INFINITY NATURAL RESOURCES, INC.INR
INFINITY NATURAL RESOURCES, INC. Fair Value Disclosure
Fair Value Measurements
Certain of our assets and liabilities are measured at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we use market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.
The carrying values of cash and cash equivalents, including accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value due to their short-term nature. The carrying value of outstanding borrowings under the Credit Facility approximates fair value because the interest rates are variable and reflective of market rates. The estimated fair value of borrowings under the Credit Facility would be categorized as a Level 2 measurement within the fair value hierarchy.
We follow ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
•Level 1: Quoted Prices in Active Markets for Identical Assets - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2: Significant Other Observable Inputs - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets (other than quoted prices included within Level 1), and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3: Significant Unobservable Inputs - inputs to the valuation methodology are unobservable but should reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk (consistent with the fair value measurement objective).
Recurring Fair Value Measurements
The following table presents, for each applicable level within the fair value hierarchy, our net derivative assets and liabilities, including both current and noncurrent portions, measured at fair value on a recurring basis.
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Fixed price swaps | $ | — | $ | 33,079 | $ | — | $ | 33,079 | |||||||||||||||
| Basis swaps | — | 349 | — | 349 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Fixed price swaps | — | — | — | — | |||||||||||||||||||
| Basis swaps | — | (10,172) | — | (10,172) | |||||||||||||||||||
| Total | $ | — | $ | 23,256 | $ | — | $ | 23,256 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Fixed price swaps | $ | — | $ | 4,012 | $ | — | $ | 4,012 | |||||||||||||||
Basis swaps | — | — | — | — | |||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Fixed price swaps | — | (13,685) | — | (13,685) | |||||||||||||||||||
Basis swaps | — | (13,263) | — | (13,263) | |||||||||||||||||||
Total | $ | — | $ | (22,938) | $ | — | $ | (22,938) | |||||||||||||||
Derivative assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. We have classified our derivative instruments into levels depending upon the data utilized to determine their fair values. The Company uses industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, implied market volatility, time value, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data. As such, the Company classifies the fair value of its commodity derivative contract within Level 2 of the fair value hierarchy.
Nonrecurring Fair Value Measurements
Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances. These assets and liabilities can include asset retirement obligations when incurred and other long-lived assets that are written down to fair value when they are impaired. The Company did not record any impairment charge related to these assets and liabilities for the years ended December 31, 2025 and December 31, 2024.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.