sm-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-31539

SM ENERGY COMPANY

(Exact name of registrant as specified in its charter)

Delaware

41-0518430

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1700 Lincoln Street, Suite 3200, Denver, Colorado

80203

(Address of principal executive offices)

(Zip Code)

(303) 861-8140

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	SM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 24, 2024, the registrant had 114,418,413 shares of common stock outstanding.

TABLE OF CONTENTS


Item		Page
	Cautionary Information about Forward-Looking Statements	3

	Part I	4

Item 1.	Financial Statements (unaudited)	4

	Condensed Consolidated Balance Sheets September 30, 2024, and December 31, 2023	4

	Condensed Consolidated Statements of Operations Three and N ine Months Ended September 30, 2024, and 2023	5

	Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 30, 2024, and 2023	6

	Condensed Consolidated Statements of Stockholders’ Equity Continuous Quarterly Presentation Ended September 30, 2024, and 2023	7

	Condensed Consolidated Statements of Cash Flows N i ne Months Ended September 30, 2024, and 2023	9

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

	Part II	42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42



Item 6.	Exhibits	43

	Signatures	44

Cautionary Information about Forward-Looking Statements

This Report on Form 10-Q (“Form 10-Q” or “this report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements included in this report, other than statements of historical fact, that address activities, conditions, events, or developments with respect to our financial condition, results of operations, business prospects or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “pending,” “plan,” “potential,” “projected,” “seek,” “target,” “will,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear throughout this report, and include statements about such matters as:

•business strategies and other plans and objectives for future operations, including plans for expansion and growth of operations or to defer capital investment, plans with respect to future dividend payments, debt redemptions or equity repurchases, capital markets activities, environmental, social, and governance (“ESG”) goals and initiatives, and our outlook on our future financial condition or results of operations;

•risks related to the integration of the Uinta Basin Acquisition, including our ability to realize the expected benefits of the Uinta Basin Acquisition or any business disruptions that could result from the Uinta Basin Acquisition; see Note 11 - Acquisitions in Part I, Item 1 of this report for discussion and the definition of the Uinta Basin Acquisition;

•our expected accounting treatment of the Uinta Basin Acquisition, discussed in Note 11 - Acquisitions in Part I, Item 1 of this report;

•the amount and nature of future capital expenditures, the resilience of our assets to declining commodity prices, and the availability of liquidity and capital resources to fund capital expenditures;

•our outlook on prices for future crude oil, natural gas, and natural gas liquids (also referred to throughout this report as “oil,” “gas,” and “NGLs,” respectively), well costs, service costs, production costs, and general and administrative costs, and the effects of inflation on each of these;

•armed conflict, political instability, or civil unrest in oil and gas producing regions and shipping channels, including instability in the Middle East, the wars and armed conflicts between Russia and Ukraine, and among Israel and Hamas, Hezbollah, and Iran and its proxy forces, and related potential effects on laws and regulations, or the imposition of economic or trade sanctions (“War and Geopolitical Instability”);

•any changes to the borrowing base, aggregate revolving lender commitments or maturity date, or any other amendments to our Seventh Amended and Restated Credit Agreement, as amended (“Credit Agreement”);

•cash flows, liquidity, interest and related debt service expenses, changes in our effective tax rate, and our ability to repay debt in the future;

•our drilling and completion activities and other exploration and development activities, each of which could be affected by supply chain disruptions and inflation, our ability to obtain permits and governmental approvals, and plans by us, our joint development partners, and/or other third-party operators;

•possible or expected acquisitions and divestitures, including the possible divestiture or farm-out of, or farm-in or joint development of, certain properties;

•oil, gas, and NGL reserve estimates and estimates of both future net revenues and the present value of future net revenues associated with those reserve estimates, as well as the conversion of proved undeveloped reserves to proved developed reserves;

•our expected future production volumes, identified drilling locations, as well as drilling prospects, inventories, projects and programs;

•changes in proposed or final federal income tax laws and regulations or exposure to additional income tax liabilities; and

•other similar matters, such as those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this report.

Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. We caution you that forward-looking statements are not guarantees of future performance and these statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that may cause our financial condition, results of operations, business prospects or economic performance to differ from expectations include the factors discussed in the Risk Factors section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), and Exhibit 99.2 to our Current Report on Form 8-K filed with the United States Securities and Exchange Commission (“SEC”) on July 18, 2024, and in subsequent reports that we file with the SEC.

