Carrizo Oil & Gas, Inc. is a Houston-based energy company which, together with its subsidiaries (collectively, the “Company”), is actively engaged in the exploration, development, and production of crude oil, NGLs, and natural gas from resource plays located in the United States. The Company’s current operations are principally focused in proven, producing oil and gas plays in the Eagle Ford Shale in South Texas and the Permian Basin in West Texas.

The accompanying unaudited interim consolidated financial statements include the accounts of the Company after elimination of intercompany transactions and balances and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and therefore do not include all disclosures required for financial statements prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly, in all material respects, the Company’s interim financial position, results of operations and cash flows. However, the results of operations for the periods presented are not necessarily indicative of the results of operations that may be expected for the full year. These financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Annual Report”). Except as disclosed herein, there have been no material changes to the information disclosed in the notes in the 2017 Annual Report. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications had no material impact on prior period amounts.

The tabletables below summarizes the impact of adoption for the three and six months ended March 31,June 30, 2018:

Changes to crude oil, NGL, and natural gas revenues and lease operating expense are due to the conclusion that the Company controls the product throughout processing before transferring to the customer for certain natural gas processing arrangements. Therefore, any transportation, gathering, and processing fees incurred prior to transfer of control are included in lease operating expense.

The Company’s revenues are comprised solely of revenues from customers and include the sale of crude oil, NGLs, and natural gas. The Company believes that the disaggregation of revenue into these three major product types appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on our single geographic location. Crude oil, NGL, and natural gas revenues are recognized at a point in time when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, control has transferred and collectability of the revenue is probable. The transaction price used to recognize revenue is a function of the contract billing terms. Revenue is invoiced by calendar month based on volumes at contractually based rates with payment typically required within 30 days of the end of the production month. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in “Accounts receivable, net” in the consolidated balance sheets. As of March 31,June 30, 2018 and December 31, 2017, receivables from contracts with customers were $66.3$87.1 million and $85.6 million, respectively. Taxes assessed by governmental authorities on crude oil, NGL, and natural gas sales are presented separately from such revenues in the consolidated statements of income.

The Company is in the process of reviewing and determining the contracts to which ASU 2016-02 applies with the assistance of a third party consultant. These include contracts such as non-cancelable leases, drilling rig contracts, pipeline gathering, transportation and gas processing agreements, and contracts for the use of vehicles and well equipment. The Company continues to review current accounting policies, controls, processes, and disclosures that will change as a result of adopting the new standard. Based upon its initial assessment, the Company expects the adoption of ASU 2016-02 will result in: (i) an increase in assets and liabilities due to the required recognition of right-of-use (“ROU”) assets and corresponding lease liabilities, (ii) increases in depreciation, depletion and amortization and interest expense, (iii) decreases in lease operating and

Supplemental net income attributable to common shareholders per common share information is provided below:

The table below presents the a reconciliation of the basic weighted average dilutive and anti-dilutive securitiescommon shares outstanding to diluted weighted average common shares outstanding for the periods presented which consisted of unvested restricted stock awardsthree and units, unvested performance sharessix months ended June 30, 2018 and exercisable common stock warrants:2017:

The consolidated statements of income for the three and six months ended March 31,June 30, 2018 areinclude total revenues of $43.5 million and net income attributable to common shareholders of $34.8 million from the ExL Acquisition.

The estimated aggregate net proceeds for each of the divestitures above were recognized as a reduction of proved oil and gas properties.

The Company could also receive contingent consideration of $5.0 million per year if crude oil prices exceed specific thresholds for each of the years of 2018 through 2020 as described in “Note 3. Acquisitions and Divestitures of Oil and Gas Properties”Steven A. Webster, Chairman of the Company’s 2017 Annual Report (the “Contingent Utica Consideration”).Board of Directors, serves as Co-Managing Partner and President of Avista Capital Holdings, LP. ACP II’s Board of Managers has the sole authority for determining whether, when and to what extent any cash distributions will be declared and paid to members of ACP II. Mr. Webster is not a member of ACP II’s Board of Managers. The Company determined that the Contingent Utica Consideration is an embedded derivative and has reflected the asset at fair value in current and non-current “Other assets” in the consolidated balance sheets. The total fair valueterms of the Contingent Utica Consideration as of March 31, 2018 and December 31, 2017 was $9.0 million and $8.0 million, respectively. See “Note 10. Derivative Instruments” and “Note 11. Fair Value Measurements” for further details. The contingent consideration, if received, will be recognized asAvista Marcellus joint venture were approved by a reduction of the fair value asset in the consolidated balance sheets.

