What changed in this filing

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Item 1. Financial Statements

2021-10-29 compared with 2021-07-30 · 205 added, 139 removed, 512 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

2021 December 31,

46 unchanged sentences

(in thousands, except per share data)

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

12 unchanged sentences

Total operating expenses 633,982 384,147 2,033,222 1,703,284

Loss from operations ( 180,624 ) ( 312,679 ) ( 391,545 ) ( 793,771 )

Income (loss) from operations 126,257 ( 103,132 ) ( 265,288 ) ( 896,903 )

Interest expense ( 40,861 ) ( 41,519 ) ( 120,268 ) ( 123,385 )

Gain (loss) on extinguishment of debt 5 25,070 ( 2,139 ) 264,546

Other non-operating expense, net ( 853 ) ( 185 ) ( 1,224 ) ( 679 )

Loss before income taxes ( 223,157 ) ( 125,937 ) ( 474,320 ) ( 636,840 )

Other non-operating income (expense), net 153 ( 1,680 ) ( 1,071 ) ( 2,359 )

Income (loss) before income taxes 85,554 ( 121,261 ) ( 388,766 ) ( 758,101 )

Income tax benefit 39 22,969 95 158,662

Net loss $ ( 222,995 ) $ ( 89,252 ) $ ( 474,264 ) $ ( 501,147 )

Net income (loss) $ 85,593 $ ( 98,292 ) $ ( 388,671 ) $ ( 599,439 )

Basic weighted-average common shares outstanding 121,457 114,371 118,224 113,462

Diluted weighted-average common shares outstanding 123,851 114,371 118,224 113,462

Basic net loss per common share $ ( 1.88 ) $ ( 0.79 ) $ ( 4.07 ) $ ( 4.43 )

Diluted net loss per common share $ ( 1.88 ) $ ( 0.79 ) $ ( 4.07 ) $ ( 4.43 )

Basic net income (loss) per common share $ 0.70 $ ( 0.86 ) $ ( 3.29 ) $ ( 5.28 )

Diluted net income (loss) per common share $ 0.69 $ ( 0.86 ) $ ( 3.29 ) $ ( 5.28 )

Dividends per common share $ 0.01 $ 0.01 $ 0.02 $ 0.02

1 unchanged sentence

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 222,995 ) $ ( 89,252 ) $ ( 474,264 ) $ ( 501,147 )

Net income (loss) $ 85,593 $ ( 98,292 ) $ ( 388,671 ) $ ( 599,439 )

Other comprehensive income, net of tax:

1 unchanged sentence

Total other comprehensive income, net of tax 246 1,195 1,029 1,573

Total comprehensive loss $ ( 222,403 ) $ ( 89,064 ) $ ( 473,481 ) $ ( 500,769 )

Total comprehensive income (loss) $ 85,839 $ ( 97,097 ) $ ( 387,642 ) $ ( 597,866 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

20 unchanged sentences

Balances, June 30, 2021 120,970,853 $ 1,210 $ 1,838,859 $ ( 274,745 ) $ ( 12,815 ) $ 1,552,509

Net income — — — 85,593 — 85,593

Other comprehensive income — — — — 246 246

Cash dividends declared, $ 0.01 per share

— — — ( 1,215 ) — ( 1,215 )

Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings 502,937 5 ( 4,737 ) — — ( 4,732 )

Stock-based compensation expense — — 4,498 — — 4,498

Balances, September 30, 2021 121,473,790 $ 1,215 $ 1,838,620 $ ( 190,367 ) $ ( 12,569 ) $ 1,636,899

The accompanying notes are an integral part of these condensed consolidated financial statements.

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued)

(in thousands, except share data and dividends per share)

Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity

15 unchanged sentences

Balances, June 30, 2020 113,553,271 $ 1,136 $ 1,825,327 $ 465,310 $ ( 10,941 ) $ 2,280,832

Net loss — — — ( 98,292 ) — ( 98,292 )

Other comprehensive income — — — — 1,195 1,195

Cash dividends declared, $ 0.01 per share

— — — ( 1,146 ) — ( 1,146 )

Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings 1,019,529 10 ( 1,567 ) — — ( 1,557 )

Stock-based compensation expense — — 4,164 — — 4,164

Other — — ( 88 ) — — ( 88 )

Balances, September 30, 2020 114,572,800 $ 1,146 $ 1,827,836 $ 365,872 $ ( 9,746 ) $ 2,185,108

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

13 unchanged sentences

Cash flows from investing activities:

Net proceeds from the sale of oil and gas properties 8,835 92

Capital expenditures ( 550,265 ) ( 419,777 )

Other, net 221 92

Acquisition of proved and unproved oil and gas properties ( 3,321 ) ( 7,075 )

Net cash used in investing activities ( 544,751 ) ( 426,760 )

7 unchanged sentences

Dividends paid ( 1,178 ) ( 1,130 )

Other ( 1 ) ( 354 )

Other, net ( 4,733 ) ( 1,985 )

Net cash used in financing activities ( 155,601 ) ( 107,324 )

9 unchanged sentences

____________________________________________

(1) Please refer to Note 5 - Long-Term Debt for discussion of the debt transactions executed during the six months ended June 30, 2021, and 2020.

(1) Please refer to Note 5 - Long-Term Debt for discussion of the debt transactions completed during the nine months ended September 30, 2021, and 2020.

The accompanying notes are an integral part of these condensed consolidated financial statements.

10 unchanged sentences

Operating results for the periods presented are not necessarily indicative of expected results for the full year.

In connection with the preparation of the Company’s unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2021, and through the filing of this report.

In connection with the preparation of the Company’s unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of September 30, 2021, and through the filing of this report.

Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited condensed consolidated financial statements.

