10q10k10q10k.net

What changed in Riley Exploration Permian, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Riley Exploration Permian, Inc.'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.

+280 added−276 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in Riley Exploration Permian, Inc.'s 2023 10-K

280 paragraphs added · 276 removed · 212 edited across 4 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

144 edited+36 added−20 removed292 unchanged
Biggest changeAny of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for: • injury or loss of life; • employee/employer liabilities and risks, including wrongful termination, discrimination, labor organizing, retaliation claims, and general human resource related matters; • damage to and destruction of property, natural resources and equipment; • pollution and other environmental hazards or damage; • abnormally pressured formations, fires or explosions or natural disasters; • mechanical difficulties, such as stuck oil field drilling and service tools and casing collapse; • regulatory investigations and penalties; • landowner claims for property damage and restoration costs; • suspension of our operations; and repair and remediation costs; • repair and remediation costs.
Biggest changeOur exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the risk of fire, explosions, blowouts, surface cratering or other cratering, uncontrollable flows of natural gas, oil, well fluids and formation water, pipe or pipeline failures, processing or transportation capacity constraints or disruptions, abnormally pressured formations, casing collapses, reservoir damage and environmental hazards such as oil, produced water or chemical spills, natural gas leaks, ruptures or discharges of toxic gases. 35 Table of Contents Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for: • injury or loss of life; • medical monitoring; • natural resources damages; • employee/employer liabilities and risks, including wrongful termination, discrimination, labor organizing, retaliation claims, and general human resource related matters; • damage to and destruction of property, natural resources and equipment; • pollution and other environmental hazards or damage; • abnormally pressured formations, fires or explosions or natural disasters; • mechanical difficulties, such as stuck oil field drilling and service tools and casing collapse; • regulatory investigations and penalties; • landowner claims for property damage and restoration costs; • suspension of our operations; • repair and remediation costs.
The successful acquisition of oil and natural gas properties requires an assessment of several factors, including: • recoverable reserves; • future oil, natural gas and NGL prices and their applicable differentials; • estimates of operating costs; • estimates future development costs; • estimates of the costs and timing of plugging and abandonment; and • environmental and other liabilities.
The successful acquisition of oil and natural gas properties requires an assessment of several factors, including: • recoverable reserves; • future oil, natural gas and NGL prices and their applicable differentials; • estimates of operating costs; • estimates of future development costs; • estimates of the costs and timing of plugging and abandonment; and • environmental and other liabilities.
Our exploration, exploitation and development activities and equipment could be adversely affected by extreme weather conditions, such as floods, lightening, drought, ice and other storms, prolonged freeze events, and tornadoes, which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.
Our exploration, exploitation, development, and production activities and equipment could be adversely affected by extreme weather conditions, such as floods, lightening, drought, ice and other storms, prolonged freeze events, and tornadoes, which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.
Our operations are subject to stringent federal, state and local laws and regulations governing occupational safety and health aspects of our operations, the discharge of materials into the environment and environmental and human health protection.
Our operations are subject to stringent federal, state and local laws and regulations governing occupational safety and health aspects of our operations, the discharge of materials into the environment and environmental and human health and safety protection.
In addition, any testing, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.
In addition, any testing, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.
The market price of our common stock may also fluctuate significantly in response to the following factors, some of which are beyond our control: • our operating and financial performance and drilling locations, including reserve estimates; • actual or anticipated fluctuations in our quarterly results of operations, and financial indicators, such as net income, cash flow and revenues; • our failure to meet revenue, reserves or earnings estimates by research analysts or other investors; • sales of our common stock by the Company or other stockholders, or the perception that such sales may occur; • the public reaction to our press releases, other public announcements, and filings with the SEC; • strategic actions by our competitors or competition for, among other things, capital, acquisition of reserves, undeveloped land and skilled personnel; • publication of research reports about us or the oil and natural gas exploration and production industry generally; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • the failure of research analysts to cover our common stock; • increases in market interest rates or funding rates, which may increase our cost of capital; • changes in market valuations of similar companies; • changes in accounting principles, policies, guidance, interpretations or standards; 52 Table of Contents • additions or departures of key management personnel; • actions by our stockholders; • commencement or involvement in litigation; • general market conditions, including fluctuations in commodity prices; • political conditions in oil and natural gas producing regions; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “ Risk Factors ” section.
The market price of our common stock may also fluctuate significantly in response to the following factors, some of which are beyond our control: • our operating and financial performance and drilling locations, including reserve estimates; • actual or anticipated fluctuations in our quarterly results of operations, and financial indicators, such as net income, cash flow and revenues; • our failure to meet revenue, reserves or earnings estimates by research analysts or other investors; • sales of our common stock by the Company or other stockholders, or the perception that such sales may occur; • the public reaction to our press releases, other public announcements, and filings with the SEC; • strategic actions by our competitors or competition for, among other things, capital, acquisition of reserves, undeveloped land and skilled personnel; • publication of research reports about us or the oil and natural gas exploration and production industry generally; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • the failure of research analysts to cover our common stock; • increases in market interest rates or funding rates, which may increase our cost of capital; • changes in market valuations of similar companies; • changes in accounting principles, policies, guidance, interpretations or standards; • additions or departures of key management personnel; • actions by our stockholders; • commencement or involvement in litigation; • general market conditions, including fluctuations in commodity prices; • political conditions in oil and natural gas producing regions; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “ Risk Factors ” section.
If cash flow generated by our operations or available borrowings under our revolving credit facility are not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our properties, which in turn could lead to a decline in our reserves and production, and would adversely affect our business, financial condition, and results of operations.
