Derivatives

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]


Note 11			Derivatives

The Company has two types of derivative instruments as of December 31, 2022: (i) commodity derivatives and (ii) a contingent consideration derivative. In previous periods, the Company also engaged in an interest rate swap derivative, which concluded during the quarterly period ended June 30, 2022. See Notes (i) 2 for the Company's significant accounting policies for derivatives and presentation in the consolidated financial statements, (ii) 12 for fair value measurement of derivatives on a recurring basis and (iii) 18 for derivatives subsequent events.

The following table summarizes components the Company's gain (loss) on derivatives, net by type of derivative instrument for the periods presented:


	Years ended December 31,
(in thousands)	2022		2021		2020
Commodity	$	(291,973)	$	(453,784)	$	73,662

Contingent consideration	(6,764)		1,639		6,795
Interest rate	14		(30)		(343)
Gain (loss) on derivatives, net	$	(298,723)	$	(452,175)	$	80,114


Commodity

Due to the inherent volatility in oil, NGL and natural gas prices and the sometimes wide pricing differentials between where the Company produces and where the Company sells such commodities, the Company engages in commodity derivative transactions, such as puts, swaps, collars and basis swaps to hedge price risk associated with a portion of the Company's anticipated sales volumes. By removing a portion of the price volatility associated with future sales volumes, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations. During the year ended December 31, 2022, the Company's derivatives were settled based on reported prices on commodity exchanges, with (i) oil

derivatives settled based on WTI NYMEX and Brent ICE pricing, (ii) NGL derivatives settled based on Mont Belvieu OPIS pricing and (iii) natural gas derivatives settled based on Henry Hub NYMEX and Waha Inside FERC pricing.

The following table summarizes open commodity derivative positions as of December 31, 2022, for commodity derivatives that were entered into through December 31, 2022, for the settlement periods presented:


	Year 2023
Oil:



WTI NYMEX - Collars:
Volume (Bbl)	5,089,000
Weighted-average floor price ($/Bbl)	$	68.58
Weighted-average ceiling price ($/Bbl)	$	84.88







































Natural gas:



Henry Hub NYMEX - Collars:
Volume (MMBtu)	25,550,000
Weighted-average floor price ($/MMBtu)	$	4.14
Weighted-average ceiling price ($/MMBtu)	$	8.43

Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:
Volume (MMBtu)	25,550,000
Weighted-average differential ($/MMBtu)	$	(1.65)


Contingent consideration

The Sixth Street PSA provided for potential contingent payments to be paid to the Company if certain cash flow targets are met related to divested oil and natural gas property operations. The Sixth Street Contingent Consideration provides the Company with the right to receive up to a maximum of $93.7 million in additional cash consideration, comprised of potential quarterly payments through June 2027 totaling up to $38.7 million and a potential balloon payment of $55.0 million in June 2027. As of December 31, 2022, the maximum remaining additional cash consideration of the contingent consideration was $88.9 million. The fair value of the Sixth Street Contingent Consideration was determined to be $26.6 million as of December 31, 2022 and $35.9 million as of December 31, 2021.

See Note 4 for further discussion of the Working Interest Sale associated with the Sixth Street Contingent Consideration.


Interest rate swap

In previous periods, the Company was engaged in an interest rate derivative swap to hedge interest rate risk associated with a portion of the Company's anticipated outstanding debt under the Senior Secured Credit Facility. The Company paid a fixed rate over the contract term for that portion. During the year ended December 31, 2022, the Company's interest rate swap derivative, which concluded during the quarterly period ended June 30, 2022, was settled based on LIBOR rates. By removing a portion of the interest rate volatility associated with anticipated outstanding debt, the Company intended to mitigate, but not eliminate, the potential effects of variability in cash flows from operations.