11 unchanged sentences

ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022.

As of June 30, 2021, the Company has not elected to use the optional guidance and continues to evaluate the options provided by ASU 2020-04 and ASU 2021-01.

As of September 30, 2021, the Company has not elected to use the optional guidance and continues to evaluate the options provided by ASU 2020-04 and ASU 2021-01.

Please refer to Note 5 - Long-Term Debt for discussion of the use of the London Interbank Offered Rate (“LIBOR”) in connection with borrowings under the Credit Agreement.

There are no other ASUs that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company as of June 30, 2021, or through the filing of this report.

There are no other ASUs that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company as of September 30, 2021, or through the filing of this report.

Note 2 - Revenue from Contracts with Customers

1 unchanged sentence

Oil, gas, and NGL production revenue presented within the accompanying unaudited condensed consolidated statements of operations (“accompanying statements of operations”) is reflective of the revenue generated from contracts with customers.

The tables below present oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the three and six months ended June 30, 2021, and 2020:

The tables below present oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the three and nine months ended September 30, 2021, and 2020:

Midland Basin South Texas Total

Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,

Three Months Ended

September 30, Three Months Ended

September 30,

2021 2020 2021 2020 2021 2020

8 unchanged sentences

Midland Basin South Texas Total

Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,

Nine Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020 2021 2020

12 unchanged sentences

Please refer to Note 2 - Revenue from Contracts with Customers in the 2020 Form 10-K for more information regarding the types of contracts under which oil, gas, and NGL production revenue is generated.

Significant judgments made in applying the guidance in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, relate to the point in time when control transfers to purchasers in gas processing arrangements with midstream processors.

Significant judgments made in applying the guidance in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, relate to the point in time when control transfers to purchasers in gas processing arrangements with midstream processors.

The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with generally predictable differentials.

7 unchanged sentences

Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”) until payment is received.

The accounts receivable balances from contracts with customers within the accompanying balance sheets as of June 30, 2021, and

December 31, 2020, were $ 173.3 million and $ 108.9 million, respectively.

To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates.

The accounts receivable balances from contracts with customers within the accompanying balance sheets as of September 30, 2021, and December 31, 2020, were $ 227.5 million and $ 108.9 million, respectively.

To estimate accounts receivable from contracts with

customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates.

Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser.

Note 3 - Equity

On June 17, 2020, the Company issued warrants to purchase up to an aggregate of approximately 5.9 million shares, or approximately five percent of its then outstanding common stock, at an exercise price of $ 0.01 per share (“Warrants”).

On June 17, 2020, in connection with the Exchange Offers described below in Note 5 - Long-Term Debt , the Company issued warrants to purchase up to an aggregate of approximately 5.9 million shares, or approximately five percent of its then outstanding common stock, at an exercise price of $ 0.01 per share (“Warrants”).

Upon issuance, the $ 21.5 million fair value of the Warrants was recorded in additional paid-in capital on the accompanying balance sheets, and was determined using a stochastic Monte Carlo simulation using geometric Brownian motion (“GBM Model”).

1 unchanged sentence

There have been no changes to the initial carrying amount of the Warrants since issuance.

The Warrant Agreement, dated June 17, 2020 (“Warrant Agreement”), provides that the Warrants are exercisable any time from and after the Triggering Date, as subsequently defined, until June 30, 2023.

The Triggering Date is defined by the Warrant Agreement as the first trading day following five consecutive trading days on which the product of the number of shares of common stock issued and outstanding on four of the five trading days multiplied by the closing price per share of common stock for each such trading day exceeds $ 1.0 billion (“Triggering Date”).

The Warrant Agreement, dated as of June 17, 2020 (“Warrant Agreement”), provides that the Warrants are exercisable any time from and after the Triggering Date, as subsequently defined, until June 30, 2023.

The Triggering Date, which occurred on January 15, 2021 , is defined by the Warrant Agreement as the first trading day following five consecutive trading days on which the product of the number of shares of common stock issued and outstanding on four of the five trading days multiplied by the closing price per share of common stock for each such trading day exceeds $ 1.0 billion (“Triggering Date”).

The Warrants are indexed to the Company’s common stock and are required to be settled through physical settlement or net share settlement, if exercised.

The Triggering Date occurred on January 15, 2021 , and the Warrants became and will remain exercisable at the election of the holders until their expiration on June 30, 2023.

During the second quarter of 2021, the Company issued 5,918,089 shares of common stock as a result of the cashless exercise of 5,922,260 Warrants at a weighted-average share price of $ 15.45 per share, as determined under the terms of the Warrant Agreement.

1 unchanged sentence

Securities and Exchange Commission on June 11, 2021.

No Warrants were exercised during the third quarter of 2021.

The unexercised Warrants will remain exercisable at the election of the holders until their expiration on June 30, 2023 .

Note 4 - Income Taxes

The provision for income taxes for the three and six months ended June 30, 2021, and 2020, consisted of the following:

For the Three Months Ended June 30, For the Six Months Ended June 30,

The provision for income taxes for the three and nine months ended September 30, 2021, and 2020, consisted of the following:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

11 unchanged sentences

Note 5 - Long-Term Debt

The following table summarizes the Company’s total outstanding balance on its revolving credit facility, Senior Secured Notes net of unamortized discount and deferred financing costs, and Senior Unsecured Notes net of unamortized deferred financing costs, as of June 30, 2021, and December 31, 2020:

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

(in thousands)

9 unchanged sentences

The Company’s Credit Agreement, which is scheduled to mature on September 28, 2023, provides for a senior secured revolving credit facility with a maximum loan amount of $ 2.5 billion.

As of June 30, 2021, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 1.1 billion.

The next scheduled borrowing base redetermination date is October 1, 2021.