If cash flow generated by our operations or available borrowings under our Credit Facility are not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our properties, which in turn could lead to a decline in our reserves and production, and would adversely affect our business, financial condition, and results of operations.
Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Reviews may not always be performed on every well, and environmental problems, such as subsurface or groundwater contamination, are not necessarily observable even when a review is performed.
Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Reviews may not always be performed on every well or facility, and environmental problems, such as subsurface or groundwater contamination, are not necessarily observable even when a review is performed.
If our revenue or the borrowing base under our revolving credit facility decreases as a result of lower oil, natural gas and NGL prices, operating difficulties, declines in reserves, or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations and growth at current levels.
If our revenue or the borrowing base under our Credit Facility decreases as a result of lower oil, natural gas and NGL prices, operating difficulties, declines in reserves, or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations and growth at current levels.
These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens, increased risk of litigation, and adverse impacts on the Company’s access to capital. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance, and the public may engage in the permitting process, including through intervention in the courts.
These concerns and actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens, increased risk of litigation, and adverse impacts on the Company’s access to capital. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance, and the public may engage in the permitting process, including through intervention in the courts.
Our revolving credit facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine in accordance with the terms of the agreement. The borrowing base depends on, among other things, projected revenues from, and asset values of, the proved oil and natural gas properties securing our loan.
Our Credit Facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine in accordance with the terms of the agreement. The borrowing base depends on, among other things, projected revenues from, and asset values of, the proved oil and natural gas properties securing our loan.
Our access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.
Our access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.
We purchase such derivatives to achieve more predictable cash flows, to reduce our exposure to adverse fluctuations in the prices of oil, natural gas, and NGLs, and in order to remain in compliance with covenants in our revolving credit facility. Accordingly, our earnings may fluctuate significantly as a result of changes in fair value of our derivative instruments.
We purchase such derivatives to achieve more predictable cash flows, to reduce our exposure to adverse fluctuations in the prices of oil, natural gas, and NGLs, and in order to remain in compliance with covenants in our Credit Facility. Accordingly, our earnings may fluctuate significantly as a result of changes in fair value of our derivative instruments.
The designation of previously unprotected species in areas where we operate as threatened or endangered could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have a material adverse impact on our ability to develop and produce our reserves.
The designation or proposed designation of previously unprotected species in areas where we operate as threatened or endangered could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have a material adverse impact on our ability to develop and produce our reserves.
Our bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for any actions arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Our bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for any actions arising under the Securities Act of 1933, as amended, or the Exchange Act.
At the state level, Texas, where we conduct our operations, is among the states that has adopted regulations that impose new or more stringent permitting, including the requirement for hydraulic-fracturing operators to complete and submit a list of chemicals used during the fracking process.
At the state level, Texas, where we conduct most of our operations, is among the states that has adopted regulations that impose new or more stringent permitting, including the requirement for hydraulic-fracturing operators to complete and submit a list of chemicals used during the fracking process.
For example, during the period from January 1, 2016 to December 31, 2022, NYMEX West Texas Intermediate (referred to as WTI) oil prices ranged from a high of $123.64 per Bbl on March 8, 2022 to a low of $(36.98) per Bbl on April 20, 2020.
For example, during the period from January 1, 2016 to December 31, 2023, NYMEX West Texas Intermediate (referred to as WTI) oil prices ranged from a high of $123.64 per Bbl on March 8, 2022 to a low of $(36.98) per Bbl on April 20, 2020.
In addition, our revolving credit facility imposes certain limitations on our ability to enter into mergers or combination transactions as well as limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions. We may incur losses as a result of title defects in the properties in which we invest.
In addition, our Credit Facility imposes certain limitations on our ability to enter into mergers or combination transactions as well as limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions. We may incur losses as a result of title defects in the properties in which we invest.
A failure to comply with the provisions of our revolving credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable.
A failure to comply with the provisions of our Credit Facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable.
Any acquisition involves other potential risks, including, among other things: • the validity of our assumptions about reserves, future production, revenues and costs; 38 Table of Contents • a decrease in our liquidity by using a significant portion of our cash from operations or borrowing capacity to finance acquisitions; • a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions; • the ultimate value of any contingent consideration agreed to be paid in an acquisition; • dilution to stockholders if we use equity as consideration for, or to finance, acquisitions; • the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate; • an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; and • an increase in our costs or a decrease in our revenues associated with any potential royalty owner or landowner claims or disputes, or other litigation encountered in connection with an acquisition.
Any acquisition involves other potential risks, including, among other things: • the validity of our assumptions about reserves, future production, revenues and costs; • a decrease in our liquidity by using a significant portion of our cash from operations or borrowing capacity to finance acquisitions; • a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions; • the ultimate value of any contingent consideration agreed to be paid in an acquisition; • dilution to stockholders if we use equity as consideration for, or to finance, acquisitions; • the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate; • an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; and • an increase in our costs or a decrease in our revenues associated with any potential royalty owner or landowner claims or disputes, or other litigation encountered in connection with an acquisition.
This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016; however, this agreement does not create any binding obligations for nations to limit their GHG emissions.
This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016. This agreement does not create any binding obligations for nations to limit their GHG emissions.
Any significant reduction in our borrowing base under our revolving credit facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.
Any significant reduction in our borrowing base under our Credit Facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.
We expect to fund our growth primarily through cash flow from operations, availability under our revolving credit facility, and subsequent equity or debt offerings when appropriate.
We expect to fund our growth primarily through cash flow from operations, availability under our Credit Facility, and subsequent equity or debt offerings when appropriate.
