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DERIVATIVES
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES DERIVATIVES
All derivative financial instruments are recorded at fair value. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the cash and non-cash changes in fair value in the condensed consolidated statements of operations under the caption “Gain (loss) on derivative instruments, net.”

Commodity Contracts

The Company historically has used fixed price swap contracts, fixed price basis swap contracts and costless collars with corresponding put and call options to reduce price volatility associated with certain of its royalty income. At September 30, 2025, the Company has puts, costless collars and fixed price basis swaps outstanding.

The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with put contracts for oil based on WTI Cushing and fixed price basis swaps for oil based on the spread between the WTI Cushing crude oil price and the Argus WTI Midland crude oil price. The Company’s fixed price basis swaps for natural gas are for the spread between the Waha Hub natural gas price and the Henry Hub natural gas price. The weighted average differential represents the amount of reduction to the WTI Cushing oil price and the Waha Hub natural gas price for the notional volumes covered by the basis swap contracts. Under the Company’s costless collar contracts, each collar has an established floor price and ceiling price. When the settlement price is below the floor price, the counterparty is required to make a payment to the Company, and when the settlement price is above the ceiling price, the Company is required to make a payment to the counterparty. When the settlement price is between the floor and the ceiling, there is no payment required.

By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are all participants in the amended and restated credit facility, which is secured by substantially all of the assets of the Operating Company; therefore, the Company is not required to post any collateral. The Company’s counterparties have been determined to have an acceptable credit risk; therefore, the Company does not require collateral from its counterparties. Market risks involved in our use of derivative instruments relate to our potential inability to realize the benefits of any increases in commodity prices above the prices established by our derivative contracts.

As of September 30, 2025, the Company had the following outstanding derivative contracts. When aggregating multiple contracts, the weighted average contract price is disclosed.

SwapsCollarsPuts
Settlement MonthSettlement YearType of ContractBbls/MMBtu Per DayIndexWeighted Average DifferentialWeighted Average Floor PriceWeighted Average Ceiling Price
Average
Strike Price
Average
Deferred Premium
OIL
Oct. - Dec.
2025
Puts
40,000
WTI Cushing
$—$—$—$55.00$(1.70)
Jan. - Mar.
2026
Puts
25,000
WTI Cushing
$—$—$—$54.30$(1.76)
NATURAL GAS
Oct. - Dec.
2025Basis Swaps60,000Waha Hub$(1.00)$—$—$—$—
Jan. - Dec.
2026
Basis Swaps
80,000
Waha Hub
$(1.61)$—$—$—$—
Jan. - Dec.
2027
Basis Swaps
40,000
Waha Hub
$(1.40)$—$—$—$—
Oct. - Dec.
2025Costless Collar60,000Henry Hub$—$2.50$4.93$—$—
Jan. - Dec.
2026
Costless Collar
60,000
Henry Hub
$—$2.75$6.64$—$—
Treasury Locks

During the third quarter of 2025, the Company entered into certain treasury lock contracts to reduce the forecasted interest rate risk associated with the issuance of the Guaranteed Senior Notes. The treasury locks were terminated and settled upon issuance of the Guaranteed Senior Notes with a gain of $3 million recognized under the caption “Gain (loss) on derivative instruments, net” on the condensed consolidated statements of operations for the three and nine months ended September 30, 2025.

Contingent Liability

The 2026 WTI Contingent Liability was recorded in “Accrued liabilities” on the Company’s condensed consolidated balance sheet at September 30, 2025, and in “Other long-term liabilities” on the Company’s consolidated balance sheet at December 31, 2024. The change in fair value of the 2026 WTI Contingent Liability is recognized in “Gain (loss) on derivative instruments, net” on the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2025.

Balance Sheet Offsetting of Derivative Assets and Liabilities

The fair value of derivative instruments is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity. These fair values are recorded by netting asset and liability positions, including any deferred premiums, that are with the same counterparty and are subject to contractual terms which provide for net settlement. See Note 11—Fair Value Measurements for further details.

Gains and Losses on Derivative Instruments

The following table summarizes the gains and losses on derivative instruments included in the condensed consolidated statements of operations and the net cash receipts (payments) on derivatives for the periods presented:

Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024

(In millions)
Gain (loss) on derivative instruments, net:
Commodity contracts$13 $7 $15 $5 
2026 WTI Contingent Liability2 — 3 — 
Treasury locks3 — 3 — 
Total$18 $7 $21 $5 
Net cash receipts (payments) on derivatives:
Commodity contracts$8 $— $20 $(2)
Treasury locks3 — 3 — 
Total$11 $— $23 $(2)