The forward-looking statements in this report speak only as of the filing of this report. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by applicable securities laws.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,735,313	$	616,164
Accounts receivable	226,604		231,165
Derivative assets	72,287		56,442
Prepaid expenses and other	10,224		12,668
Total current assets	2,044,428		916,439
Property and equipment (successful efforts method):
Proved oil and gas properties	12,501,494		11,477,358
Accumulated depletion, depreciation, and amortization	(7,370,881)		(6,830,253)
Unproved oil and gas properties, net of valuation allowance of $33,095 and $35,362, respectively	287,311		335,620
Wells in progress	291,197		358,080

Other property and equipment, net of accumulated depreciation of $62,435 and $59,669, respectively	45,149		35,615
Total property and equipment, net	5,754,270		5,376,420
Noncurrent assets:
Acquisition deposit held in escrow	102,000		—
Derivative assets	11,584		8,672
Other noncurrent assets	115,490		78,454
Total noncurrent assets	229,074		87,126
Total assets	$	8,027,772	$	6,379,985
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	560,839	$	611,598

Derivative liabilities	2,401		6,789
Other current liabilities	17,859		15,425
Total current liabilities	581,099		633,812
Noncurrent liabilities:
Revolving credit facility	—		—
Senior Notes, net	2,706,700		1,575,334


Asset retirement obligations	125,327		118,774

Net deferred tax liabilities	467,459		369,903
Derivative liabilities	448		1,273
Other noncurrent liabilities	85,193		65,039
Total noncurrent liabilities	3,385,127		2,130,323

Commitments and contingencies (note 6)

Stockholders’ equity:
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 114,418,413 and 115,745,393 shares, respectively	1,144		1,157
Additional paid-in capital	1,492,778		1,565,021
Retained earnings	2,570,108		2,052,279
Accumulated other comprehensive loss	(2,484)		(2,607)
Total stockholders’ equity	4,061,546		3,615,850
Total liabilities and stockholders’ equity	$	8,027,772	$	6,379,985

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

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Operating revenues and other income:
Oil, gas, and NGL production revenue	$	642,380	$	639,699	$	1,835,427	$	1,757,032

Other operating income, net	1,233		1,202		2,611		8,128
Total operating revenues and other income	643,613		640,901		1,838,038		1,765,160
Operating expenses:
Oil, gas, and NGL production expense	148,380		138,264		422,377		426,200
Depletion, depreciation, amortization, and asset retirement obligation liability accretion	202,942		189,353		548,781		501,374
Exploration	12,097		10,245		47,772		43,633

General and administrative	35,141		29,255		96,431		84,424
Net derivative (gain) loss	(86,283)		75,355		(70,256)		12,352
Other operating expense, net	384		2,832		4,206		20,182
Total operating expenses	312,661		445,304		1,049,311		1,088,165
Income from operations	330,952		195,597		788,727		676,995
Interest expense	(50,682)		(23,106)		(94,362)		(67,713)
Interest income	18,017		4,106		31,120		13,802

Other non-operating expense	(637)		(233)		(684)		(696)
Income before income taxes	297,650		176,364		724,801		622,388
Income tax (expense) benefit	(57,127)		45,979		(142,786)		(51,619)
Net income	$	240,523	$	222,343	$	582,015	$	570,769

Basic weighted-average common shares outstanding	114,405		117,823		114,870		119,589
Diluted weighted-average common shares outstanding	114,993		118,328		115,701		120,165
Basic net income per common share	$	2.10	$	1.89	$	5.07	$	4.77
Diluted net income per common share	$	2.09	$	1.88	$	5.03	$	4.75
Net dividends declared per common share	$	0.20	$	0.15	$	0.56	$	0.45

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

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	240,523	$	222,343	$	582,015	$	570,769
Other comprehensive income, net of tax:
Pension liability adjustment	108		14		123		40
Total other comprehensive income, net of tax	108		14		123		40
Total comprehensive income	$	240,631	$	222,357	$	582,138	$	570,809

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)

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


				Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Common Stock					Retained Earnings
	Shares	Amount
Balances, December 31, 2023	115,745,393	$	1,157	$	1,565,021	$	2,052,279	$	(2,607)	$	3,615,850
Net income	—	—		—		131,199		—		131,199
Other comprehensive income	—	—		—		—		8		8
Net cash dividends declared, $0.18 per share	—	—		—		(20,707)		—		(20,707)

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings	1,147	—		(22)		—		—		(22)
Stock-based compensation expense	1,839	—		5,018		—		—		5,018

Purchase of shares under Stock Repurchase Program	(712,235)	(7)		(33,088)		—		—		(33,095)
Balances, March 31, 2024	115,036,144	$	1,150	$	1,536,929	$	2,162,771	$	(2,599)	$	3,698,251
Net income	—	—		—		210,293		—		210,293
Other comprehensive income	—	—		—		—		7		7
Net cash dividends declared, $0.18 per share	—	—		—		(20,532)		—		(20,532)
Issuance of common stock under Employee Stock Purchase Plan	56,006	1		1,843		—		—		1,844

Stock-based compensation expense	35,691	1		5,787		—		—		5,788

Purchase of shares under Stock Repurchase Program	(1,058,956)	(11)		(51,700)		—		—		(51,711)

Balances, June 30, 2024	114,068,885	$	1,141	$	1,492,859	$	2,352,532	$	(2,592)	$	3,843,940
Net income	—	—		—		240,523		—		240,523
Other comprehensive income	—	—		—		—		108		108
Net cash dividends declared, $0.20 per share	—	—		—		(22,947)		—		(22,947)