Inspections are often not performed on properties being acquired, and environmental matters, such as subsurface contamination, are not necessarily observable even when an inspection is undertaken.
Inspections are often not performed on properties being acquired, and environmental matters, such as subsurface and groundwater contamination, are not necessarily observable even when an inspection is undertaken.
Approximate ly 11% of our net leasehold acreage is undeveloped and that acreage may not ultimately be developed or become commercially productive, which could cause us to lose rights under our leases as well as have a material adverse effect on our oil and natural gas reserves and future production and, therefore, our future cash flow and income.
Approximate ly 6% of our net leasehold acreage is undeveloped and that acreage may not ultimately be developed or become commercially productive, which could cause us to lose rights under our leases as well as have a material adverse effect on our oil and natural gas reserves and future production and, therefore, our future cash flow and income.
Any acquisition involves potential risks that may disrupt our business, including the following, among other things: • mistaken assumptions about volumes or the timing of those volumes, revenues or costs, including synergies; • an inability to successfully integrate the acquired assets or businesses; • the assumption of unknown liabilities; • exposure to potential lawsuits; • limitations on rights to indemnity from the seller; • the diversion of management’s and employees’ attention from other business concerns; • unforeseen difficulties operating in new geographic areas; and • customer or key employee losses at the acquired businesses.
Any acquisition involves potential risks that may disrupt our business, including the following, among other things: • mistaken assumptions about volumes or the timing of those volumes, revenues or costs, including synergies; • an inability to successfully integrate the acquired assets or businesses; 38 Table of Contents • the assumption of unknown liabilities; • exposure to potential lawsuits; • limitations on rights to indemnity from the seller; • the diversion of management’s and employees’ attention from other business concerns; • unforeseen difficulties operating in new geographic areas; and • customer or key employee losses at the acquired businesses.
The level of our indebtedness could affect our operations in several ways, including the following: • a significant portion of our cash flow could be used to service the indebtedness; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; • the covenants contained in our revolving credit facility limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments; and • a high level of debt could impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes.
The level of our indebtedness could affect our operations in several ways, including the following: • a significant portion of our cash flow could be used to service the indebtedness; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; • the covenants contained in our Credit Facility and Senior Notes limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments; and • a high level of debt could impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes.
Changes in environmental laws and regulations occur frequently and tend to become more stringent over time, and any changes that result in more stringent or costly well drilling, construction, completion or water management activities, air emissions control or waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition.
Changes in environmental laws and regulations occur frequently and tend to become more stringent over time, and any changes that result in more stringent or costly well drilling, construction, completion or water management activities, air emissions control or waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our results of 45 Table of Contents operations, competitive position or financial condition.
Further, many factors may curtail, delay, or cancel our scheduled drilling projects, including the following: • delays and increased costs imposed by or resulting from compliance with environmental and other regulatory requirements including limitations on or resulting from wastewater discharge and disposal, subsurface injections, greenhouse gas emissions, and hydraulic fracturing; • pressure or irregularities in geological formations; • increases in the cost of, or shortages or delays in availability of drilling rigs and qualified personnel for hydraulic fracturing activities; • shortages of or delays in obtaining water resources, suitable proppant, and chemicals in sufficient quantities for use in hydraulic fracturing activities; • equipment failures or accidents; • lack of available gathering facilities or delays in construction of gathering facilities; • lack of available capacity on interconnecting transmission pipelines; • adverse weather conditions, such as tornadoes, droughts, ice storms, and extreme freeze events; • lack of available treatment or disposal options for oil and natural gas waste, including produced water; • environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; • issues related to permitting under and compliance with environmental and other governmental regulations; • declines or volatility in oil, natural gas, and NGL prices; • limited availability of financing at acceptable terms; • title problems or legal disputes regarding leasehold rights; and • limitations in the market for oil, natural gas, and NGLs.
Further, many factors may curtail, delay, or cancel our scheduled drilling projects, including the following: • delays and increased costs imposed by or resulting from compliance with environmental and other regulatory requirements including limitations on or resulting from wastewater discharge and disposal, subsurface injections, greenhouse gas emissions, and hydraulic fracturing; • pressure or irregularities in geological formations; 41 Table of Contents • increases in the cost of, or shortages or delays in availability of drilling rigs and qualified personnel for hydraulic fracturing activities; • shortages of or delays in obtaining water resources, suitable proppant, and chemicals in sufficient quantities for use in hydraulic fracturing activities; • equipment failures or accidents; • lack of available gathering facilities or delays in construction of gathering facilities; • lack of available capacity or disruptions in operation of interconnecting transmission pipelines and processing facilities; • adverse weather conditions, such as tornadoes, droughts, ice storms, and extreme freeze events; • lack of available treatment or disposal options for oil and natural gas waste, including produced water; • environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the air, surface and subsurface environment; • issues related to permitting under and compliance with environmental and other governmental regulations; • declines or volatility in oil, natural gas, and NGL prices; • limited availability of financing at acceptable terms; • title problems or legal disputes regarding leasehold rights; and • limitations in the market for oil, natural gas, and NGLs.
Further, our ability to pay dividends to our stockholders will be restricted and our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and our common stock holders could experience a partial or total loss of their investment.
Further, our ability to pay dividends to our stockholders will be restricted and our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and our common stockholders could experience a partial or total loss of their investment.
Risks Related to our Business, Operations, and Strategy Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in the Permian Basin to stem rising seismic activity and earthquakes could increase our operating costs and adversely impact our business, results of operations and financial condition.
