Infinity Natural Resources Q3FY27 Results: Derivative loss hits $64.4 million
- Total derivative loss of $64.4 million recorded for Q3 2026
- Non-cash mark-to-market unrealized losses accounted for $63.2 million of the total
- Realized cash settlements contributed only $1.2 million to the loss
- Oil swap portfolio shows negative fair value of $44.6 million vs positive $36.8 million for NYMEX gas
*this image is generated using AI for illustrative purposes only.
Infinity Natural Resources Inc reported a total derivative loss of $64.4 million for the third quarter ended September 30, 2026. The significant negative impact was primarily driven by non-cash mark-to-market unrealized losses of $63.2 million on its outstanding commodity hedge portfolio.
Realized cash settlements associated with settled derivative contracts accounted for only $1.2 million of the total loss. These settlements were tied to financial contracts referencing crude oil, natural gas, natural gas liquids (NGLs), and regional basis differentials. The company stated that these contracts were entered into pursuant to its board-approved hedging strategy.
Breakdown of Derivative Positions
The majority of the unrealized loss stems from the revaluation of open positions using prevailing forward commodity price curves at the end of the reporting period. The following table summarizes the fair value of open oil and gas swaps scheduled to settle after September 30, 2026.
| Commodity | Year | Volume | Weighted Avg Price | Fair Value ($ thousands) |
|---|---|---|---|---|
| Oil (WTI) Swaps | 2026 | 801 MBbls | $63.71/Bbl | (19,499) |
| Oil (WTI) Swaps | 2027 | 1,710 MBbls | $65.08/Bbl | (24,170) |
| Oil (WTI) Swaps | 2028 | 884 MBbls | $70.87/Bbl | (932) |
| Oil (WTI) Total | - | 3,395 MBbls | - | (44,601) |
| Natural Gas (NYMEX) | 2026 | 8,886,000 MMBtu | $4.31/MMBtu | 9,903 |
| Natural Gas (NYMEX) | 2027 | 44,334,000 MMBtu | $3.91/MMBtu | 31,781 |
| Natural Gas (NYMEX) | 2028 | 35,370,000 MMBtu | $3.76/MMBtu | 1,019 |
| Natural Gas (NYMEX) | 2029 | 29,970,000 MMBtu | $3.61/MMBtu | (2,961) |
| Natural Gas (NYMEX) | 2030 | 26,310,000 MMBtu | $3.56/MMBtu | (2,931) |
| Natural Gas (NYMEX) Total | - | 144,870,000 MMBtu | - | 36,811 |
What the Numbers Show
A clear divergence exists between the company's oil and natural gas hedging outcomes as of September 30, 2026. While the oil swap portfolio carries a substantial negative fair value of $44.6 million, indicating that current market prices are significantly above the weighted average hedge prices of $63.71–$70.87 per barrel, the natural gas (NYMEX) portfolio shows a positive fair value of $36.8 million. This suggests that forward natural gas prices have fallen below Infinity's locked-in hedge prices of $3.56–$4.31 per MMBtu, providing an offsetting asset value on the balance sheet despite the overall net derivative loss reported in the quarter.
Portfolio Composition
The company also holds fixed basis and basis differential hedges for natural gas, which currently show negative fair values totaling approximately $17.3 million combined. NGL hedges contribute another $14.8 million in negative fair value. The table below details the remaining natural gas and NGL positions.
| Instrument | Year | Volume | Weighted Avg Price | Fair Value ($ thousands) |
|---|---|---|---|---|
| Nat Gas (Fixed Basis) | 2026 | 4,296,000 MMBtu | $3.12/MMBtu | 4,567 |
| Nat Gas (Fixed Basis) | 2027 | 10,372,000 MMBtu | $2.96/MMBtu | 4,922 |
| Nat Gas (Basis) | 2026 | 13,641,000 MMBtu | $(0.96)/MMBtu | (1,950) |
| Nat Gas (Basis) | 2027 | 29,537,000 MMBtu | $(0.62)/MMBtu | (3,766) |
| Nat Gas (Basis) | 2028 | 33,086,250 MMBtu | $(0.51)/MMBtu | (2,153) |
| NGLs | 2026 | 620 MBbls | $35.89/Bbl | (5,962) |
| NGLs | 2027 | 1,645 MBbls | $33.68/Bbl | (8,396) |
| NGLs | 2028 | 84 MBbls | $57.96/Bbl | (408) |
These figures are preliminary and unaudited. Final results will be reported in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2026.
How might the significant divergence between oil and natural gas hedge valuations influence Infinity Natural Resources' future hedging strategy and risk management adjustments?
What impact could the $44.6 million negative fair value in oil swaps have on the company's reported earnings and cash flow projections for the upcoming quarters?
Given the positive fair value in the natural gas portfolio, is Infinity likely to unwind these profitable positions to offset losses elsewhere, or will they hold until settlement?
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