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings	349,528	3		(6,819)		—		—		(6,816)
Stock-based compensation expense	—	—		6,587		—		—		6,587
Purchase of shares under Stock Repurchase Program	—	—		151		—		—		151

Balances, September 30, 2024	114,418,413	$	1,144	$	1,492,778	$	2,570,108	$	(2,484)	$	4,061,546

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
	Common Stock					Retained Earnings
	Shares	Amount
Balances, December 31, 2022	121,931,676	$	1,219	$	1,779,703	$	1,308,558	$	(4,022)	$	3,085,458
Net income	—	—		—		198,552		—		198,552
Other comprehensive income	—	—		—		—		13		13
Net cash dividends declared, $0.15 per share	—	—		—		(18,078)		—		(18,078)


Stock-based compensation expense	—	—		4,318		—		—		4,318

Purchase of shares under Stock Repurchase Program	(1,413,758)	(14)		(40,454)		—		—		(40,468)
Balances, March 31, 2023	120,517,918	$	1,205	$	1,743,567	$	1,489,032	$	(4,009)	$	3,229,795
Net income	—	—		—		149,874		—		149,874
Other comprehensive income	—	—		—		—		13		13
Net cash dividends declared, $0.15 per share	—	—		—		(17,704)		—		(17,704)
Issuance of common stock under Employee Stock Purchase Plan	68,210	1		1,815		—		—		1,816
Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings	774	—		(7)		—		—		(7)
Stock-based compensation expense	56,872	1		4,162		—		—		4,163
Purchase of shares under Stock Repurchase Program	(2,550,706)	(26)		(69,457)		—		—		(69,483)
Other	19,037	—		—		—		—		—
Balances, June 30, 2023	118,112,105	$	1,181	$	1,680,080	$	1,621,202	$	(3,996)	$	3,298,467
Net income	—	—		—		222,343		—		222,343
Other comprehensive income	—	—		—		—		14		14
Net cash dividends declared, $0.15 per share	—	—		—		(17,543)		—		(17,543)
Issuance of common stock under Employee Stock Purchase Plan	(18)	—		—		—		—		—
Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings	553,442	6		(7,881)		—		—		(7,875)
Stock-based compensation expense	—	—		6,038		—		—		6,038

Purchase of shares under Stock Repurchase Program	(2,351,642)	(24)		(97,127)		—		—		(97,151)
Balances, September 30, 2023	116,313,887	$	1,163	$	1,581,110	$	1,826,002	$	(3,982)	$	3,404,293

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

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	582,015	$	570,769
Adjustments to reconcile net income to net cash provided by operating activities:

Depletion, depreciation, amortization, and asset retirement obligation liability accretion	548,781		501,374


Stock-based compensation expense	17,393		14,519
Net derivative (gain) loss	(70,256)		12,352
Net derivative settlement gain	46,288		20,398
Amortization of deferred financing costs	4,925		4,114

Deferred income taxes	116,522		43,171
Other, net	(25,590)		(11,489)
Net change in working capital	(15,433)		(57,329)





Net cash provided by operating activities	1,204,645		1,097,879

Cash flows from investing activities:

Capital expenditures	(957,156)		(766,756)
Acquisition of proved and unproved oil and gas properties	(836)		(109,318)
Other, net	80		657
Net cash used in investing activities	(957,912)		(875,417)

Cash flows from financing activities:


Debt issuance costs related to credit facility	(2,378)		—
Net proceeds from Senior Notes	1,477,032		—
Cash paid to repurchase Senior Notes	(349,118)		—
Repurchase of common stock	(83,991)		(205,246)
Dividends paid	(62,136)		(54,167)
Net proceeds from sale of common stock	1,844		1,815
Net share settlement from issuance of stock awards	(6,837)		(7,882)

Net cash provided by (used in) financing activities	974,416		(265,480)

Net change in cash, cash equivalents, and restricted cash	1,221,149		(43,018)
Cash, cash equivalents, and restricted cash at beginning of period	616,164		444,998
Cash, cash equivalents, and restricted cash at end of period	$	1,837,313	$	401,980

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

SM ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(in thousands)


	For the Nine Months Ended September 30,
	2024		2023
Supplemental schedule of additional cash flow information and non-cash activities:
Operating activities:
Cash paid for interest, net of capitalized interest (1)	$	(83,130)	$	(77,514)
Net cash paid for income taxes	$	(7,623)	$	(6,176)
Investing activities:
Changes in capital expenditure accruals	$	(33,187)	$	35,683
Non-cash financing activities (2)

Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	1,735,313	$	401,980
Restricted cash (3)	102,000		—
Cash, cash equivalents, and restricted cash at end of period	$	1,837,313	$	401,980

____________________________________________

(1) Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2024, does not include $9.0 million in fees paid to secure firm commitments for senior unsecured bridge term loans in connection with the Uinta Basin Acquisition discussed and defined in Note 11 - Acquisitions.