Risks Related to our Business, Operations, and Strategy Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in certain areas of the Permian Basin to stem rising seismic activity and earthquakes could increase our operating costs and adversely impact our business, results of operations and financial condition.
Item 1A. Risk Factors The Company is subject to various risks and uncertainties in the ordinary course of our business. The following summarizes significant risks and uncertainties that may adversely affect our business, financial condition or results of operations. Other risks are described in Item 1 and 2. Business and Properties, Item 7.
Item 1A. Risk Factors The Company is subject to various risks and uncer tainties in the ordinary course of business. The following summarizes significant risks and uncertainties that may adversely affect our business, financial condition or results of operations. Other risks are described in Item 1 and 2. Business and Properties, Item 7.
Such extreme weather conditions could also impact other areas of our operations, including access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of, and our access to, necessary third-party services, such as electrical power, water, gathering, processing, compression and transportation services.
Such extreme weather conditions could also impact other areas of our operations, including access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of, and our access to, necessary third-party services, such as electrical power, water, gathering, processing, compression, transportation, and produced water disposal services.
Negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about hydraulic fracturing, oil spills, seismic activity, greenhouse gas emissions, and explosions of natural gas transmission lines may lead to increased regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
Negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about hydraulic fracturing, oil spills, seismic activity, greenhouse gas emissions, and explosions of natural gas 43 Table of Contents transmission lines may lead to increased regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including: • unexpected drilling conditions; • title problems; • pressure or lost circulation in formations; • equipment failure or accidents; • adverse weather conditions; • compliance with environmental and other governmental or contractual requirements; and • increase in the cost of, shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services.
Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including: • unexpected drilling conditions; • title problems; 30 Table of Contents • pressure or lost circulation in formations; • equipment failure or accidents; • adverse weather conditions; • compliance with environmental and other governmental or contractual requirements; and • increase in the cost of, shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services.
Negative public perception could cause the permits we need to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business. Risks Related to Acts of God and Cyber Security Power outages, limited availability of electrical resources, and increased energy costs could have a material adverse effect on us.
Negative public perception could cause the permits we need to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business. Risks Related to Acts of God and Cybersecurity Power outages, limited availability of electrical resources, and increased energy costs could have a material adverse effect on us.
We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations. Reserve estimates depend on many assumptions that may turn out to be inaccurate.
We may be required to assume the risk of the physical and environmental condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations. Reserve estimates depend on many assumptions that may turn out to be inaccurate.
For example, we cannot control the success of drilling and development activities on properties operated by third parties, which depend on a number of factors under the control of a third-party operator, including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational activities, the timing and amount of capital expenditures and the selection of suitable technology.
For example, we cannot control the success of drilling and development activities on 34 Table of Contents properties operated by third parties, which depend on a number of factors under the control of a third-party operator, including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational activities, the timing and amount of capital expenditures and the selection of suitable technology.
Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the forseeable future.
Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.
FERC may also impose administrative and criminal remedies and disgorgement of profits associated with any violation. While our operations have not been regulated by FERC as a natural gas company under the NGA, FERC has adopted regulations that may subject certain of our otherwise non-FERC jurisdictional facilities to FERC annual reporting requirements.
FERC may also impose administrative and criminal remedies and 46 Table of Contents disgorgement of profits associated with any violation. While our operations have not been regulated by FERC as a natural gas company under the NGA, FERC has adopted regulations that may subject certain of our otherwise non-FERC jurisdictional facilities to FERC annual reporting requirements.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock. Risks Related to the Company If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock. 54 Table of Contents Risks Related to the Company If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.
These laws and regulations may impose numerous obligations applicable to our operations including (i) the acquisition of a permit before conducting drilling, production, and other regulated activities; (ii) the restriction of types, quantities and concentration of materials that may be released into the environment; (iii) the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands, protected species habitat, and other protected areas; (iv) the 45 Table of Contents application of specific health and safety criteria addressing worker protection; (v) the imposition of substantial liabilities for pollution resulting from our operations; (vi) the installation of costly emission monitoring and/or pollution control equipment; and (vii) the reporting of the types and quantities of various substances that are generated, stored, processed, or released in connection with our properties.
These laws and regulations may impose numerous obligations applicable to our operations including (i) the acquisition of a permit before conducting drilling, production, and other regulated activities; (ii) the restriction of types, quantities and concentration of materials that may be released into the environment; (iii) the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands, protected species habitat, and other sensitive or protected areas; (iv) the application of specific health and safety criteria addressing worker protection; (v) the imposition of substantial liabilities for pollution resulting from our operations; (vi) the installation of costly emission monitoring and/or pollution control equipment; and (vii) the reporting of the types and quantities of various substances that are generated, stored, processed, transported, disposed, or released in connection with our properties.
This concentration of voting power could delay or prevent an acquisition of the Company on terms that other stockholders may desire. Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove current management.
This concentration of voting power could delay or prevent an acquisition of the Company on terms that other stockholders may desire. 55 Table of Contents Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove current management.
Until a greater number of horizontal wells have been completed in the San Andres Formation, and a longer production history from these wells has been established, there may be a greater variance in our proved reserves on a year-over-year basis due to the transition from vertical to horizontal reserves in both the proved developed and proved undeveloped categories.
Until a greater number of horizontal wells have been completed in the San Andres Formation, and a longer production history from these wells has been established, there may be a greater variance in our proved reserves on a year-over-year basis due to the 31 Table of Contents transition from vertical to horizontal reserves in both the proved developed and proved undeveloped categories.
