Quarterly report pursuant to Section 13 or 15(d)

FINANCIAL INSTRUMENTS

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FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
FINANCIAL INSTRUMENTS
NOTE 5 — FINANCIAL INSTRUMENTS
Natural Gas Financial Instruments
The primary purpose of our commodity risk management activities is to hedge our exposure to cash flow variability from commodity price risk due to fluctuations in commodity prices. The Company uses natural gas financial futures and option contracts to economically hedge the commodity price risks associated with a portion of our expected natural gas production. As of June 30, 2023, there were no open natural gas financial instrument positions.
LNG Financial Futures
During the year ended December 31, 2021, we entered into LNG financial futures contracts to reduce our exposure to commodity price fluctuations and to achieve more predictable cash flows relative to two LNG cargos that we were committed to purchase from and sell to unrelated third-party LNG merchants in the normal course of business in January and April 2022. As of June 30, 2023, there were no open LNG financial instrument positions.
Contingent Consideration
On August 18, 2022, the Company completed the acquisition of certain natural gas assets in the Haynesville Shale basin (the “Asset Acquisition”). The Asset Acquisition included cash consideration payable to the sellers of $7.5 million (the “Contingent Consideration”) if the average NYMEX Henry Hub gas price for the contract delivery months beginning with August 2022 through March 2023 exceeded a specific threshold (the “Threshold”) per MMBtu. The Threshold was not met and, therefore, the Company is not obligated to pay the Contingent Consideration.
The following table summarizes the effect of the Company’s financial instruments on the Condensed Consolidated Statements of Operations (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Natural gas financial instruments:
Realized gain (loss) $ 11,444  $ (10,536) $ 23,310  $ (11,251)
Unrealized (loss) gain (10,891) 6,790  (10,463) (8,311)
LNG financial futures:
Realized gain —  —  —  3,532 
Unrealized loss —  —  —  5,161 
Contingent Consideration:
Realized gain —  —  118  — 
The following table presents the classification of the Company’s financial derivative assets and liabilities that are required to be measured at fair value on a recurring basis on the Company’s Condensed Consolidated Balance Sheets (in thousands):
June 30, 2023 December 31, 2022
Current assets:
Natural gas financial instruments $ —  $ 10,463 
LNG financial futures —  — 
Current liabilities:
Contingent Consideration —  118 
The Company’s natural gas financial instruments are valued using quoted prices in active exchange markets as of the balance sheet date and are classified as Level 1 within the fair value hierarchy.