(2) Please refer to Note 5 - Long-Term Debt for discussion of the debt transactions executed during the nine months ended September 30, 2024.

(3) Represents a deposit held in a third-party escrow account related to the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions, and is included in the acquisition deposit held in escrow line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”). Please refer to Note 11 - Acquisitions for additional discussion.

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

SM ENERGY COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Summary of Significant Accounting Policies

Description of Operations

SM Energy Company, together with its consolidated subsidiaries (“SM Energy” or the “Company”), is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas, and following the closing of the Uinta Basin Acquisition on October 1, 2024, in the state of Utah. Please refer to Note 11 - Acquisitions for discussion and the definition of the Uinta Basin Acquisition.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. These financial statements do not include all information and notes required by GAAP for annual financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the 2023 Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. 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 September 30, 2024, 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.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2023 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report. These unaudited condensed consolidated financial statements should be read in conjunction with the 2023 Form 10-K.

Recently Issued Accounting Guidance

Accounting Standards Updates. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 was issued to improve the disclosures about a public entity’s reportable segments and to provide additional, more detailed information about a reportable segment’s expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied on a retrospective basis to all prior periods presented in the financial statements. The Company is within the scope of this ASU and expects to adopt ASU 2023-07 and related guidance on December 31, 2024. Adoption of ASU 2023-07 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 was issued to improve the disclosures primarily related to rate reconciliations and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied on a prospective basis; however, retrospective application is permitted. The Company is within the scope of this ASU and expects to adopt ASU 2023-09 on January 1, 2025, on a prospective basis. Adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

SEC Final Rule to Enhance and Standardize Climate-Related Disclosures. On March 6, 2024, the SEC adopted final rules to require registrants to disclose certain climate-related information in registration statements and annual reports. On April 4, 2024, the SEC issued an order staying the final rules pending completion of judicial review of the petitions challenging the final rules. The order does not amend the compliance dates contemplated by the final rules, which are applicable to the Company for fiscal years beginning with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2025. The Company is currently evaluating the potential impact of the final rules on its financial statements and related disclosures.

As of September 30, 2024, and through the filing of this report, no other accounting guidance has been issued and not yet adopted that is applicable to the Company and that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures.

Note 2 - Revenue from Contracts with Customers

The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs from its Midland Basin and South Texas assets. Oil, gas, and NGL production revenue presented within the accompanying unaudited condensed consolidated statements of operations (“accompanying statements of operations”) reflects 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:


	Midland Basin						South Texas						Total
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,
	2024			2023			2024			2023			2024			2023

	(in thousands)
Oil production revenue	$	386,915		$	369,858		$	144,912		$	129,376		$	531,827		$	499,234
Gas production revenue	19,265			45,215			31,290			36,592			50,555			81,807
NGL production revenue	176			175			59,822			58,483			59,998			58,658
Total	$	406,356		$	415,248		$	236,024		$	224,451		$	642,380		$	639,699
Relative percentage	63		%	65		%	37		%	35		%	100		%	100		%


	Midland Basin						South Texas						Total
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023			2024			2023

	(in thousands)
Oil production revenue	$	1,097,936		$	992,867		$	407,339		$	350,598		$	1,505,275		$	1,343,465
Gas production revenue	82,636			131,804			80,948			113,461			163,584			245,265
NGL production revenue	394			563			166,174			167,739			166,568			168,302
Total	$	1,180,966		$	1,125,234		$	654,461		$	631,798		$	1,835,427		$	1,757,032
Relative percentage	64		%	64		%	36		%	36		%	100		%	100		%

The Company recognizes oil, gas, and NGL production revenue at the point in time when custody and title (“control”) of the product transfers to the purchaser, which may differ depending on the applicable contractual terms. Transfer of control determines the presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations. Fees and other deductions incurred by the Company prior to transfer of control are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. When control is transferred at or near the wellhead, sales are based on a wellhead market price that may be affected by fees and other deductions incurred by the purchaser subsequent to the transfer of control.

Revenue is recorded in the month when performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying balance sheets until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of September 30, 2024, and December 31, 2023, were $173.1 million and $175.3 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. The time period between production and satisfaction of performance obligations is generally less than one day, therefore there are no material unsatisfied or partially unsatisfied performance obligations at the end of the reporting period.

Note 3 - Equity

Stock Repurchase Program

During the second quarter of 2024, the Company’s Board of Directors re-authorized the Company’s existing stock repurchase program to re-establish the Company’s authorization to repurchase up to $500.0 million in aggregate value of its common stock through December 31, 2027 (“Stock Repurchase Program”). The Stock Repurchase Program permits the Company to repurchase shares of its

common stock from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of the Credit Agreement and the indentures governing the Senior Notes, as defined in Note 5 - Long-Term Debt. Please refer to Note 3 - Equity in the 2023 Form 10-K for additional information regarding the Company’s Stock Repurchase Program.

