COMMODITY DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

COMMODITY DERIVATIVE INSTRUMENTS

COMMODITY DERIVATIVE INSTRUMENTS

The Company utilizes derivative instruments to manage its exposure to fluctuations in the underlying commodity prices of its inventory. The Company's management sets and implements hedging policies, including volumes, types of instruments and counterparties, to support oil prices at targeted levels and manage its exposure to fluctuating prices.

The Company’s derivative instruments consist of swap and futures arrangements for oil. In a commodity swap agreement, if the agreed-upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For futures arrangements, the Company receives the difference positive or negative between an agreed-upon strike price and the market price.

The mark-to-market effects of these contracts as of March 31, 2021 and December 31, 2020, are summarized in the following table. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of

the crude oil swap agreements is based on the difference between the strike price and the New York Mercantile Exchange futures price for the applicable trading months.

As of March 31, 2021
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value
Futures	Mar. 2021- Jun. 2021	$	74.39	75,000	$	342,031

As of December 31, 2020
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value
Futures	Dec. 2020-Mar. 2021	$	62.33	55,000	$	(94,214)

The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of March 31, 2021 and December 31, 2020 are presented in the table below.

Balance Sheet Classification	Contract Type	2021		2020
	Crude oil futures	$	342,031	$	(94,214)
Derivative commodity asset (liability)		$	342,031	$	(94,214)

For the three months ended March 31, 2021 and 2020, we recognized a $721,531 loss and a $4,427,782 gain, respectively, on commodity derivative contracts on the consolidated statements of operations as part of our cost of revenues.