Average depreciation, depletion and amortization (“DD&A”) per Boe of proved properties was $13.73$13.74 and $12.69$12.43 for the three months ended March 31,June 30, 2018 and 2017.2017, respectively, and $13.73 and $12.55 for the six months ended June 30, 2018 and 2017, respectively.

The Company capitalized internal costs of employee compensation and benefits, including stock-based compensation, directly associated with acquisition, exploration and development activities totaling $6.6$6.1 million and $5.4$1.9 million for the three months

ended March 31,June 30, 2018 and 2017, respectively, and $12.7 million and $7.3 million for the six months ended June 30, 2018 and 2017, respectively.

Unproved properties, not being amortized, include unevaluated leasehold and seismic costs associated with specific unevaluated properties and related capitalized interest. The Company capitalized interest costs associated with its unproved properties totaling $10.4$8.7 million and $3.8$4.0 million for the three months ended March 31,June 30, 2018 and 2017.2017, respectively, and $19.1 million and $7.8 million for the six months ended June 30, 2018 and 2017, respectively.

The Company’s estimated annual effective income tax rates are used to allocate expected annual income tax expense or benefit to interim periods. The rates are the ratio of estimated annual income tax expense or benefit to estimated annual income or loss before income taxes by taxing jurisdiction, except for discrete items, which are significant, unusual or infrequent items for which income taxes are computed and recorded in the interim period in which the discrete item occurs. The estimated annual effective income tax rates are applied to the year-to-date income or loss before income taxes by taxing jurisdiction to determine the income tax expense or benefit allocated to the interim period. The Company updates its estimated annual effective income tax rates on a quarterly basis considering the geographic mix of the estimated annual income or loss attributable to the tax jurisdictions in which the Company operates.

The Company’s income tax expense differs from the income tax expense computed by applying the U.S. federal statutory corporate income tax rate of 21% for the three and six months ended June 30, 2018 and 35% for the three and six months ended March 31, 2018 andJune 30, 2017, respectively, to income before income taxes as follows:

Significant changes in the Company’s operations, including the ExL Acquisition in the Delaware Basin in the third quarter of 2017 and divestitures of substantially all of the Company’s assets in the Utica and Marcellus Shales in the fourth quarter of 2017 and in the Niobrara Formation in the first quarter of 2018, resulted in changes to the Company’s state apportionment for estimated state deferred tax liabilities. As a result of these changes, as well as current period activity, the Company recorded state current and deferred state income tax expense of $0.3$0.5 million primarily associated withand $0.8 million for the future Texas deferred tax liabilities.three and six months ended June 30, 2018, respectively.

On December 22, 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act (the “Act”) which made significant changes to U.S. federal income tax law, including lowering the U.S. federal statutory corporate income tax rate to 21% from 35% beginning January 1, 2018. Due to the uncertainty or diversity in views aboutregarding the application of ASC 740 in the period of enactment of the Act, the SEC issued Staff Accounting Bulletin 118 which allowed the Company to provide a provisional estimate of the impacts of the Act in its earnings for the year ended December 31, 2017 and also provided a one-year measurement period in which the Company would record additional impacts from the enactment of the Act as they are identified. As of March 31,June 30, 2018, the Company hadhas not made any changes to the provisional estimatesestimate recorded in its Consolidated Financial Statements included inearnings for the 2017 Annual Report.year ended December 31, 2017. While the Company has made a reasonable estimate of the effects on its existing deferred tax balances, it has not completed its accounting for the tax effects of the enactment of the Act and continueswill continue to analyzemonitor provisions with discrete rate impacts, such as the effects oflimitation on executive compensation for subsequent events and additional guidance provided within the Act in its consolidated financial statements and operations.one year measurement period.