The following table presents activity under the Company’s Stock Repurchase Program:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands, except per share data)
Shares of common stock repurchased (1)	—		2,352		1,771		6,316
Weighted-average price per share (2)	$	—	$	40.97	$	47.40	$	32.48
Cost of shares of common stock repurchased (2) (3)	$	—	$	96,336	$	83,955	$	205,120

____________________________________________

(1) All repurchased shares of the Company’s common stock were retired upon repurchase.

(2) Amounts exclude excise taxes, commissions, and fees.

(3) Amounts may not calculate due to rounding.

As of September 30, 2024, $500.0 million remained available for repurchases of the Company’s outstanding common stock through December 31, 2027, under the Stock Repurchase Program.

Note 4 - Income Taxes

The provision for income taxes consisted of the following:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023

	(in thousands)
Current portion of income tax expense:
Federal	$	(10,201)		$	(3,923)		$	(23,675)		$	(6,732)
State	(1,311)			(1,173)			(2,589)			(1,716)
Deferred portion of income tax (expense) benefit	(45,615)			51,075			(116,522)			(43,171)
Income tax (expense) benefit	$	(57,127)		$	45,979		$	(142,786)		$	(51,619)

Effective tax rate	19.2		%	(26.1)		%	19.7		%	8.3		%

Income tax expense or benefit differs from the amount that would be calculated by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences primarily relate to the effect of federal tax credits, state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on compensation of covered individuals, changes in valuation allowances, the cumulative effect of other smaller permanent differences, and can also reflect the cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balances. The quarterly effective tax rate and the resulting income tax expense or benefit can also be affected by the proportional effects of forecast net income or loss and the correlative effect on the valuation allowance for each of the periods presented in the table above.

The Company completed a multi-year research and development (“R&D”) credit study in 2023, which resulted in a favorable adjustment to the Company’s effective tax rate for the three and nine months ended September 30, 2023. The effective tax rates for the three and nine months ended September 30, 2024, reflect the benefit of current R&D credits claimed. The Company expects favorable adjustments to the Company’s effective tax rate to continue in the fourth quarter of 2024 resulting from qualifying R&D activity and anticipated credit claims.

The Company complies with authoritative accounting guidance regarding uncertain tax positions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2024, except for any potential changes related to the Company’s 2024 R&D credit claims.

For all years before 2020, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities.

Note 5 - Long-Term Debt

Credit Agreement

The Company’s Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $3.0 billion, and as of September 30, 2024, the borrowing base and aggregate lender commitments under the Credit Agreement were $2.5 billion and $1.25 billion, respectively.

Prior to the Second Amendment, as defined and discussed below, commitment fees on the unused portion of the aggregate lender commitment amount were accrued at rates from the borrowing base utilization grid set forth in the Credit Agreement, as presented in Note 5 - Long-Term Debt in the 2023 Form 10-K.

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of September 30, 2024, and December 31, 2023:


	As of September 30, 2024		As of December 31, 2023

	(in thousands)
Revolving credit facility (1)	$	—	$	—
Letters of credit (2)	2,000		2,500
Available borrowing capacity	1,248,000		1,247,500
Total aggregate lender commitment amount	$	1,250,000	$	1,250,000

____________________________________________

(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 $8.9 million and $8.5 million as of September 30, 2024, and December 31, 2023, 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.

First Amendment. On July 2, 2024, the Company and its lenders entered into the First Amendment to the Credit Agreement (“First Amendment”) to amend certain provisions of the Credit Agreement to facilitate financing for the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions.

Second Amendment. On October 1, 2024, the Company and its lenders entered into the Second Amendment to the Credit Agreement (“Second Amendment”) in conjunction with the closing of the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions, to, among other things: (i) increase the aggregate revolving lender commitments available under the Credit Agreement from $1.25 billion to $2.0 billion; (ii) extend the maturity date of the Credit Agreement; and (iii) modify certain other provisions reflective of the increased aggregate revolving lender commitments, increased Company size and scale, and extended maturity date. The Credit Agreement is scheduled to mature on the earlier of (a) October 1, 2029 (“Stated Maturity Date”), or (b) 91 days prior to the maturity date of any of the Company’s outstanding Senior Notes, as defined below, to the extent that, on or before such date, the respective Senior Notes in an amount exceeding $50.0 million have not been repaid, exchanged, repurchased, refinanced, or otherwise redeemed in full, and, if refinanced or exchanged, with a scheduled maturity date that is not earlier than at least 180 days after the Stated Maturity Date.

Under the Second Amendment, interest and commitment fees associated with the revolving credit facility are accrued based on a total revolving commitments utilization grid set forth in the Second Amendment, and as presented in the table below. At the Company’s election, borrowings under the Credit Agreement may be in the form of Secured Overnight Financing Rate (“SOFR”) revolving loans, Alternate Base Rate (“ABR”) revolving loans, or Swingline loans. SOFR revolving loans accrue interest at SOFR plus the applicable margin from the utilization grid, and ABR revolving loans and Swingline loans accrue interest at a market-based floating rate, plus the applicable margin from the utilization grid. Commitment fees are accrued on the unused portion of the aggregate revolving lender commitment amount at rates from the utilization grid.


