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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
 FORM 10-Q
________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
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: 1-13283
  pva-20210331_g1.jpg
PENN VIRGINIA CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________
Virginia 23-1184320
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
16285 PARK TEN PLACE, SUITE 500
HOUSTON, TX 77084
(Address of principal executive offices) (Zip Code)
(713722-6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValuePVACNasdaq Global Select Market
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 (“Exchange Act”) 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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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 by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court.    Yes   No  
 As of April 30, 2021, there were 37,857,930 shares of common stock and common stock equivalents outstanding, including 15,309,821 shares of common stock and equity with economic and voting power equal to 22,548,109 shares of common stock (as further described in this Quarterly Report on Form 10-Q).



PENN VIRGINIA CORPORATION
QUARTERLY REPORT ON FORM 10-Q
 For the Quarterly Period Ended March 31, 2021
 Table of Contents
Part I - Financial Information
Item Page
1.Financial Statements - unaudited.
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements:
1. Nature of Operations
 2. Basis of Presentation
3. Juniper Transactions
4. Accounts Receivable and Revenues from Contracts with Customers
5. Derivative Instruments
 6. Property and Equipment
 7. Long-Term Debt
8. Income Taxes
9. Leases
 10. Supplemental Balance Sheet Detail
 11. Fair Value Measurements
 12. Commitments and Contingencies
 13. Equity
 14. Share-Based Compensation and Other Benefit Plans
 15. Interest Expense
16. Earnings per Share
Forward-Looking Statements
2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview and Executive Summary
Key Developments
Financial Condition
Results of Operations
Off Balance Sheet Arrangements
Critical Accounting Estimates
3.Quantitative and Qualitative Disclosures About Market Risk.
4.Controls and Procedures.
Part II - Other Information
1.Legal Proceedings.
1A.Risk Factors.
5.Other Information.
6.Exhibits.
Signatures



Part I. FINANCIAL INFORMATION
Item 1.     Financial Statements.
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS unaudited
(in thousands, except per share data) 
Three Months Ended March 31,
 20212020
Revenues and other
Crude oil$81,913 $86,308 
Natural gas liquids3,562 1,893 
Natural gas2,833 2,690 
Other operating income, net247 488 
Total revenues and other88,555 91,379 
Operating expenses
Lease operating8,825 10,532 
Gathering, processing and transportation4,674 5,444 
Production and ad valorem taxes5,513 6,154 
General and administrative13,177 7,230 
Depreciation, depletion and amortization23,884 40,718 
Impairments of oil and gas properties1,811  
Total operating expenses57,884 70,078 
Operating income30,671 21,301 
Other income (expense)
Interest expense(5,397)(8,180)
Loss on extinguishment of debt(1,231) 
Derivatives(44,368)151,119 
Other, net(6)(8)
Income (loss) before income taxes(20,331)164,232 
Income tax (expense) benefit310 (1,138)
Net income (loss)(20,021)163,094 
Net loss attributable to Noncontrolling interest6,449  
Net income (loss) attributable to common shareholders$(13,572)$163,094 
Net income (loss) per share:
Basic$(0.89)$10.76 
Diluted$(0.89)$10.76 
Weighted average shares outstanding – basic15,263 15,152 
Weighted average shares outstanding – diluted15,263 15,160 
See accompanying notes to condensed consolidated financial statements.

3


PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME unaudited
(in thousands) 
 
 Three Months Ended March 31,
 20212020
Net income (loss)$(20,021)$163,094 
Other comprehensive income (loss):
Change in pension and postretirement obligations, net of tax2 (1)
 2 (1)
Comprehensive income (loss)(20,019)163,093 
Net loss attributable to Noncontrolling interest6,449  
Other comprehensive income attributable to Noncontrolling interest(1) 
Comprehensive income (loss) attributable to common shareholders$(13,571)$163,093 

See accompanying notes to condensed consolidated financial statements.
4


PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS unaudited
(in thousands, except share data)
March 31,December 31,
 20212020
Assets  
Current assets  
Cash and cash equivalents$11,868 $13,020 
Accounts receivable, net of allowance for credit losses66,371 45,849 
Derivative assets13,093 75,506 
Prepaid and other current assets19,547 19,045 
Total current assets110,879 153,420 
Property and equipment, net (full cost method)792,077 723,549 
Derivative assets5,269 25,449 
Other assets4,906 4,908 
Total assets$913,131 $907,326 
Liabilities and Equity  
Current liabilities  
Accounts payable and accrued liabilities$99,950 $63,089 
Derivative liabilities44,328 85,106 
Current portion of long-term debt7,500  
Total current liabilities151,778 148,195 
Deferred income taxes397  
Derivative liabilities14,914 28,434 
Other non-current liabilities8,337 8,362 
Long-term debt, net363,562 509,497 
Commitments and contingencies (Note 12)
Equity  
Preferred stock of $0.01 par value – 5,000,000 shares authorized; 225,481.09 and none issued at March 31, 2021 and December 31, 2020, respectively
2  
Common stock of $0.01 par value – 45,000,000 shares authorized; 15,309,821 and 15,200,435 shares issued as of March 31, 2021 and December 31, 2020, respectively
153 152 
Paid-in capital155,164 203,463 
Retained earnings (Accumulated deficit)(4,218)9,354 
Accumulated other comprehensive loss(130)(131)
Noncontrolling interest223,172  
Total equity374,143 212,838 
Total liabilities and equity$913,131 $907,326 