Any drilling activities we are able to conduct on these potential locations may not be successful or result in our ability to add additional proved reserves to our overall proved reserves or may result in a downward revision of our estimated proved reserves, which could have a material adverse effect on our future business and results of operations.
Any drilling activities we are able to 40 Table of Contents conduct on these potential locations may not be successful or result in our ability to add additional proved reserves to our overall proved reserves or may result in a downward revision of our estimated proved reserves, which could have a material adverse effect on our future business and results of operations.
We may incur significant additional costs to comply with such existing state requirements and, in the event additional state level restrictions relating to the hydraulic-fracturing process are adopted in areas where we operate, we may become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.
We may incur significant additional costs to comply with such existing state requirements and, in the event additional state level restrictions relating to the hydraulic-fracturing process are 48 Table of Contents adopted in areas where we operate, we may become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.
The adoption and implementation of any international, federal or state legislation or regulations that require reporting of GHGs or otherwise restrict emissions of GHGs could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
The adoption and implementation of any international, federal or state legislation or regulations that require reporting of GHGs or otherwise restrict or impose taxes or fees on emissions of GHGs could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn could cause our stock price or trading volume to decline. 53 Table of Contents We may not generate sufficient cash to support any dividend to our common stockholders.
If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn could cause our stock price or trading volume to decline. We may not generate sufficient cash to support any dividend to our common stockholders.
Some of our competitors may have greater financial, technical and personnel resources than we do, which may allow them to gain technological 42 Table of Contents advantages or implement new technologies before we can. Additionally, we may be unable to implement new technologies or services at all, on a timely basis or at an acceptable cost.
Some of our competitors may have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages or implement new technologies before we can. Additionally, we may be unable to implement new technologies or services at all, on a timely basis or at an acceptable cost.
These constraints and the resulting shortages or 44 Table of Contents high costs could delay or temporarily halt our operations and materially increase our operation and capital costs, which could have a material adverse effect on our business, financial condition and results of operations. Our business could be negatively affected by security threats, including cybersecurity threats, and other disruptions.
These constraints and the resulting shortages or high costs could delay or temporarily halt our operations and materially increase our operation and capital costs, which could have a material adverse effect on our business, financial condition and results of operations. Our business could be negatively affected by security threats, including cybersecurity threats, and other disruptions.
FERC regulation may indirectly impact gathering services not directly subject to FERC regulation. FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on interstate open access 47 Table of Contents transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets.
FERC regulation may indirectly impact gathering services not directly subject to FERC regulation. FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets.
Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of our existing revolving credit facility or future debt arrangements may restrict us from adopting some of these alternatives.
Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of our existing Credit Facility, our Senior Notes, or future debt arrangements may restrict us from adopting some of these alternatives.
We may, in the future, determine it prudent or be required by applicable laws or regulations to establish and fund one or more decommissioning, plugging, abandonment, and reclamation reserve funds to provide for payment of future decommissioning, plugging, abandonment, and reclamation costs, which could decrease funds available to service debt obligations.
We may, in the future, determine it prudent or be required by applicable laws or regulations to establish and fund one or more decommissioning, surface equipment removal, plugging, abandonment, and reclamation reserve funds to provide for payment of future decommissioning, surface equipment removal, plugging, abandonment, and reclamation costs, which could decrease funds available to service debt obligations.
Risks that we face while drilling include, but are not limited to, failing to land our wellbore in the desired drilling zone, not staying in the desired drilling zone while drilling horizontally through the formation, not running our casing the entire length of the wellbore and not being able to run tools and other equipment 32 Table of Contents consistently through the horizontal wellbore.
Risks that we face while drilling include, but are not limited to, failing to land our wellbore in the desired drilling zone, not staying in the desired drilling zone while drilling horizontally through the formation, not running our casing the entire length of the wellbore and not being able to run tools and other equipment consistently through the horizontal wellbore.
These events could lead to financial losses from remedial actions, loss of business or potential liability. Loss of our information and computer systems could adversely affect our business. We are dependent on our information systems and computer-based programs, including our well operations information, seismic data, electronic data processing and accounting data.
These events could lead to financial losses from remedial actions, loss of business or potential liability. 44 Table of Contents Loss of our information and computer systems could adversely affect our business. We are dependent on our information systems and computer-based programs, including our well operations information, seismic data, electronic data processing and accounting data.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, plugging, abandonment, and reclamation costs and we will be responsible for the payment of the balance of such costs. SEC rules could limit our ability to book additional proved undeveloped reserves in the future.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, surface equipment removal, plugging, abandonment, and reclamation costs and we will be responsible for the payment of the balance of such costs. SEC rules could limit our ability to book additional proved undeveloped reserves in the future.
In addition, to the extent our suppliers source their products or raw materials from foreign markets, the cost of such equipment could be impacted if the United States imposes tariffs on imported goods from countries where these goods are produced.
In addition, to the extent our suppliers source their products or raw materials from foreign markets, the cost of such equipment could be impacted if the United States imposes tariffs on imported goods from countries 42 Table of Contents where these goods are produced.
The TCJA remains unclear in some respects and continues to be subject to potential amendments and technical corrections. The United States Treasury Department and the IRS have issued significant guidance since the TCJA was enacted, interpreting the TCJA and clarifying some of the uncertainties, and are continuing to issue new guidance.
The TCJA remains unclear in 51 Table of Contents some respects and continues to be subject to potential amendments and technical corrections. The United States Treasury Department and the IRS have issued significant guidance since the TCJA was enacted, interpreting the TCJA and clarifying some of the uncertainties, and are continuing to issue new guidance.