Total Revolving Commitments Utilization Percentage	<25%		≥25% <50%		≥50% <75%		≥75% <90%		≥90%
SOFR Revolving Loans	1.750	%	2.000	%	2.250	%	2.500	%	2.750	%
ABR Revolving Loans or Swingline Loans	0.750	%	1.000	%	1.250	%	1.500	%	1.750	%
Commitment Fee Rate	0.375	%	0.375	%	0.500	%	0.500	%	0.500	%

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 24, 2024:


	As of October 24, 2024

	(in thousands)
Revolving credit facility	$	159,000
Letters of credit (1)	2,000
Available borrowing capacity	1,839,000
Total aggregate lender revolving commitment amount	$	2,000,000

____________________________________________

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

On October 11, 2024, the Company’s lenders completed the semi-annual borrowing base redetermination, which resulted in an increase to the Company’s borrowing base to $3.0 billion and reaffirmed the aggregate revolving lender commitment at the existing amount of $2.0 billion. The next borrowing base redetermination date is scheduled to occur on April 1, 2025.

Senior Notes

The Company’s Senior Notes, net line item on the accompanying balance sheets as of September 30, 2024, and December 31, 2023, consisted of the following (collectively referred to as “Senior Notes”):


	As of September 30, 2024						As of December 31, 2023
	Principal Amount		Unamortized Deferred Financing Costs		Principal Amount, Net		Principal Amount		Unamortized Deferred Financing Costs		Principal Amount, Net

	(in thousands)
5.625% Senior Notes due 2025	$	—	$	—	$	—	$	349,118	$	896	$	348,222
6.75% Senior Notes due 2026	419,235		1,343		417,892		419,235		1,868		417,367
6.625% Senior Notes due 2027	416,791		1,813		414,978		416,791		2,395		414,396
6.5% Senior Notes due 2028	400,000		3,890		396,110		400,000		4,651		395,349
6.75% Senior Notes due 2029	750,000		11,061		738,939		—		—		—
7.0% Senior Notes due 2032	750,000		11,219		738,781		—		—		—
Total	$	2,736,026	$	29,326	$	2,706,700	$	1,585,144	$	9,810	$	1,575,334

On July 25, 2024, the Company issued $750.0 million in aggregate principal amount of its 6.75% Senior Notes at par with a maturity date of August 1, 2029 (“2029 Senior Notes”). The Company received net proceeds of $738.5 million after deducting fees of $11.5 million, which are being amortized as deferred financing costs over the life of the 2029 Senior Notes. Also on July 25, 2024, the Company issued $750.0 million in aggregate principal amount of its 7.0% Senior Notes at par with a maturity date of August 1, 2032 (“2032 Senior Notes”). The Company received net proceeds of $738.5 million after deducting fees of $11.5 million, which are being amortized as deferred financing costs over the life of the 2032 Senior Notes.

On August 26, 2024 (“Redemption Date”), the Company redeemed the $349.1 million of aggregate principal amount outstanding of its 5.625% Senior Notes due June 1, 2025 (“2025 Senior Notes”), pursuant to the terms of the indenture governing the 2025 Senior Notes which provided for a redemption price equal to 100 percent of the principal amount outstanding of the 2025 Senior Notes on the Redemption Date, plus accrued and unpaid interest. Upon redemption, the Company recorded a loss on extinguishment of debt of $0.5 million related to the accelerated expense recognition of the remaining unamortized deferred financing costs. The Company canceled all redeemed 2025 Senior Notes upon settlement.

The 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 Notes prior to their maturity at redemption prices that may include a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Notes.

Covenants

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, make certain investments, or merge or consolidate with other entities. The Company was in compliance with all financial and non-financial covenants as of September 30, 2024, and through the filing of this report. Please refer to Note 5 - Long-Term Debt in the 2023 Form 10-K, the First Amendment to the Credit Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2024, and the Second Amendment to the Credit Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2024, 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 September 30, 2024, and 2023, totaled $5.4 million and $4.9 million, respectively, and totaled $17.6 million and $16.3 million for the nine months ended September 30, 2024, and 2023, 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.

Note 6 - Commitments and Contingencies

Commitments

Other than those items discussed below, there have been no changes in commitments through the filing of this report that differ materially from those disclosed in the 2023 Form 10-K.

Drilling Rig Service Contracts. During the nine months ended September 30, 2024, the Company entered into new drilling rig contracts. As of September 30, 2024, the Company’s drilling rig commitments totaled $19.2 million under contract terms extending through the second quarter of 2025. If all of the drilling rig contracts were terminated as of September 30, 2024, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $10.4 million in early termination fees. No early termination penalties or standby fees were incurred by the Company during the nine months ended September 30, 2024, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2024.

