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Commodity Derivative Financial Instruments

3 Months Ended

Mar. 31, 2023

Investments, All Other Investments [Abstract]

Commodity Derivative Financial Instruments

Note 5 – 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 in such a way that would 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 changes to the derivative asset or liability on the Company’s consolidated balance sheets.

The following table summarizes the net realized and unrealized gains (losses) reported in earnings related to the commodity derivative instruments for the three months ended March 31, 2023 and 2022:

		Three Months Ended March 31,
		2023				2022
Gain (Loss) on Derivatives:
Oil derivatives		$	(66,823	)		$	(112,321	)

The following represents the Company’s net cash payments on derivatives for the three months ended March 31, 2023 and 2022:

		Three Months Ended March 31,
		2023				2022

Oil derivatives		$	(41,187	)		$	(83,260	)

The following table sets forth the Company’s outstanding derivative contracts at March 31, 2023:

	2023
	2^nd Quarter		3^rd Quarter		4^th Quarter

WTI Index Put Options:
Quarterly volume (MBbls)	40.35		41.86		41.00
Floor price (Bbl)	$40.00-$55.00		$40.00-$60.00		$40.00-$50.00