These factors may make drilling activity in the affected parts of the Permian Basin less economical and adversely impact our business, results of operations and financial condition. 28 Table of Contents Enhanced scrutiny on ESG matters could have an adverse effect on the Company’s operations.
These factors may make drilling activity in the affected parts of the Permian Basin less economical and adversely impact our business, results of operations and financial condition. Enhanced scrutiny on ESG matters could have an adverse effect on the Company’s operations.
The occurrence of an event that is not covered 36 Table of Contents or fully covered by insurance and any delay in the payment of insurance proceeds for covered events could have a material adverse effect on our business, financial condition and results of operations.
The occurrence of an event that is not covered or fully covered by insurance and any delay in the payment of insurance proceeds for covered events could have a material adverse effect on our business, financial condition and results of operations.
Limitation or restrictions on our ability to obtain water may have an adverse effect on our operating results. Water is an essential component of shale and conventional oil and natural gas development during both the drilling and hydraulic fracturing processes.
Limitation or restrictions on our ability to obtain water or dispose of flowback and produced water may have an adverse effect on our operating results. Water is an essential component of shale and conventional oil and natural gas development during both the drilling and hydraulic fracturing processes.
If the price differentials pursuant to which our production is subject were to widen due to oversupply or other factors, our revenue could be negatively impacted. An increase in the differential between NYMEX WTI and the reference or regional index price used to price our oil and natural gas would reduce our cash flows from operations.
If the price differentials pursuant to which our production is subject were to widen due to oversupply or other factors, our revenue could be negatively impacted. 33 Table of Contents An increase in the differential between NYMEX WTI and the reference or regional index price used to price our oil and natural gas would reduce our cash flows from operations.
Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.
Our failure to achieve consolidation savings, to integrate the 36 Table of Contents acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.
Under our certificate of incorporation, certain of our stockholders and/or one or more of their respective affiliates are permitted to engage in business activities or invest in or acquire businesses which may compete with our business or do business with any client of ours.
Under our certificate of incorporation, certain of our stockholders and/or one or more of their respective affiliates are permitted to engage in business activities or invest in or acquire businesses which may compete with our business or do business with any client of 56 Table of Contents ours.
SEC rules require that, subject to limited exceptions, proved undeveloped reserves, or PUDs, may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking. This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.
SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking. This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.
If any such climatic events were to occur, they could have an adverse effect on our financial condition and results of operations and the financial condition and operations of our customers. 50 Table of Contents Increases in interest rates could adversely affect our business.
If any such climatic events were to occur, they could have an adverse effect on our financial condition and results of operations and the financial condition and operations of our customers. Increases in interest rates could adversely affect our business.
Certain of our stockholders and their respective portfolio companies may acquire or seek to acquire assets that we seek to acquire and, as a 56 Table of Contents result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.
Certain of our stockholders and their respective portfolio companies may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.
As of December 31, 2022, approximately 11% of our net leasehold acreage was undeveloped or acreage on which wells have not been drilled or completed to a point that would pe rmit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
As of December 31, 2023, approximately 6% of our net leasehold acreage was undeveloped or acreage on which wells have not been drilled or completed to a point that would pe rmit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
Additionally, future legislation could be enacted that increases the taxes or fees imposed on oil and 51 Table of Contents natural gas extraction or production. Any such legislation could result in increased operating costs and/or reduced consumer demand for petroleum products, which in turn could affect the prices we receive for our oil, natural gas or NGLs.
Additionally, future legislation could be enacted that increases the taxes or fees imposed on oil and natural gas extraction or production. Any such legislation could result in increased operating costs and/or reduced consumer demand for petroleum products, which in turn could affect the prices we receive for our oil, natural gas or NGLs.
We intend to extend or renew any core lease we plan to develop or are still assessing for development that is set to expire in 2023 and expect to incur $0.6 million to extend or renew those leases, after taking into account the expected drilling of wells and holding leases by production.
We intend to extend or renew any core lease we plan to develop or are still assessing for development that is set to expire in 2024 and expect to incur $0.2 million to extend or renew those leases, after taking into account the expected drilling of wells and holding leases by production.
We are responsible for compliance with all applicable laws and regulations regarding the decommissioning, plugging, abandonment, and reclamation of our facilities at the end of their economic life, the costs of which may be substantial.
We are responsible for compliance with all applicable laws and regulations regarding the decommissioning, surface equipment removal, plugging, abandonment, and reclamation of our facilities at the end of their economic life, the costs of which may be substantial.
We depend to a large extent on the services of our officers, including Bobby Riley, our Chief Executive Officer, Kevin Riley, our President, Philip Riley, our Chief Financial Officer, Corey Riley, our Executive Vice President – Business Intelligence, Michael Palmer, our Executive Vice President Corporate – Land.
We depend to a large extent on the services of our officers, including Bobby Riley, our Chief Executive Officer and President, Philip Riley, our Chief Financial Officer and Executive Vice President – Strategy , Corey Riley, our Executive Vice President – Business Intelligence, and Michael Palmer, our Executive Vice President Corporate – Land.
For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the Company’s 55 Table of Contents assets.
For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the Company’s assets.
If our leases expire, we will lose our right to develop such properties. Substantially all of our producing properties are located in the Northwest Shelf within the Permian Basin of West Texas, making us vulnerable to risks associated with operating in one major geographic area.
If our leases expire, we will lose our right to develop such properties. Substantially all of our producing properties are located in the Northwest Shelf within the Permian Basin of West Texas and Southeastern New Mexico, making us vulnerable to risks associated with operating in one major geographic area.