On June 8, 2021, the Company entered into a sixth amendment (“Sixth Amendment”) to the Credit Agreement to amend certain definitions and covenants relating to the Company's ability to issue permitted refinancing debt and repurchase or redeem outstanding indebtedness to facilitate the Tender Offer and the 2022 Senior Notes Redemption, each as defined below.

On June 8, 2021, the Company entered into a sixth amendment to the Credit Agreement to amend certain definitions and covenants relating to the Company's ability to issue permitted refinancing debt and to repurchase or redeem outstanding indebtedness to facilitate the Tender Offer and the 2022 Senior Notes Redemption, each as defined below.

As of September 30, 2021, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 1.1 billion.

Subsequent to September 30, 2021, the fall semi-annual borrowing base redetermination was completed, which reaffirmed both the Company’s borrowing base and aggregate lender commitments at $ 1.1 billion.

The next scheduled borrowing base redetermination date is April 1, 2022.

Interest and commitment fees associated with the revolving credit facility are accrued based on a borrowing base utilization grid set forth in the Credit Agreement as presented in Note 5 - Long-Term Debt in the 2020 Form 10-K .

4 unchanged sentences

Please refer to Note 1 - Summary of Significant Accounting Policies for discussion of FASB ASU 2020-04 and ASU 2021-01, which provides guidance related to reference rate reform .

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of July 21, 2021, June 30, 2021, and December 31, 2020:

As of July 21, 2021 As of June 30, 2021 As of December 31, 2020

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of October 21, 2021, September 30, 2021, and December 31, 2020:

As of October 21, 2021 As of September 30, 2021 As of December 31, 2020

(in thousands)

2 unchanged sentences

Letters of credit (2)

2,500 2,500 42,000

Available borrowing capacity 1,097,500 1,097,500 965,000

1 unchanged sentence

____________________________________________

(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 3.5 million and $ 4.3 million as of June 30, 2021, and December 31, 2020, respectively.

(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 3.1 million and $ 4.3 million as of September 30, 2021, and December 31, 2020, respectively.

These costs are being amortized over the term of the revolving credit facility on a straight-line basis.

(2) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis.

Q2 2021 Senior Notes Transactions.

On June 23, 2021, the Company issued $ 400.0 million in aggregate principal amount of its 6.5 % Senior Notes at par with a maturity date of July 15, 2028 (“2028 Senior Notes”).

The Company received net proceeds of

$ 392.8 million after deducting paid and accrued fees of $ 7.2 million, which are being amortized as deferred financing costs over the life of the 2028 Senior Notes.

The net proceeds were used to repurchase $ 193.1 million and $ 172.3 million of outstanding principal amount of the Company’s 2022 Senior Notes and 2024 Senior Notes, respectively, through a cash tender offer (“Tender Offer”), and to redeem the remaining $ 19.3 million of 2022 Senior Notes not repurchased as part of the Tender Offer (“2022 Senior Notes Redemption”).

The Company paid total consideration, excluding accrued interest, of $ 385.3 million, and recorded a net loss on extinguishment of debt of $ 2.1 million for the three months ended June 30, 2021, which included $ 1.5 million of accelerated unamortized deferred financing costs and $ 600,000 of net premiums.

The Company canceled all repurchased and redeemed 2022 Senior Notes and 2024 Senior Notes upon settlement.

Q2 2020 Senior Notes Transactions.

During the second quarter of 2020, the Company initiated an offer to exchange certain of its outstanding Senior Unsecured Notes, as defined and presented in the Senior Unsecured Notes section below, other than its 1.50 % Senior Convertible Notes due 2021 (“2021 Senior Convertible Notes,” and together with the Senior Unsecured Notes, “Old Notes”), and entered into a private exchange of certain of its outstanding 2021 Senior Convertible Notes and portions of its outstanding Senior Unsecured Notes (“Private Exchange”), in each case, for newly issued 10.0 % Senior Secured Second Lien Notes due January 15, 2025 (“2025 Senior Secured Notes”), referred to together as “Exchange Offers.”

On June 17, 2020, the Company exchanged $ 611.9 million in aggregate principal amount of Senior Unsecured Notes and $ 107.0 million in aggregate principal amount of 2021 Senior Convertible Notes for $ 446.7 million in aggregate principal amount of 2025 Senior Secured Notes.

Further, in connection with the Private Exchange, the Company tendered $ 53.5 million in cash to certain holders of the 2021 Senior Convertible Notes and issued the Warrants.

Please refer to Note 3 - Equity for more information regarding the Warrants issued by the Company.

Upon the closing of the Exchange Offers, the Company recorded a net gain on extinguishment of debt of $ 227.3 million which included the recognition of $ 6.1 million and $ 5.6 million of previously unamortized debt discount and deferred financing costs, respectively.

The Company canceled all retired Senior Unsecured Notes and 2021 Senior Convertible Notes upon closing of the Exchange Offers.

Pursuant to the indenture governing its 2021 Senior Convertible Notes, the Company’s remaining outstanding 2021 Senior Convertible Notes became secured and are subsequently referred to as the “2021 Senior Secured Convertible Notes,” and together with the 2025 Senior Secured Notes, the “Senior Secured Notes.” Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional information regarding the debt transactions that occurred during the second quarter of 2020.

Q1 2020 Senior Notes Transactions.

During the first quarter of 2020, the Company repurchased a total of $ 40.7 million in aggregate principal amount of its 2022 Senior Notes in open market transactions for a total settlement amount, excluding accrued interest, of $ 28.3 million.

In connection with the repurchases, the Company recorded a net gain on extinguishment of debt of $ 12.2 million for the three months ended March 31, 2020.

