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What changed in Amplify Energy Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Amplify Energy Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+337 added−365 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-09)

Top changes in Amplify Energy Corp.'s 2023 10-K

337 paragraphs added · 365 removed · 266 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

109 edited+38 added−38 removed204 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.” 18 Table of Contents The following tables summarize our average net production, average unhedged sales prices by product and average lease operating cost expense per Boe by geographic region for the years ended December 31, 2022 and 2021, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2022 ​ ​ Oil ​ NGLs ​ Natural Gas ​ Total ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Lease ​ ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Operating ​ ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Expense ​ ​ (MBbls) ​ ($/Bbl) ​ (MBbls) ​ ($/Bbl) ​ (MMcf) ​ ($/Mcf) ​ (MBoe) ​ ($/Boe) ​ ($/Boe) Oklahoma 488 $ 95.10 660 $ 31.57 7,343 $ 7.00 2,371 $ 50.00 $ 9.11 Rockies (Bairoil) 1,325 ​ 88.52 — ​ — — ​ — 1,325 ​ 88.52 ​ 39.17 Southern California (Beta) (1) 18 ​ 77.55 — ​ — — ​ — 18 ​ 77.55 ​ 1,524.98 East Texas/ North Louisiana 175 ​ 93.55 680 ​ 36.61 15,367 ​ 6.16 3,416 ​ 39.78 ​ 6.97 Eagle Ford (Non-Op) 321 ​ 96.87 49 ​ 33.69 283 ​ 6.36 418 ​ 82.82 ​ 15.97 Total 2,327 ​ $ 91.34 1,389 ​ $ 34.11 22,993 ​ $ 6.43 7,548 ​ $ 54.02 ​ $ 17.45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average net production (MBoe/d) ​ ​ ​ 20.7 ​ ​ (1) On October 2, 2021, the Beta field was shut-in after the Incident and therefore the table above reflects minimal activity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2021 ​ ​ Oil ​ NGLs ​ Natural Gas ​ Total ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Lease ​ ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Operating ​ ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Expense ​ (MBbls) ($/Bbl) (MBbls) ($/Bbl) (MMcf) ($/Mcf) (MBoe) ($/Boe) ($/Boe) Oklahoma 517 ​ $ 66.63 659 ​ $ 27.68 7,246 ​ $ 2.98 2,381 ​ $ 31.21 ​ $ 6.90 Rockies (Bairoil) 1,336 ​ 62.20 — ​ — — ​ — 1,336 ​ ​ 62.20 ​ ​ 32.64 Southern California (Beta) (1) 996 ​ 61.77 — ​ — — ​ — 996 ​ 61.77 ​ 37.50 East Texas/ North Louisiana 169 ​ 64.88 719 ​ 29.41 16,268 ​ 3.67 3,599 ​ 25.49 ​ 5.23 Eagle Ford (Non-Op) 333 ​ 67.25 52 ​ 29.11 294 ​ 3.90 435 ​ 57.68 ​ 11.93 Total 3,351 ​ $ 63.43 1,430 ​ $ 28.62 23,808 ​ $ 3.46 8,747 ​ $ 38.39 ​ $ 13.88 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average net production (MBoe/d) ​ ​ ​ ​ 24.0 ​ ​ (1) On October 2, 2021, the Beta field was shut-in after the Incident and therefore the table above reflects only nine months of activity.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.” 17 Table of Contents The following tables summarize our average net production, average unhedged sales prices by product and average lease operating cost expense per Boe by geographic region for the years ended December 31, 2023 and 2022, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ Oil ​ NGLs ​ Natural Gas ​ Total ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Lease ​ ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Operating ​ ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Expense ​ ​ (MBbls) ​ ($/Bbl) ​ (MBbls) ​ ($/Bbl) ​ (MMcf) ​ ($/Mcf) ​ (MBoe) ​ ($/Boe) ​ ($/Boe) Oklahoma 426 $ 76.14 602 $ 21.48 6,706 $ 2.95 2,145 $ 30.36 $ 9.25 Bairoil 1,199 ​ 72.15 — ​ — — ​ — 1,199 ​ 72.15 ​ 41.34 Beta (1) 679 ​ 75.31 — ​ — — ​ — 679 ​ 75.31 ​ 57.02 East Texas/ North Louisiana 157 ​ 75.05 681 ​ 23.08 13,359 ​ 2.46 3,065 ​ 19.67 ​ 8.12 Eagle Ford 312 ​ 76.29 40 ​ 19.47 232 ​ 2.52 391 ​ 64.44 ​ 16.82 Total 2,773 ​ $ 74.17 1,323 ​ $ 22.24 20,297 ​ $ 2.62 7,479 ​ $ 38.54 ​ $ 18.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average net production (MBoe/d) ​ ​ ​ 20.5 ​ ​ (1) The Beta field restarted production in April 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2022 ​ ​ Oil ​ NGLs ​ Natural Gas ​ Total ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Lease ​ ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Production ​ Sales ​ Operating ​ ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Volumes ​ Price ​ Expense ​ (MBbls) ($/Bbl) (MBbls) ($/Bbl) (MMcf) ($/Mcf) (MBoe) ($/Boe) ($/Boe) Oklahoma 488 ​ $ 95.10 660 ​ $ 31.57 7,343 ​ $ 7.00 2,371 ​ $ 50.00 ​ $ 9.11 Bairoil 1,325 ​ 88.52 — ​ — — ​ — 1,325 ​ ​ 88.52 ​ ​ 39.17 Beta (1) 18 ​ 77.55 — ​ — — ​ — 18 ​ 77.55 ​ 1,524.98 East Texas/ North Louisiana 175 ​ 93.55 680 ​ 36.61 15,367 ​ 6.16 3,416 ​ 39.78 ​ 6.97 Eagle Ford 321 ​ 96.87 49 ​ 33.69 283 ​ 6.36 418 ​ 82.82 ​ 15.97 Total 2,327 ​ $ 91.34 1,389 ​ $ 34.11 22,993 ​ $ 6.43 7,548 ​ $ 54.02 ​ $ 17.45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average net production (MBoe/d) ​ ​ ​ ​ 20.7 ​ ​ (1) On October 2, 2021, the Beta field was shut-in after the Incident and therefore the table above reflects minimal activity.
Brooker graduated with honors from the University of Texas at Austin in 1989 with a Bachelor of Science degree in Petroleum Engineering and is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers and the Society of Petroleum Evaluation Engineers.
Brooker graduated with honors from the University of Texas at Austin in 1989 with a Bachelor of Science degree in Petroleum Engineering and is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers.
We consider competitive market compensation paid by our peers and other companies comparable to us in size, geographic location and operations in order to ensure compensation remains competitive and fulfills our goal of recruiting and retaining talented employees. Training and Development We are committed to the training and development of our employees.
We consider competitive market compensation paid by our peers and other companies comparable to us in size, geographic location and operations in order to ensure our compensation remains competitive and fulfills our goal of recruiting and retaining talented employees. Training and Development We are committed to the training and development of our employees.
In October 2020, BOEM and BSEE issued a proposed rule to clarify, streamline, and provide greater transparency to financial assurance requirements for the oil and gas industry, including streamlining the evaluation criteria for determining if and when additional security is required for Outer Continental Shelf (“OCS”) leases, pipeline rights-of-way and rights-of-use and easement and revising the process for issuing decommissioning obligations for facilities on the OCS.
In October 2020, BOEM and BSEE issued a proposed rule to clarify, streamline, and provide greater transparency to financial assurance requirements for the oil and gas industry, including streamlining the evaluation criteria for determining if and when additional security is required for Outer Continental Shelf (“OCS”) leases, pipeline rights-of-way and rights-of-use and easement (“RUE”) and revising the process for issuing decommissioning obligations for facilities on the OCS.
In addition, the long-term trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment and thus, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to our operations. 23 Table of Contents Under certain environmental laws that impose strict as well as joint and several liability, we may be required to remediate contaminated properties currently or formerly owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from our own actions that were in compliance with all applicable laws at the time those actions were taken.
In addition, the long-term trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment and thus, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to our operations. 22 Table of Contents Under certain environmental laws that impose strict as well as joint and several liability, we may be required to remediate contaminated properties currently or formerly owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from our own actions that were in compliance with all applicable laws at the time those actions were taken.
Qualifications of Responsible Technical Persons Internal Engineers . Tony Lopez is the technical person at the Company, primarily responsible for overseeing and providing oversight of the preparation of the reserves estimates with our third-party reserve engineers. 16 Table of Contents Mr. Lopez has over 16 years of corporate reserve reporting experience. Mr.
Qualifications of Responsible Technical Persons Internal Engineers . Tony Lopez is the technical person at the Company, primarily responsible for overseeing and providing oversight of the preparation of the reserves estimates with our third-party reserve engineers. 15 Table of Contents Mr. Lopez has over 16 years of corporate reserve reporting experience. Mr.
The adoption and implementation of any regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas we produce.
The adoption and implementation of any new regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas we produce.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commodity Derivative Contracts.” 17 Table of Contents (3) PV-10 is a non-GAAP financial measure and represents the year end present value of estimated future cash inflows from proved oil and natural gas reserves, less future development and operating costs, discounted at 10% per annum to reflect the timing of future cash flows and using SEC prescribed pricing assumptions for the period.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commodity Derivative Contracts.” 16 Table of Contents (3) PV-10 is a non-GAAP financial measure and represents the year end present value of estimated future cash inflows from proved oil and natural gas reserves, less future development and operating costs, discounted at 10% per annum to reflect the timing of future cash flows and using SEC prescribed pricing assumptions for the period.
The proposed rule would make the existing regulations in Subpart OOOOa more stringent and create a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).
The proposed rule sought to make the existing regulations in Subpart OOOOa more stringent and create a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).
For example, the California Department of Fish and Wildlife’s Office of Oil Spill Prevention and Response has adopted oil-spill prevention regulations that overlap with federal regulations. 25 Table of Contents We also generate solid wastes, including hazardous wastes, which are subject to the requirements of the Resource Conservation and Recovery Act, as amended (“RCRA”), and comparable state statutes.
For example, the California Department of Fish and Wildlife’s Office of Oil Spill Prevention and Response has adopted oil-spill prevention regulations that overlap with federal regulations. 24 Table of Contents We also generate solid wastes, including hazardous wastes, which are subject to the requirements of the Resource Conservation and Recovery Act, as amended (“RCRA”), and comparable state statutes.
Most recently, at the 27th conference of parties (“COP27”), President Biden announced the EPA’s proposed standards to reduce methane emissions from existing oil and gas sources, and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
At the 27th conference of parties (“COP27”), President Biden announced the EPA’s proposed standards to reduce methane emissions from existing oil and gas sources, and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
Hydraulic Fracturing We use hydraulic fracturing as a means to maximize the productivity of almost every well that we drill and complete, except in our offshore wells. Hydraulic fracturing is a necessary part of the completion process because our properties are dependent upon our ability to effectively fracture the producing formations in order to produce at economic rates.
Hydraulic Fracturing Hydraulic fracturing is used as a means to maximize the productivity of almost every well that we drill and complete, except in our offshore wells. Hydraulic fracturing is a necessary part of the completion process because our properties are dependent upon our ability to effectively fracture the producing formations in order to produce at economic rates.
This is an energy content correlation and does not reflect a value or price relationship between the commodities . (2) The average reserve-to-production ratio is calculated by dividing estimated net proved reserves as of December 31, 2022 by the annualized average net production for the three months ended December 31, 2022.
This is an energy content correlation and does not reflect a value or price relationship between the commodities . (2) The average reserve-to-production ratio is calculated by dividing estimated net proved reserves as of December 31, 2023 by the annualized average net production for the three months ended December 31, 2023.
We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 30% -75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time.
We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 50% − 75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time.
We maintain all required discharge permits necessary to conduct our operations and we believe we are in substantial compliance with their terms. 26 Table of Contents In addition, in some instances, the operation of underground injection wells for the disposal of wastewater has been alleged to cause earthquakes.
We maintain all required discharge permits necessary to conduct our operations and we believe we are in substantial compliance with their terms. 25 Table of Contents In addition, in some instances, the operation of underground injection wells for the disposal of wastewater has been alleged to cause earthquakes.
Texas has also imposed requirements for drilling, putting pipe down and cementing wells, and testing and reporting requirements. 27 Table of Contents Certain governmental reviews have been conducted that focus on environmental aspects of hydraulic fracturing practices, which could lead to increased regulation.
Texas has also imposed requirements for drilling, putting pipe down and cementing wells, and testing and reporting requirements. 26 Table of Contents Certain governmental reviews have been conducted that focus on environmental aspects of hydraulic fracturing practices, which could lead to increased regulation.
Operations General As of December 31, 2022, the Company is the operator of record of properties containing 92% of our total estimated proved reserves. We design and manage the development, recompletion and/or workover operations, and supervise other operation and maintenance activities for all of the wells we operate.
Operations General As of December 31, 2023, the Company is the operator of record of properties containing 92% of our total estimated proved reserves. We design and manage the development, recompletion and/or workover operations, and supervise other operation and maintenance activities for all of the wells we operate.
Most states, and some counties and municipalities, in which we operate also regulate one or more of the following: ● the location of wells; ● the method of drilling and casing wells; ● the surface use and restoration of properties upon which wells are drilled; ● the plugging and abandoning of wells; ● transportation of materials and equipment to and from our well sites and facilities; ● transportation and disposal of produced fluids and natural gas; and ● notice to surface owners and other third parties.
Most states, and some counties and municipalities, in which we operate also regulate one or more of the following: 31 Table of Contents ● the location of wells; ● the method of drilling and casing wells; ● the surface use and restoration of properties upon which wells are drilled; ● the plugging and abandoning of wells; ● transportation of materials and equipment to and from our well sites and facilities; ● transportation and disposal of produced fluids and natural gas; and ● notice to surface owners and other third parties.
None of our proved undeveloped reserves as of December 31, 2022 are scheduled to be developed on a date more than five years from the date the reserves were initially booked as PUDs. PUDs will be converted from undeveloped to developed as the applicable wells begin production.
None of our proved undeveloped reserves as of December 31, 2023 are scheduled to be developed on a date more than five years from the date the reserves were initially booked as PUDs. PUDs will be converted from undeveloped to developed as the applicable wells begin production.
As a result, the final form and timing of the implementation of the new regulatory regime affecting commodity derivatives remains uncertain. In particular, on October 18, 2011, the CFTC adopted final rules under the Dodd-Frank Act establishing position limits for certain energy commodity futures and options contracts and economically equivalent swaps, futures and options.
As a result, the final form and timing of the implementation of the new regulatory regime affecting commodity derivatives remains uncertain. 33 Table of Contents In particular, on October 18, 2011, the CFTC adopted final rules under the Dodd-Frank Act establishing position limits for certain energy commodity futures and options contracts and economically equivalent swaps, futures and options.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by EPA. On November 15, 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
In addition, the proposed rule sought to establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
On a third platform, Elly, the oil, water and gas are separated, and the oil is prepared for sale, while the gas is burned as fuel for power and the water is recycled back into the reservoir for pressure maintenance.
On a third platform, Elly, the oil, water and gas are separated, and the oil is prepared for sale, while the gas is utilized as fuel for power and the water is recycled back into the reservoir for pressure maintenance.
In October 2021, the Council on Environmental Quality issued a notice of proposed rulemaking to amend the NEPA regulatory changes adopted in 2020 in two phases. Phase 1 of the Council on Environmental Quality’s proposed rulemaking process was finalized on April 20, 2022, and generally restored provisions that were in effect prior to 2020.
In October 2021, the Council on Environmental Quality issued a notice of proposed rulemaking to amend the NEPA regulatory changes adopted in 2020 in two phases. Phase I of the Council on Environmental Quality’s proposed rulemaking process was finalized in April 2022, and generally restored provisions that were in effect prior to 2020.
Certain reporting requirements arising from the new PHMSA rule took effect in 2022, with additional requirements taking effect later in 2023. 33 Table of Contents Moreover, effective April 2017, the PHMSA adopted new rules increasing the maximum administrative civil penalties for violation of the pipeline safety laws and regulations.
Certain reporting requirements arising from the new PHMSA rule took effect in 2022, with additional requirements taking effect later in 2023. Moreover, effective April 2017, the PHMSA adopted new rules increasing the maximum administrative civil penalties for violation of the pipeline safety laws and regulations.
