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Note 7 - Commodity Derivatives | 6 Months Ended
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Jun. 30, 2024
Notes to Financial Statements |
Derivatives and Fair Value [Text Block] | 7. COMMODITY DERIVATIVES The Company’s results of operations and cash flows are affected by changes in market prices for crude oil and natural gas. To manage a portion of its exposure to price volatility from producing crude oil and natural gas, the Company may enter into commodity derivative contracts to protect against price declines in future periods. The Company does not enter into derivative contracts for speculative purposes. The Company does not apply hedge accounting. Accordingly, changes in the fair value of the derivative contracts are recorded in the Condensed Consolidated Statements of Operations and are included as a non-cash adjustment to net income in the operating activities section in the Condensed Consolidated Statements of Cash Flows. As of June 30, 2024, the Company had commodity derivative contracts outstanding as summarized in the tables below:
|  | Fixed Price Swaps |
|  | Quantity |  |  | Weighted |
|  | Crude oil |  |  | Average |
Commodity/ Index/ Maturity Period |  | (Bbls)(1) |  |  | Price |
NYMEX WTI |  |  |  |  |  |  |  |
Crude Oil 2024 Contracts: |  |  |  |  |  |  |  |
Third quarter 2024 |  |  | 45,000 |  |  | $ | 79.80 |
Fourth quarter 2024 |  |  | 40,720 |  |  | $ | 78.15 |
Total 2024 |  |  | 85,720 |  |  | $ | 79.02 |
Crude Oil 2025 Contracts: |  |  |  |  |  |  |  |
First quarter 2025 |  |  | 45,000 |  |  | $ | 75.73 |
Second quarter 2025 |  |  | 43,225 |  |  | $ | 74.19 |
Third quarter 2025 |  |  | 39,100 |  |  | $ | 72.82 |
Fourth quarter 2025 |  |  | 36,800 |  |  | $ | 71.64 |
Total 2025 |  |  | 164,125 |  |  | $ | 73.71 |
Total all contracts |  |  | 249,845 |  |  | $ | 75.53 |
(1) | “Bbl” refers to one stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons.
The following table details the fair value of commodity derivative contracts recorded in the accompanying Condensed Consolidated Balance Sheets by category:
|  | June 30, 2024 |  |  | December 31, 2023 |
|  | (in thousands) |
Derivative assets: |  |  |  |  |  |  |  |
Current assets |  | $ | - |  |  | $ | 1,844 |
Non-current assets |  |  | - |  |  |  | - |
Total derivative assets |  | $ | - |  |  | $ | 1,844 |
Derivative liabilities: |  |  |  |  |  |  |  |
Current liabilities |  | $ | 97 |  |  | $ | - |
Non-current liabilities |  |  | 77 |  |  |  | - |
Total derivative liabilities |  | $ | 174 |  |  | $ | - |
As of June 30, 2024, all commodity derivative contracts held by the Company were subject to a master netting arrangement with its counterparty. The terms of the Company’s derivative agreements provide for offsetting of amounts payable or receivable between it and the counterparty for contracts that settle on the same date. The Company’s agreements also provide that in the event of an early termination, the counterparty has the right to offset amounts owed or owing under that and any other agreement. The Company’s accounting policy is to offset positions when we have a right of offset or master netting arrangement. See Note 13-Fair Value Measurements for disclosure of the fair value of derivative assets and liabilities on a gross and net basis. The following table summarizes the components of the commodity derivative settlement gain (loss) as well as the components of the net commodity derivative (gain) loss line-item presentation in the accompanying Condensed Consolidated Statements of Operations:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | (in thousands) |  |  |  |  |  |  |  |  |
Commodity derivative settlement gain (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil contracts |  | $ | 121 |  |  | $ | (89 | ) |  | $ | 525 |  |  | $ | (466 | )
Gas contracts |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (28 | )
Total commodity derivative settlement gain (loss) |  | $ | 121 |  |  | $ | (89 | ) |  | $ | 525 |  |  | $ | (494 | )
Total net commodity derivative gain (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil contracts |  | $ | (112 | ) |  | $ | 288 |  |  | $ | (1,493 | ) |  | $ | 1,148 |
Gas contracts |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 60 |
Total net commodity derivative gain (loss) |  | $ | (112 | ) |  | $ | 288 |  |  | $ | (1,493 | ) |  | $ | 1,208 |

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