The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term "market risk" refers to the risk of loss arising from adverse changes in natural gas, NGLs and oil prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market-risk exposure. All of our market-risk sensitive instruments were entered into for purposes other than trading. All accounts are U.S. dollar denominated. These risks have not materially changed and should be read in conjunction with Item 7A Quantitative and Qualitative Disclosures about Market Risk as presented in the Form 10-K. Market Risk We are exposed to market risks related to natural gas, NGLs and oil prices, which are difficult to predict. We employ various strategies, including the use of commodity derivative instruments, to manage the risks related to these price fluctuations. These derivative instruments apply to a varying portion of our production and provide partial price protection. These arrangements can limit the benefit to us of increases in prices but offer protection in the event of price declines. Further, if our counterparties defaulted, this protection might be limited as we might not receive the benefits of the derivatives. Realized prices are influenced by the complex dynamics of supply and demand that exist in the global energy markets. Changes in natural gas prices affect us more than changes in oil prices because approximately 64% of our December 31, 2025 proved reserves are natural gas and 1% of proved reserves are oil. In addition, a portion of our NGLs, which are 35% of proved reserves, are also impacted by changes in oil and natural gas prices. At times, we are also exposed to market risks related to changes in interest rates. These risks did not change materially from December 31, 2025 to June 30, 2026. NGLs prices are somewhat seasonal, particularly for propane. Therefore, the relationship of NGLs prices to NYMEX WTI (or West Texas Intermediate) will vary due to product components, seasonality and geographic supply and demand. We sell NGLs in several regional U.S. markets, some of which are exported to international markets by other parties. If we are not able to sell or store NGLs or we are unable to access NGLs infrastructure, we may be required to curtail production or shift our drilling activities to dry gas areas. Commodity Price Risk We use commodity-based derivative contracts to manage exposures to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. At times, certain of our derivatives are swaps where we receive a fixed price (or a fixed percentage of a price) for our production and pay market prices to the counterparty. Our derivatives program can also include collars, which establish a minimum floor price and a predetermined ceiling price. Our program may also include a three-way collar which is a combination of three options. We have also entered into natural gas derivative instruments containing a fixed price swap and a sold option (which we refer to as a swaption). As of June 30, 2026, our derivative program includes swaps, collars, three-way collars and swaptions. The fair value of these contracts, represented by the estimated amount that would be realized upon immediate liquidation based on a comparison of the contract price and a reference price, generally NYMEX for natural gas and oil or Mont Belvieu for NGLs, was an asset of $130.6 million as of June 30, 2026. These contracts expire monthly through December 2028. For additional information on our derivative contracts, see Note 7 to the accompanying consolidated financial statements. Other Commodity Risk We are impacted by basis risk, caused by factors that affect the relationship between commodity futures prices reflected in derivative commodity instruments and the cash market price of the underlying commodity. Natural gas transaction prices are frequently based on industry reference prices that may vary from prices experienced in local markets. If commodity price changes in one region are not reflected in other regions, derivative commodity instruments may no longer provide the expected hedge, resulting in increased basis risk. Therefore, in addition to the swaps, collars, three-way collars and swaptions discussed above, we have entered into natural gas basis swap agreements. The price we receive for our gas production can be more or less than the NYMEX Henry Hub price because of basis adjustments, relative quality and other factors. Basis swap agreements effectively fix the basis adjustments. The fair value of the natural gas basis swaps was a liability of $10.6 million as of June 30, 2026, and they settle through December 2030. 29 Commodity Sensitivity Analysis The following table shows the fair value of our derivatives and the hypothetical changes in fair value that would result from a 10% and a 25% change in commodity prices as of June 30, 2026. We remain at risk for possible changes in the market value of commodity derivative instruments; however, such risks should be mitigated by price changes in the underlying physical commodity (in thousands): Hypothetical Change in Fair Value Increase in Commodity Price of Decrease in Commodity Price of Fair Value 10% 25% 10% 25% Swaps $ 93,756 $ (52,158 ) $ (130,394 ) $ 52,158 $ 130,394 Collars 1,986 (2,711 ) (6,860 ) 2,788 7,194 Three-way collars 35,504 (26,874 ) (66,201 ) 26,012 56,944 Basis swaps (10,633 ) 4,841 12,103 (4,841 ) (12,103 ) Swaptions (657 ) (2,473 ) (10,310 ) 606 657 Our commodity-based derivative contracts expose us to the credit risk of non-performance by the counterparty to the contracts. Our exposure is diversified primarily among major investment grade financial institutions and we have master netting agreements with our counterparties that provide for offsetting payables against receivables from separate derivative contracts. Our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. As of June 30, 2026, our derivative counterparties included sixteen financial institutions, of which eleven were secured lenders in our bank credit facility. Counterparty credit risk is considered when determining the fair value of our derivative contracts. While our counterparties are primarily major investment grade financial institutions, the fair value of our derivative contracts has been adjusted to account for the risk of non-performance by certain of our counterparties, which was immaterial. Interest Rate Risk As of June 30, 2026, we had total debt of approximately $881.0 million, of which $500 million, or approximately 57%, were senior notes based on fixed interest rates and the remainder was based on variable interest rates. Our bank credit facility which provides for variable interest rate borrowings had a balance of $381.0 million as of June 30, 2026 and incurred interest at a rate of 5.4% as of June 30, 2026. The 30-day SOFR rate as of June 30, 2026 was approximately 3.65%. A 1% increase in short-term interest rates on the floating-rate debt outstanding on June 30, 2026 would result in approximately $3.8 million in additional annual interest expense.