See accompanying notes to condensed consolidated financial statements.
5


PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS unaudited
(in thousands)
 Three Months Ended March 31,
 20212020
Cash flows from operating activities  
Net income (loss)$(20,021)$163,094 
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Loss on exchange of debt1,231  
Depreciation, depletion and amortization23,884 40,718 
Impairments of oil and gas properties1,811  
Derivative contracts:
Net (gains) losses44,368 (151,119)
Cash settlements and premiums received (paid), net(7,169)(269)
Deferred income tax expense (benefit)(310)2,320 
Gain on sales of assets, net(4)(6)
Non-cash interest expense611 823 
Share-based compensation 2,246 856 
Other, net6 8 
Changes in operating assets and liabilities, net(14,442)16,048 
Net cash provided by operating activities32,211 72,473 
Cash flows from investing activities  
Capital expenditures(34,758)(62,015)
Proceeds from sales of assets, net4 75 
Net cash used in investing activities(34,754)(61,940)
Cash flows from financing activities  
Proceeds from credit facility borrowings 46,000 
Repayment of credit facility borrowings(85,500)(9,000)
Repayment of second lien term loan(53,140) 
Proceeds from redeemable common units151,160  
Proceeds from redeemable preferred stock2  
Transaction costs paid on behalf of Noncontrolling interest(5,543) 
Issue costs paid for Noncontrolling interest securities(3,758) 
Debt issuance costs paid(1,830) 
Net cash provided by financing activities1,391 37,000 
Net increase (decrease) in cash and cash equivalents(1,152)47,533 
Cash and cash equivalents – beginning of period13,020 7,798 
Cash and cash equivalents – end of period$11,868 $55,331 
Supplemental disclosures:  
Cash paid for:  
Interest, net of amounts capitalized$4,888 $7,442 
Non-cash investing and financing activities:
Changes in property and equipment related to capital contributions$(38,415)$ 
Changes in asset retirement obligation related to capital contributions$14 $ 
Changes in accrued liabilities related to capital expenditures$20,246 $18,660 
 

See accompanying notes to condensed consolidated financial statements.
6


PENN VIRGINIA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS unaudited
For the Quarterly Period Ended March 31, 2021
(in thousands, except per share amounts or where otherwise indicated)

1.     Nature of Operations
Penn Virginia Corporation (together with its consolidated subsidiaries, unless the context otherwise requires, “Penn Virginia,” the “Company,” “we,” “us” or “our”) is an independent oil and gas company focused on the onshore exploration, development and production of oil, natural gas liquids (“NGLs”) and natural gas. Our current operations consist of drilling unconventional horizontal development wells and operating our producing wells in the Eagle Ford Shale (the “Eagle Ford”) in Gonzales, Lavaca, Fayette and DeWitt Counties in South Texas. We operate in and report our financial results and disclosures as one segment, which is the exploration, development and production of crude oil, NGLs and natural gas.

2.    Basis of Presentation
Our unaudited Condensed Consolidated Financial Statements include the accounts of Penn Virginia and all of our subsidiaries. Intercompany balances and transactions have been eliminated. A substantial nonncontrolling interest in our subsidiaries is provided for in our Condensed Consolidated Statements of Operations and Comprehensive Income as well as our Condensed Consolidated Balance Sheets as of and for the period ended March 31, 2021 (see Note 3 for additional detail including the basis of presentation of the noncontrolling interest). Our Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Preparation of these statements involves the use of estimates and judgments where appropriate. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of our Condensed Consolidated Financial Statements, have been included. Our Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Certain amounts on the Condensed Consolidated Statements of Operation for the three months ended March 31, 2020 and the Condensed Consolidated Balance Sheet as of December 31, 2020 have been reclassified to conform to the 2021 presentation.
Subsequent Events
Management has evaluated all of our activities through the issuance date of our Condensed Consolidated Financial Statements and has concluded that no subsequent events have occurred that would require recognition or disclosure in our Condensed Consolidated Financial Statements or disclosure in the Notes thereto.

3.    Juniper Transactions
On January 15, 2021 (the “Closing Date”), the Company consummated the previously announced transactions (collectively, the “Juniper Transactions”) contemplated by: (i) the Contribution Agreement, dated November 2, 2020 (the “Contribution Agreement”), by and among the Company, PV Energy Holdings, L.P. (the “Partnership”) and JSTX Holdings, LLC (“JSTX”), an affiliate of Juniper Capital Advisors, L.P. (“Juniper Capital” and, together with its affiliates “Juniper”); and (ii) the Contribution Agreement, dated November 2, 2020 (the “Asset Agreement,” and, together with the Contribution Agreement, the “Juniper Transaction Agreements”), by and among Rocky Creek Resources, LLC, an affiliate of Juniper Capital (“Rocky Creek”), the Company and the Partnership.
In connection with the consummation of the Juniper Transactions, the Company completed a reorganization into an up-C structure which is intended to, among other things, result in the holders of the Series A Preferred Stock, par value $0.01 per share, of the Company (“Series A Preferred Stock”) having a voting interest in the Company that is commensurate with such holders’ economic interest in the Partnership, including (i) the conversion of each of the Company’s corporate subsidiaries into limited liability companies which are disregarded for U.S. federal income tax purposes, including the conversion of Penn Virginia Holding Corp. into Penn Virginia Holdings, LLC, a Delaware limited liability company (“Holdings”), and (ii) the Company’s contribution of all of its equity interests in Holdings to the Partnership in exchange for 15,268,686 newly issued common units representing limited partner interests (the “Common Units”).

