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Commodity Derivative Financial Instruments

12 Months Ended

Dec. 31, 2022

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, 2022 and 2021:

		For the Year Ended December 31,
		2022				2021
Gain (loss) on derivatives:
Oil derivatives		$	(387,930	)		$	(586,181	)

The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2022 and 2021:

		For the Year Ended December 31,
		2022				2021

Oil derivatives		$	(259,696	)		$	(299,481	)
Natural gas derivatives			—				(535,960	)
Total		$	(259,696	)		$	(835,441	)

The following table sets forth the Company’s outstanding derivative contracts at December 31, 2022:

	1^st Quarter		2^nd Quarter		3^rd Quarter		4^th Quarter
2023
WTI Index Put Options:
Quarterly volume (Bbl)	46,400		15,340		16,860		17,000
Floor Price (Bbl)	$40.00-$65.00		$40.00-$55.00		$55.00-$60.00		$50.00