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Commodity Derivative Financial Instruments

12 Months Ended

Dec. 31, 2021

Investments, All Other Investments [Abstract]

Commodity Derivative Financial Instruments

Note 7 – Commodity 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 does not enter into derivative financial instruments for speculative or trading purposes. The Company’s derivative financial instruments consist of put options.

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 contracts are recognized and recorded as an asset or liability on the Company’s consolidated balance sheets.

The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2021 and 2020:

		For the Year Ended December 31,
		2021				2020
Gain (loss) on derivatives:
Oil derivatives		$	(586,181	)		$	1,738,871

The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2021 and 2020:

		For the Year Ended December 31,
		2021				2020
Oil derivatives		$	(299,481	)		$	1,520,988
Natural gas derivatives			(535,960	)			—
Total		$	(835,441	)		$	1,520,988

The following table sets forth the Company’s outstanding derivative contracts at December 31, 2021:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
2022
WTI Index Put Options:
Quarterly volume (MBbl)	20.56		20.43		20.32		15.72
Floor Price (Bbl)	$40.00		$40.00		$40.00		$40.00

	1st Quarter		2nd  Quarter		3rd Quarter
2023
WTI Index Put Options:
Quarterly volume (MBbl)	13.40		15.34		10.86
Floor Price (Bbl)	$40.00		$55.00		$55.00

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- Definition

The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures.

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