Deferred tax assets are recorded for net operating losses and temporary differences between the book and tax basis of assets and liabilities expected to produce tax deductions in future periods. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those deferred tax assets would be deductible. The Company assesses the realizability of its deferred tax assets onPrimarily as a quarterly basis by considering whether it is more likely than not that all or a portionresult of the deferred tax assets will not be realized. The Company considers all available evidence (both positiveimpairments of proved oil and negative) when determining whether a valuation allowance is required. In making this assessment,gas properties recognized beginning in the third quarter of 2015 and continuing through the third quarter of 2016, the Company evaluated possible sources of taxable income that may be available to realize the deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies.

the impact of the partial release,table above for changes in the valuation allowance as of March 31, 2018 was $324.6 million. Forfor the three and six months ended March 31,June 30, 2018 and 2017, as a resultwhich primarily related to activity during each respective period and, for the three and six months ended June 30, 2017, the effect of adopting Accounting Standards Update (“ASU”) No.ASU 2016-09, Compensation - StockCompensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), the Company recognized previously unrecognized windfall tax benefits which resulted in a cumulative-effect adjustment to retained earnings of approximately $15.7 million. This adjustment increased deferred tax assets, which in turn increased the valuation allowance by the same amount as of the beginning of 2017, resulting in a net cumulative-effect adjustment to retained earnings of zero. This increase in the valuation allowance was more than offset by a partial release of $17.4 million as a result of activity during the first quarter of 2017.Accounting.

On January 31, 2018, as a result of the divestiture in the Eagle Ford Shale discussed above, the Company’s borrowing base under the senior secured revolving credit facility was reduced from $900.0 million to $830.0 million, however, the elected commitment amount remained unchanged at $800.0 million. See “Note 14. Subsequent Events” for details of

On May 4, 2018, the Company entered into the twelfth amendment that was entered intoto its credit agreement governing the revolving credit facility to, among other things, (i) establish the borrowing base at $1.0 billion, with an elected commitment amount of $900.0 million, until the next redetermination thereof, (ii) reduce the applicable margin for Eurodollar loans from 2.0%-3.0% to 1.5%-2.5%, depending on level of facility usage, (iii) amend the covenant limiting payment of dividends and distributions on equity to increase the Company’s ability to make dividends and distributions on its equity interests and (iv) amend certain other provisions, in May 2018.each case as set forth therein.

The obligations of the Company under the credit agreement are guaranteed by the Company’s material domestic subsidiaries and are secured by liens on substantially all of the Company’s assets, including a mortgage lien on oil and gas properties having at least 90% of the total value of the oil and gas properties included in the Company’s reserve report used in its most recent redetermination.

Borrowings outstanding under the credit agreement bear interest at the Company’s option at either (i) a base rate for a base rate loan plus the margin set forth in the table below, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBO rate plus 1.00%, or (ii) an adjusted LIBO rate for a Eurodollar loan plus the margin set

The Company is subject to certain covenants under the terms of the credit agreement, which include the maintenance of the following financial covenants determined as of the last day of each quarter: (1) a ratio of Total Debt to EBITDA of not more than 4.00 to 1.00 and (2) a Current Ratio of not less than 1.00 to 1.00. As defined in the credit agreement, Total Debt excludes debt premiums and debt issuance costs and is net of cash and cash equivalents, EBITDA for the fiscal quarter ended March 31, 2018 is calculated based on an annualized average of the last three fiscal quarters, and EBITDA for fiscal quarters ending thereafter will be calculated based on the last four fiscal quarters in each case after giving pro forma effect to EBITDA for material acquisitions and divestitures of oil and gas properties, and the Current Ratio includes an add back of the unused portion of lender commitments. As of March 31,June 30, 2018, the ratio of Total Debt to EBITDA was 2.602.53 to 1.00 and the Current Ratio was 1.521.49 to 1.00. Because the financial covenants are determined as of the last day of each quarter, the ratios can fluctuate significantly period to period as the level of borrowings outstanding under the credit agreement are impacted by the timing of cash flows from operations, capital expenditures, acquisitions and divestitures of oil and gas properties and securities offerings.

The credit agreement also places restrictions on the Company and certain of its subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of the Company’s common stock, redemptions of senior notes, investments, acquisitions and divestitures of oil and gas properties, mergers, transactions with affiliates, hedging transactions and other matters.

The credit agreement is subject to customary events of default, including in connection with a change in control. If an event of default occurs and is continuing, the lenders may elect to accelerate amounts due under the credit agreement (except in the case of a bankruptcy event of default, in which case such amounts will automatically become due and payable).

