COMMODITY DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 option and futures arrangements for oil. For option and 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 September 30, 2022 and December 31, 2021, 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 futures agreements is based on the difference between the strike price and the New York Mercantile Exchange and Brent Complex futures price for the applicable trading months.


As of September 30, 2022
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value
				(in thousands)	(in thousands)
Swap	Sept. 2022 - Nov. 2022	$	4.51	12	$	54
Swap	Sept. 2022 - Nov. 2022	$	2.39	6	$	14
Option	Sept. 2022 - Nov. 2022	$	10.75	42	$	1,075
Swap	Sept. 2022 - Nov. 2022	$	1.52	50	$	76


As of December 31, 2021
Contract Type	Contract Period	Weighted Average Strike Price (Barrels)		Remaining Volume (Barrels)	Fair Value
				(in thousands)	(in thousands)
Options	Dec. 2021-Mar. 2022	$	3.18	18	$	136
Futures	Dec. 2021-Mar. 2022	$	31.59	20	$	71
Futures	Dec. 2021-Mar. 2022	$	32.48	50	$	(111)

The carrying values of the Company’s derivatives positions and their locations on the consolidated balance sheets as of September 30, 2022 and December 31, 2021 are presented in the table below.


Balance Sheet Classification	Contract Type	2022		2021

	Crude oil options	$	1,075	$	136
	Crude oil swaps	144		—
	Crude oil futures	—		(40)
Derivative commodity assets		$	1,219	$	96

For the three months ended September 30, 2022 and 2021, we recognized $11.0 million and $0.3 million of gain, respectively, on commodity derivative contracts on the consolidated statements of operations as part of our cost of revenues.

For the nine months ended September 30, 2022 and 2021, we recognized $87.2 million and $2.2 million of loss, respectively, on commodity derivative contracts on the consolidated statements of operations as part of our cost of revenues.