Derivatives

12 Months Ended

Sep. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives

12. DERIVATIVES

The Company has entered into fixed swap contracts and costless collar contracts. These instruments are intended to reduce the Company’s exposure to short-term fluctuations in the price of natural gas and oil. Collar contracts set a fixed floor price and a fixed ceiling price and provide payments to the Company if the index price falls below the floor or require payments by the Company if the index price rises above the ceiling. Fixed swap contracts set a fixed price and provide payments to the Company if the index price is below the fixed price or require payments by the Company if the index price is above the fixed price. These contracts cover only a portion of the Company’s natural gas and oil production, provide only partial price protection against declines in natural gas and oil prices and may limit the benefit of future increases in prices. All of the Company’s derivative contracts at September 30, 2020, were with Bank of Oklahoma. All of the Company’s derivative contracts at September 30, 2019, were with Bank of Oklahoma and Koch Supply and Trading LP. The Company’s derivative contracts with Bank of Oklahoma are secured under its credit facility with Bank of Oklahoma. The derivative contracts with Koch were unsecured. The derivative instruments have settled or will settle based on the prices below.

Derivative contracts in place as of September 30, 2020

	Production volume
Contract period	covered per month	Index	Contract price
Natural gas costless collars
April - October 2020	10,000 Mmbtu	NYMEX Henry Hub	$2.20 floor / $2.59 ceiling
November 2020 - December 2021	50,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.90 ceiling
November 2020 - December 2021	40,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
November 2020	26,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
December 2020	28,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
January 2021	32,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
February 2021	25,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
March 2021	30,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
April 2021	31,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
May 2021	32,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
June 2021	30,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
July 2021	31,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
August 2021	12,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
September 2021	11,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
October 2021	9,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
November 2021	8,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
December 2021	10,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
January 2022	25,500 Mmbtu	NYMEX Henry Hub	$2.30 floor / $2.85 ceiling
November - December 2020	53,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
January 2021	72,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
February 2021	48,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
March 2021	61,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
April 2021	63,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
May 2021	69,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
June 2021	61,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
July 2021	83,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
August - September 2021	27,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
October 2021	20,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
November 2021	14,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
December 2021	4,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
January 2022	77,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.10 ceiling
November 2020	54,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
December 2020	55,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
January 2021	64,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
February 2021	52,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
March - April 2021	62,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
May 2021	66,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
June 2021	60,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
July 2021	64,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
August 2021	24,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
September 2021	18,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
October 2021	19,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
November - December 2021	20,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling
January - February 2022	50,000 Mmbtu	NYMEX Henry Hub	$2.30 floor / $3.00 ceiling

	Production volume
Contract period	covered per month	Index	Contract price
Natural gas fixed price swaps
January - December 2020	80,000 Mmbtu	NYMEX Henry Hub	$	2.750
April - October 2020	10,000 Mmbtu	NYMEX Henry Hub	$	2.405
November 2020 - March 2021	10,000 Mmbtu	NYMEX Henry Hub	$	2.661
January 2021 - February 2022	50,000 Mmbtu	NYMEX Henry Hub	$	2.729
January 2021 - December 2021	10,000 Mmbtu	NYMEX Henry Hub	$	2.765
November 2020	26,500 Mmbtu	NYMEX Henry Hub	$	2.582
December 2020	28,000 Mmbtu	NYMEX Henry Hub	$	2.582
January 2021	32,000 Mmbtu	NYMEX Henry Hub	$	2.582
February 2021	25,500 Mmbtu	NYMEX Henry Hub	$	2.582
March 2021	30,500 Mmbtu	NYMEX Henry Hub	$	2.582
April 2021	31,500 Mmbtu	NYMEX Henry Hub	$	2.582
May 2021	32,500 Mmbtu	NYMEX Henry Hub	$	2.582
June 2021	30,500 Mmbtu	NYMEX Henry Hub	$	2.582
July 2021	31,500 Mmbtu	NYMEX Henry Hub	$	2.582
August 2021	12,500 Mmbtu	NYMEX Henry Hub	$	2.582
September 2021	11,000 Mmbtu	NYMEX Henry Hub	$	2.582
October 2021	9,000 Mmbtu	NYMEX Henry Hub	$	2.582
November 2021	8,000 Mmbtu	NYMEX Henry Hub	$	2.582
December 2021	10,000 Mmbtu	NYMEX Henry Hub	$	2.582
January 2022	25,500 Mmbtu	NYMEX Henry Hub	$	2.582
Oil costless collars
January - December 2020	2,000 Bbls	NYMEX WTI	$55.00 floor / $62.00 ceiling
August - October 2020	1,000 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
November - December 2020	500 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
January 2021	2,000 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
February 2021	1,500 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
March - July 2021	2,000 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
January 2022	2,500 Bbls	NYMEX WTI	$36.00 floor / $43.60 ceiling
August - October 2020	1,000 Bbls	NYMEX WTI	$37.00 floor / $44.50 ceiling
November - December 2020	500 Bbls	NYMEX WTI	$37.00 floor / $44.50 ceiling
January - July 2021	2,000 Bbls	NYMEX WTI	$37.00 floor / $44.50 ceiling
August - September 2021	500 Bbls	NYMEX WTI	$37.00 floor / $44.50 ceiling
January 2022	3,000 Bbls	NYMEX WTI	$37.00 floor / $44.50 ceiling
August 2020	1,000 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
September - November 2020	500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
December 2020	1,000 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
January 2021	2,500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
February 2021	1,500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
March - April 2021	2,000 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
May 2021	2,500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
June - July 2021	2,000 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
August 2021	500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
January 2022	2,500 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
February 2022	5,000 Bbls	NYMEX WTI	$37.00 floor / $45.00 ceiling
Oil fixed price swaps
January - December 2020	2,000 Bbls	NYMEX WTI	$	55.28
January - December 2020	2,000 Bbls	NYMEX WTI	$	58.65
January - December 2020	2,000 Bbls	NYMEX WTI	$	60.00
January - December 2020	2,000 Bbls	NYMEX WTI	$	58.05