This amount included discounts realized upon repurchase of $ 12.4 million partially offset by $ 235,000 of accelerated unamortized deferred financing costs.

The Company canceled all repurchased 2022 Senior Notes upon settlement.

Senior Secured Notes .

Senior Secured Notes, net of unamortized discount and deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of June 30, 2021, and December 31, 2020, consisted of the following:

As of June 30, 2021

Senior Secured Notes, net of unamortized discount and deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of September 30, 2021, and December 31, 2020, consisted of the following (collectively referred to as “Senior Secured Notes”):

As of September 30, 2021

Principal Amount Unamortized Debt Discount Unamortized Deferred Financing Costs Net

(in thousands)

1.50 % Senior Secured Convertible Notes due 2021

$ 65,485 $ — $ — $ 65,485

10.0 % Senior Secured Notes due 2025

$ 446,675 $ 32,232 $ 9,436 $ 405,007

Total $ 512,160 $ 34,208 $ 10,145 $ 467,807

As of December 31, 2020

6 unchanged sentences

Total $ 512,160 $ 39,771 $ 11,733 $ 460,656

The Senior Secured Notes are senior obligations of the Company, secured on a second-priority basis, ranking junior to the Company’s obligations under the Credit Agreement and equal in priority to one another.

The Senior Secured Notes listed above are senior obligations of the Company, secured on a second-priority basis, ranking junior to the Company’s obligations under the Credit Agreement and equal in priority to one another.

The Senior Secured Notes rank senior in right of payment with all of the Company’s existing and any future unsecured senior or subordinated debt.

The 2021 Senior Secured Convertible Notes matured on July 1, 2021, and on that day, the Company used borrowings under its revolving credit facility to retire at par the outstanding principal amount of $ 65.5 million.

Interest expense recognized on the 2021 Senior Secured Convertible Notes related to the stated interest rate and amortization of the debt discount totaled $ 1.1 million and $ 2.6 million for the three months ended June 30, 2021, and 2020, respectively, and totaled $ 2.3 million and $ 5.4 million for the six months ended June 30, 2021, and 2020, respectively.

The Company may redeem some or all of its 2025 Senior Secured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest, as described in the indenture governing the 2025 Senior Secured Notes.

The 1.50 % Senior Secured Convertible Notes due 2021 (“2021 Senior Secured Convertible Notes”) matured on July 1, 2021, and on that day, the Company used borrowings under its revolving credit facility to retire at par the outstanding principal amount of $ 65.5 million.

Interest expense recognized on the 2021 Senior Secured Convertible Notes related to the stated interest rate and amortization of the debt discount.

No interest expense was recognized for the three months ended September 30, 2021, $ 1.1 million was recognized for the three months ended September 30, 2020, and $ 2.3 million and $ 6.6 million was recognized for the nine months ended September 30, 2021, and 2020, respectively.

The Company may redeem some or all of its 10.0 % Senior Secured Notes due 2025 (“2025 Senior Secured Notes”) prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest, as described in the indenture governing the 2025 Senior Secured Notes.

Senior Unsecured Notes .

Senior Unsecured Notes, net of unamortized deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of June 30, 2021, and December 31, 2020, consisted of the following:

As of June 30, 2021 As of December 31, 2020

Senior Unsecured Notes, net of unamortized deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of September 30, 2021, and December 31, 2020, consisted of the following (collectively referred to as “Senior Unsecured Notes,” and together with the Senior Secured Notes, “Senior Notes”):

As of September 30, 2021 As of December 31, 2020

Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net

13 unchanged sentences

Total $ 1,689,913 $ 17,290 $ 1,672,623 $ 1,674,581 $ 13,918 $ 1,660,663

The senior unsecured notes listed above (collectively referred to as “Senior Unsecured Notes,” and together with the Senior Secured Notes, “Senior Notes”) are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt.

The Company may redeem some or all of its Senior Unsecured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Unsecured Notes.

The Senior Unsecured Notes listed above are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt.

Company may redeem some or all of its Senior Unsecured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Unsecured Notes.

Senior Notes Activity

Second Quarter 2021 Senior Notes Transactions.

On June 23, 2021, the Company issued $ 400.0 million in aggregate principal amount of its 6.5 % Senior Notes at par with a maturity date of July 15, 2028 (“2028 Senior Notes”).

The Company received net proceeds of $ 392.8 million after deducting fees of $ 7.2 million, which are being amortized as deferred financing costs over the life of the 2028 Senior Notes.

The net proceeds were used to repurchase $ 193.1 million and $ 172.3 million of outstanding principal amount of the Company’s 6.125 % Senior Notes due 2022 (“2022 Senior Notes”) and 5.0 % Senior Notes due 2024 (“2024 Senior Notes”), respectively, through a cash tender offer (“Tender Offer”), and to redeem the remaining $ 19.3 million of 2022 Senior Notes not repurchased as part of the Tender Offer (“2022 Senior Notes Redemption”).

The Company canceled all repurchased and redeemed 2022 Senior Notes and 2024 Senior Notes upon settlement.

Second Quarter 2020 Senior Notes Transactions.

During the second quarter of 2020, the Company initiated an offer to exchange certain of its then outstanding Senior Unsecured Notes, other than its 1.50 % Senior Unsecured Convertible Notes due 2021 (“2021 Senior Unsecured Convertible Notes,” and together with the Senior Unsecured Notes, “Old Notes”), and entered into a private exchange of certain of its then outstanding 2021 Senior Unsecured Convertible Notes and portions of its then outstanding Senior Unsecured Notes (“Private Exchange”), in each case, for newly issued 2025 Senior Secured Notes, referred to together as “Exchange Offers.”

