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DERIVATIVE AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2022
DERIVATIVE AND HEDGING ACTIVITIES |
DERIVATIVE AND HEDGING ACTIVITIES | 7. DERIVATIVE AND HEDGING ACTIVITIES The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk and interest rate risk. In accordance with the Company’s policy and the requirements under the Term Loan Agreement, it generally hedges a substantial, but varying, portion of anticipated oil and natural gas production for future periods. Derivatives are carried at fair value on the unaudited condensed consolidated balance sheets as assets or liabilities, with the changes in the fair value included in the unaudited condensed consolidated statements of operations for the period in which the change occurs. The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts, as well as all payments and receipts on settled derivative contracts, in “Net gain (loss) on derivative contracts” on the unaudited condensed consolidated statements of operations. The Company’s hedge policies and objectives may change significantly as its operational profile changes. The Company does not enter into derivative contracts for speculative trading purposes. It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial or commodity hedging institutions deemed by management as competent and competitive market makers. As of September 30, 2022, the Company did not post collateral under any of its derivative contracts as they are secured under the Company’s Term Loan Agreement. The Company’s crude oil, and natural gas derivative positions at any point in time may consist of fixed-price swaps, costless put/call collars, basis swaps and WTI NYMEX rolls further described as follows:
| ● | Fixed-price swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for crude oil and natural gas.
| ● | Costless collars consist of a sold call, which establishes a maximum price the Company will receive for the volumes under contract and a purchased put that establishes a minimum price and are generally utilized less frequently by the Company than fixed-price swaps.
| ● | Basis swaps effectively lock in a price differential between regional prices (i.e. Midland) where the product is sold and the relevant pricing index under which the oil production is hedged (i.e. Cushing).
| ● | WTI NYMEX roll agreements account for pricing adjustments to the trade month versus the delivery month for contract pricing.
The following table summarizes the location and fair value amounts of all commodity derivative contracts in the unaudited condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance sheet location |  | September 30, 2022 |  | December 31, 2021 |  | Balance sheet location |  | September 30, 2022 |  | December 31, 2021
Current assets | ​ | $ | 18,225 | ​ | $ | 1,383 | ​ | Current liabilities | ​ | $ | (41,088) | ​ | $ | (58,322)
Other noncurrent assets | ​ | ​ | 8,789 | ​ | ​ | 2,515 | ​ | Other noncurrent liabilities | ​ | ​ | (23,583) | ​ | ​ | (7,144)
​ | ​ | $ | 27,014 | ​ | $ | 3,898 | ​ | ​ | ​ | $ | (64,671) | ​ | $ | (65,466)
​ The following table summarizes the location and amounts of the Company’s realized and unrealized gains and losses on derivative contracts in the Company’s unaudited condensed consolidated statements of operations (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Location of net gain (loss) | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | on derivative contracts on | ​ | September 30, | ​ | September 30,
Type |  | Statement of Operations | ​ | 2022 | ​ | 2021 | ​ | 2022 | ​ | 2021
Commodity derivative contracts: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized gain (loss) | ​ | Other income (expenses) | ​ | $ | 102,112 | ​ | $ | 1,816 | ​ | $ | 23,911 | ​ | $ | (69,053)
Realized gain (loss) | ​ | Other income (expenses) | ​ | ​ | (34,478) | ​ | ​ | (22,387) | ​ | ​ | (112,045) | ​ | ​ | (50,318)
Total net gain (loss) | ​ | ​ | ​ | $ | 67,634 | ​ | $ | (20,571) | ​ | $ | (88,134) | ​ | $ | (119,371)
​ At September 30, 2022, the Company had the following open crude oil and natural gas derivative contracts:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Instrument |  | ​ | 2022 |  | ​ | 2023 |  | ​ | 2024 |  | ​ | 2025 | ​ | ​ | 2026
Crude oil: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fixed-price swap: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (Bbls) | ​ | ​ | 631,398 | ​ | ​ | 2,519,350 | ​ | ​ | 1,761,468 | ​ | ​ | 1,127,696 | ​ | ​ | 484,213
Weighted average price | ​ | $ | 54.64 | ​ | ​ | 69.62 | ​ | ​ | 63.56 | ​ | ​ | 60.66 | ​ | ​ | 64.43
Basis swap: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (Bbls) | ​ | ​ | 622,398 | ​ | ​ | 2,586,562 | ​ | ​ | 1,759,239 | ​ | ​ | 1,127,696 | ​ | ​ | 484,213
Weighted average price | ​ | $ | 0.44 | ​ | ​ | 0.40 | ​ | ​ | 0.26 | ​ | ​ | 0.15 | ​ | ​ | 0.11
WTI NYMEX roll: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (Bbls) | ​ | ​ | 622,398 | ​ | ​ | 2,519,350 | ​ | ​ | 1,613,039 | ​ | ​ | 1,127,696 | ​ | ​ | 484,213
Weighted average price | ​ | $ | 0.15 | ​ | ​ | 0.58 | ​ | ​ | 0.30 | ​ | ​ | 0.13 | ​ | ​ | 0.20
Natural gas: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fixed-price swap: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (MMBtu) | ​ | ​ | 385,500 | ​ | ​ | 4,888,650 | ​ | ​ | 3,401,504 | ​ | ​ | 2,867,065 | ​ | ​ | 742,678
Weighted average price | ​ | $ | 3.87 | ​ | ​ | 3.67 | ​ | ​ | 3.37 | ​ | ​ | 3.17 | ​ | ​ | 4.01
Two-way collar: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (MMBtu) | ​ | ​ | 1,578,768 | ​ | ​ | 2,199,328 | ​ | ​ | 1,848,139 | ​ | ​ | 825,653 | ​ | ​ | 760,562
Weighted average price (call) | ​ | $ | 4.79 | ​ | ​ | 5.91 | ​ | ​ | 4.97 | ​ | ​ | 4.71 | ​ | ​ | 4.64
Weighted average price (put) | ​ | $ | 4.04 | ​ | ​ | 4.36 | ​ | ​ | 3.57 | ​ | ​ | 3.65 | ​ | ​ | 4.04
Basis swap: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total volumes (MMBtu) | ​ | ​ | 1,838,418 | ​ | ​ | 6,876,237 | ​ | ​ | 5,225,092 | ​ | ​ | 3,724,085 | ​ | ​ | 1,512,752
Weighted average price | ​ | $ | (0.55) | ​ | ​ | (0.75) | ​ | ​ | (0.75) | ​ | ​ | (0.59) | ​ | ​ | (0.85)
​ The Company presents the fair value of its derivative contracts at the gross amounts in the unaudited condensed consolidated balance sheets. The following table shows the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts at September 30, 2022 and December 31, 2021 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Derivative Assets | ​ | Derivative Liabilities
Offsetting of Derivative Assets and Liabilities |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Amounts - Consolidated Balance Sheet | ​ | $ | 27,014 | ​ | $ | 3,898 | ​ | $ | (64,671) | ​ | $ | (65,466)
Amounts Not Offset - Consolidated Balance Sheet | ​ | ​ | (24,845) | ​ | ​ | (3,898) | ​ | ​ | 24,845 | ​ | ​ | 3,898
Net Amount | ​ | $ | 2,169 | ​ | $ | — | ​ | $ | (39,826) | ​ | $ | (61,568)
​ The Company enters into an International Swap Dealers Association Master Agreement (ISDA) with each counterparty prior to a derivative contract with such counterparty. The ISDA is a standard contract that governs all derivative contracts entered into between the Company and the respective counterparty. The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date and in the same currency.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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