On January 19,During the first quarter of 2018, the Company delivered a noticeredeemed $320.0 million of redemption to the trustee foroutstanding aggregate principal amount of its 7.50% Senior Notes at a price equal to call for redemption on February 18, 2018, $100.0 million aggregate principal amount101.875% of par. Upon the outstanding 7.50% Senior Notes. On February 20, 2018,redemptions, the Company paid an aggregate redemption price of $105.1$336.9 million, which included a redemption premiumpremiums of $1.9$6.0 million as well as accrued and unpaid interest of $3.2$10.9 million from the last interest payment date up to, but not including, the redemption date. As a result of the redemption of $100.0 million of the 7.50% Senior Notes,redemptions, the Company recorded a loss on extinguishment of debt of $2.7$8.7 million, which includesincluded the redemption premiumpremiums of $6.0 million paid to redeem the notes and non-cash charges of $0.8$2.7 million attributable to the write-off of unamortized premium and debt issuance costs associated with the 7.50% Senior Notes.costs.

On January 31,May 3, 2018, the Company delivered a notice of redemption toredeemed the trustee for its 7.50% Senior Notes to call for redemption on March 2, 2018, $220.0remaining $4.4 million aggregateoutstanding principal amount of the outstanding 7.50%its 4.375% Convertible Senior Notes. On March 2, 2018,Notes due 2028 at a price equal to 100% of par. Upon redemption, the Company paid an aggregate redemption price of $231.8$4.5 million, which includes a redemption premium of $4.1 million as well asincluded accrued and unpaid interest of $7.7$0.1 million from the last interest payment date up to, but not including, the redemption date. As a result of the redemption of $220.0 million of the 7.50% Senior Notes, the Company recorded a loss on extinguishment of debt of $6.0 million, which includes the redemption premium paid to redeem the notes and non-cash charges of $1.9 million attributable to the write-off of unamortized premium and debt issuance costs associated with the 7.50% Senior Notes.

From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not currently expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.

The results of operations and financial position of the Company continue to be affected from time to time in varying degrees by domestic and foreign political developments as well as legislation and regulations pertaining to restrictions on oil and gas production, imports and exports, natural gas regulation, tax increases, environmental regulations and cancellation of contract rights. Both the likelihood and overall effect of such occurrences on the Company vary greatly and are not predictable.

On August 10, 2017, the Company closed on the issuance and sale in a private placement of (i) $250.0 million initial liquidation preference (250,000 shares) of 8.875% redeemable preferred stock, par value $0.01 per share (the “Preferred Stock”) and (ii) warrants for 2,750,000 shares of the Company’s common stock, with a term of ten years and an exercise price of $16.08 per share, exercisable only on a net share settlement basis (the “Warrants”), for a cash purchase price equal to $970.00 per share of Preferred Stock, to certain funds managed or sub-advised by GSO Capital Partners LP and its affiliates (the “GSO Funds”). The Company used the net proceeds of approximately $236.4 million, net of issuance costs to fund a portion of the purchase price for the ExL Acquisition and for general corporate purposes.

The Preferred Stock has a liquidation preference of $1,000.00 per share and bears an annual cumulative dividend rate of 8.875%, payable on March 15, June 15, September 15 and December 15 of any given year. The Company may elect to pay all or a portion of the Preferred Stock dividends in shares of its common stock in decreasing percentages as follows with respect to any preferred stock dividend declared by the Company’s Board of Directors and paid in respect of a quarter ending:

If the Company fails to satisfy the Preferred Stock dividend on the applicable dividend payment date, then the unpaid dividend will be added to the liquidation preference until paid.

The Preferred Stock outstanding is not mandatorily redeemable, but can be redeemed at the Company’s option and, in certain circumstances, at the option of the holders of the Preferred Stock. On or prior to August 10, 2018, the Company had the right to redeem up to 50,000 shares of Preferred Stock, in cash, at $1,000.00 per share, plus accrued and unpaid dividends in an amount not to exceed the sum of the cash proceeds of divestitures of oil and gas properties and related assets, the sale or issuance of the Company’s common stock and the sale of any of the Company’s wholly owned subsidiaries. On January 19,In the first quarter of 2018, the Company provided a notice to be delivered to the holders of its Preferred Stock under which it called for redemption ofredeemed 50,000 shares of Preferred Stock, representing 20% of the issued and outstanding Preferred Stock, on January 24, 2018. TheStock. Upon redemption, the Company paid $50.5 million, on January 24, 2018 upon redemption, which consisted of $1,000.00 per share of Preferred Stock redeemed, plus accrued and unpaid dividends, with a portion of the proceeds from the divestitures of oil and gas properties. See “Note 3. Acquisitions and Divestitures of Oil and Gas Properties” for further details.

