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FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

FINANCIAL INSTRUMENTS

NOTE 4 — FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, derivative instruments and debt.

Derivative Instruments

The following table reflects the contracted volumes and weighted average prices under the terms of the Company’s open derivative contracts as of March 31, 2024:


				Average
		Instrument		Daily		Total		Weighted			Weighted			Weighted
Period		Type		Volumes ⁽¹⁾		Volumes ⁽¹⁾		Strike Price			Put Price			Call Price
Natural Gas - Henry Hub (NYMEX)				(Mmbtu)		(Mmbtu)			($/Mmbtu)			($/Mmbtu)			($/Mmbtu)
Apr 2024 - Dec 2024		calls		65,000		17,875,000		$	—		$	—		$	6.13
Jan 2025 - Mar 2025		calls		62,000		5,580,000		$	—		$	—		$	5.50
Apr 2024 - Dec 2024 ⁽¹⁾		swaps		65,455		18,000,000		$	2.39		$	—		$	—
Jan 2025 - Mar 2025 ⁽¹⁾		swaps		63,333		5,700,000		$	2.72		$	—		$	—
Apr 2025 - Dec 2025 ⁽¹⁾		puts		62,182		17,100,000		$	—		$	2.27		$	—
Jan 2026 - Dec 2026 ⁽¹⁾		puts		55,890		20,400,000		$	—		$	2.35		$	—
Jan 2027 - Dec 2027 ⁽¹⁾		puts		52,306		19,200,000		$	—		$	2.37		$	—
Jan 2028 - Apr 2028 ⁽¹⁾		puts		49,587		6,000,000		$	—		$	2.50		$	—

⁽¹⁾	MMbtu – Million British Thermal Units

The Company has elected not to designate its derivative instruments contracts for hedge accounting. Accordingly, commodity derivatives are recorded on the Condensed Consolidated Balance Sheets at fair value with settlements of such contracts, and changes in the unrealized fair value, recorded as Derivative gain, net on the Condensed Consolidated Statements of Operations in each period presented.

The fair value of the Company’s derivative financial instruments was recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):


		March 31,			December 31,
		2024			2023
Prepaid expenses and other current assets		$	2,801		$	1,180
Other assets			6,747			10,068
Accrued liabilities			5,046			6,267
Other liabilities			—			2,756

The Company measures the fair value of its derivative instruments by applying the income approach, using models with inputs that are classified within Level 2 of the valuation hierarchy. The income approach converts expected future cash flows to a present value amount based on market expectations. The inputs used for the fair value measurement of derivative financial instruments are the exercise price, the expiration date, the settlement date, notional quantities, the implied volatility, the discount curve with spreads and published commodity future prices.

Although the Company has master netting arrangements with its counterparties, the amounts recorded on the Condensed Consolidated Balance Sheets are on a gross basis.

The impact of commodity derivative contracts on the Condensed Consolidated Statements of Operations were as follows (in thousands):


		Three Months Ended March 31,
		2024			2023
Realized (gain) loss		$	(3,755)		$	230
Unrealized gain			(1,122)			(39,470)
Derivative gain, net		$	(4,877)		$	(39,240)

Debt

The following table presents the net values and estimated fair values of the Company’s debt (in thousands):


		March 31, 2024						December 31, 2023
		Net Value			Fair Value			Net Value			Fair Value
Term Loan		$	111,425		$	108,294		$	111,107		$	108,467
11.75% Notes			270,417			284,818			269,910			283,443
TVPX Loan			9,386			9,967			9,587			10,156
Total		$	391,228		$	403,079		$	390,604		$	402,066

The fair value of the TVPX Loan and the Term Loan were measured using a discounted cash flows model and current market rates. The fair value of the 11.75% Notes was measured using quoted prices, although the market is not a highly liquid market. The fair value of debt was classified as Level 2 within the valuation hierarchy.