On June 17, 2020, the Company exchanged $ 611.9 million in aggregate principal amount of Senior Unsecured Notes and $ 107.0 million in aggregate principal amount of 2021 Senior Unsecured Convertible Notes for $ 446.7 million in aggregate principal amount of 2025 Senior Secured Notes.

Further, in connection with the Private Exchange, the Company tendered $ 53.5 million in cash to certain holders of the 2021 Senior Unsecured Convertible Notes and issued the Warrants.

Please refer to Note 3 - Equity for more information regarding the Warrants.

The Company canceled all Senior Unsecured Notes and 2021 Senior Unsecured Convertible Notes that were retired upon closing of the Exchange Offers.

Pursuant to the indenture governing its 2021 Senior Unsecured Convertible Notes, the Company’s remaining outstanding 2021 Senior Unsecured Convertible Notes became secured.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional information regarding the debt transactions that occurred during the second quarter of 2020.

First Quarter and Third Quarter 2020 Senior Notes Transactions.

During the nine months ended September 30, 2020, the Company repurchased $ 103.2 million in aggregate principal amount of its 2022 Senior Notes and $ 29.0 million in aggregate principal amount of its 2024 Senior Notes in open market transactions at a discount, for a total settlement amount, excluding accrued interest, of $ 94.2 million.

In connection with the repurchases, the Company recorded a net gain on extinguishment of debt of $ 25.1 million and $ 37.3 million for the three and nine months ended September 30, 2020, respectively.

The net gain on extinguishment of debt includes discounts realized upon repurchase of $ 25.5 million and $ 37.9 million for the three and nine months ended September 30, 2020, respectively, partially offset by accelerated unamortized deferred financing costs of $ 0.5 million and $ 0.7 million for the three and nine months ended September 30, 2020, respectively.

The Company canceled all repurchased 2022 Senior Notes and 2024 Senior Notes upon settlement.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional detail on the Company’s Senior Notes.

The Company is subject to certain financial and non-financial covenants under the Credit Agreement and the indentures governing the Senior Notes that, among other terms, limit the Company’s ability to incur additional indebtedness, make restricted payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, merge or consolidate with another company, and with respect to the Company’s restricted subsidiaries, permit the consensual restriction on the ability of such restricted subsidiaries to pay dividends or indebtedness owing to the Company or to any other restricted subsidiaries.

The Company was in compliance with all covenants under the Credit Agreement and the indentures governing the Senior Notes as of June 30, 2021, and through the filing of this report.

The Company was in compliance with all covenants under the Credit Agreement and the indentures governing the Senior Notes as of September 30, 2021, and through the filing of this report.

Please refer to Note 5 - Long-Term Debt in the 2020 Form 10-K for additional detail on the Company’s covenants under the Credit Agreement and indentures governing the Senior Notes.

Capitalized Interest

Capitalized interest costs for the three months ended June 30, 2021, and 2020, totaled $ 4.7 million and $ 4.1 million, respectively, and totaled $ 9.0 million and $ 6.8 million for the six months ended June 30, 2021, and 2020, respectively.

The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and the timing and amount of costs associated with capital projects that are considered in progress.

Capitalized interest costs for the three months ended September 30, 2021, and 2020, totaled $ 3.5 million and $ 4.8 million, respectively, and totaled $ 12.5 million and $ 11.6 million for the nine months ended September 30, 2021, and 2020, respectively.

The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and

the timing and amount of costs associated with capital projects that are considered in progress.

Capitalized interest costs are included in total costs incurred.

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Drilling Rig Service Contracts .

During the first half of 2021, the Company amended certain of its drilling rig contracts resulting in the extension of contract terms.

As of June 30, 2021, the Company’s drilling rig commitments totaled $ 16.1 million under contract terms extending through the second quarter of 2022.

If all of these contracts were terminated as of June 30, 2021, the Company would avoid a portion of the contractual service commitments;

During the nine months ended September 30, 2021, the Company amended certain of its drilling rig contracts resulting in the extension of contract terms.

As of September 30, 2021, the Company’s drilling rig commitments totaled $ 8.6 million under contract terms extending through the second quarter of 2022.

If all of these contracts were terminated as of September 30, 2021, the Company would avoid a portion of the contractual service commitments;

however, the Company would be required to pay $ 5.1 million in early termination fees.

No material expenses related to early termination or standby fees were incurred by the Company during the six months ended June 30, 2021, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2021.

No material expenses related to early termination or standby fees were incurred by the Company during the nine months ended September 30, 2021, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2021.

Drilling and Completion Commitments .

During the first half of 2021, the Company amended an agreement that includes minimum drilling and completion footage requirements on certain existing leases.

During the first quarter of 2021, the Company amended an agreement that includes minimum drilling and completion footage requirements on certain existing leases.

If these minimum requirements are not satisfied by March 31, 2022, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements.

As of June 30, 2021, the liquidated damages could range from zero to a maximum of $ 45.1 million, with the maximum exposure assuming no additional development activity occurred prior to March 31, 2022.

As of September 30, 2021, the liquidated damages could range from zero to a maximum of $ 25.9 million, with the maximum exposure assuming no additional development activity occurred prior to March 31, 2022.

As of the filing of this report, the Company expects to meet its obligations under this agreement.

Other Contracts.

During the second quarter of 2021, the Company entered into an operating lease agreement with a total estimated obligation of $ 26.1 million and an initial term extending through the second quarter of 2033.

During the second quarter of 2021, the Company entered into an operating lease with a total estimated obligation of $ 25.8 million and an initial term extending through the second quarter of 2033.

As of the filing of this report, the Company expects to meet this commitment.

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Note 7 - Compensation Plans

As of June 30, 2021, 3.8 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”).

As of September 30, 2021, 4.2 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”).