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On the Closing Date, (i) pursuant to the terms of the Contribution Agreement, JSTX contributed to the Partnership, as a capital contribution, $150 million in cash in exchange for 17,142,857 newly issued Common Units and the Company issued to JSTX 171,428.57 shares of Series A Preferred Stock at a price equal to the par value of the shares acquired, and (ii) pursuant to the terms of the Asset Agreement, including certain closing adjustments based on a September 1, 2020 effective date (the “Effective Date”), Rocky Creek contributed to our operating subsidiary certain oil and gas assets in exchange for 5,405,252 newly issued Common Units and the Company issued to Rocky Creek 54,052.52 shares of Series A Preferred Stock at a price equal to the par value of the shares acquired, including 495,900 Common Units and 4,959 shares of Series A Preferred Stock placed in an indemnity escrow to support post-closing indemnification claims, 50% of such escrowed amount to be disbursed 180 days after the Closing and the remainder one year after the Closing. In connection with the contribution of the oil and gas assets under the Asset Agreement, we received $1.2 million of revenues attributable to production from the Rocky Creek assets for the period from December 2020 through the Closing Date.
We incurred a total of $19.0 million of professional fees, including advisory, legal, consulting fees and other costs in connection with the Juniper Transactions. A total of $5.0 million were attributable to services and costs incurred and recognized in 2020 as general and administrative expenses (“G&A”). The remaining $14.0 million of costs were incurred in January 2021 or otherwise incurred contingent upon the closing of the Juniper Transactions, including $5.5 million of transaction costs incurred by Juniper that were required to be paid by the Company under the Juniper Transaction Agreements as well as $3.8 million of costs incurred by us related to the issuance of the Series A Preferred Stock and Common Units. Collectively, these amounts were classified as a reduction to the capital contribution on our Consolidated Balance Sheet. The remainder of $4.7 million, representing professional fees and other costs, has been recognized as a component of G&A in the quarter ended March 31, 2021.
In determining the appropriate accounting for the Partnership and Juniper’s interest, we considered the guidance in Accounting Standards Codification (“ASC”) 810, Consolidation. The Partnership is considered a variable interest entity for which the Company is the primary beneficiary as it has a controlling financial interest in the Partnership and has the power to direct the activities most significant to the Partnership’s economic performance, as well as the obligation to absorb losses and receive benefits that are potentially significant. As such, the Partnership is reflected as a consolidated subsidiary in the Condensed Consolidated Financial Statements. The ownership interest in the Partnership held by Juniper (the “Noncontrolling interest”) is included in the Condensed Consolidated Balance Sheet as Noncontrolling interest, which is classified within permanent equity. The Noncontrolling interest is classified in permanent equity as it does not meet the definition of a liability under ASC 480, Distinguishing Liabilities from Equity and, among other considerations, the Common Units are optionally redeemable by the holder for a fixed number of shares (on a one-for-one basis) on and after July 14, 2021 and there’s no fixed or determinable date or fixed or determinable price for redemption; further, while the Common Units may be redeemed with Common Stock or cash, the method of settlement is solely at the discretion of the Company, with the Company having the ability to settle the redemption in shares. Additionally, while the holders of the Series A Preferred Stock, who also own the Common Units, could cause the Non-controlling interest to be redeemed through an event that is not solely within the control of the Company such as a change in control, through their majority voting rights, all holders of equally and more subordinated equity interests in the Company would be entitled to receive the same form of consideration upon such event.
The Noncontrolling interest percentage is based on the proportionate amount of the number of Common Units held by Juniper to the total Common Units outstanding which is also equivalent to the voting power in the Company associated with the Series A Preferred Stock held by Juniper. The Noncontrolling interest was initially measured on the Closing Date as the sum of (i) total Shareholders’ equity immediately prior to the closing the Juniper Transactions, (ii) the fair value of Juniper’s and Rocky Creek’s contributions provided in exchange for Common Units and Series A Preferred Stock (net of the of Juniper transaction costs and securities issuance costs paid by the Company and including the cash received directly by the Company for a portion of the Rocky Creek revenues as discussed above and asset retirement obligations (“AROs”) associated with the contributed properties); and (iii) a deferred income tax adjustment attributable to the Juniper Transactions, the total of which was then multiplied by the Noncontrolling interest percentage. The difference between the calculated Noncontrolling interest and the fair value of the consideration received was recorded as a reduction to paid-in capital.

8


The following table reconciles the initial investment by Juniper and the carrying value of their Noncontrolling interest as of the Closing Date with changes through and as of March 31, 2021:
Cash contribution$150,000 
Issue costs paid for Noncontrolling interest securities(3,758)
Transaction costs paid on behalf of Noncontrolling interest(5,543)
Fair value of Rocky Creek oil and gas properties contributed38,415 
Revenues received attributable to contributed properties1,160 
Asset retirement obligations of the contributed properties(14)
Fair value of capital contributions180,260 
Income tax adjustment attributable to the Juniper Transactions(708)
Total shareholders’ equity prior to the Closing Date205,558 
$385,110 
Juniper voting power through Series A Preferred Stock59.6 %
Noncontrolling interest as of the Closing Date$229,620 
Net loss attributable to Noncontrolling interest(6,449)
Other comprehensive income attributable to Noncontrolling interest1 
Noncontrolling interest as of March 31, 2021$223,172 

4.       Accounts Receivable and Revenues from Contracts with Customers
Accounts Receivable and Major Customers
The following table summarizes our accounts receivable by type as of the dates presented:
March 31,December 31,
 20212020
Customers$52,623 $39,672 
Joint interest partners11,270 3,079 
Derivative settlements from counterparties2,835 3,287 
Other7 8 
 66,735 46,046 
Less: Allowance for credit losses(364)(197)
 $66,371 $45,849 
Revenue from Contracts with Customers
For the three months ended March 31, 2021, three customers accounted for $54.1 million, or approximately 61%, of our consolidated product revenues. The revenues generated from these customers during the three months ended March 31, 2021, were $23.0 million, $20.1 million and $11.0 million, or 26%, 23% and 12% of the consolidated total, respectively. For the three months ended March 31, 2020, four customers accounted for $66.5 million, or approximately 73%, of our consolidated product revenues. As of March 31, 2021 and December 31, 2020, $23.5 million and $24.1 million, or approximately 45% and 61%, respectively, of our consolidated accounts receivable from customers was related to these customers. No significant uncertainties exist related to the collectability of amounts owed to us by any of these customers.
Credit Losses and Allowance for Credit Losses
In accordance with our accounting policies, we assess our portfolio of accounts receivable for credit losses by assigning credit risks to receivables originating by portfolio segment type as described below.
Customers. We sell our commodity products to approximately 16 customers. A substantial majority of these customers are large, internationally recognized refiners and marketers in the case of our crude oil sales and large domestic processors and interstate pipelines with respect to our NGL and natural gas sales. Due primarily to the historical market efficiencies and generally timely settlements associated with commodity sale transactions for crude oil, NGLs and natural gas, we have assessed this portfolio segment at zero risk for those receivables originated during the three months ended March 31, 2021.
Mutual Operators. As of March 31, 2021, we had mutual joint interest partner relationships with two upstream producers that also operate properties for which we have non-operated working interests. We have assessed receivables from these operators that originated in the three months ended March 31, 2021 with a five percent risk.

