FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2023

FAIR VALUE MEASUREMENTSThe following tables present assets and liabilities accounted for at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):


	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity	$	14	$	—	$	—	$	14
Derivative instruments, assets	14		—		—		14
Derivative instruments, liabilities
Derivative warrants	—		—		23,455		23,455
Derivative warrants, liabilities	—		—		23,455		23,455
Total	$	14	$	—	$	(23,455)	$	(23,441)

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity	$	—	$	—	$	—	$	—
Derivative instruments, assets	—		—		—		—
Derivative instruments, liabilities
Commodity	242		—		—		242
Derivative warrants	—		—		14,270		14,270
Derivative warrants, liabilities	242		—		14,270		14,512
Total	$	(242)	$	—	$	(14,270)	$	(14,512)

Level 3 instruments include the Initial Warrants and Additional Warrants granted in connection with the Loan and Security Agreement, see Note 15 "Financing Agreements". We revalued the 2,835 thousand warrants granted and outstanding at March 31, 2023 using the Dynamic Black-Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares. The Dynamic Black-Scholes Merton unobservable inputs used were as follows:


Dynamic Black-Scholes Merton Unobservable Inputs
	Initial Warrants		Additional Warrants
Expected dividend rate	—	%	—	%
Expected volatility	112.01	%	108.72	%
Risk free interest rate	3.71	%	3.60	%
Expected term	4.0		4.5

The following is an analysis of changes in the derivative liability classified as level 3 in the fair value hierarchy as of March 31, 2023 and December 31, 2022 (in thousands):


Level Three Roll-Forward
	March 31, 2023		December 31, 2022
Balance at beginning of period	$	14,270	$	75,211
Warrants granted	—		25,669

Equity component of the convertible senior note	—		(78,789)
Change in valuation of warrants included in net income	9,185		(7,821)
Balance at end of period	$	23,455	$	14,270

See Note 20 "Commodity Derivative Instruments", below for information on the impact on results of operations of our commodity derivative instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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