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Note 3 - Derivative Instruments

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

3. DERIVATIVE INSTRUMENTS

As of September 30, 2024 and December 31, 2023, 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) and 0.3 million MMBtu of natural gas at September 30, 2024 and December 31, 2023, respectively. 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. The Company recognizes all of its derivative instruments as either assets or liabilities which are recorded at fair value on its Condensed Consolidated Balance Sheet. 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, 2024 and December 31, 2023 (in thousands):

		*September 30,*				*December 31,*
Location on Condensed Consolidated Balance Sheet		*2024*				*2023*
Prepaid expenses and other current assets^(1),(2)		$	236			$	—
Right-of-use assets and other noncurrent assets ^(1),(2)			—				—
		$	236			$	—

(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 or gain on natural gas derivatives within the Company's Condensed Consolidated Statements of Operations. The table below presents the changes in the fair value as well as the net realized gains and losses for all of its derivatives from the Call Options for the three and nine months ended September 30, 2024 and 2023 (in thousands):

		*Three Months Ended*								*Nine Months Ended*
		*September 30,*								*September 30,*
Changes in fair value of derivatives		*2024*				*2023*				*2024*				*2023*
Fair value of natural gas derivatives, beginning of period		$	329			$	81			$	—			$	572
Purchases of natural gas derivatives			—				—				359				—
Unrealized losses transferred to realized losses, net			(80	)			(316	)			(444	)			(862	)
Change in unrealized gain (loss) on natural gas derivatives ⁽¹⁾			(13	)			267				321				322
Fair value of natural gas derivatives, end of period		$	236			$	32			$	236			$	32

		*Three Months Ended*								*Nine Months Ended*
		*September 30,*								*September 30,*
Realized gain (loss) from derivative instruments		*2024*				*2023*				*2024*				*2023*
Unrealized gains (losses) transferred to realized gains (losses), net		$	(80	)		$	(316	)		$	(444	)		$	(862	)
Derivative settlement payments received ⁽²⁾			—				—				—				—
Realized gain (loss) from natural gas derivatives, net ⁽²⁾		$	(80	)		$	(316	)		$	(444	)		$	(862	)

(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 which are not measured at fair value each reporting period.