| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
7. Derivative Financial Instruments
Our market risk exposure relates primarily to commodity prices and, from time to time, we use various derivative instruments to manage our exposure to this commodity price risk from sales of our crude oil and natural gas. All of the present derivative counterparties are also lenders or affiliates of lenders participating in our Company Credit Agreement or Term Loan. We are exposed to credit loss in the event of nonperformance by the derivative counterparties; however, we currently anticipate that each of our derivative counterparties will be able to fulfill their contractual obligations. We are not required to provide additional collateral to the derivative counterparties and we do not require collateral from our derivative counterparties.
We have elected not to designate our commodity derivative contracts as hedging instruments; therefore, all current period changes in the fair value of derivative contracts are recognized in earnings during the periods presented. The cash flows of all of our commodity derivative contracts are included in Net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.
We entered into commodity contracts for crude oil and natural gas which related to a portion of our expected future production. The crude oil contracts are based on West Texas Intermediate (“WTI”) crude oil prices and the natural gas contracts are based off the Henry Hub prices, both of which are quoted off the New York Mercantile Exchange (“NYMEX”).
The following table reflects the contracted volumes and weighted average prices under the terms of the Company’s open derivative contracts as of June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
Instrument |
|
Daily |
|
Total |
|
Weighted |
|
Weighted |
|
Weighted |
Period |
|
Type |
|
Volumes |
|
Volumes |
|
Strike Price |
|
Put Price |
|
Call Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil - WTI (NYMEX) |
|
(Bbls)(1) |
|
(Bbls)(1) |
|
|
($/Bbl)(1) |
|
|
($/Bbl)(1) |
|
|
($/Bbl)(1) |
Jul 2021 - Dec 2021 |
|
swap |
|
4,000 |
|
736,000 |
|
$ |
42.06 |
|
$ |
— |
|
$ |
— |
Jul 2021 - Dec 2021 |
|
collar |
|
200 |
|
36,800 |
|
$ |
— |
|
$ |
40.00 |
|
$ |
54.90 |
Jul 2021 - Feb 2022 |
|
collar |
|
2,024 |
|
491,733 |
|
$ |
— |
|
$ |
38.81 |
|
$ |
57.24 |
Jan 2022 - Feb 2022 |
|
swap |
|
3,000 |
|
177,000 |
|
$ |
42.98 |
|
$ |
— |
|
$ |
— |
Mar 2022 - May 2022 |
|
swap |
|
2,044 |
|
188,006 |
|
$ |
42.33 |
|
$ |
— |
|
$ |
— |
Mar 2022 - May 2022 |
|
collar |
|
2,000 |
|
184,000 |
|
$ |
— |
|
$ |
35.00 |
|
$ |
48.50 |
Mar 2022 - Sept 2022 |
|
swap |
|
1,615 |
|
345,638 |
|
$ |
54.53 |
|
$ |
— |
|
$ |
— |
Mar 2022 - Sept 2022 |
|
collar |
|
1,615 |
|
345,638 |
|
$ |
— |
|
$ |
45.00 |
|
$ |
62.50 |
Oct 2022 |
|
swap |
|
2,172 |
|
67,332 |
|
$ |
58.50 |
|
$ |
— |
|
|
— |
Oct 2022 |
|
collar |
|
2,172 |
|
67,332 |
|
$ |
— |
|
$ |
46.00 |
|
|
66.50 |
Nov 2022 |
|
swap |
|
2,176 |
|
65,280 |
|
$ |
58.25 |
|
$ |
— |
|
|
— |
Nov 2022 |
|
collar |
|
2,176 |
|
65,280 |
|
$ |
— |
|
$ |
46.00 |
|
|
66.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas - Henry Hub (NYMEX) |
|
(MMbtu)(2) |
|
(MMbtu)(2) |
|
|
($/MMbtu)(2) |
|
|
($/MMbtu)(2) |
|
|
($/MMbtu)(2) |