These factors include the following: • worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas, and NGLs; • the price and quantity of foreign imports, including foreign oil; • the actions by members of OPEC+; • political, economic, and military conditions in or affecting other producing countries, including embargoes or conflicts in the Middle East, Africa, South America and Russia; • the level of global oil and natural gas exploration and production activity; • the level of global oil and natural gas inventories; • prevailing prices on local price indices in the areas in which we operate; • the cost of producing and delivering oil and natural gas and conducting other operations; • the recovery rates of new oil, natural gas and NGL reserves; • lead times associated with acquiring equipment and products, and availability of qualified personnel; • late deliveries of supplies; • technical difficulties or failures; • the proximity, capacity, cost, and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals and transportation availability; • localized and global weather conditions; • public health concerns such as pandemic diseases; • technological advances affecting energy consumption, including advances in exploration, development and production technologies; 29 Table of Contents • shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil, natural gas, and NGLs; • uncertainty in capital and commodities markets and the ability of companies in our industry to raise equity capital and debt financing; • the price and availability of alternative fuels; and • domestic, local, and foreign governmental regulation and taxes.
These factors include the following: • worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas, and NGLs; • private and government investment in and regulatory incentives for non-fossil fuel energy production; • changes in applicable laws and regulations; • the price and quantity of foreign imports, including foreign oil; • the actions by members of OPEC+; • political, economic, and military conditions in or affecting other producing countries, including embargoes or conflicts in the Middle East, Africa, South America and Russia; • the level of global oil and natural gas exploration and production activity; 28 Table of Contents • the level of global oil and natural gas inventories; • prevailing prices on local price indices in the areas in which we operate; • the cost of producing and delivering oil and natural gas and conducting other operations; • the recovery rates of new oil, natural gas and NGL reserves; • lead times associated with acquiring equipment and products, and availability of qualified personnel; • late deliveries of supplies; • technical difficulties or failures; • the proximity, capacity, cost, and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals and transportation availability; • localized and global weather conditions and events; • public health concerns such as pandemic diseases; • technological advances affecting energy consumption, including advances in exploration, development and production technologies; • shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil, natural gas, and NGLs; • uncertainty in capital and commodities markets and the ability of companies in our industry to raise equity capital and debt financing; • the price and availability of alternative fuels; and • domestic, local, and foreign governmental regulation and taxes.
The development of our estimated proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced. A t December 31, 2022, approximately 37% of our total estimated proved reserves were classified as proved undeveloped.
The development of our estimated proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced. A t December 31, 2023, approximately 44% of our total estimated proved reserves were classified as proved undeveloped.
The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, oil, natural gas and NGL prices, actual drilling results, the availability of drilling rigs and other services and equipment, and regulatory, technological and competitive developments.
The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, oil, natural gas and NGL prices, actual drilling results, the availability of drilling rigs and other services and equipment, regulatory, technological and competitive developments, and worldwide and regional economic conditions.
Extreme weather conditions could adversely affect our ability to conduct drilling activities in the areas where we operate.
Extreme weather conditions could adversely affect our ability to conduct drilling and production activities in the areas where we operate.
It is not possible to predict these costs with certainty since they will be a function of regulatory requirements at the time of decommissioning, plugging, abandonment, and reclamation.
It is not possible to predict these costs with certainty since they will be a function of regulatory requirements at the time of decommissioning, surface equipment removal, plugging, abandonment, and reclamation.
Permanent restrictions imposed to protect threatened or endangered species and their habitats could prohibit drilling in certain areas or require the implementation of expensive mitigation or conservation measures.
Permanent restrictions imposed to protect threatened or endangered species and their habitats could prohibit drilling in certain areas or require the implementation of expensive 50 Table of Contents mitigation or conservation measures.

… 120 more changes not shown on this page.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+1 added−8 removed2 unchanged
Removed
The Company was named as a defendant in an adversary proceeding (the "Adversary Proceeding") commenced on October 25, 2021 in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court"), by the Trustee of the Chapter 7 bankruptcy of the Hoactzin Partners, L.P. ("Hoactzin").
Added
See Note 13 - Commitments and Contingencies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a discussion of our commitments and contingencies.
Removed
The complaint in the Adversary Proceeding alleges that in October of 2018, one year prior to the Hoactzin bankruptcy filing in October of 2019, Peter Salas ("Salas"), Chairman of the Board of Tengasco during the period of the purported fraudulent transfers, caused Hoactzin to transfer its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to the Company for an amount the complaint alleges was purportedly less than the reasonable equivalent value of such Kansas Working Interests.
Removed
The complaint includes avoidance actions and other causes of action in connection with the transfer of the Kansas Working Interests, as well as other causes of action alleged related to certain transactions to which the Company was not a party.
Removed
On October 13, 2022, the Company entered into a Compromise Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the Trustee for the bankruptcy estate for Hoactzin to resolve certain claims against the Company in the Adversary Proceeding.
Removed
Under the terms of the Settlement Agreement, the Company agreed to pay $80 thousand to the Trustee in full settlement and satisfaction of (a) all claims, causes of action, and damages that have been asserted against the Company or could be asserted against the Company in the Adversary Proceeding; and (b) all claims which might arise from or relate to any actions taken by the Company while acting in connection with Debtor.
Removed
In November 2022, the Bankruptcy Court approved the Settlement Agreement, and the Company made the settlement payment to the Trustee in accordance with the Settlement Agreement. Subsequently, the Bankruptcy Court entered an Order Granting the Joint Motion to Dismiss resulting in the dismissal of the Adversary Proceeding with prejudice (the "Dismissal Order"), as contemplated by the Settlement Agreement.
