Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of natural gas and oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control. Factors influencing natural gas and oil prices include the level of global demand for oil, the foreign supply of natural gas and oil, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions. It is impossible to predict future natural gas and oil prices with any degree of certainty. Sustained weakness in natural gas and oil prices may adversely affect our financial condition and results of operations and may also reduce the amount of natural gas and oil reserves that we can produce economically. Any reduction in our natural gas and oil reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in natural gas and oil prices can have a favorable impact on our financial condition, results of operations and capital resources.

As of December 31, 2025, we had natural gas price swap agreements to hedge approximately 116.8 Bcf of our 2026 production at an average price of $3.51 per MMBtu. We have also entered into natural gas collars to hedge approximately 167.9 Bcf of natural gas with an average floor price of $3.50 per MMBtu and an average ceiling price of $4.35 per MMBtu. None of our derivative contracts have margin requirements or collateral provisions that could require funding prior to the scheduled cash settlement date.

An increase of 10% in the market price of natural gas on December 31, 2025 would decrease the fair value of our natural gas swaps and collars by approximately $70.4 million. A decrease of 10% in the market price of natural gas on December 31, 2025 would increase the fair value of our natural gas price swaps and collars by approximately $70.0 million. The impact of hypothetical changes in market prices of natural gas on our natural gas derivative financial instruments does not include the offsetting impact that the same hypothetical changes in market prices of natural gas may have on our physical sales of natural gas. Since our outstanding natural gas derivative financial instruments hedge only a portion of our forecasted physical gas production, a positive or negative impact to the fair value of our natural gas derivative financial instruments would be partially offset by our physical sales of natural gas.

Since December 31, 2025, we entered into natural gas collar contracts to hedge an additional 58.4 Bcf of 2027 natural gas production at an average ceiling price of $4.37 per MMBtu and an average floor price of $3.50 per MMBtu.

Interest Rates

At December 31, 2025, we had approximately $2.8 billion principal amount of long-term debt outstanding. $965.0 million of our long-term debt bear interest at a fixed rate of 5.875% and $1.6 billion of our long-term debt bear interest at a fixed rate of 6.75%. The fair market value of the senior notes due 2030 and senior notes due 2029 as of December 31, 2025 were $931.2 million and $1.6 billion, respectively, based on the market price of approximately 97% and 99% of the face amount of such debt. At December 31, 2025, we had $260.0 million of outstanding borrowings under our bank credit facility, which is subject to variable rates of interest that are tied to adjusted SOFR or an alternate base rate, at our option. Any increase in these interest rates would have an adverse impact to our results of operations and cash flow.