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Large Partners. As of March 31, 2021, five legal entities had working interests of 10 percent or greater in properties that we operate. These entities are primarily passive investors. We have assessed receivables from these entities that originated in the three months ended March 31, 2021 with a two percent risk.
All Others. As of March 31, 2021, approximately 15 legal entities had working interests of less than 10 percent in properties that we operate. We have assessed receivables from these entities that originated in the three months ended March 31, 2021 with a 10 percent risk. As of March 31, 2021 and December 31, 2020, approximately $0.2 million of accounts receivables attributable to this portfolio segment was past due, or over 60 days. In addition, the derivative settlements from counterparties referenced in the table above have been assessed zero risk. Collectability from these counterparties is discussed further in Note 5.
    As of March 31, 2021 and December 31, 2020, the allowance for credit losses is entirely attributable to receivables from joint interest partners. The following table summarizes the activity in our allowance for credit losses, by portfolio segment, for the three months ended March 31, 2021:
Mutual OperatorsLarge PartnersAll OthersTotal
Balance at beginning of period$9 $87 $101 $197 
Provision for expected credit losses(7)202 (28)167 
Write-offs and recoveries    
Balance at end of period$2 $289 $73 $364 


5.    Derivative Instruments
We utilize derivative instruments, typically swaps, put options and call options which are placed with financial institutions that we believe are acceptable credit risks, to mitigate our financial exposure to commodity price volatility associated with anticipated sales of our future production and volatility in interest rates attributable to our variable rate debt instruments. Our derivative instruments are not formally designated as hedges in the context of GAAP. While the use of derivative instruments limits the risk of adverse commodity price and interest rate movements, such use may also limit the beneficial impact of future product revenues and interest expense from favorable commodity price and interest rate movements. From time to time, we may enter into incremental derivative contracts in order to increase the notional volume of production we are hedging, restructure existing derivative contracts or enter into other derivative contracts resulting in modification to the terms of existing contracts. In accordance with our internal policies, we do not utilize derivative instruments for speculative purposes.
Commodity Derivatives
The following is a general description of the commodity derivative instruments we have employed:
Swaps. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, or the swap price, with the payments calculated by reference to specified commodities or indexes. The counterparty to a swap contract is required to make a payment to us based on the amount of the swap price in excess of the settlement price multiplied by the notional volume if the settlement price for any settlement period is below the swap price for such contract. We are required to make a payment to the counterparty based on the amount of the settlement price in excess of the swap price multiplied by the notional volume if the settlement price for any settlement period is above the swap price for such contract.
Put Options. A put option has a defined strike, or floor price. We have entered into put option contracts in the roles of buyer and seller depending upon our particular hedging objective. The buyer of the put option pays the seller a premium to enter into the contract. When the settlement price is below the floor price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the notional volume. When the settlement price is above the floor price, the put option expires worthless. Certain of our purchased put options have deferred premiums. For the deferred premium puts, we agree to pay a premium to the counterparty at the time of settlement.
Call Options. A call option has a defined strike, or ceiling price. We have entered into call option contracts in the roles of buyer and seller depending upon our particular hedging objective. The buyer of the call option pays the seller a premium to enter into the call option. When the settlement price is above the ceiling price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the notional volume. When the settlement price is below the ceiling price, the call option expires worthless.
We typically combine swaps, purchased put options, purchased call options, sold put options and sold call options in order to achieve various hedging objectives. Certain of these objectives result in combinations that operate as collars which include purchased put options and sold call options, three-way collars which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap, among others.
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We determine the fair values of our commodity derivative instruments using industry-standard models that consider various assumptions, including current market value and contractual prices for the underlying instruments, implied volatilities, time value and nonperformance risk. For the current market prices, we use third-party quoted forward prices, as applicable, for NYMEX West Texas Intermediate (“NYMEX WTI”), Magellan East Houston (“MEH”) crude oil, NYMEX Henry Hub (“NYMEX HH”) natural gas and OPIS Mt. Belvieu Ethane (“OPIS Mt Belv Ethane”) natural gas liquids closing prices as of the end of the reporting period. Nonperformance risk is incorporated by utilizing discount rates adjusted for the credit risk of our counterparties if the derivative is in an asset position, and our own credit risk if the derivative is in a liability position.
The following table sets forth our commodity derivative positions, presented on a net basis by period of maturity, as of March 31, 2021:
2Q20213Q20214Q20211Q20222Q20223Q20224Q20221Q20232Q2023
NYMEX WTI Crude Swaps
Average Volume Per Day (bbl)3,297 815 815 
Weighted Average Swap Price ($/bbl)$55.89 $45.54 $45.54 
NYMEX WTI Crude Collars
Average Volume Per Day (bbl)12,088 10,870 8,152 5,417 4,533 4,484 4,484 2,9172,855
Weighted Average Purchased Put Price ($/bbl)$43.82 $41.80 $40.40 $40.00 $40.00 $40.00 $40.00 40.0040.00
Weighted Average Sold Call Price ($/bbl)$54.67 $56.09 $52.10 $53.49 $52.47 $52.47 $52.47 50.0050.00
NYMEX WTI Sold Puts
Average Volume Per Day (bbl)4,945 5,707 5,707
Weighted Average Sold Put Price ($/bbl)$29.83 $35.14 $35.14 
NYMEX WTI Crude CMA Roll Basis Swaps
Average Volume Per Day (bbl)18,132 17,935 17,935 
Weighted Average Swap Price ($/bbl)$0.17 $0.17 $0.17 
NYMEX HH Collars
Average Volume Per Day (MMBtu)9,890 9,783 9,783 
Weighted Average Purchased Put Price ($/MMBtu)$2.607 $2.607 $2.607 
Weighted Average Sold Call Price($/MMBtu)$3.117 $3.117 $3.117 
NYMEX HH Sold Puts
Average Volume Per Day (MMBtu)6,593 6,522 6,522 
Weighted Average Sold Put Price ($/MMBtu)$2.000 $2.000 $2.000 
OPIS Mt Belv Ethane Swaps
Average Volume per Day (gal)36,264 35,870 
Weighted Average Fixed Price ($/gal)$0.2263 $0.2288 
Interest Rate Derivatives
We have a series of interest rate swap contracts (the “Interest Rate Swaps”) establishing fixed interest rates on a portion of our variable interest rate indebtedness under the credit agreement (the “Credit Facility”) and the Second Lien Credit Agreement, dated as of September 29, 2017 (the “Second Lien Facility”). The notional amount of the Interest Rate Swaps totals $300 million, with us paying a weighted average fixed rate of 1.36% on the notional amount, and the counterparties paying a variable rate equal to LIBOR through May 2022.