Longshore and Harbor Workers ’ ; · Employment Practices Liability; · Energy Package/Control of Well; · Crime; and · Loss of Production Income; · Fiduciary Liability. · Cybersecurity ​ ​ We continuously monitor regulatory changes and comments and consider their impact on the insurance market, along with and our overall risk profile.
Longshore and Harbor Workers’; · Employment Practices Liability; · Energy Package/Control of Well; · Crime; and · Loss of Production Income; · Fiduciary Liability. · Cybersecurity; ​ ​ We continuously monitor regulatory changes and comments and consider their impact on the insurance market, along with and our overall risk profile.
Our employees are able to attend training seminars and off-site workshops or to join professional associations that will enable them to remain up-to-date on the latest changes and best practices in their respective fields. Diversity and Inclusion We are committed to providing a diverse and inclusive workplace and career development opportunities to attract and retain talented employees.
Our employees are able to attend training seminars and off-site workshops or to join professional associations that will enable them to remain up-to-date on the latest changes and best practices in their respective fields. 35 Table of Contents Diversity and Inclusion We are committed to providing a diverse and inclusive workplace and career development opportunities to attract and retain talented employees.
Authorizations under NEPA also are subject to protest, appeal or litigation, which can delay or halt projects. Endangered Species Act and Migratory Bird Treaty Act The federal ESA and analogous state statutes restrict activities that may adversely affect endangered and threatened species or their habitat. In August 2019, the U.S.
Authorizations under NEPA also are subject to protest, appeal or litigation, which can delay or halt projects. 30 Table of Contents Endangered Species Act and Migratory Bird Treaty Act The federal ESA and analogous state statutes restrict activities that may adversely affect endangered and threatened species or their habitat. In August 2019, the U.S.
In addition to these programs, we have several other programs designed to further promote the health and wellness of our employees, as well as an employee assistance program that offers counseling and referral services for a broad range of personal and family situations. The success of our business is fundamentally connected to the safety and well-being of our employees.
In addition to these programs, we have several other programs designed to further promote the health and wellness of our employees, including, among others, an employee assistance program that offers counseling and referral services for a broad range of personal and family situations. The success of our business is fundamentally connected to the safety and well-being of our employees.
(“Amplify Energy,” the “Company”, “we,” “us”, “our,” or similar terms), is a publicly traded Delaware corporation, in which our common stock is listed on the NYSE under the symbol “AMPY.” Overview Amplify Energy is an independent oil and natural gas company engaged in the acquisition, development, exploitation and production of oil and natural gas properties.
(“Amplify Energy,” the “Company,” “we,” “us,” “our,” or similar terms), is a publicly traded Delaware corporation, in which our common stock is listed on the NYSE under the symbol “AMPY.” Overview Amplify Energy is an independent oil and natural gas company engaged in the acquisition, development, exploitation and production of oil and natural gas properties.
The Outer Continental Shelf Lands Act requires that all pipelines operating on or across the OCS provide open access, non-discriminatory transportation service. BOEM/BSEE has established formal and informal complaint procedures for shippers that believe they have been denied open and non-discriminatory access to transportation on the OCS. The U.S.
The Outer Continental Shelf Lands Act requires that all pipelines operating on or across the OCS provide open access, non-discriminatory transportation service. BOEM/BSEE has established formal and informal complaint procedures for shippers that believe they have been denied open and non-discriminatory access to transportation on the OCS. 32 Table of Contents The U.S.
Under these regulations, in 2016 and 2017, the OCC ordered us to limit the volume of saltwater disposed of in saltwater disposal wells in the Arbuckle formation, and it established caps for ten of our saltwater disposal wells in February 2017, which caps are still in place.
Under these regulations, the OCC ordered us to limit the volume of saltwater disposed of in saltwater disposal wells in the Arbuckle formation, and it established caps for ten of our saltwater disposal wells, which caps are still in place.
We may, however, from time to time, hedge more or less than this approximate amount. Periodically, we enter into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates (such as those in our Revolving Credit Facility) to fixed interest rates.
We may, however, from time to time, hedge more or less than this approximate amount. 20 Table of Contents Periodically, we enter into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates (such as those in our Revolving Credit Facility) to fixed interest rates.
The following table sets forth information as of December 31, 2022 relating to our leasehold acreage. ​ ​ ​ ​ ​ ​ Region ​ Developed Acreage (1) ​ Gross (2) Net (3) Oklahoma 112,221 94,464 Rockies (Bairoil) 6,653 6,653 Southern California (Beta) 17,280 17,280 East Texas/ North Louisiana 243,101 181,460 Eagle Ford (Non-Op) 14,167 811 Total 393,422 300,668 (1) Developed acres are acres spaced or assigned to productive wells or wells capable of production.
The following table sets forth information as of December 31, 2023 relating to our leasehold acreage. ​ ​ ​ ​ ​ ​ Region ​ Developed Acreage (1) ​ Gross (2) Net (3) Oklahoma 112,221 94,464 Bairoil 6,653 6,653 Beta 17,280 17,280 East Texas/ North Louisiana 243,101 181,460 Eagle Ford 14,167 811 Total 393,422 300,668 (1) Developed acres are acres spaced or assigned to productive wells or wells capable of production.
Our assets consist primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (Bairoil), federal waters offshore Southern California (Beta), East Texas/North Louisiana, and Eagle Ford (Non-op). Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs.
Our assets consist primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (“Bairoil”), federal waters offshore Southern California (“Beta”), East Texas/North Louisiana, and Eagle Ford (Non-op). Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs.
At December 31, 2022, 9 gross (0.5 net) wells were in various stages of completion. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2021 ​ Gross Net Gross Net Development wells: ​ ​ ​ ​ Productive 27.0 1.1 36.0 1.0 Dry 1 0.1 — — Exploratory wells: Productive — — — — Dry — — — — Total wells: Productive 27.0 1.1 36.0 1.0 Dry 1.0 0.1 — — Total 28.0 1.2 36.0 1.0 ​ 20 Table of Contents Delivery Commitments We have no commitments to deliver a fixed and determinable quantity of our oil or natural gas production in the near future under our existing sales contracts.
At December 31, 2023, we had no wells that were in various stages of completion. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2022 ​ Gross Net Gross Net Development wells: ​ ​ ​ ​ Productive 9.0 0.5 27.0 1.1 Dry — — 1 0.1 Exploratory wells: Productive — — — — Dry — — — — Total wells: Productive 9.0 0.5 27.0 1.1 Dry — — 1.0 0.1 Total 9.0 0.5 28.0 1.2 ​ 19 Table of Contents Delivery Commitments We have no commitments to deliver a fixed and determinable quantity of our oil or natural gas production in the near future under our existing sales contracts.
Our Eagle Ford properties contained 2.9 MMBoe of estimated net proved reserves as of December 31, 2022 based on our reserve report. Those properties collectively generated average net production of 1.1 MBoe/d for the three months ended December 31, 2022. Our Oil and Natural Gas Data Our Reserves Internal Controls.
Our Eagle Ford properties contained 2.5 MMBoe of estimated net proved reserves as of December 31, 2023 based on our reserve report. Those properties collectively generated average net production of 0.9 MBoe/d for the three months ended December 31, 2023. Our Oil and Natural Gas Data Our Reserves Internal Controls.
Some of those laws relate to resource conservation and equal employment opportunity. We do not believe that compliance with these laws will have a material adverse effect on us. Human Capital Overview At December 31, 2022, the Company had 208 employees, none of whom were represented by labor unions or covered by any collective bargaining agreement.
Some of those laws relate to resource conservation and equal employment opportunity. We do not believe that compliance with these laws will have a material adverse effect on us. 34 Table of Contents Human Capital Overview On December 31, 2023, the Company had 214 employees, none of whom were represented by labor unions or covered by any collective bargaining agreement.
All of our current development and production activities, as well as proposed development plans, on federal lands, including those in the Pacific Ocean, require governmental permits that are subject to the requirements of NEPA. This environmental review process has the potential to delay the development of oil and natural gas projects.
A final rule is expected in April 2024. All of our current development and production activities, as well as proposed development plans, on federal lands, including those in the Pacific Ocean, require governmental permits that are subject to the requirements of NEPA. This environmental review process has the potential to delay the development of oil and natural gas projects.
Marketing and Major Customers The following individual customers each accounted for 10% or more of our total reported revenues for the period indicated: ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2022 2021 Major customers: ​ HF Sinclair Corporation (formerly: Sinclair Oil & Gas Company) 23 % 20 % Southwest Energy LP 13 % n/a % Koch Energy Services, LLC ​ 13 % n/a % Phillips 66 n/a % 19 % ETC Texas Pipeline LTD ​ n/a % 12 % ​ The production sales agreements covering our properties contain customary terms and conditions for the oil and natural gas industry and provide for sales based on prevailing market prices.
Marketing and Major Customers The following individual customers each accounted for 10% or more of our total reported revenues for the period indicated: ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2023 2022 Major customers: ​ HF Sinclair Corporation (formerly: Sinclair Oil & Gas Company) 24 % 23 % Southwest Energy LP 13 % 13 % Phillips 66 ​ 17 % n/a % Koch Energy Services, LLC n/a % 13 % ​ The production sales agreements covering our properties contain customary terms and conditions for the oil and natural gas industry and provide for sales based on prevailing market prices.
We do not own the drilling rigs or other oil field services equipment used for drilling or maintaining wells on our onshore properties; independent contractors provide all the equipment and personnel associated with these activities. Our Beta platforms have permanent drilling systems in place.
We do not own the drilling rigs used for drilling wells on our onshore properties; independent contractors provide all the equipment and personnel associated with these activities. Our Beta platforms have permanent drilling systems in place.
Our main telephone number is (832) 219-9001. 36 Table of Contents Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8–K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our website at www.amplifyenergy.com as soon as reasonably practicable after these reports have been electronically filed with, or furnished to, the SEC.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8–K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our website at www.amplifyenergy.com as soon as reasonably practicable after these reports have been electronically filed with, or furnished to, the SEC.
For information regarding existing and proposed governmental regulations regarding hydraulic fracturing and related environmental matters, see “— Environmental, Occupational Health and Safety Matters and Regulations — Hydraulic Fracturing.” Insurance In accordance with customary industry practice, we maintain insurance against many, but not all, potential losses or liabilities arising from our operations and at costs that we believe to be economic.
We currently do not discharge water to the surface. 21 Table of Contents For information regarding existing and proposed governmental regulations regarding hydraulic fracturing and related environmental matters, see “— Environmental, Occupational Health and Safety Matters and Regulations — Hydraulic Fracturing.” Insurance In accordance with customary industry practice, we maintain insurance against many, but not all, potential losses or liabilities arising from our operations and at costs that we believe to be economic.
East Texas / North Louisiana Approximately 35% of our estimated proved reserves as of December 31, 2022 and approximately 45% of our average daily net production for the three months ended December 31, 2022 were located in the East Texas/ North Louisiana region.
East Texas / North Louisiana Approximately 30% of our estimated proved reserves as of December 31, 2023 and approximately 38% of our average daily net production for the three months ended December 31, 2023 were located in the East Texas/ North Louisiana region.
Those properties collectively contained 43.9 MMBoe of estimated net proved reserves as of December 31, 2022 based on our reserve report and generated average net production of 9.5 MBoe/d for the three months ended December 31, 2022.
Those properties collectively contained 29.9 MMBoe of estimated net proved reserves as of December 31, 2023 based on our reserve report and generated average net production of 8.0 MBoe/d for the three months ended December 31, 2023.
We currently have insurance policies that include the following: ​ ​ · Commercial General Liability; · Oil Pollution Act Liability; · Primary Umbrella / Excess Liability; · Pollution Legal Liability; · Property; · Charterer ’ s Legal Liability; · Workers ’ Compensation; · Non-Owned Aircraft Liability; · Employer ’ s Liability; · Automobile Liability; · Maritime Employer ’ s Liability; · Directors & Officers Liability; · U.S.
We currently have insurance policies that include the following: ​ ​ · Commercial General Liability; · Oil Pollution Act Liability; · Primary Umbrella / Excess Liability; · Pollution Legal Liability; · Property; · Charterer’s Legal Liability; · Workers’ Compensation; · Non-Owned Aircraft Liability; · Employer’s Liability; · Automobile Liability; · Maritime Employer’s Liability; · Directors & Officers Liability; · U.S.
(2) Standardized measure is calculated in accordance with Accounting Standards Codification, or ASC, Topic 932, Extractive Activities—Oil and Gas , and is calculated using SEC pricing, before market differentials, of $93.67 Bbl for crude oil and NGLs and $6.36 MMBtu for natural gas.
(2) Standardized measure is calculated in accordance with Accounting Standards Codification, or ASC, Topic 932, Extractive Activities—Oil and Gas , and is calculated using SEC pricing, before market differentials, of $78.22 per Bbl for crude oil and NGLs and $2.64 per MMBtu for natural gas.
Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the quantities and present value of our estimated reserves.” Development of Proved Undeveloped Reserves As of December 31, 2022, we had 1,058 MBoe of proved undeveloped reserves (“PUDs”) comprised of 858 Mbbls of oil, 607 MMcf of natural gas and 98 Mbbls of NGLs.
Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the quantities and present value of our estimated reserves.” Development of Proved Undeveloped Reserves As of December 31, 2023, we had 1,926 MBoe of proved undeveloped reserves (“PUDs”) comprised of 1,772 MBbls of oil, 451 MMcf of natural gas and 77 MBbls of NGLs.
Eagle Ford (Non-Op) Approximately 2% of our estimated proved reserves as of December 31, 2022 and approximately 5% of our average daily net production for the three months ended December 31, 2022 were located in the Eagle Ford region. Our Eagle Ford properties include wells and properties in fields located primarily in the Eagleville fields.
Eagle Ford Approximately 3% of our estimated proved reserves as of December 31, 2023 and approximately 4% of our average daily net production for the three months ended December 31, 2023 were located in the Eagle Ford region. Our Eagle Ford properties include wells and properties in fields located primarily in the Eagleville fields.
Moreover, any legislation or regulatory programs to reduce GHG emissions could increase the cost of consumption, and thereby reduce demand for, the oil and natural gas we produce. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition and results of operations.
Such climate change regulatory and legislative initiatives could have a material adverse effect on our business, financial condition and results of operations. Moreover, any legislation or regulatory programs to reduce GHG emissions could increase the cost of consumption, and thereby reduce demand for, the oil and natural gas we produce.
Our Rockies properties contained 28.4 MMBbls of estimated net proved oil and NGLs reserves as of December 31, 2022 based on our reserve report and generated average net production of 3.7 MBoe/d for the three months ended December 31, 2022.
The Beta properties contained 12.7 MMBbls of estimated net proved oil reserves as of December 31, 2023 based on our reserve report and generated average net production of 3.0 MBoe/d for the three months ended December 31, 2023.
The following table sets forth information with respect to (i) wells drilled and completed during the periods indicated and (ii) wells drilled in a prior period but completed during the periods indicated.
Drilling Activities Our drilling activities primarily consist of development wells. The following table sets forth information with respect to (i) wells drilled and completed during the periods indicated and (ii) wells drilled in a prior period but completed during the periods indicated.
Although COVID-19 conditions improved in 2022, our focus remained on providing a safe office environment for our employees while continuing to allow for remote work, hybrid work and flexible work schedules where feasible. With the support of the varying work arrangements and a geographically dispersed workforce, we continued to develop ways to best support our people.
Our focus remains on providing a safe office environment for our employees while continuing to allow for remote work, hybrid work and flexible work schedules where feasible. With the support of the varying work arrangements and a geographically dispersed workforce, we continue to develop ways to best support our people.
For example, under a new OSHA standard limiting respirable silica exposure, the oil and gas industry was required to implement engineering controls and work practices to limit exposures below the new limits by June 2021. Failure to comply with OSHA requirements can lead to the imposition of penalties.
For example, under a new OSHA standard limiting respirable silica exposure, the oil and gas industry was required to implement engineering controls and work practices to limit exposures below the new limits. Failure to comply with OSHA requirements can lead to the imposition of penalties. We believe that our operations are in substantial compliance with the OSHA requirements.
As of December 31, 2022: ● Our total estimated proved reserves were approximately 124.0 MMBoe, of which approximately 42% were natural gas, 39% were oil and 19% were NGLs and 99% were classified as proved developed reserves; ● We produced from 2,486 gross (1,323 net) producing wells across our properties, with an average working interest of 53%, and the Company is the operator of record of the properties containing 92% of our total estimated proved reserves; and ● Our average net production for the three months ended December 31, 2022, was 20.8 MBoe/d, implying a reserve-to-production ratio of approximately 16 years.