The Company may also grant other types of long-term incentive-based awards, such as cash awards and performance-based cash awards, to eligible employees under its compensation plan.

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The Company records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the date of grant.

Total compensation expense recorded for PSUs was $ 1.3 million and $ 2.8 million for the three months ended June 30, 2021, and 2020, respectively, and $ 4.5 million and $ 5.4 million for the six months ended June 30, 2021, and 2020,

respectively.

As of June 30, 2021, there was $ 3.0 million of total unrecognized compensation expense related to non-vested PSU awards, which is being amortized through 2022.

There were no material changes to the outstanding and non-vested PSUs during the six months ended June 30, 2021.

Total compensation expense recorded for PSUs was $ 0.8 million and $ 1.6 million for the three months ended September 30, 2021, and 2020, respectively, and $ 5.3 million and $ 7.0 million for the nine months ended September 30, 2021, and 2020, respectively.

As of September 30, 2021, there was $ 2.2 million of total unrecognized compensation expense related to non-vested PSUs, which is being amortized through 2022.

A summary of activity during the nine months ended September 30, 2021, is presented in the following table:

Weighted-Average Grant-Date Fair Value

Non-vested at beginning of year 830,464 $ 17.52

Granted — $ —

Vested ( 352,395 ) $ 23.81

Forfeited ( 12,222 ) $ 15.76

Non-vested at end of quarter 465,847 $ 12.80

____________________________________________

(1) The number of shares of common stock assumes a multiplier of one .

The actual final number of shares of common stock to be issued will range from zero to two times the number of PSUs awarded depending on the three-year performance multiplier.

During the nine months ended September 30, 2021, the Company settled PSUs that were granted in 2018, which earned a 1.0 times multiplier.

The Company and all eligible recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements.

After withholding 112,919 shares to satisfy income and payroll tax withholding obligations, 234,823 shares of the Company’s common stock were issued in accordance with the terms of the applicable award agreement.

Employee Restricted Stock Units

The Company grants restricted stock units (“RSUs”) to eligible persons as part of its Equity Plan.

Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period.

Each of the RSUs granted represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period.

RSUs generally vest one-third of the total grant on each anniversary date of the grant over the applicable vesting period or upon other triggering events as set forth in the Equity Plan.

The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the date of grant.

The fair value of an RSU is equal to the closing price of the Company’s common stock on the date of the grant.

The fair value of an individual RSU is equal to the closing price of the Company’s common stock on the date of the grant.

Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards.

Total compensation expense recorded for employee RSUs was $ 2.1 million and $ 2.7 million for the three months ended June 30, 2021, and 2020, respectively, and $ 4.3 million and $ 5.3 million for the six months ended June 30, 2021, and 2020, respectively.

As of June 30, 2021, there was $ 10.1 million of total unrecognized compensation expense related to non-vested RSU awards, which is being amortized through 2023.

There were no material changes to the outstanding and non-vested RSUs during the six months ended June 30, 2021.

Subsequent to June 30, 2021, the Company settled 349,328 RSUs upon the vesting of awards granted in previous years.

The Company and all grant participants mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements.

As a result, the Company issued 250,009 net shares of common stock upon settlement of the awards.

The remaining 99,319 shares were withheld to satisfy income and payroll tax withholding obligations that occurred upon delivery of the shares underlying those RSUs.

Total compensation expense recorded for employee RSUs was $ 2.9 million and $ 1.8 million for the three months ended September 30, 2021, and 2020, respectively, and $ 7.2 million and $ 7.1 million for the nine months ended September 30, 2021, and 2020, respectively.

As of September 30, 2021, there was $ 23.7 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through 2024.

A summary of activity during the nine months ended September 30, 2021, is presented in the following table:

RSUs Weighted-Average Grant-Date Fair Value

Non-vested at beginning of year 2,097,860 $ 8.83

Granted 661,402 $ 25.47

Vested ( 394,930 ) $ 16.69

Forfeited ( 67,619 ) $ 10.25

Non-vested at end of quarter 2,296,713 $ 12.23

During the nine months ended September 30, 2021, the Company settled RSUs upon the vesting of awards granted in previous years.

After withholding 106,543 shares to satisfy income and payroll tax withholding obligations, 268,114 shares of the Company’s common stock were issued in accordance with the terms of the applicable award agreements.

Director Shares

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Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, ensuring that the accrual is no more than 2,500 shares per offering period and not in excess of $ 25,000 in value related to purchases for each calendar year.

The purchase price of the stock is 85 percent of the lower of the fair market value of the stock on either the first or last day of the purchase period.

Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, subject to a maximum of 2,500 shares per offering period and a maximum of $ 25,000 in value related to purchases for each calendar year.

The purchase price of the stock is 85 percent of the lower of the trading price of the stock on either the first or last day of the purchase period.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

There were 252,665 and 297,013 shares issued under the ESPP during the second quarters of 2021, and 2020, respectively.

Total proceeds to the Company for the issuance of these shares was $ 1.3 million and $ 947,000 for the six months ended June 30, 2021, and 2020, respectively.

There were 252,665 and 297,013 shares issued under the ESPP during the nine months ended September 30, 2021, and 2020, respectively.

Total proceeds to the Company for the issuance of these shares was $ 1.3 million and $ 0.9 million for the nine months ended September 30, 2021, and 2020, respectively.

The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model.

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• Level 3 – significant inputs to the valuation model are unobservable

The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of June 30, 2021:

Level 1 Level 2 Level 3

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Oil and Gas Properties and Other Property and Equipment

The Company had no material assets included in total property and equipment, net, measured at fair value as of June 30, 2021, or December 31, 2020.

The Company had no material assets included in total property and equipment, net, measured at fair value as of September 30, 2021, or December 31, 2020.

