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Commodity Price Risk.
−Removed: Our most significant market risk relates to the prices we receive for oil, natural gas and NGLs.
−Removed: Due to the historical price volatility of these commodities, from time to time, depending upon our view of opportunities under the then-prevailing market conditions, we enter into commodity pricing derivative contracts for a portion of our anticipated production volumes for the purpose of reducing the variability of oil, natural gas and NGLs we receive.
−Removed: We may use a variety of commodity-based derivative contracts, including fixed price swaps, basis swaps and collars.
−Removed: At December 31, 2022, the Company's open derivative contracts consisted of natural gas commodity derivative contracts under which we will receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume.
−Removed: These commodity derivative contracts consisted of the following:
−Removed: Notional Units Weighted Average Fixed Price per Unit
−Removed: Natural Gas Price Swaps:
−Removed: January 2023 - March 2023 1,044,000 MMBtu $ 8.39
−Removed: Because we have not designated any of our derivative contracts as hedges for accounting purposes, changes in fair values of our derivative contracts are recognized as gains and losses in current period earnings.
−Removed: As a result, our current period earnings may be significantly affected by changes in the fair value of our commodity derivative contracts.
−Removed: Changes in fair value are principally measured based on a comparison of future prices to the contract price at the period-end.
+Added: Our most significant market risk relates to the prices we receive for our oil, natural gas and NGLs.
+Added: Due to the historical price volatility of these commodities, from time to time, depending upon our view of opportunities under the then-prevailing current market conditions, we have historically entered into commodity derivative contracts for a portion of our anticipated production volumes for the purpose of reducing the impact of the variability of oil, natural gas and NGL prices.
+Added: We have used, and may use, a variety of commodity-based derivative contracts, including fixed price swaps, basis swaps and collars.
+Added: At December 31, 2023, we had no open commodity derivative contracts or obligations to enter into commodity derivative contracts.
+Added: Because we historically have not designated any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts were recognized as gains and losses in current period earnings.
+Added: As a result, and when applicable, current period earnings could have been significantly affected by changes in the fair value of our commodity derivative contracts.
+Added: Changes in fair value were principally measured based on a comparison of future prices to the contract price at the end of the period.
The following table summarizes derivative activity for the years ended December 31, 2023 and 2022 (in thousands):
1 unchanged sentence
(Gain) loss on derivative contracts $ (1,447) $ (5,975)
−Removed: Cash paid (received) on settlements $ (1,525) $ 2,230
+Added: Realized settlement gains (losses) on derivative contracts $ 5,876 $ 1,525
See “Note 6—Derivatives” to the accompanying consolidated financial statements in Item 8 of this report for additional information regarding our commodity derivatives.
−Removed: We are exposed to credit risk related to counterparties to our derivative financial contracts.
+Added: As applicable, we were exposed to credit risk related to counterparties to our derivative financial contracts.
All of our derivative transactions have been carried out in the over-the-counter market.
The use of derivative transactions in over-the-counter markets involves the risk that the counterparties may be unable to meet the financial terms of the transactions.
−Removed: The counterparties for all of our derivative transactions have an “investment grade” credit rating.
−Removed: We monitor the credit ratings of our derivative counterparties and consider our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts.
−Removed: Historically, derivative contracts have been with multiple counterparties to minimize exposure to any individual counterparty, and in addition our counterparties have been large financial institutions.
−Removed: We do not require collateral or other security from counterparties to support derivative instruments.
−Removed: We have master netting agreements with our derivative contract counterparties, which allow us to net our derivative assets and liabilities by commodity type with the same counterparty.
−Removed: As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the commodity derivative contracts.
−Removed: Therefore, we are not required to post additional collateral under our commodity derivative contracts.
−Removed: We are also exposed to credit risk related to the collection of receivables from our joint interest partners for their proportionate share of expenditures made on projects we operate.
+Added: The counterparties for all of our derivative transactions have had an “investment grade” credit rating.
+Added: We have historically monitored the credit ratings of our derivative counterparties and considered our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts.
+Added: Our derivative contracts have historically been with multiple counterparties to minimize exposure to any individual counterparty, and in addition our counterparties have been large financial institutions.
+Added: We did not require collateral or other security from counterparties to support derivative instruments.
+Added: We historically had master netting agreements with our derivative contract counterparties, which allowed us to net our derivative assets and liabilities by commodity type with the same counterparty.
+Added: As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk was limited to the net amounts due from the counterparties under the commodity derivative contracts.
+Added: Therefore, we were not required to post additional collateral under our commodity derivative contracts.
+Added: We are also exposed to credit risk related to the collection of receivables from our joint interest partners for their proportionate share of expenditures on wells and properties we operate.
Historically, our credit losses on joint interest receivables have been immaterial.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.