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Derivative Financial Instruments
 3 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

Note 7. Derivative Financial Instruments

 

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive.

 

The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk. Derivative contracts are utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash flows associated with anticipated sales of future oil and natural gas production. The Company follows FASB ASC Topic 815, Derivatives and Hedging (ASC Topic 815), to account for its derivative financial instruments.

 

The Company’s crude oil derivative positions consist of put options. 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 realized and unrealized gain (loss) on commodity price hedging contracts on the consolidated statements of operations. All derivative contracts are recorded at fair market value and included in the consolidated balance sheets as assets or liabilities.

 

The Company may have multiple hedge positions that span a several-month time period and result in fair value asset and liability positions. At the end of the reporting periods, those positions are offset to a single fair value asset or liability for each commodity and the netted balance is reflected in the consolidated balance sheets as an asset or liability.

 

During the quarter ended June 30, 2020 the Company entered into a series of crude oil put option contracts.

 

The following table summarizes the fair value amounts of derivative contracts in the consolidated balance sheets as well as the gross recognized derivative assets in the consolidated balance sheets as of June 30, 2020.

 

    Gross Recognized
Asset		     Gross Amounts
Offset		     Net Recognized
Asset		  
Oil price hedging contracts - current   $ 550     $ -     $ 550  
Oil price hedging contracts – non-current     -       -       -  
    $ 550     $ -     $ 550  

 

The following tables summarizes the amounts of the Company’s realized and unrealized gains (losses) on derivative contracts in the Company’s consolidated statements of operations for the quarter ended June 30, 2020.

 

    Gain Recognized  
Realized gain (loss) on oil price hedging contracts   $ (7,800 )
Unrealized gain (loss) on oil price hedging contracts     550  
Net realized and unrealized loss on derivative contracts   $ (7,250 )

 

The periods covered, notional amounts, fixed price and related commodity pricing index of the Company’s outstanding crude oil derivative contracts as of June 30, 2020 are set forth in the table below:

 

Period   Type of Contract   Index   Volume
Bbls		     Weighted Average
Floor Price		  
July 2020   Put Options   NY MEX WTI     3,000     $ 25.00  
August 2020   Put Options   NY MEX WTI     2,000     $ 25.00