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Note 4 - Derivative Instruments

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4. DERIVATIVE INSTRUMENTS

As of September 30, 2023 and December 31, 2022, the Company held a series of call options (“the Call Options”) for the purchase of natural gas related to customer commitments. The Call Options are for a total of 0.5 million MMBtu (million British thermal units) of natural gas at September 30, 2023 which extend into the second quarter of 2024. The Company purchased the Call Options to manage the risk of increasing natural gas prices above what it can charge its customers. The Company may also enter into other derivative transactions when beneficial. Except for contracts qualifying for the normal purchase normal sales exception, as further described below, the Company recognizes all of its derivative instruments as either assets or liabilities which are recorded at fair value on the Company's Condensed Consolidated Balance Sheets. The fair value of the Call Options are predominantly determined from broker quotes and are considered a level 2 fair value measurement. The following table presents the location and fair value of the Call Options at September 30, 2023 and December 31, 2022 on the Company's Condensed Consolidated Balance Sheets (in thousands):

		*September 30,*				*December 31,*
Location on Condensed Consolidated Balance Sheet			2023 ⁽¹⁾				2022 ⁽¹⁾
Prepaidexpenses and other current assets ⁽²⁾		$	32			$	347
Right-of-use assets and other noncurrent assets ⁽²⁾			—				225
		$	32			$	572

(1) Amounts are presented on a gross basis.

(2) The classification between current and noncurrent assets is based upon when the Call Options mature.

The Company has not designated the Call Options as a hedge under U.S. GAAP and all resulting gains and losses from changes in the fair value of its derivative instruments are included within change in unrealized loss on natural gas derivatives within the Company's Condensed Consolidated Statements of Operations. The table below presents the changes in the fair value of the Call Options for the three and nine months ended September 30, 2023 and 2022 as well as their net realized gains and losses (in thousands).

		*Three Months Ended*								*Nine Months Ended*
		*September 30,*								*September 30,*
Changes in fair value of derivatives		*2023*					*2022*				*2023*				*2022*
Fair value of natural gas derivatives, beginning of period		$	81			$	1,126			$	572			$	—
Purchases of natural gas derivatives			—				—				—				2,241
Unrealized losses transferred to realized losses, net			(316	)			(324	)			(862	)			(540	)
Change in unrealized gain (loss) on natural gas derivatives ⁽¹⁾			267				926				322				27
Fair value of natural gas derivatives, end of period		$	32			$	1,728			$	32			$	1,728

		*Three Months Ended*								*Nine Months Ended*
		*September 30,*								*September 30,*
Realized gain (loss) from derivative instruments		*2023*					*2022*				*2023*				*2022*
Unrealized gains (losses) transferred to realized gains (losses), net		$	(316	)		$	(324	)		$	(862	)		$	(540	)
Derivative settlement payments received ⁽²⁾			—				682				—				1,062
Realized gain (loss) from natural gas derivatives, net ⁽²⁾		$	(316	)		$	358			$	(862	)		$	522

(1) Amounts are presented as their own separate line item within the Company's Condensed Consolidated Statements of Operations.

(2) Amounts are included within cost of revenues on the Company's Condensed Consolidated Statements of Operations.

The Company also enters into forward contracts for purchases of natural gas and/or electricity to meet liquefaction requirements and forward sales contracts for the delivery of LNG to its customers. These contracts are not accounted for as derivatives, but accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period.