Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide both quantitative and qualitative insights into our exposure to market risk. Market risk refers to the potential for financial loss arising from adverse changes in commodity prices and interest rates. These disclosures are not intended to serve as precise forecasts of future losses, but rather to offer a framework for understanding reasonably possible risks. The forward-looking information presented reflects our approach to managing and mitigating market risk exposure within the context of our ongoing operational and financial strategy. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.
Commodity Price Risk
Our results of operations and cash flows are highly sensitive to fluctuations in the prices of crude oil, natural gas and NGLs. The volatility in these prices is influenced by various factors, including market conditions, geopolitical events, supply-demand imbalances, regulatory changes and other external factors outside of the Company's control. To partially reduce the impact of price volatility on our revenues and cash flows, we utilize commodity-based derivative contracts.
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See Note 6 - Derivative Instruments and Note 7 - Fair Value Measurements in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a full discussion of our commodity-based derivative contracts and the fair value measurements associated with our derivatives, respectively.
For the year ended December 31, 2025, oil and natural gas sales, net was $392.0 million, excluding any effect of our derivative contracts. Oil and natural gas sales, net would have increased or decreased by approximately $39.2 million if there was a 10% change in realized pricing. As of December 31, 2025 , the fair value of our oil and natural gas derivative contracts was a net asset of $24 million. A 10% change in the forward curves associated with our oil and natural gas derivative contracts would have changed our net position by approximately $29 million .
Interest Rate Risk
Our business is subject to the effects of market interest rates. These interest rates are influenced by macroeconomic factors such as inflation, consumer spending and federal reserve monetary policy. Interest rate risk could increase our cost of capital and potentially slow economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business. We are also exposed to market risk related to changes in interest rates on our indebtedness under our Credit Facility. To mitigate this risk, the Company utilizes interest rate derivative contracts to partially reduce exposure to interest rate fluctuations.
See Note 10 - Long-Term Debt and Note 6 - Derivative Instruments in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a full discussion of our long-term debt and interest rate derivative contracts, respectively.
Item 8. Financial Statements and Supplementary Data
The information required by this item appears beginning on page F-1 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.