Drilling and Completion Commitments. During the nine months ended September 30, 2024, the Company entered into an agreement that includes minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2026, 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 September 30, 2024, the liquidated damages could range from zero to a maximum of $55.0 million, with the maximum exposure assuming no additional development activity occurs prior to March 31, 2026. As of the filing of this report, the Company expects to meet its drilling and completion footage obligations under this agreement.

Subsequent Events. As part of the Uinta Basin Acquisition, certain contracts and leases containing both short-term and long-term commitments were assigned to the Company effective as of the closing date of October 1, 2024. The Company is evaluating the minimum commitments, terms and conditions, and operational plans related to activities under these contracts and leases, as well as the expected financial statement impact. Please see Note 11 - Acquisitions for discussion and the definition of the Uinta Basin Acquisition.

Certain contracts assigned to the Company include material, long-term oil gathering, processing, transportation throughput, and delivery commitments with various third-parties, under which the Company would be required to make periodic deficiency payments for any shortfalls in delivering specified minimum volume commitments. As of October 1, 2024, if the Company failed to deliver any product under these contracts, the aggregate undiscounted deficiency payments would total approximately $135.8 million. One of these contracts does not have a minimum volume commitment associated with it, however, as of October 1, 2024, the Company would owe a cancellation fee of $4.9 million if the agreement was terminated.

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. As of the filing of this report, in the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.

Note 7 - Derivative Financial Instruments

Summary of Oil, Gas, and NGL Derivative Contracts in Place

The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials, and the associated effect on cash flows. All commodity derivative contracts that the Company enters into are for other-than-trading purposes. The Company’s commodity derivative contracts consist of price swap and collar arrangements for oil and gas production, and price swap arrangements for NGL production. In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap price, the Company receives the difference between the index price and the agreed upon swap price. If the index price is higher than the swap price, the Company pays the difference. For collar arrangements, the Company receives the difference between an agreed upon index price and the floor price if the index price is below the floor price. The Company pays the difference between the agreed upon ceiling price and the index price if the index price is above the ceiling price. 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 and 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 is sold. As of September 30, 2024, the Company had basis swap contracts with fixed price differentials between:

•NYMEX WTI and Argus WTI Midland (“WTI Midland”) for a portion of its Midland Basin oil production with sales contracts that settle at WTI Midland prices;

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

•NYMEX Henry Hub (“HH”) and Inside FERC Houston Ship Channel (“IF HSC”) for a portion of its South Texas gas production with sales contracts that settle at IF HSC prices; and

•NYMEX HH and Inside FERC West Texas (“IF Waha”) for a portion of its Midland Basin gas production with sales contracts that settle at IF Waha prices.

The Company has also entered into 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 September 30, 2024, the Company had commodity derivative contracts outstanding through the fourth quarter of 2026 as summarized in the table below:


	Contract Period
	Fourth Quarter 2024		2025		2026
Oil Derivatives (volumes in MBbl and prices in $ per Bbl):
Swaps
NYMEX WTI Volumes	1,906		1,973		—
Weighted-Average Contract Price	$	74.25	$	72.36	$	—


Collars
NYMEX WTI Volumes	1,917		4,515		—
Weighted-Average Floor Price	$	69.93	$	65.69	$	—
Weighted-Average Ceiling Price	$	82.27	$	81.65	$	—
Basis Swaps
WTI Midland-NYMEX WTI Volumes	1,230		4,556		—
Weighted-Average Contract Price	$	1.21	$	1.18	$	—


WTI Houston MEH-NYMEX WTI Volumes	309		2,130		1,546
Weighted-Average Contract Price	$	1.82	$	1.86	$	2.02
Roll Differential Swaps
NYMEX WTI Volumes	2,334		—		—
Weighted-Average Contract Price	$	0.66	$	—	$	—

Gas Derivatives (volumes in BBtu and prices in $ per MMBtu):
Swaps
NYMEX HH Volumes	1,569		7,321		4,645
Weighted-Average Contract Price	$	3.03	$	3.97	$	3.73


IF Waha Volumes	—		—		1,548
Weighted-Average Contract Price	$	—	$	—	$	3.26


Collars
NYMEX HH Volumes	7,328		29,920		13,438
Weighted-Average Floor Price	$	3.38	$	3.23	$	3.25
Weighted-Average Ceiling Price	$	4.97	$	4.70	$	4.90









Basis Swaps




IF Waha-NYMEX HH Volumes	5,240		20,501		—
Weighted-Average Contract Price	$	(0.73)	$	(0.66)	$	—
IF HSC-NYMEX HH Volumes	5,750		946		—
Weighted-Average Contract Price	$	(0.38)	$	0.0025	$	—

NGL Derivatives (volumes in MBbl and prices in $ per Bbl):
Swaps
OPIS Propane Mont Belvieu Non-TET Volumes	434		396		—
Weighted-Average Contract Price	$	31.85	$	32.86	$	—
OPIS Normal Butane Mont Belvieu Non-TET Volumes	97		45		—
Weighted-Average Contract Price	$	39.84	$	39.48	$	—
OPIS Isobutane Mont Belvieu Non-TET Volumes	28		25		—
Weighted-Average Contract Price	$	41.58	$	41.58	$	—

Commodity Derivative Contracts Entered Into Subsequent to September 30, 2024

Subsequent to September 30, 2024, and through the filing of this report, the Company entered into the following commodity derivative contracts:

•NYMEX WTI price swap contracts for the first through third quarters of 2025 for a total of 1.9 MMBbl of oil production at a weighted-average contract price of $71.72 per Bbl; and

•NYMEX HH price swap contract for the second quarter of 2026 for a total of 1,430 BBtu of gas production at a weighted-average contract price of $3.25 per MMBtu.