As of December 31, 2023: ● Our total estimated proved reserves were approximately 98.1 MMBoe, consisted of approximately 42% oil, 38% natural gas, and 20% NGLs, and 98% were classified as proved developed reserves; ● We produced from 2,516 gross (1,348 net) producing wells across our properties, with an average working interest of 54%, and the Company is the operator of record of the properties containing 92% of our total estimated proved reserves; and ● Our average net production for the three months ended December 31, 2023, was 20.8 MBoe/d, implying a reserve-to-production ratio of approximately 12.9 years.
The information contained on, or connected to, our website is not incorporated by reference into this Annual Report and should not be considered part of this or any other report that we file with or furnish to the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding the Company at www.sec.gov.
The information contained on, or connected to, our website is not incorporated by reference into this Annual Report and should not be considered part of this or any other report that we file with or furnish to the SEC.
In August 2022, President Biden signed into law the Inflation Reduction Act of 2022. Among other things, the Inflation Reduction Act includes a methane emissions reduction program that amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems.
Among other things, the Inflation Reduction Act includes a methane emissions reduction program that amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems.
Among other things, the November 2022 supplemental proposed rule removes an emissions monitoring exemption for small wellhead-only sites and creates a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters”. The EPA is expected to issue a final rule by August 2023.
Among other things, the November 2022 supplemental proposed rule removed an emissions monitoring exemption for small wellhead-only sites and created a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters”.
To ensure that we had an adequate number of wells for disposal, we secured permits for additional saltwater disposal wells outside of the Arbuckle formation. We timely satisfied all OCC saltwater disposal requirements, while maintaining our production base without any negative material impact.
To ensure that we had an adequate number of wells for disposal, we secured permits for additional saltwater disposal wells outside of the Arbuckle formation. We are currently in compliance with all OCC saltwater disposal requirements and have maintained our production base without any negative material impact.
As of December 31, 2022 approximately 16% of our total workforce self-identified as a racial or ethnic minority and approximately 20% self-identified as female. As of the same date, approximately 27% of the employees located in our corporate headquarters self-identified as a racial or ethnic minority and approximately 48% self-identified as female.
As of December 31, 2023, approximately 17% of our total workforce self-identified as a racial or ethnic minority and approximately 18% self-identified as female. As of the same date, approximately 29% of the employees located in our corporate headquarters self-identified as a racial or ethnic minority and approximately 49% self-identified as female.
Our proved non-producing and proved undeveloped reserves make up 18% of the total proved reserves, with approximately 25.7% of these requiring hydraulic fracturing as of December 31, 2022.
Our proved developed non-producing and proved undeveloped reserves make up 9.6% of the total proved reserves, with approximately 41.6% of these requiring hydraulic fracturing as of December 31, 2023.
PHMSA updates the maximum administrative civil penalties each year to account for inflation, and as of January 2021, the penalty limits are up to $225,134 per violation per day and up to $2,251,334 for a related series of violations.
PHMSA updates the maximum administrative civil penalties each year to account for inflation, and as of December 2023, the penalty limits are up to $266,015 per violation per day and up to $2,660,135 for a related series of violations.
Injection rates and pressures are monitored instantaneously and in real time at the surface during our hydraulic fracturing operations. Pressure is monitored on both the injection string and the immediate annulus to the injection string.
Injection rates and pressures are monitored instantaneously and in real time at the surface during our hydraulic fracturing operations. Pressure is monitored on both the injection string and the immediate annulus to the injection string. Hydraulic fracturing operations would be shut down immediately if an abnormal change occurred to the injection pressure or annular pressure.
In addition, in 2021, President Biden publicly announced the Global Methane Pledge, a pact that aims to reduce global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector. Since its formal launch at the United Nations Climate Change Conference (“COP26”), over 150 countries have joined the pledge.
In addition, in 2021, President Biden publicly announced the Global Methane Pledge, a pact that aims to reduce global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector.
Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden on our assets.
Other Regulation of the Oil and Natural Gas Industry The oil and natural gas industry is extensively regulated by numerous federal, state and local authorities. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden on our assets.
If the proposed impacts are considered significant, the agency will prepare a detailed environmental impact statement that is made available for public review and comment.
In the course of such evaluations, an agency evaluates the potential direct, indirect and cumulative impacts of a proposed project. If the proposed impacts are considered significant, the agency will prepare a detailed environmental impact statement that is made available for public review and comment.
The following table summarizes information, based on a reserve report prepared by CG&A (which we refer to as our “reserve report”), about our proved oil and natural gas reserves by geographic region as of December 31, 2022, and our average net production for the three months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Net ​ ​ ​ ​ ​ ​ ​ ​ Estimated Net Proved Reserves ​ ​ Production ​ Average ​ ​ ​ ​ ​ ​ ​ ​ % Oil ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserve-to ​ ​ ​ ​ ​ ​ MMBoe ​ and ​ % Natural ​ % Proved ​ ​ ​ ​ % of ​ Production ​ Producing Wells Region ​ (1) ​ NGL ​ Gas ​ Developed ​ ​ MBoe/d ​ Total ​ Ratio (2) ​ Gross ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Years) ​ ​ ​ ​ Oklahoma 35.0 47 % 53 % 100 % 6.6 32 % 14.6 385 286 Rockies (Bairoil) 28.4 100 % — % 100 % 3.7 18 % 20.9 137 137 Southern California (Beta) (3) 13.7 100 % — % 100 % — — % — — — East Texas/ North Louisiana 43.9 24 % 76 % 100 % 9.5 45 % 12.7 1,580 875 Eagle Ford (Non-Op) 2.9 90 % 10 % 64 % 1.1 5 % 7.5 384 25 Total 124.0 58 % 42 % 99 % 20.8 100 % 16.3 2,486 1,323 (1) Determined using a ratio of six Mcf of natural gas to one Bbl of oil, condensate or NGLs based on an approximate energy equivalency.
The following table summarizes information, based on a reserve report prepared by CG&A (which we refer to as our “reserve report”), about our proved oil and natural gas reserves by geographic region as of December 31, 2023, and our average net production for the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Net ​ ​ ​ ​ ​ ​ ​ ​ Estimated Net Proved Reserves ​ ​ Production ​ Average ​ ​ ​ ​ ​ ​ ​ ​ % Oil ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserve-to ​ ​ ​ ​ ​ ​ MMBoe ​ and ​ % Natural ​ % Proved ​ ​ ​ ​ % of ​ Production ​ Producing Wells Region ​ (1) ​ NGL ​ Gas ​ Developed ​ ​ MBoe/d ​ Total ​ Ratio (2) ​ Gross ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Years) ​ ​ ​ ​ Oklahoma 29.5 48 % 52 % 100 % 5.5 27 % 14.7 372 273 Bairoil 23.5 100 % — % 100 % 3.4 16 % 18.9 137 137 Beta (3) 12.7 100 % — % 91 % 3.0 14 % 11.6 49 49 East Texas/ North Louisiana 29.9 26 % 74 % 100 % 8.0 38 % 10.3 1,564 864 Eagle Ford 2.5 90 % 10 % 68 % 0.9 4 % 7.5 394 25 Total 98.1 61 % 39 % 98 % 20.8 100 % 12.9 2,516 1,348 (1) Determined using a ratio of six Mcf of natural gas to one Bbl of oil, condensate or NGLs based on an approximate energy equivalency.
In total, we incurred total capital expenditures of approximately $4.6 million during fiscal year 2022 developing PUDs, which includes $2.1 million associated with PUDs to be completed in 2023.
Total costs incurred to develop these PUDs were approximately $4.4 million, of which $1.8 million was incurred in fiscal year 2022 and $2.6 million incurred in fiscal year 2023. In total, we incurred total capital expenditures of approximately $2.6 million during fiscal year 2023 developing PUDs.
Those properties collectively contained 35.0 MMBbls of estimated net proved reserves as of December 31, 2022 based on our reserve report and generated average net production of 6.6 MBoe/d for the three months ended December 31, 2022.
Our Oklahoma properties include wells and properties primarily located in Alfalfa and Woods counties in Oklahoma. Those properties collectively contained 29.5 MMBbls of estimated net proved reserves as of December 31, 2023 based on our reserve report and generated average net production of 5.5 MBoe/d for the three months ended December 31, 2023.
Following years of litigation, the BLM rescinded the rule in December 2017. However, several environmental groups and states have challenged the BLM’s rescission of the rule in ongoing litigation. Several states have also adopted, or are considering adopting, regulations requiring the disclosure of the chemicals used in hydraulic fracturing and/or otherwise imposing additional requirements for hydraulic fracturing activities.
Several states have also adopted, or are considering adopting, regulations requiring the disclosure of the chemicals used in hydraulic fracturing and/or otherwise imposing additional requirements for hydraulic fracturing activities.
Our compensation philosophy is designed to align the interests of our workforce with those of our stakeholders and to reward them for achieving the Company’s business and strategic objectives and driving shareholder value.
Compensation We operate in a highly competitive environment and have designed our compensation program to attract, retain and motivate talented and experienced individuals. Our compensation philosophy is designed to align the interests of our workforce with those of our stakeholders and to reward them for achieving the Company’s business and strategic objectives and driving shareholder value.
Southern California (Beta) For a discussion regarding the Incident, see Note 15 of the Notes to Consolidated Financial Statements included under “Item 8.
For a discussion regarding the Incident, see Note 15 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information.
If we fail to pay royalties or comply with safety and environmental regulations, BOEM and BSEE may require that our operations on the Beta properties be suspended or terminated, and we may be subject to civil or criminal liability, which may have a negative impact on our operations, capital expenditures, earnings or competitive position. 24 Table of Contents In November 2018, a federal district court prohibited BOEM and BSEE from approving any plans or issuing permits involving hydraulic fracturing and/or acid well stimulation on the Pacific OCS until the agencies complete consultation with the U.S.
If we fail to pay royalties or comply with safety and environmental regulations, BOEM and BSEE may require that our operations on the Beta properties be suspended or terminated, and we may be subject to civil or criminal liability, which may have a negative impact on our operations, capital expenditures, earnings or competitive position. 23 Table of Contents In June 2022, the U.S.
Concurrently, the FWS issued an advanced notice of proposed rulemaking seeking comment on the Department’s plan to develop regulations that authorize incidental take under certain prescribed conditions. The notice of proposed rulemaking is expected in March 2023 and is expected to be finalized by the end of 2023.
The comment periods for these rules ended in August 2023, and final rules are expected by April 2024. Concurrently, the FWS issued an advanced notice of proposed rulemaking seeking comment on the Department of the Interior’s plan to develop regulations that authorize incidental take under certain prescribed conditions.
Regulation of “Greenhouse Gas” Emissions At the international level, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France, which resulted in an agreement intended to nationally determine their contributions and set GHG emission reduction goals every five years beginning in 2020.
We believe that we currently are in substantial compliance with all air emissions regulations and that we hold all necessary and valid construction and operating permits for our current operations. 28 Table of Contents Climate Change Regulation At the international level, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France in 2015, which resulted in an agreement intended to nationally determine their contributions and set GHG emission reduction goals every five years beginning in 2020.
Estimated Proved Reserves The following table summarizes our estimated proved oil and natural gas reserves and related standardized measure of discounted future net cash flows attributable to our properties as of December 31, 2022, which are based on the prepared reserve report by CG&A, our independent reserve engineers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserves ​ ​ Oil ​ Natural Gas ​ NGLs ​ Total ​ (MBbls) (MMcf) (MBbls) ​ (MBoe) (1) Estimated Proved Reserves ​ ​ Developed 47,010 312,185 23,928 ​ 122,969 ​ Undeveloped 858 607 98 ​ 1,058 ​ Total 47,868 312,792 24,026 ​ 124,027 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved developed reserves as a percentage of total proved reserves ​ 99 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standardized measure (in thousands) (2) ​ $ 1,338 ​ PV-10 (in thousands) (3) ​ ​ ​ ​ ​ ​ ​ $ 1,649 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Oil and Natural Gas Prices (4) ​ ​ Oil – WTI ($ per Bbl) ​ $ 93.67 ​ Natural gas – Henry Hub ($ per MMBtu) ​ $ 6.36 ​ (1) Determined using a ratio of six Mcf of natural gas to one Bbl of oil, condensate or NGLs based on an approximate energy equivalency.
Estimated Proved Reserves The following table summarizes our estimated proved oil and natural gas reserves and related standardized measure of discounted future net cash flows attributable to our properties as of December 31, 2023, which are based on the prepared reserve report by CG&A, our independent reserve engineers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserves ​ ​ Oil ​ Natural Gas ​ NGLs ​ Total ​ (MBbls) (MMcf) (MBbls) ​ (MBoe) (1) Estimated Proved Reserves ​ ​ Developed 39,306 226,427 19,108 ​ 96,151 ​ Undeveloped 1,772 451 77 ​ 1,926 ​ Total 41,078 226,878 19,185 ​ 98,077 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved developed reserves as a percentage of total proved reserves ​ 98 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standardized measure (in thousands) (2) ​ $ 626,130 ​ PV-10 (in thousands) (3) ​ ​ ​ ​ ​ ​ ​ $ 757,013 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Oil and Natural Gas Prices (4) ​ ​ Oil – WTI ($ per Bbl) ​ $ 78.22 ​ Natural gas – Henry Hub ($ per MMBtu) ​ $ 2.64 ​ (1) Determined using a ratio of six Mcf of natural gas to one Bbl of oil, condensate or NGLs based on an approximate energy equivalency.
Our use of derivative financial instruments does not eliminate our exposure to fluctuations in commodity prices and interest rates and has in the past and could in the future result in financial losses or reduce our income. 34 Table of Contents Our sales of oil and natural gas are also subject to anti-manipulation and anti-disruptive practices authority under (i) the Commodity Exchange Act (“CEA”), as amended by the Dodd-Frank Act, and regulations promulgated thereunder by the CFTC, and (ii) the Energy Independence and Security Act of 2007 (“EISA”) and regulations promulgated thereunder by the FTC.
Our sales of oil and natural gas are also subject to anti-manipulation and anti-disruptive practices authority under (i) the Commodity Exchange Act (“CEA”), as amended by the Dodd-Frank Act, and regulations promulgated thereunder by the CFTC, and (ii) the Energy Independence and Security Act of 2007 (“EISA”) and regulations promulgated thereunder by the FTC.
Approximately 99% of the hydraulic fracturing fluids we use are made up of water and sand, and the fluids are managed and used in accordance with applicable requirements. Hydraulic fracture stimulation requires the use of a significant volume of water. Upon flowback of the water, we dispose of it into approved disposal or injection wells.
Certain state regulations require disclosure of the components in the solutions used in hydraulic fracturing operations. Approximately 99% of the hydraulic fracturing fluids we use are made up of water and sand, and the fluids are managed and used in accordance with applicable requirements. Hydraulic fracture stimulation requires the use of a significant volume of water.
Moreover, each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within its jurisdiction. 32 Table of Contents Sale and Transportation of Gas and Oil The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the construction and operations of interstate gas pipeline facilities and the rates, terms and conditions of service under which companies provide interstate transportation of gas, oil and other liquids by pipeline.
Sale and Transportation of Gas and Oil The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the construction and operations of interstate gas pipeline facilities and the rates, terms and conditions of service under which companies provide interstate transportation of gas, oil and other liquids by pipeline.
This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program.
This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. In order to implement the program, the Inflation Reduction Act required revisions to GHG reporting regulations for petroleum and natural gas systems (Subpart W) by 2024.
Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (“MBTA”), which makes it illegal to, among other things, hunt, capture, kill, possess, sell, or purchase migratory birds, nests, or eggs without a permit. This prohibition covers most bird species in the U.S.
In June and July 2022, the FWS issued final rules rescinding the regulations defining “habitat” and governing critical habitat exclusions. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (“MBTA”), which makes it illegal to, among other things, hunt, capture, kill, possess, sell, or purchase migratory birds, nests, or eggs without a permit.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor further discussion regarding the transition risks posed to us by climate change-related regulations, policies and initiatives, see the discussion below in “—Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.” 52 Table of Contents Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
Biggest changeClimate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
Accordingly, declining commodity prices may have an impact on the amount we can borrow, which could affect our cash flows and ability to execute on our business plans.
Accordingly, declining commodity prices may have an impact on the amount we can borrow, which could affect our cash flows and ability to execute our business plans.