July - December 2020	2,000 Bbls	NYMEX WTI	$	58.10
January - December 2021	8,000 Bbls	NYMEX WTI	$	37.00

The Company’s fair value of derivative contracts was a net liability of $707,647 as of September 30, 2020, and a net asset of $2,494,144 as of September 30, 2019. Realized and unrealized gains and (losses) are recorded in gains (losses) on derivative contracts on the Company’s Statement of Operations. Cash receipts in the following table reflect the gain or loss on derivative contracts which settled during the respective periods, and the non-cash gain or loss reflect the change in fair value of derivative contracts as of the end of the respective periods.

	For the Year Ended September 30,
	2020			2019			2018
Cash received (paid) on derivative contracts:
Natural gas costless collars	$	28,510		$	(191,200	)	$	451,700
Natural gas fixed price swaps		1,687,600			817,160			748,125
Oil costless collars		1,011,472			(169,256	)		(822,893	)
Oil fixed price swaps		1,381,628			(259,719	)		(1,378,825	)
Cash received (paid) on derivative contracts, net	$	4,109,210		$	196,985		$	(1,001,893	)
Non-cash gain (loss) on derivative contracts:
Natural gas costless collars	$	(706,015	)	$	10,453		$	(222,337	)
Natural gas fixed price swaps		(1,535,122	)		1,350,909			(425,865	)
Oil costless collars		(538,022	)		1,687,685			(1,026,163	)
Oil fixed price swaps		(422,632	)		2,859,113			(2,255,810	)
Non-cash gain (loss) on derivative contracts, net	$	(3,201,791	)	$	5,908,160		$	(3,930,175	)
Gains (losses) on derivative contracts, net	$	907,419		$	6,105,145		$	(4,932,068	)

The fair value amounts recognized for the Company’s derivative contracts executed with the same counterparty under a master netting arrangement may be offset. The Company has the choice to offset or not, but that choice must be applied consistently. A master netting arrangement exists if the reporting entity has multiple contracts with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on, or termination of, any one contract. Offsetting the fair values recognized for the derivative contracts outstanding with a single counterparty results in the net fair value of the transactions being reported as an asset or a liability in the Balance Sheets. The following table summarizes and reconciles the Company's derivative contracts’ fair values at a gross level back to net fair value presentation on the Company's Balance Sheets at September 30, 2020, and September 30, 2019. The Company has offset all amounts subject to master netting agreements in the Company's Balance Sheets at September 30, 2020, and September 30, 2019.

	9/30/2020								9/30/2019
	Fair Value								Fair Value
	Commodity Contracts								Commodity Contracts
	Current  Assets			Current Liabilities			Non-Current Liabilities		Current  Assets		Non-Current Assets
Gross amounts recognized	$	864,466		$	1,146,408		$	425,705	$	2,256,639	$	237,505
Offsetting adjustments		(864,466	)		(864,466	)		-		-		-
Net presentation on Balance Sheets	$	-		$	281,942		$	425,705	$	2,256,639	$	237,505

The fair value of derivative assets and derivative liabilities is adjusted for credit risk. The impact of credit risk was immaterial for all periods presented.