Derivative Assets and Liabilities Fair Value

The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. The fair value of commodity derivative contracts at September 30, 2024, and December 31, 2023, was a net asset of $81.0 million and $57.1 million, respectively.

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


	As of September 30, 2024		As of December 31, 2023

	(in thousands)
Derivative assets:
Current assets	$	72,287	$	56,442
Noncurrent assets	11,584		8,672
Total derivative assets	$	83,871	$	65,114
Derivative liabilities:
Current liabilities	$	2,401	$	6,789
Noncurrent liabilities	448		1,273
Total derivative liabilities	$	2,849	$	8,062

Offsetting of Derivative Assets and Liabilities

As of September 30, 2024, and December 31, 2023, 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. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets.

The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts:


	Derivative Assets as of				Derivative Liabilities as of
	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023

	(in thousands)
Gross amounts presented in the accompanying balance sheets	$	83,871	$	65,114	$	(2,849)	$	(8,062)
Amounts not offset in the accompanying balance sheets	(2,849)		(7,362)		2,849		7,362
Net amounts	$	81,022	$	57,752	$	—	$	(700)

The following table summarizes the commodity components of the net 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 the accompanying statements of operations, respectively:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Net derivative settlement (gain) loss:
Oil contracts	$	487	$	13,446	$	(877)	$	20,144
Gas contracts	(16,735)		(11,643)		(46,639)		(37,495)
NGL contracts	(243)		(1,489)		1,228		(3,047)
Total net derivative settlement (gain) loss	$	(16,491)	$	314	$	(46,288)	$	(20,398)

Net derivative (gain) loss:
Oil contracts	$	(65,633)	$	77,857	$	(29,805)	$	31,172
Gas contracts	(15,291)		(4,437)		(41,624)		(14,655)
NGL contracts	(5,359)		1,935		1,173		(4,165)
Total net derivative (gain) loss	$	(86,283)	$	75,355	$	(70,256)	$	12,352

Credit Related Contingent Features

As of September 30, 2024, and through the filing of this report, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group. The Company does not enter into derivative contracts with counterparties that are not part of the 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. Collateral securing indebtedness under the Credit Agreement also secures the Company’s derivative agreement obligations.

Note 8 - Fair Value Measurements

The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an 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. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs:

•Level 1 – quoted prices in active markets for identical assets or liabilities

•Level 2 – quoted prices in active markets for similar assets or 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

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 September 30, 2024						As of December 31, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

	(in thousands)
Assets:
Derivatives (1)	$	—	$	83,871	$	—	$	—	$	65,114	$	—

Liabilities:
Derivatives (1)	$	—	$	2,849	$	—	$	—	$	8,062	$	—

__________________________________________

(1) This represents a financial asset or liability that is measured at fair value on a recurring basis.

Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy.

Derivatives

The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivative instruments. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. Please refer to Note 7 - Derivative Financial Instruments for more information regarding the Company’s derivative instruments.

Long-Term Debt

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 September 30, 2024, or December 31, 2023, as they were recorded at carrying value, net of any unamortized deferred financing costs. Please refer to Note 5 - Long-Term Debt for additional information.


	As of September 30, 2024				As of December 31, 2023
	Principal Amount		Fair Value		Principal Amount		Fair Value

	(in thousands)
5.625% Senior Notes due 2025	$	—	$	—	$	349,118	$	348,189
6.75% Senior Notes due 2026	$	419,235	$	419,759	$	419,235	$	420,660
6.625% Senior Notes due 2027	$	416,791	$	417,362	$	416,791	$	416,549
6.5% Senior Notes due 2028	$	400,000	$	400,240	$	400,000	$	401,372
6.75% Senior Notes due 2029	$	750,000	$	753,750	$	—	$	—
7.0% Senior Notes due 2032	$	750,000	$	753,780	$	—	$	—

Note 9 - Earnings Per Share

Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. 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 restricted stock units (“RSU” or “RSUs”) and contingent performance share units (“PSU” or “PSUs”), which were measured using the treasury stock method. Please refer to Note 10 - Compensation Plans in this report and Note 9 - Earnings Per Share in the 2023 Form 10-K for additional detail on these potentially dilutive securities.

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


For the Three Months Ended September 30,		For the Nine Months Ended September 30,
2024	2023	2024