Further, our development and production operations may be curtailed, delayed, canceled or otherwise negatively impacted as a result of other factors, including: ● high costs, shortages or delivery delays of rigs, equipment, labor, electrical power or other services; ● unusual or unexpected geological formations; ● composition of sour natural gas, including sulfur, carbon dioxide and other diluent content; ● unexpected operational events and conditions; ● failure of down hole equipment and tubulars; ● loss of wellbore mechanical integrity; ● failure, unavailability or shortage of capacity of gathering and transportation pipelines, or other transportation facilities; ● human errors, facility or equipment malfunctions and equipment failures or accidents, including acceleration of deterioration of our facilities and equipment due to the highly corrosive nature of sour natural gas; 45 Table of Contents ● title problems; ● loss of drilling fluid circulation; ● hydrocarbon or oilfield chemical spills; ● fires, blowouts, surface craterings and explosions; ● surface spills or underground migration due to uncontrollable flows of oil, natural gas, formation water or well fluids; ● delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements; and ● adverse weather conditions and natural disasters.
Further, our development and production operations may be curtailed, delayed, canceled or otherwise negatively impacted as a result of other factors, including: ● high costs, shortages or delivery delays of rigs, equipment, labor, electrical power or other services; ● unusual or unexpected geological formations; ● composition of sour natural gas, including sulfur, carbon dioxide and other diluent content; ● unexpected operational events and conditions; ● failure of down hole equipment and tubulars; ● loss of wellbore mechanical integrity; ● failure, unavailability or shortage of capacity of gathering and transportation pipelines, or other transportation facilities; ● human errors, facility or equipment malfunctions and equipment failures or accidents, including acceleration of deterioration of our facilities and equipment due to the highly corrosive nature of sour natural gas; 42 Table of Contents ● title problems; ● loss of drilling fluid circulation; ● hydrocarbon or oilfield chemical spills; ● fires, blowouts, surface craterings and explosions; ● surface spills or underground migration due to uncontrollable flows of oil, natural gas, formation water or well fluids; ● delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements; and ● adverse weather conditions and natural disasters.
For a discussion of the risks surrounding insurance associated with the Incident, see “— We may not have adequate insurance to compensate us, and our insurers may not pay particular claims.” The production from our Wyoming Bairoil properties could be adversely affected by the cessation or interruption of the supply of CO 2 to those properties.
For a discussion of the risks surrounding insurance associated with the Incident, see “— We may not have adequate insurance to compensate us, and our insurers may not pay particular claims.” The production from our Bairoil properties could be adversely affected by the cessation or interruption of the supply of CO 2 to those properties.
Financial Statements and Supplementary Data, in this Annual Report for additional information. Certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and production may be eliminated as a result of future legislation.
Financial Statements and Supplementary Data,” in this Annual Report for additional information. Certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and production may be eliminated as a result of future legislation.
The passage of any legislation as a result of these proposals or any other similar changes in U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development and any such change could have an adverse effect on the Company’s financial position, results of operations and cash flows. 56 Table of Contents Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions.
The passage of any legislation as a result of these proposals or any other similar changes in U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development and any such change could have an adverse effect on the Company’s financial position, results of operations and cash flows. 54 Table of Contents Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions.
We inject water and CO 2 into formations on substantially all of the Wyoming Bairoil properties to increase production of oil and natural gas. The additional production and reserves attributable to the use of enhanced recovery methods are inherently difficult to predict.
We inject water and CO 2 into formations on substantially all of the Bairoil properties to increase production of oil and natural gas. The additional production and reserves attributable to the use of enhanced recovery methods are inherently difficult to predict.
If, under our CO 2 supply contracts, the supplier is unable to deliver its contractually required quantities of CO 2 to us, or if our ability to access adequate supplies is impeded, then we may not have sufficient CO 2 to produce oil and natural gas in the manner or to the extent that we anticipate, and our future oil and gas production volumes will be negatively impacted. 46 Table of Contents Many of our properties are in areas that may have been partially depleted or drained by offset wells.
If, under our CO 2 supply contracts, the supplier is unable to deliver its contractually required quantities of CO 2 to us, or if our ability to access adequate supplies is impeded, then we may not have sufficient CO 2 to produce oil and natural gas in the manner or to the extent that we anticipate, and our future oil and gas production volumes will be negatively impacted. 43 Table of Contents Many of our properties are in areas that may have been partially depleted or drained by offset wells.
If our drilling results are less than anticipated, the return on our investment for a particular project may not be as attractive as we anticipated and we could incur material write-downs of unevaluated properties, and the value of our undeveloped acreage could decline in the future. 47 Table of Contents Our potential use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations.
If our drilling results are less than anticipated, the return on our investment for a particular project may not be as attractive as we anticipated and we could incur material write-downs of unevaluated properties, and the value of our undeveloped acreage could decline in the future. 44 Table of Contents Our potential use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations.
Business — Environmental, Occupational Health and Safety Matters and Regulations” and “— Other Regulation of the Oil and Natural Gas Industry” for a description of the more significant laws and regulations that affect us. 51 Table of Contents Our business is subject to climate-related transition risks, including fuel conservation measures, technological advances and increasing public attention to climate change and environmental matters, which could reduce demand for oil and natural gas and have an adverse effect on our business, financial condition and reputation.
Business — Environmental, Occupational Health and Safety Matters and Regulations” and “— Other Regulation of the Oil and Natural Gas Industry” for a description of the more significant laws and regulations that affect us. 48 Table of Contents Our business is subject to climate-related transition risks, including fuel conservation measures, technological advances and increasing public attention to climate change and environmental matters, which could reduce demand for oil and natural gas and have an adverse effect on our business, financial condition and reputation.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions (including those related to carbon pricing schemes) would impact our business, any such future laws and regulations that require reporting of GHGs or otherwise limit emissions of GHGs from our equipment and operations could require us to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with our operations, and such requirements also could adversely affect demand for the oil and natural gas that we produce and restrict our ability to execute on our business strategy, reducing our access to financial markets, or create greater potential for governmental investigations or litigation. 53 Table of Contents Finally, it should be noted that most scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions (including those related to carbon pricing schemes) would impact our business, any such future laws and regulations that require reporting of GHGs or otherwise limit emissions of GHGs from our equipment and operations could require us to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with our operations, and such requirements also could adversely affect demand for the oil and natural gas that we produce and restrict our ability to execute on our business strategy, reducing our access to financial markets, or create greater potential for governmental investigations or litigation. 51 Table of Contents Finally, most scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events.
Business — Environmental, Occupational Health and Safety Matters and Regulations” and “— Other Regulation of the Oil and Natural Gas Industry” for a description of the laws and regulations that affect the third parties on whom we rely for gathering and transportation services. 54 Table of Contents Oil and natural gas producers’ operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids.
Business — Environmental, Occupational Health and Safety Matters and Regulations” and “— Other Regulation of the Oil and Natural Gas Industry” for a description of the laws and regulations that affect the third parties on whom we rely for gathering and transportation services. 52 Table of Contents Oil and natural gas producers’ operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids.
If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease. 43 Table of Contents Our hedging strategy may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains.
If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease. 40 Table of Contents Our hedging strategy may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains.
If we are unable or unwilling to provide additional collateral, we may have to pursue alternate bonding arrangements with other sureties. See Note 6, “Asset Retirement Obligations” and Note 16, “Commitments and Contingencies — Supplemental Bond for Decommissioning Liabilities Trust Agreement” of the Notes to Consolidated Financial Statements included under Part II, Item 8.
If we are unable or unwilling to provide additional collateral, we may have to pursue alternate bonding arrangements with other sureties. See Note 6, “Asset Retirement Obligations” and Note 16, “Commitments and Contingencies — Supplemental Bond for Decommissioning Liabilities Trust Agreement” of the Notes to Consolidated Financial Statements included under Part II, “Item 8.
Accordingly, our assumptions and estimates may change in future periods based on future events and total costs may materially increase; therefore, we can provide no assurance that we will not have to accrue significant additional costs in future periods with respect to the Incident. 37 Table of Contents We are subject to significant litigation and enforcement risk as a result of the Incident.
Accordingly, our assumptions and estimates may change in future periods based on future events and total costs may materially increase; therefore, we can provide no assurance that we will not have to accrue significant additional costs in future periods with respect to the Incident. 55 Table of Contents We are subject to significant litigation and enforcement risk as a result of the Incident.
We intend to maintain a portfolio of commodity derivative contracts covering at least 30%- 75% of our estimated production from proved developed producing reserves over a one-to-three-year period at any given point in time. These commodity derivative contracts include natural gas, oil and NGL financial swaps, put options, costless collars, and three-way collars.
We intend to maintain a portfolio of commodity derivative contracts covering at least 50%- 75% of our estimated production from proved developed producing reserves over a one-to-three-year period at any given point in time. These commodity derivative contracts include natural gas, oil and NGL financial swaps, put options, costless collars, and three-way collars.
We had three customers that each accounted for 10% or more of total reported revenues for the year ended December 31, 2022. The loss of these customers or any significant customer, should we be unable to replace them, could adversely affect our revenues and have a material adverse effect on our financial condition and results of operations.
We had three customers that each accounted for 10% or more of total reported revenues for the year ended December 31, 2023. The loss of these customers or any significant customer, should we be unable to replace them, could adversely affect our revenues and have a material adverse effect on our financial condition and results of operations.
Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves, which could adversely affect our business, results of operations and financial condition. 44 Table of Contents The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil and natural gas reserves.
Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves, which could adversely affect our business, results of operations and financial condition. 41 Table of Contents The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil and natural gas reserves.
In addition, destructive forms of protest and opposition by activists and other disruptions, including acts of sabotage or eco-terrorism, against oil and gas production and activities could potentially result in damage or injury to people, property or the environment or lead to extended interruptions of our operations, adversely affecting our financial condition and results of operations. ITEM 1B.
In addition, destructive forms of protest and opposition by activists and other disruptions, including acts of sabotage or eco-terrorism, against oil and gas production and activities could potentially result in damage or injury to people, property or the environment or lead to extended interruptions of our operations, adversely affecting our financial condition and results of operations.
Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce from our reserves. 55 Table of Contents The cost of decommissioning is uncertain. We are required to maintain reserve funds to provide for the payment of decommissioning costs associated with the Beta properties.
Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce from our reserves. 53 Table of Contents The cost of decommissioning is uncertain. We are required to maintain reserve funds to provide for the payment of decommissioning costs associated with the Beta properties.
Most recently, at COP27, President Biden announced the EPA’s proposed standards to reduce methane emissions from existing oil and gas sources, and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
At COP27, President Biden announced the EPA’s proposed standards to reduce methane emissions from existing oil and gas sources, and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
No impairment expense was recognized for the years ended December 31, 2022 and 2021. An extended decline in commodity prices may cause us to write down, as a non-cash charge to earnings, the carrying value of our oil and natural gas properties for impairments.
No impairment expense was recognized for the years ended December 31, 2023 and 2022. An extended decline in commodity prices may cause us to write down, as a non-cash charge to earnings, the carrying value of our oil and natural gas properties for impairments.
We are vulnerable to the risks associated with operating offshore California, including risks relating to: ● impacts of climate change and natural disasters such as earthquakes, tidal waves, mudslides, fires and floods; ● oil field service costs and availability; ● compliance with environmental and other laws and regulations; ● third-party marine vessels, including situations similar to the Incident; ● remediation and other costs resulting from oil spills, releases of hazardous materials and other environmental and natural resource damages; and 48 Table of Contents ● failure of equipment or facilities.
We are vulnerable to the risks associated with operating offshore Southern California, including risks relating to: ● impacts of climate change and natural disasters such as earthquakes, tidal waves, mudslides, fires and floods; ● oil field service costs and availability; ● compliance with environmental and other laws and regulations; ● third-party marine vessels, including situations similar to the Incident; ● remediation and other costs resulting from oil spills, releases of hazardous materials and other environmental and natural resource damages; and 45 Table of Contents ● failure of equipment or facilities.
For example, for the five years ended December 31, 2022, the NYMEX-WTI oil future price ranged from a high of $122.11 per Bbl to a low of $(37.63) per Bbl, while the NYMEX-Henry Hub natural gas future price ranged from a high of $9.68 per MMBtu to a low of $1.48 per MMBtu.
For example, for the five years ended December 31, 2023, the NYMEX-WTI oil future price ranged from a high of $122.11 per Bbl to a low of $(37.63) per Bbl, while the NYMEX-Henry Hub natural gas future price ranged from a high of $9.68 per MMBtu to a low of $1.48 per MMBtu.
Such climate change regulatory and legislative initiatives could have a material adverse effect on our business, financial condition and results of operations. The $1 trillion legislative infrastructure package passed by Congress in November 2021 includes a number of climate-focused spending initiatives targeted at climate resilience, enhanced response and preparation for extreme weather events, and clean energy and transportation investments.
Such climate change regulatory and legislative initiatives could have a material adverse effect on our business, financial condition and results of operations. 50 Table of Contents The $1 trillion legislative infrastructure package passed by Congress in November 2021 includes a number of climate-focused spending initiatives targeted at climate resilience, enhanced response and preparation for extreme weather events, and clean energy and transportation investments.
Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with other parties. Any increase in the nonpayment or nonperformance by our vendors and/or counterparties could adversely affect our business, financial condition, results of operations and cash flows. We may be unable to compete effectively with larger companies.
Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with other parties. Any increase in the nonpayment or nonperformance by our vendors and/or counterparties could adversely affect our business, financial condition, results of operations and cash flows. 46 Table of Contents We may be unable to compete effectively with larger companies.
Historically, oil and natural gas prices have been volatile and fluctuate in response to changes in supply and demand, market uncertainty, and other factors that are beyond our control, including: ● the regional, domestic and foreign supply of oil, natural gas and NGLs; ● the level of commodity prices and expectations about future commodity prices; ● the level of global oil and natural gas exploration and production; ● localized supply and demand fundamentals, including the proximity and capacity of pipelines and other transportation facilities, and other factors that result in differentials to benchmark prices from time to time; ● the cost of exploring for developing, producing and transporting reserves; ● the price and quantity of foreign imports; ● political and economic conditions in oil producing countries, including conflicts in or among the Middle East, Africa, South America and Russia; ● the ability of members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls; ● speculative trading in crude oil and natural gas derivative contracts; ● the level of consumer product demand; ● weather conditions and other natural disasters; ● risks associated with operating drilling rigs; ● technological advances affecting exploration and production operations and overall energy consumption; ● domestic and foreign governmental regulations and taxes; ● the impact of energy conservation efforts; ● the continued threat of terrorism and the impact of military and other action, including escalating tensions between Russia and Ukraine and the potential destabilizing effect such conflict may pose for the European continent or the global oil and natural gas markets ● the price and availability of competitors’ supplies of oil and natural gas and alternative fuels; and 40 Table of Contents ● overall domestic and global economic conditions.
Historically, oil and natural gas prices have been volatile and fluctuate in response to changes in supply and demand, market uncertainty, and other factors that are beyond our control, including: ● the regional, domestic and foreign supply of oil, natural gas and NGLs; ● the level of commodity prices and expectations about future commodity prices; ● the level of global oil and natural gas exploration and production; ● localized supply and demand fundamentals, including the proximity and capacity of pipelines and other transportation facilities, and other factors that result in differentials to benchmark prices from time to time; ● the cost of exploring for developing, producing and transporting reserves; ● the price and quantity of foreign imports; ● political and economic conditions in oil producing countries, including conflicts in or among the Middle East, Africa, South America, Russia and Israel; ● the ability of members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls; ● speculative trading in crude oil and natural gas derivative contracts; ● the level of consumer product demand; ● weather conditions and other natural disasters; ● risks associated with operating drilling rigs; ● technological advances affecting exploration and production operations and overall energy consumption; ● domestic and foreign governmental regulations and taxes; ● the impact of energy conservation efforts; 37 Table of Contents ● the continued threat of terrorism and the impact of military and other action, including the Russian invasion of Ukraine and the Israel-Hamas war and the potential destabilizing effect such conflicts may pose for the European continent or the global oil and natural gas markets; ● the price and availability of competitors’ supplies of oil and natural gas and alternative fuels; and ● overall domestic and global economic conditions.
Additionally, new regulations and legislation, as well as evolving practices, may increase the cost of compliance, require changes to our operations and strategic plans and impact our ability to capitalize on our assets. 38 Table of Contents The Incident may impact our ability to access financing on acceptable terms and may materially impact our liquidity.
Additionally, new regulations and legislation, as well as evolving practices, may increase the cost of compliance, require changes to our operations and strategic plans and impact our ability to capitalize on our assets. The Incident may impact our ability to access financing on acceptable terms and may materially impact our liquidity.