The following table presents impairment of proved properties expense and abandonment and impairment of unproved properties expense recorded for the periods presented:

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

(in millions)

(in thousands)

Impairment of proved oil and gas properties and related support equipment $ — $ — $ — $ 956,650

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____________________________________________

(1) These impairments related to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks.

The balances in the unproved oil and gas properties line item on the accompanying balance sheets as of June 30, 2021, and December 31, 2020, are recorded at carrying value.

(2) Amounts may not calculate due to rounding.

For the six months ended June 30, 2020, the Company recorded impairment expense of $ 956.7 million related to its South Texas proved oil and gas properties and related support facilities as a result of the decrease in commodity price forecasts at the end of the first quarter of 2020, specifically decreases in oil and NGL prices.

The balances in the unproved oil and gas properties line item on the accompanying balance sheets as of September 30, 2021, and December 31, 2020, are recorded at carrying value.

For the nine months ended September 30, 2020, the Company recorded impairment expense of $ 956.7 million related to its South Texas proved oil and gas properties and related support facilities as a result of the decrease in commodity price forecasts at the end of the first quarter of 2020, specifically decreases in oil and NGL prices.

The Company used a discount rate of 11 percent in its calculation of the present value of expected future net cash flows based on the prevailing market-based weighted average cost of capital as of March 31, 2020.

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The following table reflects the fair value of the Company’s Senior Notes obligations measured using Level 1 inputs based on quoted secondary market trading prices.

These notes were not presented at fair value on the accompanying balance sheets as of June 30, 2021, or December 31, 2020, as they were recorded at carrying value, net of any unamortized discounts and deferred financing costs.

These notes were not presented at fair value on the accompanying balance sheets as of September 30, 2021, or December 31, 2020, as they were recorded at carrying value, net of any unamortized discounts and deferred financing costs.

Please refer to Note 5 - Long-Term Debt for additional discussion.

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

Principal Amount Fair Value Principal Amount Fair Value

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$ 400,000 $ 414,352 $ — $ —

The carrying value of the Company’s revolving credit facility approximates its fair value, as the applicable interest rates are floating, based on prevailing market rates.

As of December 31, 2020, the carrying value of the Company’s revolving credit facility approximated its fair value, as the applicable interest rates are floating, based on prevailing market rates.

Note 9 - Earnings Per Share

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Diluted net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities.

Potentially dilutive securities for this calculation consist primarily of non-vested RSUs, contingent PSUs, and the Warrants, which were measured using the treasury stock method.

The Warrants became exercisable at the election of the holders on January 15, 2021 , and as a result, they were included as potentially dilutive securities on an adjusted weighted-average basis for the portion of the three and six months ended June 30, 2021, for which

they were outstanding.

Potentially dilutive securities for this calculation consist primarily of non-vested RSUs, contingent PSUs, and Warrants, all of which were measured using the treasury stock method.

Please refer to Note 3 - Equity and Note 7 - Compensation Plans in this report, and Note 9 - Earnings Per Share in the 2020 Form 10-K for additional detail on these potentially dilutive securities.

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The following table details the weighted-average number of anti-dilutive securities for the periods presented:

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

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Anti-dilutive — 158 5,200 450

The following table sets forth the calculations of basic and diluted net loss per common share:

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table sets forth the calculations of basic and diluted net income (loss) per common share:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands, except per share data)

Net loss $ ( 222,995 ) $ ( 89,252 ) $ ( 474,264 ) $ ( 501,147 )

Net income (loss) $ 85,593 $ ( 98,292 ) $ ( 388,671 ) $ ( 599,439 )

Basic weighted-average common shares outstanding 121,457 114,371 118,224 113,462

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Diluted weighted-average common shares outstanding 123,851 114,371 118,224 113,462

Basic net loss per common share $ ( 1.88 ) $ ( 0.79 ) $ ( 4.07 ) $ ( 4.43 )

Diluted net loss per common share $ ( 1.88 ) $ ( 0.79 ) $ ( 4.07 ) $ ( 4.43 )

Basic net income (loss) per common share $ 0.70 $ ( 0.86 ) $ ( 3.29 ) $ ( 5.28 )

Diluted net income (loss) per common share $ 0.69 $ ( 0.86 ) $ ( 3.29 ) $ ( 5.28 )

Note 10 - Derivative Financial Instruments

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The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows.

As of June 30, 2021, all derivative counterparties were members of the Company’s Credit Agreement lender group and all contracts were entered into for other-than-trading purposes.

The Company’s commodity derivative contracts consist of swap and collar arrangements for oil production and NGL production, and swap arrangements for gas production.

As of September 30, 2021, all derivative counterparties were members of the Company’s Credit Agreement lender group and all contracts were entered into for other-than-trading purposes.

The Company’s commodity derivative contracts consist of swap and collar arrangements for oil, natural gas, and NGL production.

In a typical 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 agreed upon swap fixed price.

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No amounts are paid or received if the index price is between the floor and ceiling prices.

The Company has entered into fixed price oil basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production volumes are sold.

Currently, the Company has basis swap contracts with fixed price differentials between NYMEX WTI and WTI Midland for a portion of its Midland Basin production with sales contracts that settle at WTI Midland prices, NYMEX WTI and Intercontinental Exchange Brent Crude (“ICE Brent”) for a portion of its Midland Basin oil production with sales contracts that settle at ICE Brent prices, and between NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal (“MEH”) for a portion of its South Texas oil production with sales contracts that settle at Argus WTI Houston MEH prices.

The Company has entered into fixed price oil and natural gas basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production volumes are sold.

