Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

10. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes the credit standing of counterparties involved and the impact of credit enhancements.

We apply fair value measurements to our commodity derivative instruments based on the following fair value hierarchy, which prioritizes the inputs to the valuation techniques used to measure fair value into three broad levels:

•Level 1—Quoted prices in active markets for identical assets and liabilities. Instruments categorized in Level 1 primarily consist of financial instruments such as exchange-traded derivative instruments.

•Level 2—Inputs other than quoted prices recorded in Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other

than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 primarily include non-exchange traded derivatives such as over-the-counter commodity forwards and swaps and options.

•Level 3—Unobservable inputs for the asset or liability, including situations where there is little, if any, observable market activity for the asset or liability. The Level 3 category includes estimated earnout obligations related to our acquisitions.

As the fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3), the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. These levels can change over time. In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In these cases, the lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured and recorded at fair value in our condensed consolidated balance sheets on a recurring basis by and their level within the fair value hierarchy (in thousands):

	Level 1		Level 2		Level 3		Total
March 31, 2024
Non-trading commodity derivative assets	$	—	$	1,142	$	—	$	1,142
Trading commodity derivative assets	—		142		—		142
Total commodity derivative assets	$	—	$	1,284	$	—	$	1,284
Non-trading commodity derivative liabilities	$	—	$	(9,444)	$	—	$	(9,444)
Trading commodity derivative liabilities	—		(6)		—		(6)
Total commodity derivative liabilities	$	—	$	(9,450)	$	—	$	(9,450)

	Level 1		Level 2		Level 3		Total
December 31, 2023
Non-trading commodity derivative assets	$	—	$	971	$	—	$	971
Trading commodity derivative assets	—		29		—		29
Total commodity derivative assets	$	—	$	1,000	$	—	$	1,000
Non-trading commodity derivative liabilities	$	—	$	(19,028)	$	—	$	(19,028)
Trading commodity derivative liabilities	—		(167)		—		(167)
Total commodity derivative liabilities	$	—	$	(19,195)	$	—	$	(19,195)

We had no transfers of assets or liabilities between any of the above levels during the three months ended March 31, 2024 and the year ended December 31, 2023.

Our derivative contracts include exchange-traded contracts valued utilizing readily available quoted market prices and non-exchange-traded contracts valued using market price quotations available through brokers or over-the-counter and on-line exchanges. In addition, in determining the fair value of our derivative contracts, we apply a credit risk valuation adjustment to reflect credit risk, which is calculated based on our or the counterparty’s historical credit risks. As of March 31, 2024 and December 31, 2023, the credit risk valuation adjustment was a reduction of derivative liabilities, net of $0.3 million and $0.3 million, respectively.