11


Financial Statement Impact of Derivatives
The impact of our derivative activities on income is included in the “Derivatives” caption on our Condensed Consolidated Statements of Operations. Derivative contracts that have expired at the end of a period, but for which cash had not been received or paid as of the balance sheet date, have been recognized as components of “Accounts receivable” (see Note 4) and “Accounts payable and accrued liabilities” (see Note 10) on the Condensed Consolidated Balance Sheets. The effects of derivative gains and (losses) and cash settlements are reported as adjustments to reconcile net income to net cash provided by operating activities. These items are recorded in the “Derivative contracts” section of our Condensed Consolidated Statements of Cash Flows under “Net (gains) losses” and “Cash settlements and premiums received (paid), net.”
The following table summarizes the effects of our derivative activities for the periods presented:
Three Months Ended March 31,
 20212020
Interest rate swap gains (losses) recognized in the Condensed Consolidated Statements of Operations$32 $(6,683)
Commodity gains (losses) recognized in the Condensed Consolidated Statements of Operations(44,400)157,802 
$(44,368)$151,119 
Interest rate cash settlements recognized in the Condensed Consolidated Statements of Cash Flows$(922)$68 
Commodity cash settlements and premiums received (paid) recognized in the Condensed Consolidated Statements of Cash Flows(6,247)(337)
$(7,169)$(269)
The following table summarizes the fair values of our derivative instruments, which we elect to present on a gross basis, as well as the locations of these instruments on our Condensed Consolidated Balance Sheets as of the dates presented:
  March 31, 2021December 31, 2020
  DerivativeDerivativeDerivativeDerivative
TypeBalance Sheet LocationAssetsLiabilitiesAssetsLiabilities
Interest rate contractsDerivative assets/liabilities - current$ $3,730 $ $3,655 
Commodity contractsDerivative assets/liabilities – current13,093 40,598 75,506 81,451 
Interest rate contractsDerivative assets/liabilities - noncurrent 615  1,645 
Commodity contractsDerivative assets/liabilities – noncurrent5,269 14,299 25,449 26,789 
  $18,362 $59,242 $100,955 $113,540 
As of March 31, 2021, we reported net commodity derivative liabilities of $36.5 million and net Interest Rate Swap liabilities of $4.3 million. The contracts associated with these positions are with seven counterparties for commodity derivatives and four counterparties for Interest Rate Swaps, all of which are investment grade financial institutions and are participants in the Credit Facility. This concentration may impact our overall credit risk in that these counterparties may be similarly affected by changes in economic or other conditions.
The agreements underlying our derivative instruments include provisions for the netting of settlements with the counterparties for contracts of similar type. We have neither paid to, nor received from, our counterparties any cash collateral in connection with our derivative positions. Furthermore, our derivative contracts are not subject to margin calls or similar accelerations. No significant uncertainties exist related to the collectability of amounts that may be owed to us by these counterparties.

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6.    Property and Equipment
The following table summarizes our property and equipment as of the dates presented: 
 March 31,December 31,
 20212020
Oil and gas properties:  
Proved$1,626,435 $1,545,910 
Unproved63,489 49,935 
Total oil and gas properties1,689,924 1,595,845 
Other property and equipment27,796 27,746 
Total properties and equipment1,717,720 1,623,591 
Accumulated depreciation, depletion and amortization(925,643)(900,042)
 $792,077 $723,549 
Unproved property costs of $63.5 million and $49.9 million have been excluded from amortization as of March 31, 2021 and December 31, 2020, respectively. An additional $0.5 million and $1.2 million of costs, associated with wells in-progress for which we had not previously recognized any proved undeveloped reserves, were excluded from amortization as of March 31, 2021 and December 31, 2020, respectively. We transferred $7.6 million and $1.4 million of undeveloped leasehold costs associated with acreage unlikely to be drilled or associated with proved undeveloped reserves, including capitalized interest, from unproved properties to the full cost pool during the three months ended March 31, 2021 and 2020, respectively. We capitalized internal costs of $0.7 million and $0.8 million and interest of $0.8 million and $0.7 million during the three months ended March 31, 2021 and 2020, respectively, in accordance with our accounting policies. Average depreciation, depletion and amortization per barrel of oil equivalent of proved oil and gas properties was $12.92 and $16.73 for the three months ended March 31, 2021 and 2020, respectively.
At the end of each quarterly reporting period, the unamortized cost of our oil and gas properties, net of deferred income taxes, is limited to the sum of the estimated after-tax discounted future net revenues from proved properties adjusted for costs excluded from amortization (the “Ceiling Test”). As of March 31, 2021, the carrying value of our proved oil and gas properties exceeded the limit determined by the Ceiling Test, resulting in a $1.8 million impairment for the quarter.

7.    Long-Term Debt
The following table summarizes our debt obligations as of the dates presented:
March 31, 2021December 31, 2020
Principal
Unamortized Discount and Deferred Issuance Costs 1, 2
Principal
Unamortized Discount and Deferred Issuance Costs 1, 2
Credit facility $228,900 $314,400 
Second lien term loan146,860 $4,698 200,000 $4,903 
Totals375,760 $4,698 514,400 $4,903 
Less: Unamortized discount 2
(1,096)(1,604)
Less: Unamortized deferred issuance costs 1, 2
(3,602)(3,299)
Totals, net$371,062 $509,497 
Less: Current portion(7,500) 
Long-term debt$363,562 $509,497 
_______________________
1     Excludes issuance costs of the Credit Facility, which represent costs attributable to the access to credit over its contractual term, that have been presented as a component of Other assets (see Note 10) and are being amortized over the term of the Credit Facility using the straight-line method.
2 Discount and issuance costs of the Second Lien Facility are being amortized over the term of the underlying loan using the effective-interest method.