Currently, the Company has basis swap contracts with fixed price differentials between:

• NYMEX WTI and WTI Midland for a portion of its Midland Basin oil production with sales contracts that settle at WTI Midland prices,

• NYMEX WTI and Intercontinental Exchange Brent Crude (“ICE Brent”) for a portion of its Midland Basin oil production with sales contracts that settle at ICE Brent prices,

• NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal (“MEH”) for a portion of its South Texas oil production with sales contracts that settle at Argus WTI Houston MEH prices, and

• NYMEX Henry Hub (“HH”) and Inside FERC Tennessee Texas, Zone 0 (“IF Tenn TX Z0”) for a portion of its South Texas gas production with sales contracts that settle at IF Tenn TX Z0 prices.

The Company has also entered into crude oil swap contracts to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month (“Roll Differential”) in which the Company pays the periodic variable Roll Differential and receives a weighted-average fixed price differential.

The weighted-average fixed price differential represents the amount of net addition (reduction) to delivery month prices for the notional volumes covered by the swap contracts.

As of June 30, 2021, the Company had commodity derivative contracts outstanding through the fourth quarter of 2023 as summarized in the tables below.

As of September 30, 2021, the Company had commodity derivative contracts outstanding through the fourth quarter of 2023 as summarized in the table below.

Contract Period

Q3 2021 Q4 2021 2022 2023

Fourth Quarter 2021 2022 2023

Oil Derivatives (volumes in MBbl and prices in $ per Bbl):

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Weighted-Average Contract Price $ — $ 3.22 $ —

NYMEX HH Volumes — 2,129 —

Weighted-Average Floor Price $ — $ 3.40 $ —

Weighted-Average Ceiling Price $ — $ 5.91 $ —

IF Tenn TX Z0-NYMEX HH Volumes — 1,254 —

Weighted-Average Contract Price (5)

$ — $ 0.04 $ —

NGL Derivatives (volumes in MBbl and prices in $ per Bbl):

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(3) Represents the price differential between Argus WTI Houston MEH (Houston, Texas) and NYMEX WTI (Cushing, Oklahoma).

(4) The Company has natural gas swaps in place that settle against Inside FERC Houston Ship Channel (“IF HSC”), Inside FERC West Texas, and Platt’s Gas Daily West Texas (“IF WAHA” and “GD WAHA”, respectively, and together “WAHA”), and Inside FERC Tennessee Texas, Zone 0 (“IF Tenn TX Z0”).

As of June 30, 2021, WAHA volumes were comprised of 70 percent IF WAHA and 30 percent GD WAHA.

Commodity Derivative Contracts Entered Into Subsequent to June 30, 2021

Subsequent to June 30, 2021, the Company entered into the following commodity derivative contracts:

• fixed price NYMEX WTI oil swap contracts through the fourth quarter of 2021 for a total of 0.4 MMBbl of oil production at a weighted-average contract price of $ 70.09 per Bbl;

• a fixed price OPIS Propane Mont Belvieu Non-TET swap contract for the second quarter of 2022 for a total of 0.1 MMBbl of propane production at a contract price of $ 35.70 per Bbl.

As of September 30, 2021, WAHA volumes were comprised of 81 percent IF WAHA and 19 percent GD WAHA.

(5) Represents the price differential between IF Tenn TX Z0 (Corpus Christi, Texas) and NYMEX HH (Erath, Louisiana).

Commodity Derivative Contracts Entered Into Subsequent to September 30, 2021

Subsequent to September 30, 2021, the Company entered into the following commodity derivative contracts:

• NYMEX WTI oil collar contracts for the third quarter of 2022 for a total of 0.3 MMBbl of oil production at a floor price of $ 70.00 per Bbl and a weighted-average ceiling price of $ 73.52 per Bbl, and for the first quarter of 2023 for a total of 0.3 MMBbl of oil production at a floor price of $ 60.00 per Bbl and a ceiling price of $ 75.20 per Bbl;

• an IF HSC gas collar contract for the first quarter of 2023 for a total of 900 BBtu of gas production at a floor price of $ 3.38 per MMBtu and a ceiling price of $ 7.75 per MMBtu.

Derivative Assets and Liabilities Fair Value

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The Company does not designate its commodity derivative contracts as hedging instruments.

The fair value of the commodity derivative contracts was a net liability of $ 616.5 million and $ 168.2 million as of June 30, 2021, and December 31, 2020, respectively.

The fair value of the commodity derivative contracts was a net liability of $ 612.1 million and $ 168.2 million as of September 30, 2021, and December 31, 2020, respectively.

The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category:

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

(in thousands)

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Offsetting of Derivative Assets and Liabilities

As of June 30, 2021, and December 31, 2020, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions.

As of September 30, 2021, and December 31, 2020, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions.

In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency.

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Derivative Assets as of Derivative Liabilities as of

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

(in thousands)

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Net amounts $ — $ 755 $ ( 612,089 ) $ ( 168,922 )

The following table summarizes the commodity components of the derivative settlement (gain) loss, as well as the components of the net derivative (gain) loss line item presented in the accompanying statements of operations:

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table summarizes the commodity components of the derivative settlement (gain) loss, and the net derivative (gain) loss line items presented within the accompanying unaudited condensed consolidated statements of cash flows (“accompanying statements of cash flows”) and within the accompanying statements of operations, respectively:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

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Credit Related Contingent Features

As of June 30, 2021, and through the filing of this report, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group.

As of September 30, 2021, and through the filing of this report, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group.

Under the Credit Agreement, the Company is required to provide mortgage liens on assets having a value equal to at least 85 percent of the total PV-9, as defined in the Credit Agreement, of the Company’s proved oil and gas properties evaluated in the most recent reserve report.

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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.

What changed 10-Q

Item 1. Financial Statements