Jul 2021 - Dec 2021 |
|
collar |
|
30,000 |
|
5,520,000 |
|
$ |
— |
|
$ |
2.18 |
|
$ |
3.00 |
Jul 2021 - Dec 2021 |
|
swap |
|
10,000 |
|
1,840,000 |
|
$ |
2.62 |
|
$ |
— |
|
$ |
— |
Jul 2021 - Dec 2021 |
|
call |
|
40,000 |
|
7,360,000 |
|
$ |
— |
|
$ |
— |
|
$ |
3.50 |
Jul 2021 - Dec 2022 |
|
collar |
|
40,000 |
|
21,960,000 |
|
$ |
— |
|
$ |
1.83 |
|
$ |
3.00 |
Jul 2021 - Dec 2022 |
|
call |
|
40,000 |
|
21,960,000 |
|
$ |
— |
|
$ |
— |
|
$ |
3.00 |
Jan 2022 - Feb 2022 |
|
collar |
|
30,000 |
|
1,830,000 |
|
$ |
— |
|
$ |
2.20 |
|
$ |
4.50 |
Jan 2022 - Dec 2022 |
|
call |
|
37,000 |
|
13,505,000 |
|
$ |
— |
|
$ |
— |
|
$ |
3.50 |
Jan 2022 |
|
swap |
|
20,000 |
|
620,000 |
|
$ |
2.79 |
|
$ |
— |
|
$ |
— |
Feb 2022 |
|
swap |
|
30,000 |
|
840,000 |
|
$ |
2.79 |
|
$ |
— |
|
$ |
— |
Mar 2022 - May 2022 |
|
collar |
|
10,000 |
|
920,000 |
|
$ |
— |
|
$ |
2.25 |
|
$ |
3.40 |
Mar 2022 - May 2022 |
|
swap |
|
10,544 |
|
970,075 |
|
$ |
2.69 |
|
$ |
— |
|
$ |
— |
Apr 2022 - Sept 2022 |
|
swap |
|
12,428 |
|
2,274,311 |
|
$ |
2.44 |
|
$ |
— |
|
$ |
— |
Oct 2022 |
|
swap |
|
16,129 |
|
499,999 |
|
$ |
2.56 |
|
$ |
— |
|
$ |
— |
Nov 2022 |
|
swap |
|
17,570 |
|
527,100 |
|
$ |
2.63 |
|
$ |
— |
|
$ |
— |
Jan 2023 - Dec 2023 |
|
call |
|
70,000 |
|
25,550,000 |
|
$ |
— |
|
$ |
— |
|
$ |
3.50 |
Jul 2021 - Mar 2025 (3) |
|
swap |
|
72,920 |
|
99,900,000 |
|
$ |
2.63 |
|
$ |
— |
|
$ |
— |
Apr 2025 - Apr 2028 (3) |
|
put |
|
55,684 |
|
62,700,000 |
|
$ |
— |
|
$ |
2.35 |
|
$ |
— |
(2) MMbtu = Million British Thermal Units
(3) These contracts were entered into by the Company’s wholly owned subsidiary, A-I LLC, in conjunction with the Mobile Bay Transaction (see Note 4 Mobile Bay Transaction).
The following amounts were recorded in the Condensed Consolidated Balance Sheets in the categories presented and include the fair value of open contracts, and closed contracts which had not yet settled (in thousands):
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2021 |
|
2020 |
Prepaid expenses and other current assets |
|
$ |
14,021 |
|
$ |
2,752 |
Other assets (long-term) |
|
|
21,005 |
|
|
2,762 |
Accrued liabilities |
|
|
82,832 |
|
|
13,620 |
Other liabilities (long-term) |
|
|
28,122 |
|
|
4,384 |
The amounts recorded on the Condensed Consolidated Balance Sheets are on a gross basis.
Changes in the fair value and settlements of contracts are recorded on the Condensed Consolidated Statements of Operations as Derivative loss (gain). The impact of our commodity derivative contracts has on the condensed consolidated Statements of Operations were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Realized loss (gain) |
|
$ |
15,357 |
|
$ |
(22,578) |
|
$ |
23,602 |
|
$ |
(31,970) |
Unrealized loss (gain) |
|
|
66,083 |
|
|
37,992 |
|
|
82,418 |
|
|
(14,528) |
Derivative loss (gain) |
|
$ |
81,440 |
|
$ |
15,414 |
|
$ |
106,020 |
|
$ |
(46,498) |
Cash receipts on commodity derivative contract settlements, net, are included within Net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows and were as follows (in thousands):
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2021 |
|
2020 |
Derivative loss (gain) |
|
$ |
106,020 |
|
$ |
(46,498) |
Derivative cash (payments) receipts, net |
|
|
(41,130) |
|
|
37,566 |
|