Annual report [Section 13 and 15(d), not S-K Item 405]

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
The Company records certain financial and non-financial assets and liabilities on the balance sheet at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. Fair value measurements are classified and disclosed in one of the following categories:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date.
Level 2 – Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 – Significant inputs to the valuation model are unobservable.
Valuation techniques that maximize the use of observable inputs are favored. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy. Reclassifications of fair value between Level 1, Level 2 and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter.
Financial assets and liabilities
The following tables summarize the Company’s financial and non-financial assets and liabilities by valuation level as of December 31, 2025 and December 31, 2024 (in thousands):
December 31, 2025
Level 1 Level 2 Level 3
Assets:
Derivative instruments $ —  $ 60,458  $ — 
Contingent consideration arrangement $ —  $ —  $ 1,290 
Total assets $ —  $ 60,458  $ 1,290 
Liabilities:
Derivative instruments $ —  $ 30,781  $ — 
December 31, 2024
Level 1 Level 2 Level 3
Assets:
Derivative instruments $ —  $ 64,088  $ — 
Contingent consideration arrangement $ —  $ —  $ 2,700 
Total assets $ —  $ 64,088  $ 2,700 
Liabilities:
Derivative instruments $ —  $ 76,970  $ — 
The Company estimates the fair value of all derivative instruments using industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, implied volatility, time value, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.
In connection with the SCOOP water infrastructure sale completed in the first quarter of 2020, the Company retained a contingent consideration arrangement. As of December 31, 2025, the fair value of the arrangement was $1.3 million, with $0.1 million classified within prepaid expenses and other current assets and $1.2 million classified within other assets. Fair value is measured using an income approach applying a discounted cash flow model and Level 3 inputs. The Company has elected the fair value option, and changes in fair value are recognized in earnings within Other, net.
Non-financial assets and liabilities
The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and gas properties. Given the unobservable nature of the inputs, including plugging costs and reserve lives, the initial measurement of the asset retirement obligation liability is deemed to use Level 3 inputs. See Note 3 for further discussion of the Company’s asset retirement obligations. Asset retirement obligations incurred were $0.6 million and $0.7 million for the years ended December 31, 2025 and 2024, respectively.
Fair value of other financial instruments
The carrying amounts on the accompanying consolidated balance sheet for cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities are carried at cost, which approximates market value due to their short-term nature. Long-term debt related to the Company's Credit Facility is carried at cost, which approximates market value based on the borrowing rates currently available to the Company with similar terms and maturities.