In addition, at any time on or prior to August 10, 2020, the Company may redeem all or part of the Preferred Stock in cash at a redemption premium of 104.4375%, plus accrued and unpaid dividends and the present value on the redemption date of all quarterly dividends that would be payable from the redemption date through August 10, 2020. After August 10, 2020, the Company may redeem all or part of the Preferred Stock in cash at redemption premiums, as presented in the table below, plus accrued but unpaid dividends.

The holders of the Preferred Stock have the option to cause the Company to redeem the Preferred Stock under the following conditions:

For the first two conditions described above, the Company has the option to settle any such redemption in cash or shares of its common stock and the holders of the Preferred Stock may elect to revoke or reduce the redemption if the Company elects to settle in shares of common stock.

The Preferred Stock are non-voting shares except as required by the Company’s articles of incorporation or bylaws. However, so long as the GSO Funds beneficially own more than 50% of the Preferred Stock, the consent of the holders of the Preferred Stock will be required prior to issuing stock senior to or on parity with the Preferred Stock, incurring indebtedness subject to a leverage ratio, agreeing to certain restrictions on dividends on, or redemption of, the Preferred Stock and declaring or paying dividends on the Company’s common stock in excess of $15.0 million per year subject to a leverage ratio. Additionally, if the Company does not redeem the Preferred Stock before August 10, 2024, in connection with a change of control or failure to pay a quarterly dividend within three months of the applicable payment date, the holders of the Preferred Stock are entitled to additional rights including:

The Preferred Stock is presented as temporary equity and is subject to accretion from its relativein the consolidated balance sheets with the issuance date fair value at the issuance dateaccreted to the redemption value using the effective interest method. The Company reassesses the presentation of the Preferred Stock in its consolidated balance sheets on a quarterly basis.

The table below summarizes changes in the carrying amount of Preferred Stock activity for the threesix months ended March 31,June 30, 2018:

For the three months ended March 31,June 30, 2018, the Company declared and paid $4.9$4.5 million of dividends in cash. On January 24, 2018, the Company paid $0.5 million ofcash dividends to the holders of record of the Preferred Stock which was redeemed, as described above. Additionally,on June 15, 2018. For the six months ended June 30, 2018, the Company declared and paid $4.4$9.3 million of cash dividends to the holders of recordthe Preferred Stock on June 15, 2018 and March 15, 2018.

For the three and six months ended March 31,June 30, 2018, the Company recorded accretion on Preferred Stock of $0.7 million and $1.5 million, respectively.

As a result of the redemption described above, the Company recorded a loss on redemption of preferred stock of $7.1 million, which included $0.1 million of direct costs incurred as a result of the redemption and a non-cash charge of $7.0 million attributable to the difference between $50.0 million, which was the consideration transferred to the holders of the Preferred Stock of $0.8excluding accrued and unpaid dividends, and $42.9 million, which is presented withwas 20% of the dividends incarrying value of the consolidated statementsPreferred Stock on the date of income.redemption.

As of March 31, 2018, there were 318,109 common shares remaining available for grantThe Company grants equity-based incentive awards under the 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (the “2017 Incentive Plan”) and the Carrizo Oil & Gas, Inc. Cash-Settled Stock Appreciation Rights Plan (“Cash SAR Plan”). The 2017 Incentive Plan replaced the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated effective May 15, 2014 (the “Prior Incentive Plan”) and, from the effective date of the 2017 Incentive Plan, no further awards may be granted under the Prior Incentive Plan. However, awards previously granted under the Prior Incentive Plan will remain outstanding in accordance with their terms. Under the 2017 Incentive Plan, the Company can grant restricted stock awards and units, stock appreciation rights that can be settled in shares of common stock or cash at the option of the Company, performance shares, stock options, and cash awards to employees, independent contractors, and non-employee directors. Under the Cash SAR Plan, the Company can grant stock appreciation rights that may only be settled in cash (“Cash SARs”) to employees and independent contractors.

The 2017 Incentive Plan provides that up to 2,675,000 shares of the Company’s common stock, plus the shares remaining available for awards under the Prior Incentive Plan at the effective date of the 2017 Incentive Plan, may be issued (the “Maximum Share Limit”). Each restricted stock award, restricted stock unit, or performance share granted under the 2017 Incentive Plan counts as

1.35 shares while aagainst the Maximum Share Limit. Each stock option or stock-settledand stock appreciation right to be settled in shares of common stock (“Stock SAR”) granted under the 2017 Incentive Plan counts as 1.00 share against the numberMaximum Share Limit. Each stock appreciation right to be settled in shares of common stock or cash (“Incentive SAR”) granted under the 2017 Incentive Plan counts as 1.00 share against the Maximum Share Limit up to the date the Company, if it so chooses, affirmatively elects to settle the stock appreciation right in cash. Each stock appreciation right to be settled in cash (“Incentive Cash SAR”) granted under the 2017 Incentive Plan or Cash SAR does not count against the Maximum Share Limit. As of June 30, 2018, there were 326,774 common shares remaining available for grant under the 2017 Incentive Plan.