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Credit Facility
The Credit Facility provides for a $1.0 billion revolving commitment and a $375 million borrowing base, including a $25 million sublimit for the issuance of letters of credit. Availability under the Credit Facility may not exceed the lesser of the aggregate commitments or the borrowing base; however, outstanding borrowings under the Credit Facility are limited to a maximum of $350 million. The borrowing base under the Credit Facility is redetermined semi-annually, generally in the Spring and Fall of each year. Additionally, we and the Credit Facility lenders generally may, upon request, initiate a redetermination at any time during the six-month period between scheduled redeterminations. However, we have the option to forego a redetermination until Fall 2021 assuming we continue to satisfy certain minimum hedging conditions that became effective with the Agreement and Amendment No. 9 to Credit Agreement (the “Ninth Amendment”) in January 2021. The Credit Facility is available to us for general corporate purposes, including working capital. The Credit Facility is scheduled to mature in May 2024. We had $0.4 million in letters of credit outstanding as of March 31, 2021 and December 31, 2020. During the three months ended March 31, 2021, we incurred and capitalized approximately $0.4 million of issue costs associated with the Ninth Amendment.
The outstanding borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin ranging from 1.50% to 2.50%, determined based on the utilization level under the Credit Facility or (b) a Eurodollar rate, including LIBOR through 2021, plus an applicable margin ranging from 2.50% to 3.50%, determined based on the utilization level under the Credit Facility. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings is payable every one, three or six months, at the election of the borrower, and is computed on the basis of a year of 360 days. As of March 31, 2021, the actual weighted-average interest rate on the outstanding borrowings under the Credit Facility was 3.11%. Unused commitment fees are charged at a rate of 0.50%.
The Credit Facility is guaranteed by the Partnership and all of its subsidiaries (excluding the borrower subsidiary) ( the “Guarantor Subsidiaries”). The guarantees under the Credit Facility are full and unconditional and joint and several. Substantially all of our consolidated assets are held by the Guarantor Subsidiaries. There are no significant restrictions on the ability of the borrower or any of the Guarantor Subsidiaries to obtain funds through dividends, advances or loans. The obligations under the Credit Facility are secured by a first priority lien on substantially all of our subsidiaries’ assets.
The Credit Facility requires us to maintain (1) a minimum current ratio (as defined in the Credit Facility, which considers the unused portion of the total commitment as a current asset), measured as of the last day of each fiscal quarter of 1.00 to 1.00, (2) a maximum leverage ratio (consolidated indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter of 3.50 to 1.00 and (3) a maximum first lien leverage ratio (consolidated secured indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter, of 2.50 to 1.00.
The Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, weekly cash balance reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends, and transactions with affiliates and other customary covenants. In addition, the Credit Facility contains certain anti-cash hoarding provisions, including the requirement to repay outstanding loans and cash collateralize outstanding letters of credit on a weekly basis in the amount of any cash on the balance sheet (subject to certain exceptions) in excess of $25 million.
The Credit Facility contains events of default and remedies. If we do not comply with the financial and other covenants in the Credit Facility, the lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility.
As of March 31, 2021, we were in compliance with all of the covenants under the Credit Facility.
Second Lien Facility
We entered into the $200 million Second Lien Facility in September 2017 at which time we received proceeds of $187.8 million, net of an original issue discount (“OID”) of $4.0 million and issue costs of $8.2 million, that were used to fund a significant acquisition and related fees and expenses. In January 2021, the amendment dated November 2, 2020 (the “Second Lien Amendment”) became effective at which time we made a $50 million prepayment as well as a $1.3 million principal payment to a single participant lender to liquidate their interest in the Second Lien Facility. The Second Lien Amendment provided for (i) the extension of the maturity date of the Second Lien Facility to September 29, 2024, (ii) an increase to the margin applicable to advances under the Second Lien Facility, (iii) the imposition of certain limitations on capital expenditures, acquisitions and investments if the Asset Coverage Ratio (as defined therein) at the end of any fiscal quarter is less than 1.25 to 1.00, (iv) the requirement for maximum and, in certain circumstances as described therein, minimum hedging arrangements, (v) beginning in 2021, a requirement to make quarterly amortization payments equal to $1.875 million and (vi) a provision for the
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replacement of the LIBOR interest rate upon its expiration. We incurred and capitalized $1.4 million of issue costs in connection with the Second Lien Amendment and wrote off $1.2 million of previously capitalized issue costs and OID allocable to the aforementioned prepayments as a loss on the extinguishment of debt.
The outstanding borrowings under the Second Lien Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin of 7.25% or (b) a Eurodollar rate, including LIBOR through 2021, with a floor of 1.00%, plus an applicable margin of 8.25%; provided that the applicable margin will increase to 8.25% and 9.25%, respectively, during any quarter in which the quarterly amortization payment is not made. As of March 31, 2021, the actual interest rate of outstanding borrowings under the Second Lien Facility was 9.25%. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings is payable every one or three months (including in three month intervals if we select a six-month interest period), at our election and is computed on the basis of a 360-day year.
We have the right, to the extent permitted under the Credit Facility and an intercreditor agreement between the lenders under the Credit Facility and the lenders under the Second Lien Facility, to prepay loans under the Second Lien Facility at any time, subject to the following prepayment premiums (in addition to customary “breakage” costs with respect to Eurodollar loans): from January 15, 2021 through January 14, 2022, 102% of the amount being prepaid; from January 15, 2022 through January 14, 2023, 101% of the amount being prepaid; and thereafter, no premium. The Second Lien Facility also provides for the following prepayment premiums in the event of a change in control that results in an offer of prepayment that is accepted by the lenders under the Second Lien Facility: from January 15, 2021 through January 14, 2022, 102% of the amount being prepaid; from January 15, 2023 through January 14, 2023, 101% of the amount being prepaid; and thereafter, no premium.
The Second Lien Facility is collateralized by substantially all of the Partnership’s and its subsidiaries’ assets with lien priority subordinated to the liens securing the Credit Facility. The obligations under the Second Lien Facility are guaranteed by the Partnership and the Guarantor Subsidiaries.
The Second Lien Facility has no financial covenants, but contains affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), limitations on capital expenditures, investments, the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends and transactions with affiliates and other customary covenants.
As of March 31, 2021, we were in compliance with all of the covenants under the Second Lien Facility.

