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FAIR VALUE MEASUREMENTS | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | 13. FAIR VALUE MEASUREMENTS The Company’s fair value measurements are estimated pursuant to a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, giving highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability, and may affect the valuation of the assets and liabilities and their placement within the hierarchy level. The three levels of inputs that may be used to measure fair value are defined as: Level 1 - Quoted prices for identical assets and liabilities traded in active exchange markets. Level 2 - Observable inputs other than Level 1 that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, or other observable inputs that can be corroborated by observable market data. Level 3 - Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Recurring Fair Value Measurements Commodity Derivative Instruments We measure the fair value of commodity derivative contracts using an income valuation technique based on the contract price of the underlying positions, crude oil forward curves, discount rates, and Company or counterparty non-performance risk. The fixed-price swaps and collar derivative contracts are included in Level 2. The fair value of commodity derivative contracts and their presentation in our condensed consolidated balance sheet as of June 30, 2022 are presented below: SCHEDULE OF RECURRING MEASUREMENTS OF FAIR VALUE OF ASSETS AND LIABILITIES
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Fair Value |  |  | Effect Of Netting |  |  | Net Fair Value Presented in the Condensed Consolidated Balance Sheet |
(in thousands)
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | - |  |  | $ | 430 |  |  | $ | - |  |  | $ | 430 |  |  | $ | (430 | ) |  | $ | - |
Non-current: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | - |  |  | $ | 644 |  |  | $ | - |  |  | $ | 644 |  |  | $ | (644 | ) |  | $ | - |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | - |  |  | $ | (6,755 | ) |  | $ | - |  |  | $ | (6,755 | ) |  | $ | 430 |  |  | $ | (6,325 | )
Non-current: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | - |  |  | $ | (1,952 | ) |  | $ | - |  |  | $ | (1,952 | ) |  | $ | 644 |  |  | $ | (1,308 | )
Net derivative instruments |  | $ | - |  |  | $ | (7,633 | ) |  | $ | - |  |  | $ | (7,633 | ) |  | $ | - |  |  | $ | (7,633 | )
Marketable Equity Securities We measure the fair value of marketable equity securities based on quoted market prices obtained from independent pricing services. The Company has an investment in the marketable equity securities of Anfield Energy (“Anfield”), which it acquired as consideration for sales of certain mining operations. Anfield is traded in an active market under the trading symbol AEC:TSXV and has been classified as Level 1. SCHEDULE OF INVESTMENT IN THE MARKETABLE EQUITY SECURITIES
|  | June 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Current assets: |  |  |  |  |  |  |  |
Marketable equity securities |  |  |  |  |  |  |  |
Number of shares owned |  |  | 2,421,180 |  |  |  | 2,421,180 |
Quoted market price |  | $ | 0.06213 |  |  | $ | 0.07874 |
Fair value of marketable equity securities |  | $ | 150,417 |  |  | $ | 190,641 |
Nonrecurring Fair Value Measurements Asset Retirement Obligations The Company measures the fair value of asset retirement obligations as of the date a well is acquired, the date a well begins drilling, or the date the Company revises its ARO assumptions using a discounted cash flow method based on unobservable inputs including estimates of the costs to abandon and the timing of when the Company will ultimately abandon the asset. These estimates are based on engineering estimates and estimated reserve life and therefore are designated as Level 3 within the valuation hierarchy See Note 10- Asset Retirement Obligations. Other Assets and Liabilities The Company evaluates the fair value on a non-recurring basis of properties acquired in asset acquisitions. The fair value of the oil and gas properties is determined based upon estimated future discounted cash flow, a Level 3 input, using estimated production which we reasonably expect, and estimated prices adjusted for differentials. Unobservable inputs include estimated future oil and natural gas production, prices, operating and development costs, and a discount rate of 10%, all Level 3 inputs within the fair value hierarchy. The carrying value of financial instruments included in current assets and current liabilities approximate fair value due to the short-term nature of those instruments. The carrying value of the amounts borrowed under the Credit Agreement approximate fair value because the interest on the Credit Agreement is at a floating rate.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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