil derivatives	$	(357,915	)	$	2,509,045

The following represents the Company’s net cash receipts from (payments on) derivatives for the three months ended March 31, 2021 and 2020:

	Three months ended March 31,
	2021			2020
Net cash received from payments on derivatives
Oil derivatives	$	(127,944	)	$	533,285

The following table sets forth the Company’s outstanding derivative contracts at March 31, 2021. The Company has no outstanding natural gas derivatives.

	2^ndQuarter		3^rdQuarter		4^thQuarter
2021
Oil Swaps:
Quarterly volume (MBbl)		15.18		5.20		—
Price per Bbl	$	50.87	$	38.25		—