We currently estimate that the total costs we have incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees to be approximately $160.0 million to $170.0 million.
We currently estimate that the total costs we have incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees to be approximately $190.0 million to $210.0 million.
Under these regulations, in 2016 and 2017, the OCC ordered us to limit the volume of saltwater disposed of in saltwater disposal wells in the Arbuckle formation and established caps for ten of our saltwater disposal wells in February 2017, which caps are still in place.
Under these regulations, the OCC ordered us to limit the volume of saltwater disposed of in saltwater disposal wells in the Arbuckle formation and established caps for ten of our saltwater disposal wells, which caps are still in place.
Under our Revolving Credit Facility, we are required to (i) maintain, as of the date of determination, a maximum total debt to EBITDAX ratio of 3.00 to 1.00, (ii) maintain a current ratio of not less than 1.00 to 1.00, and (iii) use commercially feasible best efforts to hedge at least 50%-75% of our estimated production from total proved developed producing reserves.
Under our Revolving Credit Facility, we are required to (i) maintain, as of the date of determination, a maximum total debt to EBITDAX ratio of 3.00 to 1.00, (ii) maintain a current ratio of not less than 1.00 to 1.00, and (iii) hedge at least 50% − 75% of our estimated production from total proved developed producing reserves.
In addition, responding to the Incident may place a significant burden on our cash flow, which could also impede our ability to invest in new opportunities and deliver long-term growth. 39 Table of Contents In addition, our response to the Incident and associated consequences have required significant management focus.
In addition, responding to the Incident may place a significant burden on our cash flow, which could also impede our ability to invest in new opportunities and deliver long-term growth. In addition, our response to the Incident and associated consequences have required significant management focus.
The reputational consequences of the Incident, ongoing concerns surrounding costs arising from the Incident, ongoing contingencies related to the Incident and the impact of the Incident on our liquidity and financial performance could increase our financing costs and limit our access to financing on acceptable terms.
The reputational consequences of the Incident, ongoing contingencies related to the Incident and the impact of the Incident on our liquidity and financial performance could increase our financing costs and limit our access to financing on acceptable terms.
If a default occurs and remains uncured or unwaived, the administrative agent or majority lenders under our Revolving Credit Facility may elect to declare all borrowings outstanding thereunder, if any, together with accrued interest and other fees, to be immediately due and payable.
A breach of any of these covenants could result in a default under our Revolving Credit Facility. If a default occurs and remains uncured or unwaived, the administrative agent or majority lenders under our Revolving Credit Facility may elect to declare all borrowings outstanding thereunder, if any, together with accrued interest and other fees, to be immediately due and payable.
Our Revolving Credit Facility requires us to repay any deficiency over a certain period or pledge additional oil and gas properties to eliminate such deficiency, which we are required to do within 30 days of notice to do so.
Our Revolving Credit Facility requires us to repay any deficiency over a certain period or pledge additional oil and gas properties to eliminate such deficiency within 30 days of notice.
The Incident may result in more stringent permitting obligations and regulation of our and other oil and gas activities including in federal waters off California and elsewhere, particularly relating to environmental, health and safety protection controls, oversight of oil and gas operations and required financial assurance.
The Incident may result in more stringent permitting obligations and regulation of our properties and other oil and gas activities, including at Beta and elsewhere, particularly relating to environmental, health and safety protection controls, oversight of oil and gas operations and required financial assurance.
Risks Related to the Southern California Pipeline Incident Certain uncertainties remain regarding the extent and timing of costs and liabilities relating to the Incident, and potential changes in the regulatory and operating environment in which we operate resulting from the Incident may increase the risks to which we are exposed.
Risks Related to the Beta Pipeline Incident There are remaining uncertainties regarding the extent and timing of costs and liabilities relating to the Incident, and potential changes in the regulatory and operating environment in which we operate resulting from the Incident may increase the risks to which we are exposed.
The Incident response and associated consequences have placed significant demands on our employees, and the reputational damage suffered by us as a result of the Incident and any consequent adverse impact on our business could affect employee recruitment, productivity, retention and the results of our operations.
The Incident response and associated consequences have placed significant demands on our employees, and the reputational damage suffered by us as a result of the Incident and any consequent adverse impact on our business could affect employee recruitment, productivity, retention and the results of our operations. 57 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
For the year ended December 31, 2022, we recognized LOPI insurance payments of $50.2 million from our Beta properties due to the Incident; however, the LOPI insurance policy in effect at the time of the Incident provides eighteen months of LOPI coverage and thus no additional LOPI insurance can be recognized after March 31, 2023.
For the year ended December 31, 2023, we recognized LOPI insurance payments of $17.9 million from our Beta properties due to the Incident; however, the LOPI insurance policy in effect at the time of the Incident provided eighteen months of LOPI coverage and thus no additional LOPI insurance was recognized after March 31, 2023.
We may also be impacted by significant disruptions to the operations of our logistics and service providers. 41 Table of Contents Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business.
We may also be impacted by significant disruptions to the operations of our logistics and service providers. Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business. Our future success depends on the skills, experience and efforts of our key executive officers.
If we are unable to repay our indebtedness when due or declared due, the administrative agent will also have the right to proceed against the collateral pledged to it to secure the indebtedness under our Revolving Credit Facility.
If we are unable to repay our indebtedness when due or declared due, the administrative agent will also have the right to proceed against the collateral pledged to it to secure the indebtedness under our Revolving Credit Facility. If such indebtedness were to be accelerated, our assets may not be sufficient to repay in full our secured indebtedness.
To ensure that we had an adequate number of wells for disposal, we secured permits for additional saltwater disposal wells outside of the Arbuckle formation. We timely satisfied all OCC saltwater disposal requirements, while maintaining our production base without any negative material impact.
To ensure that we had an adequate number of wells for disposal, we secured permits for additional saltwater disposal wells outside of the Arbuckle formation. We are currently in compliance with all OCC saltwater disposal requirements, and have maintained our production base without any negative material impact.
If for any reason we were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of our production were uncollectible, we would recognize a charge in the earnings of that period for the probable loss and could suffer a material reduction in our liquidity and cash flows. 49 Table of Contents We are exposed to trade credit risk in the event of nonperformance by our vendors and other counterparties in the ordinary course of our business activities.
If for any reason we were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of our production were uncollectible, we would recognize a charge in the earnings of that period for the probable loss and could suffer a material reduction in our liquidity and cash flows.
A decrease in energy use due to weather changes may affect our financial condition through decreased revenues. The effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
The effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
We cannot guarantee that our insurance policies will cover all losses that we incur in connection with the Incident or that disputes over insurance claims will not arise with our insurance carriers. Additionally, the insurers may not pay particular claims or may take an extended period of time to do so.
We may not have adequate insurance to compensate us, and our insurers may not pay particular claims. We cannot guarantee that our insurance policies will cover all losses that we incur in connection with the Incident or that disputes over insurance claims will not arise with our insurance carriers.
When such event occurs, we file claims under our LOPI policy and recognize LOPI in the period that insurers accept the claim and all uncertainty with respect to the receipt or amount of claim is resolved.
Proceeds from LOPI insurance claims are intended to partially offset the loss of revenue resulting from certain events that cause suspension of operations. When such event occurs, we file claims under our LOPI policy and recognize LOPI in the period that insurers accept the claim and all uncertainty with respect to the receipt or amount of claim is resolved.
These restrictions limit our ability to, among other things: ● incur additional liens; ● incur additional indebtedness; ● merge, consolidate or sell our assets; ● pay dividends or make other distributions or repurchase or redeem our stock; ● make certain investments; and ● enter into transactions with our affiliates.
These restrictions limit our ability to, among other things: ● incur additional liens; ● incur additional indebtedness; ● merge, consolidate or sell our assets; ● pay dividends or make other distributions or repurchase or redeem our stock; ● make certain investments; and ● enter into transactions with our affiliates. 39 Table of Contents Our Revolving Credit Facility also requires us to comply with certain financial maintenance covenants as discussed above.
At this time, it is not possible to estimate the total number of future claims or the full extent of compensable damages arising from the Incident. Consolidated civil litigation is pending in the United States District Court for the Central District of California.
At this time, it is not possible to estimate the total number of future claims or the full extent of compensable damages arising from the Incident.
Many of our vendors and other counterparties finance their activities through cash flow from operations, the incurrence of debt or the issuance of equity.
Some of our vendors and other counterparties may be highly leveraged and subject to their own operating and regulatory risks. Many of our vendors and other counterparties finance their activities through cash flow from operations, the incurrence of debt or the issuance of equity.
GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. In addition, in September 2021, President Biden publicly announced the Global Methane Pledge, a pact that aims to reduce global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector.
In addition, in September 2021, President Biden publicly announced the Global Methane Pledge, a pact that aims to reduce global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector. Since its formal launch at COP26, over 150 countries have joined the pledge.
If such indebtedness were to be accelerated, our assets may not be sufficient to repay in full our secured indebtedness. 42 Table of Contents We may also be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenants in our Revolving Credit Facility.
We may also be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenants in our Revolving Credit Facility.
These limitations and our dependence on the operator and third-party working interest owners for these projects could cause us to incur unexpected future costs, lower production and materially and adversely affect our financial condition and results of operations. 50 Table of Contents We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations.
These limitations and our dependence on the operator and third-party working interest owners for these projects could cause us to incur unexpected future costs, lower production and materially and adversely affect our financial condition and results of operations.
Furthermore, the risks associated with the Incident may heighten the consequences of other risks to which we are exposed, including with respect to access to financing and financial assurance.
Furthermore, the risks associated with the Incident may heighten the consequences of other risks to which we are exposed, including with respect to access to financing and financial assurance. Our assumptions and estimates regarding the total aggregate costs associated with the Incident may be inaccurate, which could materially and adversely affect our business, results of operations and financial condition.
For the year ended December 31, 2022, the WTI posted prices ranged from a high of $122.11 per Bbl on June 8, 2022 to a low of $71.02 per Bbl on December 9, 2022 and NYMEX-Henry Hub natural gas market price ranged from a high of $9.68 per MMBtu on August 22, 2022 to a low of $3.72 per MMBtu on January 4, 2022.
For the year ended December 31, 2023, the WTI posted prices ranged from a high of $93.68 per Bbl on September 27, 2023 to a low of $66.74 per Bbl on March 17, 2023 and NYMEX-Henry Hub natural gas market price ranged from a high of $4.17 per MMBtu on January 4, 2023 to a low of $1.99 per MMBtu on March 29, 2023.
Inflationary factors, such as increases in the labor costs, material costs, and overhead costs, may also adversely affect our financial position and operating results. Inflation has also resulted in higher interest rates in the United States, which could increase our cost of debt borrowing in the future.
Inflationary factors, such as increases in the labor costs, material costs, and overhead costs, may also adversely affect our financial position and operating results.
Our oil and natural gas development and production operations are also subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment, worker health and safety aspects of our operations, or otherwise relating to environmental protection.
Failure to comply with laws and regulations applicable to our operations, including any evolving interpretation and enforcement by governmental authorities, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 47 Table of Contents Our oil and natural gas development and production operations are also subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment, worker health and safety aspects of our operations, or otherwise relating to environmental protection.
We currently maintain insurance that covers against certain losses and expenses associated with the Incident. For example, our insurance coverage includes loss of production income (“LOPI”) insurance for our offshore properties. Proceeds from LOPI insurance claims are intended to partially offset the loss of revenue resulting from certain events that cause suspension of operations.
Additionally, the insurers may not pay particular claims or may take an extended period of time to do so. We currently maintain insurance that covers against certain losses and expenses associated with the Incident. For example, our insurance coverage includes loss of production income (“LOPI”) insurance for our offshore properties.
Our assumptions and estimates regarding the total aggregate costs associated with the Incident may be inaccurate, which could materially and adversely affect our business, results of operations and financial condition On February 2, 2022, the Unified Command announced that response and monitoring efforts have officially concluded for the Incident, and Unified Command would stand down as of such date.
On February 2, 2022, the Unified Command announced that response and monitoring efforts had officially concluded for the Incident, and the Unified Command would stand down as of such date.
Finally, we cannot guarantee that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future. The shut-in of the Pipeline could negatively impact our production, liquidity, and, ultimately, our operations, results, and performance.
Finally, we cannot guarantee that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future. 56 Table of Contents The Incident has created significant risk to our reputation and has diverted, and will continue to divert, the attention of our management team.
We are exposed to risks of loss in the event of nonperformance by our vendors and other counterparties. Some of our vendors and other counterparties may be highly leveraged and subject to their own operating and regulatory risks.
We are exposed to trade credit risk in the event of nonperformance by our vendors and other counterparties in the ordinary course of our business activities. We are exposed to risks of loss in the event of nonperformance by our vendors and other counterparties.
Further, energy needs could increase or decrease as a result of extreme weather conditions depending on the duration and magnitude of any such climate changes. Increased energy use due to weather changes may require us to invest in additional equipment to serve increased demand.
Our ability to mitigate the adverse physical impacts of climate change depends in part upon our disaster preparedness and response and business continuity planning. Further, energy needs could increase or decrease as a result of extreme weather conditions depending on the duration and magnitude of any such climate changes.
This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. Additionally, almost one-half of the states have taken legal measures to reduce emissions of GHGs, including through the planned development of GHG emission inventories and/or regional GHGs cap and trade programs.
Additionally, many of the states have taken legal measures to reduce emissions of GHGs, including through the planned development of GHG emission inventories and/or regional GHGs cap and trade programs.
In November 2019, plans were formally announced for the U.S. to withdraw from the Paris Agreement with an effective exit date in November 2020. In February 2021, the current administration announced reentry of the U.S. into the Paris Agreement along with a new “nationally determined contribution” for U.S.
In February 2021, the current administration announced reentry of the U.S. into the Paris Agreement along with a new “nationally determined contribution” for the U.S. GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030.
A pandemic, epidemic or outbreak of an infectious disease, may materially adversely affect our business.
Inflation has also resulted in higher interest rates in the United States, which could increase our cost of debt borrowing in the future. 38 Table of Contents A pandemic, epidemic or outbreak of an infectious disease, may materially adversely affect our business.
In addition, various states and local governments have vowed to continue to enact regulations to achieve the goals of the Paris Agreement.
Most recently, at COP28, nearly 200 countries, including the United States, agreed to transition away from fossil fuels while accelerating action in this decade to achieve net zero greenhouse gas emissions by 2050. In addition, various states and local governments have vowed to continue to enact regulations to achieve the goals of the Paris Agreement.
Removed
On August 25, 2022, we reached an agreement in principle with plaintiffs in the class action to resolve all civil claims against us and our subsidiaries. The settlement of $50.0 million, which also includes certain injunctive relief, will be funded under our insurance policies. The Court preliminarily approved the settlement on December 7, 2022.
Added
We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations.
Removed
The final approval papers were submitted to the Court on January 25, 2023 and a final approval hearing is scheduled for April 24, 2023. Federal, state and municipal authorities may also take enforcement action against us as a result of the Incident. To date, the U.S. Coast Guard, the BOEM, the U.S. Department of Justice, PHMSA, the U.S.
Added
For further discussion regarding the transition risks posed to us by climate change-related regulations, policies and initiatives, see the discussion below in “—Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.” 49 Table of Contents Increasing scrutiny and changing stakeholder expectations in respect of environmental, social and governance (“ESG”) and sustainability practices may have an adverse effect on our business, financial condition and results of operations and damage our reputation.
Removed
Department of the Interior, the BSEE, the California Department of Justice, the Orange County District Attorney, the Los Angeles County District Attorney and the California Department of Fish & Wildlife have conducted or are conducting investigations or examinations of the Incident.
Added
Companies across all industries are facing increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies, related to their sustainability practices.
Removed
Other federal agencies may or have commenced investigations and proceedings, and federal agencies such as the EPA may initiate enforcement actions seeking penalties and other relief under the Clean Water Act and other statutes.
Added
If we do not adapt to or comply with investor or other stakeholder expectations and standards on sustainability matters as they continue to evolve, meet sustainability-related goals that we have set, or if we are perceived to have not responded appropriately or quickly enough to growing concern for sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected.
Removed
The outcomes of these investigations and the nature of any remedies pursued will depend on the discretion of the relevant authorities and may result in regulatory or other enforcement actions, as well as civil liability.
Added
In addition, the Company’s continuing efforts to research, establish, accomplish, and accurately report on the implementation of our sustainability strategy, including any specific sustainability objectives, may also create additional operational risks and expenses and expose us to reputational, legal, and other risks.