8.    Income Taxes
The income tax provision for the three months ended March 31, 2021 resulted in a benefit of $0.3 million. The federal portion was fully offset by an adjustment to the valuation allowance against our net deferred tax assets resulting in an effective tax rate of 1.5%, which is fully attributable to the State of Texas. In connection with the Juniper Transactions, we recorded an adjustment of $0.7 million to “Paid-in capital” (see Note 3) attributable to certain state deferred income tax effects associated with the change in legal entity structure. Our net deferred income tax liability balance of $0.4 million as of March 31, 2021 is also fully attributable to the State of Texas and primarily related to property.
We recognized a federal and state income tax expense for the three months ended March 31, 2020 of $1.1 million. The federal and state tax expense was offset by an adjustment to the valuation allowance against our net deferred tax assets resulting in an effective tax rate of 0.7% which was fully attributable to the State of Texas. The provision also reflected a reclassification of $1.2 million from deferred tax assets to current income taxes receivable for certain refundable alternative minimum tax credit carryforwards that were later received in June 2020.
We had no liability for unrecognized tax benefits as of March 31, 2021. There were no interest and penalty charges recognized during the periods ended March 31, 2021 and 2020. Tax years from 2015 forward remain open to examination by the major taxing jurisdictions to which the Company is subject; however, net operating losses originating in prior years are subject to examination when utilized.


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9.    Leases
We generally have lease arrangements for office facilities and certain office equipment, certain field equipment including compressors, drilling rigs, crude oil storage tank capacity, land easements and similar arrangements for rights-of-way and certain gas gathering and gas lift assets. Our short-term leases included in the disclosures below are primarily comprised of our contractual arrangements with certain vendors for operated drilling rigs, crude oil storage tank capacity and our field compressors. Our primary variable lease was represented by our field gas gathering and gas lift agreement with a midstream service provider and the lease payments are charged on a volumetric basis at a contractual fixed rate.
The following table summarizes the components of our total lease cost for the periods presented:
Three Months Ended March 31,
20212020
Operating lease cost$216 $210 
Short-term lease cost2,752 11,296 
Variable lease cost4,874 5,657 
Less: Amounts charged as drilling costs 1
(2,082)(10,621)
Total lease cost recognized in the Condensed Consolidated Statement of Operations 2
$5,760 $6,542 
___________________
1    Represents the combined gross amounts incurred and (i) capitalized as drilling costs for our working interest share and (ii) billed to joint interest partners for their working interest share for short-term leases of operated drilling rigs.
2    Includes $2.2 million and $2.8 million recognized in Gathering, processing and transportation expense (“GPT”), $3.3 million and $3.5 million recognized in Lease operating expense (“LOE”) for the three months ended March 31, 2021 and 2020, respectively, and $0.2 million recognized in G&A for each of the three months ended March 31, 2021 and 2020.


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10.    Supplemental Balance Sheet Detail
The following table summarizes components of selected balance sheet accounts as of the dates presented:
 March 31,December 31,
 20212020
Prepaid and other current assets:  
Inventories 1
$4,036 $4,274 
Prepaid expenses 2
15,511 14,771 
 $19,547 $19,045 
Other assets:  
Deferred issuance costs of the Credit Facility, net of amortization$2,542 $2,349 
Right-of-use assets – operating leases2,237 2,432 
Other 127 127 
 $4,906 $4,908 
Accounts payable and accrued liabilities:  
Trade accounts payable $29,137 $7,055 
Drilling and other lease operating costs18,002 16,088 
Royalties34,223 26,615 
Production, ad valorem and other taxes5,242 3,094 
Derivative settlements to counterparties8,773 321 
Compensation2,270 4,222 
Interest 401 504 
Current operating lease obligations894 936 
Other 3
1,008 4,254 
 $99,950 $63,089 
Other liabilities:  
Asset retirement obligations$5,648 $5,461 
Noncurrent operating lease obligations1,553 1,752 
Defined benefit pension obligations 845 865 
Postretirement health care benefit obligations 291 284 
 $8,337 $8,362 
_______________________
1    Includes tubular inventory and well materials of $3.3 million and $3.9 million and crude oil volumes in storage of $0.7 million and $0.4 million as March 31, 2021 and December 31, 2020, respectively.
2     The balances as of March 31, 2021 and December 31, 2020 include $13.9 million and $13.6 million for the prepayment of drilling and completion materials and services, respectively.
3 The balance as of December 31, 2020 includes $3.5 million of accrued costs attributable to Juniper Transaction expenses.

11.    Fair Value Measurements
We apply the authoritative accounting provisions included in GAAP for measuring the fair value of both our financial and nonfinancial assets and liabilities. Fair value is an exit price representing the expected amount we would receive upon the sale of an asset or that we would expect to pay to transfer a liability in an orderly transaction with market participants at the measurement date.
Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives and our Credit Facility and Second Lien Facility borrowings. As of March 31, 2021 and December 31, 2020, the carrying values of all of these financial instruments approximated fair value.