The table below summarizes restricted stock award and unit activity for the threesix months ended March 31,June 30, 2018:

During the first quarter ofsix months ended June 30, 2018, the Company granted 1,348,415 restricted stock awards and units primarily consisting of 1,343,412 restricted stock units to employees and independent contractors with a grant date fair value of $19.7 million as part of its annual grant of long-term equity incentive awards.awards during the first quarter of 2018. These restricted stock units had a grant date fair value of $19.7 million and will vest ratably over a three-year period.

The table below summarizes the activity for SARs for the threesix months ended March 31,June 30, 2018:

During the first quarter ofsix months ended June 30, 2018, the Company granted 616,686 SARs under the 2017 Incentive Plan with a grant date fair value of $4.9 millionCash SARs to certain employees and independent contractors, all of which occurred in the first quarter of 2018 as part of itsthe Company’s annual grant of long-term equity incentive awards. These Incentive Cash SARs will vest ratably over a three-year period and expire approximately seven years from the grant date.

The grant date fair value of the Incentive Cash SARs, calculated using the Black-Scholes-Merton option pricing model, was $4.9 million. The following table summarizes the assumptions used to calculate the grant date fair value of the Incentive Cash SARs granted during the threesix months ended March 31,June 30, 2018:

The Company recognized the following stock-based compensation expense, net for the periods indicated:three and six months ended June 30, 2018 and 2017:

The Company uses commodity derivative instruments to reduce its exposure to commodity price volatility for a portion of its forecasted crude oil, NGL, and natural gas production and thereby achieve a more predictable level of cash flows to support the Company’s drilling, completion, and infrastructure capital expenditure program. program and fixed costs.

The Company does not enter into derivative instruments for speculative or trading purposes. The Company’s commodity derivative instruments consist of fixed price swaps, basis swaps, three-way collars, basis swaps, and purchased and sold call options, which are described below.

The following table sets forth a summary of the Company’s outstanding crude oil derivative positions as of June 30, 2018 at weighted average contract prices as of March 31, 2018:prices:

The following table sets forth a summary of the Company’s outstanding NGL derivative positions as of June 30, 2018 at weighted average contract prices as of March 31, 2018:prices:

The following table sets forth a summary of the Company’s outstanding natural gas derivative positions as of June 30, 2018 at weighted average contract prices as of March 31, 2018:prices:

The Company typically has numerous hedge positions that span several time periods and often result in both fair valuecommodity derivative asset and liability positions held with that counterparty. The Company nets its commodity derivative instrument fair values executed with the same counterparty, along with deferred premium obligations, to a single asset or liability pursuant to ISDA master agreements, which provide for net settlement over the term of the contract and in the event of default or termination of the contract.

Counterparties to the Company’s commodity derivative instruments who are also lenders under the Company’s credit agreement (“Lender Counterparty”) allow the Company to satisfy any need for margin obligations associated with commodity derivative instruments where the Company is in a net liability position with its counterpartiesthe Lender Counterparty with the collateral securing the credit agreement, thus eliminating the need for independent collateral posting. Counterparties to the Company’s commodity derivative instruments who are not lenders under the Company’s credit agreement (“Non-Lender Counterparty”) can require commodity derivative contracts to be novated to a lender ifinstruments where the Company’s net liability position exceeds the Company’s unsecured credit limit with that counterpartythe Non-Lender Counterparty to be novated to a Lender Counterparty and therefore do not require the posting of cash collateral.

Because the counterparties haveeach Lender Counterparty has an investment grade credit ratings, orrating and the Company has obtained guaranteesa guaranty from the applicable counterparty’seach Non-Lender Counterparty’s parent company which has an investment grade parent company,credit rating, the Company believes it does not have significant credit risk and accordingly does not currently require its counterparties to post collateral to support the net asset positions of its commodity derivative instruments. Although the Company does not currently anticipate nonperformance from its counterparties, it continually monitors the credit ratings of its counterpartieseach Lender Counterparty and its counterparty’seach Non-Lender Counterparty’s parent company, as applicable.company.