Removed
On December 15, 2021, a federal grand jury in the Central District of California returned a federal criminal indictment against Amplify Energy, Beta Operating Company, LLC, and San Pedro Bay Pipeline Company in connection with the Incident.
Added
While we create and publish voluntary disclosures regarding sustainability matters from time to time, some of the statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
Removed
The indictment alleges that we committed a misdemeanor violation of the federal Clean Water Act for negligently discharging oil into the contiguous zone of the United States. The state authorities were conducting parallel criminal investigations. The Company has reached court-approved agreements to resolve all criminal matters stemming from the Incident.
Added
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many sustainability matters.
Removed
Specifically, on August 26, 2022, as part of the resolution with the United States, we agreed to plead guilty to one count of misdemeanor negligent discharge of oil in violation of the Clean Water Act.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor additional information regarding legal proceedings, see Note 16, “Commitments and Contingencies — Litigation and Environmental” of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report and “Part II – Item 1A. Risk Factors — Risks Related to the Southern California Pipeline Incident” which are incorporated herein by reference.
Biggest changeFor additional information regarding legal proceedings, see Note 16, “Commitments and Contingencies — Litigation and Environmental” of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report and “Part II – Item 1A. Risk Factors — Risks Related to the Beta Pipeline Incident” which are incorporated herein by reference. ITEM 4.
We are not aware of any other litigation, pending or threatened, that we believe will have a material adverse effect on our financial position, results of operations or cash flows. The Company accrued $8.0 million at December 31, 2022, in regard to our litigation and legal proceedings.
We are not aware of any other litigation, pending or threatened, that we believe will have a material adverse effect on our financial position, results of operations or cash flows. The Company accrued $3.1 million at December 31, 2023, in regard to our litigation and legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 57 Table of Contents PART II
MINE SAFETY DISCLOSURES Not applicable. ​ 59 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 57 ​ PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 Item 6. Reserved 58 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 59
Biggest changeItem 4. Mine Safety Disclosures 59 ​ PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 60 Item 6. Reserved 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 61

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following sets forth information with respect to the Company’s repurchases of shares of its common stock during the fourth quarter of 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Approximate Dollar ​ ​ ​ ​ ​ ​ Shares Purchased as Value of Shares That ​ ​ ​ ​ ​ ​ Part of Publicly May Yet Be ​ Total Number of Average Price Announced Plans Purchased Under the Period Shares Purchased Paid per Share or Programs Plans or Programs (1) ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Common Shares Repurchased (1) ​ October 1, 2022 - October 31, 2022 3,152 ​ $ 6.57 — n/a November 1, 2022 - November 30, 2022 — ​ $ — — n/a December 1, 2022 - December 31, 2022 — ​ $ — — n/a (1) Common shares are generally net-settled by shareholders to cover the required withholding tax upon vesting.
Biggest changeIssuer Purchases of Equity Securities The following sets forth information with respect to the Company’s repurchases of shares of its common stock during the fourth quarter of 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Approximate Dollar ​ ​ ​ ​ ​ ​ Shares Purchased as Value of Shares That ​ ​ ​ ​ ​ ​ Part of Publicly May Yet Be ​ Total Number of Average Price Announced Plans Purchased Under the Period Shares Purchased Paid per Share or Programs Plans or Programs (1) ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Common Shares Repurchased (1) ​ October 1, 2023 - October 31, 2023 11,097 ​ $ 7.35 — n/a November 1, 2023 -November 30, 2023 — ​ $ — — n/a December 1, 2023 - December 31, 2023 26,409 ​ $ 6.16 — n/a (1) Common shares are generally net-settled by shareholders to cover the required withholding tax upon vesting.
As of February 28, 2023, we had twenty-seven record holders of our common stock, based on information provided by our transfer agent. Dividends Policy While we may decide to pay cash dividends in the future, we have not paid, nor do we currently intend to pay, any cash dividends on our common stock.
As of February 28, 2024, we had twenty-three record holders of our common stock, based on information provided by our transfer agent. Dividends Policy While we may decide to pay cash dividends in the future, we have not paid, nor do we currently intend to pay, any cash dividends on our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the trading symbol “AMPY” and has been trading since August 7, 2019. As of February 28, 2023, we had 38,710,696 shares of our common stock outstanding.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the trading symbol “AMPY” and has been trading since August 7, 2019. As of February 28, 2024, we had 39,470,258 shares of our common stock outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables presents a reconciliation of the Company’s net income (loss) and cash flows operating activities to Adjusted EBITDA, our most directly comparable GAAP financial measures, for each of the periods indicated. 69 Table of Contents Reconciliation of Net Income (Loss) to Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2022 2021 ​ (In thousands) Net income (loss) ​ $ 57,875 ​ $ (32,070) Interest expense, net ​ 14,101 ​ 12,099 DD&A ​ 23,950 ​ 28,068 Accretion of AROs ​ 7,081 ​ 6,611 Losses (gains) on commodity derivative instruments ​ 106,937 ​ 142,439 Cash settlements (paid) received on expired commodity derivative instruments ​ (148,239) ​ (88,301) Amortization of gain associated with terminated commodity derivatives ​ ​ — ​ ​ 17,977 Pipeline incident loss ​ 11,277 ​ 1,599 Pipeline incident settlement ​ 12,000 ​ — Share-based compensation expense ​ 3,086 ​ 1,612 Gain on extinguishment of debt ​ — ​ (5,516) Loss on settlement of AROs ​ 908 ​ 11 Income tax expense ​ 111 ​ — Exploration costs ​ 57 ​ 57 Acquisition and divestiture related expenses ​ 41 ​ 19 Bad debt expense ​ 1 ​ 95 Reorganization items, net ​ ​ — ​ ​ 6 LOPI ​ ​ 4,636 ​ ​ — Adjusted EBITDA ​ $ 93,822 ​ $ 84,706 ​ Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ ​ 2022 2021 ​ ​ (In thousands) Net cash provided by operating activities ​ $ 64,485 ​ $ 62,969 Changes in working capital ​ (14,812) ​ (12,395) Interest expense, net ​ 14,101 ​ 12,099 Gain (loss) on interest rate swaps ​ 935 ​ 217 Cash settlements paid (received) on interest rate swaps ​ (311) ​ 1,912 Amortization of gain associated with terminated commodity derivatives ​ ​ — ​ ​ 17,977 Pipeline incident loss ​ 11,277 ​ 1,599 Pipeline incident settlement ​ 12,000 ​ — Plugging and abandonment cost ​ 1,829 ​ 307 Amortization and write-off of deferred financing fees ​ (649) ​ (626) Acquisition and divestiture related expenses ​ 41 ​ 19 Exploration costs ​ 57 ​ 57 Reorganization items, net ​ — ​ 6 Income tax expense - current portion ​ 111 ​ — LOPI ​ ​ 4,636 ​ ​ — Other ​ 122 ​ 565 Adjusted EBITDA ​ $ 93,822 ​ $ 84,706 ​ 70 Table of Contents Liquidity and Capital Resources Overview .
Biggest changeThe following tables present a reconciliation of the Company’s net income (loss) and cash flows operating activities to Adjusted EBITDA, our most directly comparable GAAP financial measures, for each of the periods indicated. 70 Table of Contents Reconciliation of Net Income (Loss) to Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2023 2022 ​ (In thousands) Net income (loss) ​ $ 392,750 ​ $ 57,875 Interest expense, net ​ 17,719 ​ 14,101 Income tax expense (benefit) - current ​ ​ 4,817 ​ ​ 111 Income tax expense (benefit) - deferred ​ (253,796) ​ — DD&A ​ 28,004 ​ 23,950 Accretion of AROs ​ 7,951 ​ 7,081 Losses (gains) on commodity derivative instruments ​ (40,343) ​ 106,937 Cash settlements (paid) received on expired commodity derivative instruments ​ (8,273) ​ (148,239) Amortization of gain associated with terminated commodity derivatives ​ ​ 658 ​ ​ — Pipeline incident loss ​ 19,981 ​ 11,277 Pipeline incident settlement ​ — ​ 12,000 Litigation settlement ​ ​ (84,875) ​ ​ — Share-based compensation expense ​ 5,280 ​ 3,086 Loss on settlement of AROs ​ 1,003 ​ 908 Exploration costs ​ 57 ​ 57 Acquisition and divestiture related expenses ​ 219 ​ 41 Bad debt expense ​ 98 ​ 1 LOPI - timing difference ​ ​ (4,636) ​ ​ 4,636 Other ​ ​ 1,418 ​ ​ — Adjusted EBITDA ​ $ 88,032 ​ $ 93,822 ​ Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ ​ 2023 2022 ​ ​ (In thousands) Net cash provided by operating activities ​ $ 141,590 ​ $ 64,485 Changes in working capital ​ (8,517) ​ (14,812) Interest expense, net ​ 17,719 ​ 14,101 Pipeline incident loss ​ 19,981 ​ 11,277 Pipeline incident settlement ​ — ​ 12,000 Litigation settlement ​ ​ (84,875) ​ — Income tax expense (benefit) - current ​ 4,817 ​ 111 Amortization and write-off of deferred financing fees ​ (1,980) ​ (649) Exploration costs ​ 57 ​ 57 Cash settlements paid (received) on terminated derivatives ​ ​ (658) ​ ​ — Amortization of gain associated with terminated commodity derivatives ​ ​ 658 ​ ​ — Plugging and abandonment cost ​ 2,239 ​ 1,829 Acquisition and divestiture related expenses ​ 219 ​ 41 LOPI - timing difference ​ ​ (4,636) ​ ​ 4,636 Gain (loss) on interest rate swaps ​ — ​ 935 Cash settlements paid (received) on interest rate swaps ​ — ​ (311) Other ​ 1,418 ​ 122 Adjusted EBITDA ​ $ 88,032 ​ $ 93,822 ​ 71 Table of Contents Liquidity and Capital Resources Overview .
We believe accounting for oil and natural gas properties is a critical accounting estimate because the policies discussed above the impact the carrying value of our properties involve significant judgments about the impact of future events on our estimated cash flows.
We believe accounting for oil and natural gas properties is a critical accounting estimate because the policies discussed above impact the carrying value of our properties and involve significant judgments about the impact of future events on our estimated cash flows.
We believe oil and natural gas reserves is a critical accounting estimate because we must periodically reevaluate proved reserves along with estimates of future production rates, production costs and the timing of development expenditures. Future results of operations for any period could be materially affected by changes in our assumptions.
We believe the estimate of oil and natural gas reserves is a critical accounting estimate because we must periodically reevaluate proved reserves along with estimates of future production rates, production costs and the timing of development expenditures. Future results of operations for any period could be materially affected by changes in our assumptions.
Net losses on commodity derivative instruments of $106.9 million were recognized for the year ended December 31, 2022, consisting of a $41.3 million increase in the fair value of open positions and a decrease of $148.2 million in cash settlements paid on expired positions.
Net losses on commodity derivative instruments of $106.9 million were recognized for the year ended December 31, 2022, consisting of a $41.3 million increase in the fair value of open positions and a decrease of $148.2 million of cash settlements paid on expired positions.
These costs include overhead, including payroll and benefits for employees, costs of maintaining headquarters, costs of managing production and development operations, compensation expenses associated with certain long-term incentive-based plans, audit and other professional fees and legal compliance expenses. ● Interest expense.
These costs include overhead, including payroll and benefits for employees, costs of maintaining headquarters, costs of managing production and development operations, compensation expenses associated with certain long-term incentive-based plans, audit and other professional fees and legal compliance expenses. ● Interest expense, net.
The relative prices of oil and natural gas are determined by the factors impacting global and regional supply and demand dynamics, such as economic conditions, production levels, weather cycles and other events. In addition, realized prices are heavily influenced by product quality and location relative to consuming and refining markets. 60 Table of Contents Natural Gas .
The relative prices of oil and natural gas are determined by the factors impacting global and regional supply and demand dynamics, such as economic conditions, production levels, weather cycles and other events. In addition, realized prices are heavily influenced by product quality and location relative to consuming and refining markets. 61 Table of Contents Natural Gas .
Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our Revolving Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2023 development activities.
Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our Revolving Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2024 development activities.
We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 30% - 75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time.
We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 50%−75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time.
The current market conditions may also impact our ability to enter into future commodity derivative contracts. 61 Table of Contents Principal Components of Cost Structure ● Lease operating expense . These are the day-to-day costs incurred to maintain production of our natural gas, NGLs and oil.
The current market conditions may also impact our ability to enter into future commodity derivative contracts. 62 Table of Contents Principal Components of Cost Structure ● Lease operating expense . These are the day-to-day costs incurred to maintain production of our natural gas, NGLs and oil.
We define Adjusted EBITDA as net income (loss): Plus: ● Interest expense, including gains or losses on interest rate derivative contracts; ● Income tax expense; ● DD&A; ● Impairment of goodwill and long-lived assets (including oil and natural gas properties); ● Accretion of asset retirement obligations (“AROs”); ● Loss on commodity derivative instruments; ● Cash settlements received on expired commodity derivative instruments; ● Losses on sale of assets and other, net; ● Share-based compensation expenses; ● Exploration costs; ● Acquisition and divestiture related expenses; ● Amortization of gain associated with terminated commodity derivatives; ● Restructuring related costs; 68 Table of Contents ● Reorganization items, net; ● Severance payments; ● Bad debt expense; and ● Other non-routine items that we deem appropriate.
We define Adjusted EBITDA as net income (loss): Plus: ● Interest expense, including gains or losses on interest rate derivative contracts; ● Income tax expense; ● DD&A; ● Impairment of goodwill and long-lived assets (including oil and natural gas properties); ● Accretion of asset retirement obligations (“AROs”); ● Loss on commodity derivative instruments; ● Cash settlements received on expired commodity derivative instruments; ● Losses on sale of assets and other, net; 69 Table of Contents ● Share-based compensation expenses; ● Exploration costs; ● Acquisition and divestiture related expenses; ● Amortization of gain associated with terminated commodity derivatives; ● Severance payments; ● Bad debt expense; and ● Other non-routine items that we deem appropriate.
However, in addition to the settlement amount disclosed elsewhere in this Annual Report that we will receive from the vessels that struck and damaged the Pipeline and their respective owners and operators, we carry customary insurance policies, which have covered a material portion of aggregate costs, including loss of production income insurance to offset loss of revenue resulting from suspended operations.
However, in addition to the settlement amount disclosed elsewhere in this Annual Report that we received from the vessels that struck and damaged the Pipeline and their respective owners and operators, we carry customary insurance policies, which have covered a material portion of aggregate costs, including loss of production income insurance to offset loss of revenue resulting from suspended operations.
Historically, we financed a portion of our working capital requirements, capital development and acquisitions with borrowings under our Revolving Credit Facility. As a result, we incur substantial interest expense that is affected by both fluctuations in interest rates and financing decisions. We expect to continue to incur significant interest expense. ● Income tax expense.
Historically, we have financed a portion of our working capital requirements, capital development and acquisitions with borrowings under our Revolving Credit Facility. As a result, we incur substantial interest expense that is affected by both fluctuations in interest rates and financing decisions. We expect to continue to incur significant interest expense.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our Consolidated Financial Statements, together with the report of our independent registered public accounting firm, begin on page F-1 of this Annual Report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our Consolidated Financial Statements, together with the report of our independent registered public accounting firm, begin on page F-1 of this Annual Report and are incorporated herein by reference. 74 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
In addition, the timing of payments received by our customers or paid to our 71 Table of Contents suppliers can also cause fluctuations in working capital because we settle with most of our larger customers on a monthly basis and often near the end of the month.
In addition, the timing of payments received by our customers or paid to our suppliers can also cause fluctuations in working capital because we settle with most of our larger customers on a monthly basis and often near the end of the month.
We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Future events and circumstances currently unknown to us could require future impairments to our properties and materially change the carrying value of our properties. Oil and Natural Gas Reserves . Proved oil and natural gas reserves are estimated in accordance with the rules established by the SEC and FASB.
Future events and circumstances currently unknown to us could require future impairments to our properties and materially change the carrying value of our properties. 64 Table of Contents Oil and Natural Gas Reserves . Proved oil and natural gas reserves are estimated in accordance with the rules established by the SEC and FASB.
For the year ended December 31, 2021 compared to the year ended December 31, 2020 Information related to the comparison of our discussion of the cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2020, is included in “Item 7.
