W&T Offshore, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 3 — FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

The Company measures the fair value of our open derivative financial instruments by applying the income approach, using models with inputs that are classified within Level 2 of the valuation hierarchy. The inputs used for the fair value measurement of open derivative financial instruments are the exercise price, the expiration date, the settlement date, notional quantities, the implied volatility, the discount curve with spreads and published commodity future prices. Open derivative financial instruments are reported in the Condensed Consolidated Balance Sheets using fair value. See Note 8 – Derivative Financial Instruments, for additional information on derivative financial instruments.

The following table presents the fair value of our open derivative financial instruments (in thousands):


	March 31, 2022		December 31, 2021
Assets:
Derivative instruments - open contracts, current	$	73,090	$	19,215
Derivative instruments - open contracts, long-term		49,550		34,435

Liabilities:
Derivative instruments - open contracts, current		157,348		73,190
Derivative instruments - open contracts, long-term		63,318		37,989

Debt

The fair value of the Term Loan was measured using a discounted cash flows model and current market rates. The fair value of our Senior Second Lien Notes was measured using quoted prices, although the market is not a highly liquid market. The fair value of our debt was classified as Level 2 within the valuation hierarchy. See Note 2 – Debt for additional information on our debt.

The following table presents the net value and fair value of our long-term debt (in thousands):


	March 31, 2022				December 31, 2021
	Net Value		Fair Value		Net Value		Fair Value
Liabilities:
Term Loan	$	172,121	$	173,210	$	183,314	$	190,579
Senior Second Lien Notes		548,196		551,162		547,584		527,715
Total		720,317		724,372		730,898		718,294

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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