Derivative Instruments and Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Fair Value Measurements

Derivative Instruments and Fair Value Measurements

Derivative Instruments

At December 31, 2019, we had in place six commodity purchase and sale contracts with no fair value associated with them as the contractual prices of crude oil were within the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•258 barrels per day of crude oil during January 2020 through February 2020;

•322 barrels per day of crude oil during March 2020 through April 2020; and

•258 barrels per day of crude oil during May 2020 through December 2020.

At December 31, 2018, we had in place ten commodity purchase and sale contracts with fair value associated with them as the contractual prices of crude oil were outside of the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•322 barrels per day of crude oil during January 2019 through April 2019;

•258 barrels per day of crude oil during May 2019;

•322 barrels per day of crude oil during June 2019 through August 2019; and

•258 barrels per day of crude oil during September 2019 through December 2019.

The estimated fair value of forward month commodity contracts (derivatives) reflected in the accompanying consolidated balance sheets were as follows at the dates indicated (in thousands):

	Balance Sheet Location and Amount
	Current		Other		Current		Other
December 31, 2019	Assets		Assets		Liabilities		Liabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	—	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		—		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	—	$	—	$	—	$	—
December 31, 2018
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	162	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		139		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	162	$	—	$	139	$	—

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At December 31, 2019 and 2018, we were not holding nor have we posted any collateral to support our forward month fair value derivative activity. We are not subject to any credit-risk related trigger events. We have no other financial investment arrangements that would serve to offset our derivative contracts.

Forward month commodity contracts (derivatives) reflected in the accompanying consolidated statements of operations were as follows for the periods indicated (in thousands):

	Gains (Losses)
	Year Ended December 31,
	2019		2018		2017
Revenues – marketing	$	(24)	$	2	$	(26)

Fair Value Measurements

The following table reflects, by level with the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated (in thousands):

	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
December 31, 2019
Derivatives:
Current assets	$	—	$	—	$	—	$	—	$	—
Current liabilities	—		—		—		—		—
Net value	$	—	$	—	$	—	$	—	$	—
December 31, 2018
Derivatives:
Current assets	$	—	$	162	$	—	$	—	$	162
Current liabilities	—		(139)		—		—		(139)
Net value	$	—	$	23	$	—	$	—	$	23

These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value. Our assessment of the relative significance of these inputs requires judgments.

When determining fair value measurements, we make credit valuation adjustments to reflect both our own nonperformance risk and our counterparty’s nonperformance risk. When adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. Credit valuation adjustments utilize Level 3 inputs, such as credit scores to evaluate the likelihood of default by us or our counterparties. At December 31, 2019 and 2018, credit valuation adjustments were not significant to the overall valuation of our fair value contracts. As a result, applicable fair value assets and liabilities are included in their entirety in the fair value hierarchy.

Nonrecurring Fair Value Measurements

Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. During the years ended December 31, 2019 and 2018, we had no long-lived assets that were subject to non-recurring fair value measurements.

The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the year ended December 31, 2017 (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
			Quoted Prices
			in Active		Significant
	Carrying		Markets for		Other		Significant		Total
	Value at		Identical Assets		Observable		Unobservable		Non-Cash
	December 31,		and Liabilities		Inputs		Inputs		Impairment
	2017		(Level 1)		(Level 2)		(Level 3)		Loss
Oil and gas properties —
Investment in AREC	$	425	$	—	$	425	$	—	$	3,505
Investment in VestaCare	—		—		—		—		2,500
									$	6,005