For the year ended December 31, 2022 compared to the year ended December 31, 2021 Information related to the comparison of our discussion of the cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021, is included in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of our 2021 Form 10-K filed with the SEC and is incorporated by reference into this Annual Report. Capital Requirements See “— Outlook” for additional information regarding our capital spending program for 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of our 2022 Form 10-K filed with the SEC and is incorporated by reference into this Annual Report. Capital Requirements See “— Outlook” for additional information regarding our capital spending program for 2024.
We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 30% -75% of our estimated production from proved developed producing reserves over a one-to-three-year period at any given point of time. We may, however, from time-to-time hedge more or less than this approximate range.
We are required to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 50%−75% of our estimated production from proved developed producing reserves over a one-to-three-year period at any given point of time. We may, however, from time-to-time hedge more or less than this approximate range.
We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under our Revolving Credit Facility will be sufficient to support working capital, capital expenditures and other cash requirements for at least the next 12 months and, based on our current expectations, for the foreseeable future thereafter.
We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under our Revolving Credit Facility will be sufficient to support working capital, capital expenditures and other cash requirements for at least the next 12 months and, based on our current expectations, for the foreseeable future thereafter. Impact of the Beta Pipeline Incident .
As of December 31, 2022, our future commitments under this agreement were $8.0 million in 2023, and $15.8 million a year for years 2024 through 2033. See Note 16 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information. Fines .
As of December 31, 2023, our future commitments under this agreement were $15.8 million per year for years 2024 through 2033. See Note 16 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information. Fines .
The rules require that reserve estimates be prepared under existing economic and operating conditions using a trailing 12-month average price with no provision for price and cost escalation in future years except by contractual arrangements.
The rules require that reserve estimates be prepared under existing economic and operating conditions using a trailing 12-month average price with no provision for price and cost escalation in future years except by contractual arrangements. Our reserve estimates are prepared by our reserve engineers and audited by independent engineers.
Our business activities are conducted through OLLC, our wholly owned subsidiary, and its wholly owned subsidiaries. Our assets consist primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (Bairoil), federal waters offshore Southern California (Beta), East Texas/North Louisiana and Eagle Ford (Non-Op).
Our business activities are conducted through OLLC, our wholly owned subsidiary, and its wholly owned subsidiaries. Our assets consist primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (“Bairoil”), federal waters offshore Southern California (“Beta”), East Texas/North Louisiana and Eagle Ford.
Pipeline incident loss was $11.3 million and $1.6 million for the year ended December 31, 2022 and 2021. The $11.3 million reflects certain legal defense costs associated with the Incident that are not expected to be recovered under an insurance policy. See Note 15 of the Notes to Consolidated Financial Statements included under “Item 8.
Pipeline incident loss was $20.0 million and $11.3 million for the year ended December 31, 2023 and 2022. The $20.0 million reflects certain legal defense and regulatory costs associated with the Incident that are not expected to be recovered under an insurance policy. See Note 15 of the Notes to Consolidated Financial Statements included under “Item 8.
For additional information regarding our Revolving Credit Facility, see Note 8 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information. Material Cash Requirements Contractual commitments. We have contractual commitments under our debt agreements, including interest payments and principal payments.
Financial Statements and Supplementary Data” of this Annual Report for additional information. Material Cash Requirements Contractual commitments. We have contractual commitments under our debt agreements, including interest payments and principal payments. See Note 8 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information. Lease Obligations.
The charts below detail the allocation of capital across our asset base and by investment type based on the midpoint of our 2023 capital expenditure range. ​ 62 Table of Contents As has been our historical practice, we will periodically review our capital expenditures throughout the year and may adjust the budget based on commodity prices and other factors.
The charts below detail the allocation of capital across our asset base and by investment type based on the midpoint of our 2024 capital expenditure range. ​ ​ ​ 2024 CAPEX by Investment ​ 2024 CAPEX by Area ​ As has been our historical practice, we will periodically review our capital expenditures throughout the year and may adjust the budget based on commodity prices and other factors.
For example, our cumulative historical losses for the three fiscal years end December 31, 2022, 2021 and 2020 are $434.1 million, which is primarily attributable to impairment expenses of $476.9 million that were incurred during the fiscal year ended December 31, 2020.
For example, prior to 2023, our cumulative historical pre-tax losses for the three fiscal years end December 31, 2022, 2021 and 2020 were $434.1 million, which was primarily attributable to impairment expenses of $476.9 million that were incurred during the fiscal year ended December 31, 2020.
The loss of production income insurance related to the Incident will expire on March 31, 2023. We can provide no assurance that our coverage will adequately protect us against liability from all potential consequences, damages and losses related to the Incident. Capital Markets.
The loss of production income insurance related to the Incident expired on March 31, 2023. We restarted operations of the Beta Field in April 2023. We can provide no assurance that our coverage will adequately protect us against liability from all potential consequences, damages and losses related to the Incident. Capital Markets.
The change in taxes other than income is due to an increase of $10.0 million in production taxes as a result of the increase in commodity prices and an increase of $1.0 million for ad valorem tax. On a per Boe basis, taxes other than income were $4.41 and $2.54 for the year ended December 31, 2022 and 2021, respectively.
The change in taxes other than income is due to a decrease of $12.2 million in production taxes as a result of lower commodity prices offset by an increase of $0.2 million for ad valorem tax. On a per Boe basis, taxes other than income were $2.85 and $4.41 for the year ended December 31, 2023 and 2022, respectively.
Oil, natural gas and NGL revenues were $407.8 million and $335.8 million for the year ended December 31, 2022 and 2021, respectively. Average net production volumes were approximately 20.7 MBoe/d and 24.0 MBoe/d for the year ended December 31, 2022 and 2021, respectively.
Oil, natural gas and NGL revenues were $288.3 million and $407.8 million for the year ended December 31, 2023 and 2022, respectively. Average net production volumes were approximately 20.5 MBoe/d and 20.7 MBoe/d for the year ended December 31, 2023 and 2022, respectively.
Our total capital expenditures were approximately $35.8 million for the year ended December 31, 2022, which were primarily related to capital workovers and capital facilities expenditures located in the Rockies, Oklahoma and East Texas and non-operated drilling activity in Eagle Ford. Working Capital. Working capital is the amount by which current assets exceed current liabilities.
Our total capital expenditures were approximately $33.7 million for the year ended December 31, 2023, which were primarily related to capital workovers and capital facilities expenditures located in Beta, Oklahoma, Bairoil and non-operated drilling activity in Eagle Ford. Working Capital. Working capital is the amount by which current assets exceed current liabilities.
The change in general and administrative expense is primarily related to (i) an increase of $1.9 million in salaries and other payroll benefits; (ii) an increase of $1.5 million in stock compensation expense; (iii) an increase in professional services of $0.6 million; and an increase in legal services of $0.5 million.
The change in general and administrative expense is primarily related to (i) an increase of $2.1 million in salaries and other payroll benefits; (ii) an increase of $2.2 million in stock compensation expense; partially offset by (iii) a decrease in legal services of $0.9 million; and a decrease in professional services of $0.3 million.
Our reserve estimates are prepared by our reserve engineers and audited by independent engineers. 63 Table of Contents Our reserve estimates are updated at least annually using geological and reserve data, as well as production performance data. Reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available.
Our reserve estimates are updated at least annually using geological and reserve data, as well as production performance data. Reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available.
Additions to restricted investments were $6.7 million for the year ended December 31, 2022. 73 Table of Contents Financing Activities . We had net repayments of $40.0 million and $25.0 million under our Revolving Credit Facility for the year ended December 31, 2022 and 2021, respectively.
Additions to restricted investments were $8.6 million for the year ended December 31, 2023 compared to $6.7 million for the year ended December 31, 2022. Financing Activities . We had net repayments of $75.0 million and $40.0 million under our Revolving Credit Facility and Prior Revolving Credit Facility for the year ended December 31, 2023 and 2022, respectively.
Financial Statements and Supplementary Data” of this Annual Report. Pipeline incident settlement was $12.0 million for the year ended December 31, 2022, related to the resolution of the federal and state matters associated with the Incident discussed in Note 15 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
No expense was recorded for the year ended December 31, 2023 and $12.0 million was recorded for the year ended December 31, 2022, related to the resolution of the federal and state matters associated with the Incident discussed in Note 15 of the Notes to Consolidated Financial Statements included under “Item 8.
We are required to comply with certain Adjusted EBITDA-related metrics under our Revolving Credit Facility. We believe that Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
We believe that Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
Judgment is often required to determine when expenses should be recorded for legal, environmental and contingent matters. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings.
Although we are insured against various risks to the extent we believe is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K filed with the SEC and is incorporated by reference into this Annual Report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 (“ 2022 Form 10-K ”) filed with the SEC and is incorporated by reference into this Annual Report.
Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities was $64.5 million and $63.0 million for the year ended December 31, 2022 and 2021, respectively.
Key drivers of net operating cash flows are commodity prices, production volumes, operating costs and the settlement received related to the Incident. Net cash provided by operating activities was $141.6 million and $64.5 million for the year ended December 31, 2023 and 2022, respectively.
We cannot assure you that operations and other needed capital will be available on acceptable terms, or at all. We anticipate funding our 2023 capital program from internally generated cash flow, borrowings under our Revolving Credit Facility and/or debt or equity financings may provide incremental financial flexibility.
We cannot assure you that operations and other needed capital will be available on acceptable terms, or at all. We anticipate funding our 2024 capital program from internally generated cash flow but retain the flexibility to utilize borrowings under our Revolving Credit Facility, and/or to access the debt and equity capital markets.
Financial Statements and Supplementary Data” of this Annual Report for additional information. Sinking fund payments. We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for our offshore Southern California production facilities.
See Note 12 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information. Sinking fund payments. We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for our Beta production facilities.
The change in taxes other than income on a per Boe basis was primarily due to an increase in commodity prices. DD&A expense was $24.0 million and $28.1 million for the year ended December 31, 2022 and 2021, respectively.
The change in taxes other than income on a per Boe basis was primarily due to lower commodity prices. DD&A expense was $28.0 million and $24.0 million for the year ended December 31, 2023 and 2022, respectively. The change in DD&A expense was primarily driven by the restart of production at Beta.
Production volumes decreased to 20.7 MBoe/d in 2022 from 24.0 MBoe/d in 2021 and the average realized sales price increased to $54.02 per Boe in 2022 from $38.39 per Boe in 2021. The changes in production and average realized sales price were primarily related to the suspension of operations at Beta and increased realized commodity prices.
Production volumes decreased to 20.5 MBoe/d in 2023 from 20.7 MBoe/d in 2022, and the average realized sales price decreased to $38.54 per Boe in 2023 from $54.02 per Boe in 2022. The changes in production and average realized sales price were primarily related to decreased realized commodity prices.
Net cash provided by operating activities for the year ended December 31, 2022 included $147.9 million of cash paid on expired derivative instruments compared to $90.2 million of cash paid on expired derivative instruments for the year ended December 31, 2021.
Net cash provided by operating activities for the year ended December 31, 2023 included $8.3 million of cash paid on expired derivative instruments and $0.7 million of cash received on terminated derivative instruments compared to $147.9 million of cash paid on expired derivative instruments for the year ended December 31, 2022.
The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties. 65 Table of Contents The table below summarizes certain of the results of operations and period-to-period comparisons for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ ​ 2022 2021 ​ ​ ($ In thousands) Oil and natural gas sales ​ $ 407,761 ​ $ 335,779 Other revenues ​ ​ 50,695 ​ ​ 7,137 Lease operating expense ​ 131,675 ​ 121,398 Gathering, processing and transportation ​ 29,110 ​ 20,807 Taxes other than income ​ 33,308 ​ 22,250 Depreciation, depletion and amortization ​ 23,950 ​ 28,068 General and administrative expense ​ 30,164 ​ 25,285 Loss (gain) on commodity derivative instruments ​ 106,937 ​ 142,439 Pipeline incident loss ​ ​ 11,277 ​ ​ 1,599 Pipeline incident settlement ​ ​ 12,000 ​ ​ — Interest expense, net ​ 14,101 ​ 12,099 Gain on extinguishment of debt ​ — ​ 5,516 Net income (loss) ​ 57,875 ​ (32,070) ​ ​ ​ ​ ​ ​ ​ Oil and natural gas revenues: ​ ​ Oil sales ​ $ 212,522 ​ $ 212,486 NGL sales ​ 47,398 ​ 40,899 Natural gas sales ​ 147,841 ​ 82,394 Total oil and natural gas revenues ​ $ 407,761 ​ $ 335,779 ​ ​ ​ ​ ​ ​ ​ Production volumes: ​ ​ Oil (MBbls) ​ 2,327 ​ 3,351 NGLs (MBbls) ​ 1,389 ​ 1,430 Natural gas (MMcf) ​ 22,993 ​ 23,808 Total (MBoe) ​ 7,548 ​ 8,747 Average net production (MBoe/d) ​ 20.7 ​ 24.0 ​ ​ ​ ​ ​ ​ ​ Average realized sales price (excluding commodity derivatives): ​ ​ Oil (per Bbl) ​ $ 91.34 ​ $ 63.43 NGL (per Bbl) ​ 34.11 ​ 28.62 Natural gas (per Mcf) ​ 6.43 ​ 3.46 Total (per Boe) ​ $ 54.02 ​ $ 38.39 ​ ​ ​ ​ ​ ​ ​ Average unit costs per Boe: ​ ​ Lease operating expense ​ $ 17.45 ​ $ 13.88 Gathering, processing and transportation ​ 3.86 ​ 2.38 Taxes other than income ​ 4.41 ​ 2.54 General and administrative expense ​ 4.00 ​ 2.89 Depletion, depreciation and amortization ​ 3.17 ​ 3.21 ​ For the year ended December 31, 2022 compared to the year ended December 31, 2021 Net income of $57.9 million and net loss of $32.1 million was recorded for the year ended December 31, 2022 and 2021, respectively.
The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties. 66 Table of Contents The table below summarizes certain of the results of operations and period-to-period comparisons for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2023 2022 ​ ($ In thousands) Oil and natural gas sales $ 288,271 ​ $ 407,761 Other revenues ​ 19,325 ​ ​ 50,695 Lease operating expense 139,587 ​ 131,675 Gathering, processing and transportation 20,808 ​ 29,110 Taxes other than income 21,348 ​ 33,308 Depreciation, depletion and amortization 28,004 ​ 23,950 General and administrative expense 32,984 ​ 30,164 Loss (gain) on commodity derivative instruments (40,343) ​ 106,937 Pipeline incident loss ​ 19,981 ​ ​ 11,277 Pipeline incident settlement ​ — ​ ​ 12,000 Interest expense, net 17,719 ​ 14,101 Litigation settlement 84,875 ​ — Income tax (expense) benefit - current ​ (4,817) ​ ​ (111) Income tax (expense) benefit - deferred 253,796 ​ — Net income (loss) 392,750 ​ 57,875 ​ ​ ​ ​ ​ ​ Oil and natural gas revenues: ​ Oil sales $ 205,663 ​ $ 212,522 NGL sales 29,432 ​ 47,398 Natural gas sales 53,176 ​ 147,841 Total oil and natural gas revenues $ 288,271 ​ $ 407,761 ​ ​ ​ ​ ​ ​ Production volumes: ​ Oil (MBbls) 2,773 ​ 2,327 NGLs (MBbls) 1,323 ​ 1,389 Natural gas (MMcf) 20,297 ​ 22,993 Total (MBoe) 7,479 ​ 7,548 Average net production (MBoe/d) 20.5 ​ 20.7 ​ ​ ​ ​ ​ ​ Average realized sales price (excluding commodity derivatives): ​ Oil (per Bbl) $ 74.17 ​ $ 91.34 NGL (per Bbl) 22.24 ​ 34.11 Natural gas (per Mcf) 2.62 ​ 6.43 Total (per Boe) $ 38.54 ​ $ 54.02 ​ ​ ​ ​ ​ ​ Average unit costs per Boe: ​ Lease operating expense $ 18.66 ​ $ 17.45 Gathering, processing and transportation 2.78 ​ 3.86 Taxes other than income 2.85 ​ 4.41 General and administrative expense 4.41 ​ 4.00 Depletion, depreciation and amortization 3.74 ​ 3.17 ​ For the year ended December 31, 2023 compared to the year ended December 31, 2022 Net income of $392.8 million and $57.9 million was recorded for the year ended December 31, 2023 and 2022, respectively.
Financial Statements and Supplementary Data” of this Annual Report for additional information. For the year ended December 31, 2021 compared to the year ended December 31, 2020 Information related to the comparison of our discussion of the results of operations for the year ended December 31, 2021, compared to the year ended December 31, 2020, is included in “Item 7.
