Quarterly report pursuant to Section 13 or 15(d)

FINANCIAL INSTRUMENTS

v3.24.2.u1
FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
FINANCIAL INSTRUMENTS
NOTE 6 — FINANCIAL INSTRUMENTS
Natural Gas Financial Instruments
The primary purpose of our commodity risk management activities was to hedge our exposure to cash flow variability from commodity price risk due to fluctuations in commodity prices. The Company has used 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, 2024 and December 31, 2023, there were no open natural gas financial instrument positions.
Embedded Derivatives
We evaluate embedded features within a host contract to determine whether they are embedded derivatives that should be bifurcated and carried separately at fair value. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and recorded at fair value with subsequent changes in fair value recorded in Other income (expense), net in the Company’s Condensed Consolidated Statement of Operations. As described in Note 9, Borrowings, we determined that the Senior Notes and Convertible Notes contained embedded features which required bifurcation from the host contracts.
The following table presents the classification of the Company’s financial instruments 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, 2024 December 31, 2023
Current assets:
Natural gas financial instruments $ —  $ — 
Current liabilities:
Embedded derivatives 4,665  13,332 
Long-term liabilities:
Embedded derivatives 7,648  18,892 
The fair value of the Company’s embedded derivatives as of June 30, 2024 was estimated using a Black-Scholes valuation model, which is considered to be a Level 3 fair value measurement.
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,
2024 2023 2024 2023
Natural gas financial instruments:
Realized gain $ —  $ 11,444  $ —  $ 23,310 
Unrealized loss —  (10,891) —  (10,463)
Embedded Derivatives
Realized loss (6,426) —  (8,571) — 
Unrealized gain 6,198  —  4,239  — 
The following table summarizes changes in the Company’s Embedded Derivatives (in thousands):
Six Months Ended June 30, 2024
Balance at January 1, 2024 $ 32,225 
Issued — 
Settled (24,243)
Total gains or losses (realized and unrealized) included in earnings 4,332 
Balance at June 30, 2024
 $ 12,314