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Recurring Fair Value Measurements
Certain financial assets and liabilities are measured at fair value on a recurring basis on our Condensed Consolidated Balance Sheets. The following tables summarize the valuation of those assets and (liabilities) as of the dates presented:
 As of March 31, 2021
 Fair ValueFair Value Measurement Classification
DescriptionMeasurementLevel 1Level 2Level 3
Assets:    
Commodity derivative assets – current$13,093 $ $13,093 $ 
Commodity derivative assets – noncurrent$5,269 $ $5,269 $ 
Liabilities:    
Interest rate swap liabilities – current$(3,730)$— $(3,730)$— 
Interest rate swap liabilities – noncurrent$(615)$— $(615)$— 
Commodity derivative liabilities – current$(40,598)$ $(40,598)$ 
Commodity derivative liabilities – noncurrent$(14,299)$ $(14,299)$ 
 As of December 31, 2020
 Fair ValueFair Value Measurement Classification
DescriptionMeasurementLevel 1Level 2Level 3
Assets:    
Commodity derivative assets – current$75,506 $ $75,506 $ 
Commodity derivative assets – noncurrent$25,449 $ $25,449 $ 
Liabilities:    
Interest rate swap liabilities – current$(3,655)$— $(3,655)$— 
Interest rate swap liabilities – noncurrent$(1,645)$— $(1,645)$— 
Commodity derivative liabilities – current$(81,451)$ $(81,451)$ 
Commodity derivative liabilities – noncurrent$(26,789)$ $(26,789)$ 
Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one level of the fair value hierarchy to another level. In such instances, the transfer is deemed to have occurred at the beginning of the quarterly period in which the event or change in circumstances that caused the transfer occurred. There were no transfers during the three months ended March 31, 2021 and 2020.
We used the following methods and assumptions to estimate fair values for the financial assets and liabilities described below:
Commodity derivatives: We determine the fair values of our commodity derivative instruments using industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, implied volatilities, time value and non-performance risk. For the current market prices, we use third-party quoted forward prices, as applicable, for NYMEX WTI, MEH crude oil, NYMEX HH natural gas and OPIS Mt Belv Ethane natural gas liquids closing prices as of the end of the reporting periods. Each of these is a Level 2 input.
Interest rate swaps: We determine the fair values of our interest rate swaps using an income approach valuation technique which discounts future cash flows back to a single present value. We estimate the fair value of the swaps based on published interest rate yield curves as of the date of the estimate. Each of these is a Level 2 input.
Non-Recurring Fair Value Measurements
In addition to the fair value measurements applied with respect to assets contributed in the Juniper Transactions, the most significant non-recurring fair value measurements utilized in the preparation of our Condensed Consolidated Financial Statements are those attributable to the initial determination of AROs associated with the ongoing development of new oil and gas properties and certain share-based compensation awards. The determination of the fair value of AROs is based upon regional market and facility specific information. The amount of an ARO and the costs capitalized represent the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor after discounting the future cost back to the date that the abandonment obligation was incurred using a rate commensurate with the risk, which approximates our cost of funds. Because these significant fair value inputs are typically not observable, we have categorized the initial estimates as Level 3 inputs.

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12.    Commitments and Contingencies
Drilling and Completion Commitments
As of March 31, 2021, we had contractual commitments on a pad-to-pad basis for two drilling rigs. Additionally, we have an agreement, effective January 2, 2021, which can be terminated with 30 days’ notice by either party, to utilize certain frac services and related materials, with no minimum commitment, through December 31, 2021. In March 2021, we made a prepayment of $12 million under the frac services agreement in advance of completion projects for the second quarter of 2021.
Gathering and Intermediate Transportation Commitments
We have long-term agreements with Nuevo G&T and Nuevo Dos Marketing, LLC (“Nuevo Marketing” and together with Nuevo G&T, collectively “Nuevo”) to provide gathering and intermediate pipeline transportation services for a substantial portion of our crude oil and condensate production in as well as volume capacity support for certain downstream interstate pipeline transportation.
Nuevo is obligated to gather and transport our crude oil and condensate from within a dedicated area in the Eagle Ford via a gathering system and intermediate takeaway pipeline connecting to a downstream interstate pipeline operated by a third party through 2041. We have a minimum volume commitment (“MVC”) of 8,000 gross barrels of oil per day to Nuevo through 2031 under the gathering agreement. We are obligated to deliver the first 20,000 gross barrels of oil per day produced from Gonzales, Lavaca, Fayette and DeWitt Counties, Texas.
Under a marketing agreement, we have a commitment to sell 8,000 barrels per day of crude oil (gross) to Nuevo, or to any third party, utilizing Nuevo Marketing’s capacity on a downstream interstate pipeline through 2026.
Under each of the agreements with Nuevo, credits for deliveries of volumes in excess of the volume commitment may be applied to any deficiency arising in the succeeding 12-month period.
Excluding the application of existing credits that we have earned during the preceding 12-month period ended March 31, 2021 for deliveries of volumes in excess of the volume commitment, and the potential impact of the effects of price escalation from commodity price changes, if any, the minimum fee requirements attributable to the MVC under the gathering, transportation and marketing agreements are as follows: $10.5 million for the remainder of 2021, approximately $13.9 million per year for 2022 through 2025, $7.8 million for 2026, $3.8 million per year for 2027 through 2030 and $0.6 million for 2031.
Crude Oil Storage
As a component of the crude oil gathering agreement referenced above, we have access to up to approximately 180,000 barrels of dedicated tank capacity for no additional charge at the service provider’s central delivery point facility (“CDP”), in Lavaca County, Texas through February 2041. We have also contracted for access to up to an additional 70,000 barrels of tank capacity at the CDP on a month-to-month basis which can be terminated by either party with 45-days’ notice to the counterparty. We have also contracted for crude oil storage capacity for up to 90,000 barrels with a downstream interstate pipeline at a facility in DeWitt County, Texas, on a month-to-month basis which can be terminated by either party with 45-days’ notice to the counterparty. Finally, we have an agreement with a marketing affiliate of the aforementioned downstream interstate pipeline to utilize up to 62,000 barrels of capacity within their system on a firm basis and an additional 120,000 barrels, if available, on a flexible basis through July 2021. Costs associated with these agreements are in the form of monthly fixed rate short-term leases and are charged as incurred on a monthly basis to GPT.
Legal, Environmental Compliance and Other Claims
We are involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, our management believes that these claims will not have a material effect on our financial position, results of operations or cash flows. As of March 31, 2021, we had AROs of approximately $5.6 million attributable to the plugging of abandoned wells. As of March 31, 2021, we had an estimated reserve of approximately $0.1 million for certain claims made against us regarding previously divested operations included in “Accounts payable and accrued liabilities.”



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13.    Equity
The following tables summarize the components of equity and the changes therein as of and for the quarterly periods in 2021 and 2020.
Preferred StockCommon StockPaid-in CapitalRetained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive LossNoncontrolling interestTotal Equity
Balance as of December 31, 2020$ $152 $203,463 $9,354 $(131)$ $212,838 
Net loss— — — (13,572)— (6,449)(20,021)
Issuance of preferred stock2 — — — — — 2 
Issuance of Noncontrolling interest
— — (50,068)— — 229,620 179,552 
All other changes 1
— 1 1,769  1 1 1,772 
Balance as of March 31, 2021$2 $153 $155,164