For the year ended December 31, 2022 compared to the year ended December 31, 2021 Information related to the comparison of our discussion of the results of operations for the year ended December 31, 2022, compared to the year ended December 31, 2021, is included in “Item 7.
We are a corporation subject to federal and certain state income taxes. We are subject to the Texas margin tax for activities in the State of Texas. Outlook Based on our current plans, our capital expenditure program for the full year 2023 is expected to be approximately $30.0 million to $40.0 million.
We are subject to the Texas margin tax for activities in the State of Texas. 63 Table of Contents Outlook Based on our current plans, our capital expenditure program for the full year 2024 is expected to be approximately $50.0 million to $60.0 million.
Financial Statements and Supplementary Data” contained herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2022 2021 ​ (In thousands) Net cash provided by operating activities ​ $ 64,485 ​ $ 62,969 Net cash used in investing activities ​ (41,525) ​ (29,428) Net cash used in financing activities ​ (41,759) ​ (25,106) ​ For the year ended December 31, 2022 compared to the year ended December 31, 2021 Operating Activities.
Financial Statements and Supplementary Data” contained herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ 2023 2022 ​ (In thousands) Net cash provided by operating activities ​ $ 141,590 ​ $ 64,485 Net cash used in investing activities ​ (38,602) ​ (41,525) Net cash used in financing activities ​ (82,242) ​ (41,759) ​ 73 Table of Contents For the year ended December 31, 2023 compared to the year ended December 31, 2022 Operating Activities.
The increase in average realized sales price was primarily due to the increase in commodity prices. 66 Table of Contents Other revenues were $50.7 million and $7.1 million for the year ended December 31, 2022 and 2021, respectively.
The average realized sales price was $38.54 per Boe and $54.02 per Boe for the year ended December 31, 2023 and 2022, respectively. The decrease in average realized sales price was due to lower commodity prices. 67 Table of Contents Other revenues were $19.3 million and $50.7 million for the year ended December 31, 2023 and 2022, respectively.
Results of Operations The results of operations for the years ended December 31, 2022 and 2021, have been derived from our Consolidated Financial Statements.
Any increase in the valuation allowance would increase our income tax expense in the Consolidated Statements of Operations. Results of Operations The results of operations for the years ended December 31, 2023 and 2022 have been derived from our Consolidated Financial Statements.
We anticipate funding our 2023 capital program from internally generated cash flow, borrowings under our Revolving Credit Facility and/or debt or equity financings may provide incremental financial flexibility. Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on the results we report in our Consolidated Financial Statements.
We anticipate funding our 2024 capital program from internally generated cash flow. Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on the results we report in our Consolidated Financial Statements. We evaluate our estimates and judgments on an on-going basis.
Less: ● Interest income; ● Income tax benefit; ● Gain on extinguishment of debt ● Gain on expired commodity derivative instruments; ● Cash settlements paid on expired commodity derivative instruments; ● Gains on sale of assets and other, net; and ● Other non-routine items that we deem appropriate.
Less: ● Interest income; ● Income tax benefit; ● Gain on expired commodity derivative instruments; ● Cash settlements paid on expired commodity derivative instruments; ● Gains on sale of assets and other, net; and ● Other non-routine items that we deem appropriate. We are required to comply with certain Adjusted EBITDA-related metrics under our Revolving Credit Facility.
Changes in the derivative’s fair value are recognized currently in earnings as we have not elected hedge accounting for any of our derivative positions. Significant changes to the market value of derivative instruments due to the volatility of oil and natural gas prices can have an impact on our financial condition and results of operations.
Significant changes to the market value of derivative instruments due to the volatility of oil and natural gas prices can have an impact on our financial condition and results of operations. Contingencies and Insurance Accounting.
For information regarding the individual components of our cash flow amounts, see the Statements of Consolidated Cash Flows included under “Item 8.
The cash flows for the years ended December 31, 2023 and 2022, have been derived from our Consolidated Financial Statements. For information regarding the individual components of our cash flow amounts, see the Statements of Consolidated Cash Flows included under “Item 8.
We have a payment plan to pay our federal fines over a period of three years. We are scheduled to pay $2.0 million in each of 2023 and 2024 and $1.1 million in 2025. For the fines related to the state of California, we are scheduled to pay $2.9 million in 2023.
We have a payment plan to pay our federal fines over a period of three years. We are scheduled to pay $2.0 million in 2024 and $1.1 million in 2025. Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated.
The change in interest expense was from a $2.8 million increase in interest expense due to higher interest rates on our Revolving Credit Facility, offset by a decrease of $0.7 million on our interest rate swaps. Average outstanding borrowings under our Revolving Credit Facility were $215.1 million and $240.2 million for the year ended December 31, 2022 and 2021, respectively.
The change resulted from an increase in interest expense due to higher interest rates on our Revolving Credit Facility and an increase in the amortization and write-off of deferred financing costs. Average outstanding borrowings under our Revolving Credit Facility were $138.9 million and $215.1 million for the year ended December 31, 2023 and 2022, respectively.
See Note 8 of the Notes to the Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” for additional information regarding the PPP Loan. Investing Activities. Net cash used in investing activities for the year ended December 31, 2022, was $41.5 million, of which $34.8 million was used for additions to oil and natural gas properties.
Net cash used in investing activities for the year ended December 31, 2023 was $38.6 million, of which $30.7 million was used for additions to oil and natural gas properties. Net cash used in investing activities for the year ended December 31, 2022, was $41.5 million, of which $34.8 million was used for additions to oil and natural gas properties.
The following table shows the low and high commodity future index prices for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ High Low For the Year Ended December 31, 2022: ​ ​ NYMEX-WTI oil future price range per Bbl ​ $ 122.11 ​ $ 71.02 NYMEX-Henry Hub natural gas future price range per MMBtu ​ $ 9.68 ​ $ 3.72 ICE Brent oil future price range per Bbl ​ $ 123.58 ​ $ 76.10 ​ ​ ​ ​ ​ ​ ​ For the Five Years Ended December 31, 2022: ​ ​ NYMEX-WTI oil future price range per Bbl ​ $ 122.11 ​ $ (37.63) NYMEX-Henry Hub natural gas future price range per MMBtu ​ $ 9.68 ​ $ 1.48 ICE Brent oil future price range per Bbl ​ $ 123.58 ​ $ 19.33 ​ Commodity Derivative Contracts .
The following table shows the low and high commodity future index prices for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ High Low For the Year Ended December 31, 2023: ​ ​ NYMEX-WTI oil future price range per Bbl ​ $ 93.68 ​ $ 66.74 NYMEX-Henry Hub natural gas future price range per MMBtu ​ $ 4.17 ​ $ 1.99 ICE Brent oil future price range per Bbl ​ $ 96.55 ​ $ 71.84 ​ Commodity Derivative Contracts .
See Notes 4 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report for a discussion of our fair value measurements.
See additional information discussed in Note 17 of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
The change in lease operating expense on a per Boe basis was mainly due to higher aggregate costs noted above and lower production. Gathering, processing and transportation expenses were $29.1 million and $20.8 million for the year ended December 31, 2022 and 2021, respectively.
On a per Boe basis, lease operating expense was $18.66 and $17.45 for the year ended December 31, 2023 and 2022, respectively. The change in lease operating expense on a per Boe basis was mainly due to higher aggregate costs with Beta restarting operations and lower production.
Impact of the Southern California Pipeline Incident . There is certain uncertainty surrounding the full impact that the Incident will have on our financial condition and cash flow generation going forward.
There are remaining uncertainties surrounding the full impact that the Incident will have on our financial condition and cash flow generation going forward. We have incurred and will continue to incur certain costs as a result of the Incident.
No expense was recorded for the year ended December 31, 2021. 67 Table of Contents Interest expense, net was $14.1 million and $12.1 million for the year ended December 31, 2022 and 2021, respectively.
Financial Statements and Supplementary Data” of this Annual Report. 68 Table of Contents Interest expense, net was $17.7 million and $14.1 million for the year ended December 31, 2023 and 2022, respectively.
Net losses on commodity derivative instruments of $142.4 million were recognized for the year ended December 31, 2021, consisting of a $54.1 million decrease in the fair value of open positions and $88.3 million of cash settlements paid on expired positions.
Net gains on commodity derivative instruments of $40.3 million were recognized for the year ended December 31, 2023, consisting of a $47.9 million increase in the fair value of open positions, $0.7 million of cash settlements received on terminated derivative instruments partially offset by $8.3 million in cash settlements paid on expired positions.
We believe accounting for income taxes is a critical accounting estimate because the policies discussed above in assessing the carrying value of our net deferred tax assets require estimates and judgements about the impact of future events on our projected taxable income.
We considered all available evidence, including cumulative historical losses (defined as pre-tax earnings as adjusted for permanent tax adjustment), scheduled reversal of deferred tax liabilities, projected future taxable income and available tax planning strategies. 65 Table of Contents We believe accounting for income taxes is a critical accounting estimate because the policies discussed above in assessing the carrying value of our net deferred tax assets require estimates and judgements about the impact of future events on our projected taxable income, the results of which can have a material impact on our Consolidated Financial Statements.
The change in other revenues was primarily related the recognition of loss of production income insurance proceeds of $50.2 million for the year ended December 31, 2022 compared to $6.7 million for the year ended December 31, 2021. Lease operating expense was $131.7 million and $121.4 million for the year ended December 31, 2022 and 2021, respectively.
The change in other revenues was primarily related to a decrease in the recognition of loss of production income insurance related to the Incident as the insurance policy terminated during 2023. During the year ended December 31, 2023, the loss of production income was $17.9 million compared to $50.2 million for the year ended December 31, 2022.
As of December 31, 2022, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with our Revolving Credit Facility. As of December 31, 2022, we had approximately $20.0 million of available borrowings under our Revolving Credit Facility.
As of December 31, 2023, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with our Revolving Credit Facility. For additional information regarding our Revolving Credit Facility, see Note 8 of the Notes to Consolidated Financial Statements included under “Item 8.
As of December 31, 2022, we are the operator of record for properties containing 92% of our total estimated proved reserves.
Our total estimated proved reserves decreased to 98.1 MMBoe in 2023 compared to 124.0 MMBoe in 2022. The decrease is primarily due to lower commodity prices. As of December 31, 2023, we are the operator of record for properties containing 92% of our total estimated proved reserves.
We believe revenue recognition is a critical accounting estimate because revenue is an essential portion of our results of operations. Contingencies and Insurance Accounting. A provision for legal, environmental and other contingent matters is charged to expense when the loss is probable and the cost or range of cost can be reasonably estimated.
A provision for legal, environmental and other contingent matters is charged to expense when the loss is probable and the cost or range of cost can be reasonably estimated. Judgment is often required to determine when expenses should be recorded for legal, environmental and contingent matters.
Significant changes in these estimates could result in a change to our estimated reserves, which could lead to a material change to our production depletion expense. Fair Value Estimates.
Significant changes in these estimates could result in a change to our estimated reserves, which could lead to a material change to our production depletion expense. Derivative Financial Instruments. Our commodity derivative financial instruments are used to reduce the impact of natural gas and oil price fluctuations.
For the year ended December 31, 2022, we had net losses on commodity derivative instruments of $106.9 million compared to net losses of $142.4 million for the year ended December 31, 2021. During 2021, we recorded a $5.5 million gain on extinguishment of debt related to the forgiveness of the PPP Loan.
For the year ended December 31, 2023, we had net gains on commodity derivative instruments of $40.3 million compared to net losses of $106.9 million for the year ended December 31, 2022. Investing Activities.
On a per Boe basis, gathering, processing and transportation expenses were $3.86 and $2.38 for the year ended December 31, 2022 and 2021, respectively. The change on a per BOE basis is primarily related to the marketing changes discussed above. Taxes other than income was $33.3 million and $22.3 million for the year ended December 31, 2022 and 2021, respectively.
Gathering, processing and transportation expenses were $20.8 million and $29.1 million for the year ended December 31, 2023 and 2022, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.78 and $3.86 for the year ended December 31, 2023 and 2022, respectively.
In future periods, we may demonstrate cumulative historical earnings for the previous three fiscal years, which could significantly impact our valuation allowance of $284.9 million as of December 31, 2022. Any reduction in the valuation allowance would increase our income tax benefit in the Consolidated Statements of Operations.
We have reversed the entire valuation allowance on our net deferred tax assets during 2023, recording an income tax benefit of $249.0 million for the year ended December 31, 2023. In future periods, we may demonstrate cumulative historical losses for the previous three fiscal years, which could significantly impact our need for a valuation allowance.
Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs. Production and Operation Update Our oil, natural gas and NGL production for the fiscal year 2022 decreased to 31%, 3% and 3%, respectively. The decrease in production was attributable to Beta properties being shut-in due to the Incident and natural decline.
Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs. Production and Operation Update Total production for the Company in 2023 was composed of approximately 37% oil, 45% natural gas and 18% NGLs compared to 31% oil, 51% natural gas and 18% NGLs in 2022.
If the carrying value of the property exceeds its estimated undiscounted future cash flows, the carrying amount of the property is reduced to its estimated fair value using Level 3 inputs.
Such indications could be the result of downward revisions of the reserve estimates, less than expected production or drilling results, higher operating and development costs, or lower commodity prices. If the carrying value of the property exceeds its estimated undiscounted future cash flows, the carrying amount of the property is reduced to its estimated fair value using Level 3 inputs.
We review the carrying value of our oil and natural gas properties for impairments annually or when events and circumstances indicate the carrying value of our properties may not be recoverable. Such indications could be the result of downward revisions of the reserve estimates, less than expected production or drilling results, higher operating and development costs, or lower commodity prices.
We review the carrying value of our oil and natural gas properties, including support equipment for impairments quarterly or when events and circumstances indicate the carrying value of our properties may not be recoverable.
Our commodity derivative financial instruments are used to reduce the impact of natural gas and oil price fluctuations. We record our derivative instrument in the balance sheet as either an asset or liability measured at its fair value.
We record our derivative instrument in the balance sheet as either an asset or liability measured at its fair value. Changes in the derivative’s fair value are recognized currently in earnings as we have not elected hedge accounting for any of our derivative positions.
As of December 31, 2022, we had a working capital deficit of $40.6 million primarily as the result of (i) a short-term derivative liability balance of $20.9 million (ii) an accrued liabilities balance of $58.4 million (iii) an accounts payable balance of $38.4 million, and (iv) a revenue payable balance of $22.1 million, less (i) an accounts receivable balance of $80.5 million and (ii) prepaid expenses and other current assets balance of $18.8 million.
We expect that our future working capital requirements will be impacted by these same factors. 72 Table of Contents As of December 31, 2023, we had a working capital deficit (excluding commodity derivatives) of $15.9 million primarily as the result of (i) an accrued liabilities balance of $50.9 million, (ii) an accounts payable balance of $23.6 million, and (iii) a revenue payable balance of $21.9 million, less (i) an accounts receivable balance of $39.1 million, (ii) prepaid expenses and other current assets balance of $20.7 million and (iii) cash on hand of $20.7 million.
Net cash used in investing activities for the year ended December 31, 2021, was $29.4 million, of which $29.3 million was used for additions to oil and natural gas properties. Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our offshore Southern California properties.
For the year ended December 31, 2023, in East Texas, we sold a small working interest in certain acreage for $1.2 million and an override royalty interest. Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our offshore Beta properties.
As of December 31, 2022, our future commitments under these contracts were $6.1 million in 2023, $1.6 million in 2024, $1.6 million in 2025, $1.6 million in 2026, $1.1 million in 2027 and $2.9 million thereafter. See Note 12 of the Notes to Consolidated Financial Statements included under “Item 8.
We have operating leases for office and warehouse spaces, office equipment, compressors and surface rentals related to our business obligations. As of December 31, 2023, our future commitments under these contracts were $2.2 million in 2024, $2.0 million in 2025, $1.3 million in 2026, $0.8 million in 2027 and $1.8 million thereafter.
The change in production volumes was primarily due to the suspension of operations at our Beta properties and natural declines. For the year ended December 31, 2021, production from our Beta properties was 2.73 MBoe/d. The average realized sales price was $54.02 per Boe and $38.39 per Boe for the year ended December 31, 2022 and 2021, respectively.
The change in our oil production was primarily related to Beta restarting operations in April 2023. We had a decrease of 29% in oil and natural gas sales primarily due to lower realized commodity prices. Average realized sales price per Boe was $38.54 for 2023 compared to $54.02 for 2022.

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