Removed
Neither the Settlement Agreement nor the Dismissal Order has any effect on the Trustee’s claims against any of the other defendants in the Adversary Proceeding, including without limitation, those claims against Peter Salas, our former Chief Executive Officer.
Removed
For additional information regarding contingencies, see Note 14 - Commitments and Contingencies included in notes to the consolidated financial statements included elsewhere in this Annual Report. Item 4. Mine Safety Disclosures Not applicable. 57 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−2 removed1 unchanged
Biggest changeIssuer Repurchases of Equity Securities Our common stock repurchase activity for the year ended December 31, 2022 was as follows: Quarter Ending Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs Q1 12,640 $ 26.81 — — Q2 8,576 $ 25.08 — — Q3 341 $ 25.02 — — Q4 23,181 $ 18.98 — — _____________________ (1) These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions.
Biggest changeOutstanding Equity Awards Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities in Column (a)) (a) (b) (c) Equity Compensation Plans Approved by Security Holders — — 1,075,626 Equity Compensation Plans Not Approved by Security Holders — — — Total — — 1,075,626 Unregistered Sales of Equity Securities None. 60 Table of Contents Issuer Repurchases of Equity Securities Our common stock repurchase activity during the fourth quarter of 2023 was as follows: Month Ended Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs October 31 32,348 $ 31.80 — — November 30 170 $ 29.05 — — December 31 — $ — — — _____________________ (1) These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions.
The acquisition of the surrendered shares was not part of a publicly announced program to repurchase shares of our Common Stock. Any shares repurchased by the Company for personal tax withholdings are immediately retired upon repurchase.
The acquisition of the surrendered shares was not part of a publicly announced program to repurchase shares of our common stock. Any shares repurchased by the Company for personal tax withholdings are immediately retired upon repurchase. Item 6. Selected Financial Data [Reserved]
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Shares of our Common Stock are listed on the NYSE American under the symbol "REPX". There were approximately 121 holders of record of our Common Stock as of March 1, 2023.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Shares of our common stock are listed on the NYSE American under the symbol "REPX". There were approximately 125 holders of record of our common stock as of February 29, 2024.
The Company's revolving credit facility can limit the dividends the Company is able to pay unless the Company meets certain covenants in accordance with its credit agreement.
The Company's Credit Facility and Senior Notes can limit the dividends the Company is able to pay unless the Company meets certain covenants in accordance with its credit agreement and the terms of the Senior Notes.
The cash dividends were declared for all issued and outstanding common shares including unvested restricted stock issued under the Company's 2021 Long-Term Incentive Plan adopted on February 26, 2021. The Company declared quarterly dividends totaling approximately $7.6 million for the year ended September 30, 2021.
Dividends The Company declared quarterly dividends totaling approximately $27.9 million and $25.3 million for the years ended December 31, 2023 and 2022, respectively. The cash dividends were declared for all issued and outstanding common shares including unvested restricted stock issued under the Company's Amended and Restated 2021 Long-Term Incentive Plan.
The cash dividends were declared for all issued and outstanding common units including unvested units issued under the Company's 2018 Long-Term Incentive Plan. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board.
The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board.
Removed
Dividends The Company declared quarterly dividends totaling approximately $25.3 million, $6.2 million, and $10.6 million, respectively, for the year ended December 31, 2022, three months ended December 31, 2021, and year ended September 30, 2021.
Removed
Outstanding Equity Awards Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities in Column (a)) (a) (b) (c) Equity Compensation Plans Approved by Security Holders — — 440,784 Equity Compensation Plans Not Approved by Security Holders — — — Total — — 440,784 58 Table of Contents Unregistered Sales of Equity Securities None.

Item 7. Management's Discussion & Analysis

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

62 edited+31 added−34 removed18 unchanged
Biggest changeThe following table sets forth selected operating data for the years ended December 31, 2022 and September 30, 2021: Year Ended December 31, 2022 September 30, 2021 Revenues (in thousands): Oil sales $ 298,723 $ 136,421 Natural gas sales 10,755 7,500 Natural gas liquids sales 9,865 4,715 Oil and natural gas sales, net $ 319,343 $ 148,636 Production Data, net: Oil (MBbls) 3,217 2,340 Natural gas (MMcf) 3,229 2,602 Natural gas liquids (MBbls) 444 380 Total (MBoe) 4,199 3,154 Daily combined volumes (Boe/d) 11,505 8,640 Daily oil volumes (Bbls/d) 8,814 6,411 Average Realized Prices: Oil ($ per Bbl) $ 92.86 $ 58.29 Natural gas ($ per Mcf) 3.33 2.88 Natural gas liquids ($ per Bbl) 22.22 12.41 Combined ($ per Boe) $ 76.05 $ 47.12 Average Realized Prices, including derivative settlements: (1) Oil ($ per Bbl) $ 71.75 $ 51.47 Natural gas ($ per Mcf) 1.06 2.75 Natural gas liquids ($ per Bbl) 22.22 12.41 Combined ($ per Boe) $ 58.13 $ 41.95 _____________________ (1) The Company's calculation of the effects of derivative settlements includes losses on the settlement of its commodity derivative contracts.
Biggest changeConstruction of the onsite power generation facility was predominately completed during 2023 with temporary power generation beginning in November 2023 and the onsite power generation facility expected to be operational in spring of 2024. 62 Table of Contents Results of Operations Comparison for the years ended December 31, 2023 and 2022 The following table sets forth selected operating data for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Revenues (in thousands): Oil sales $ 363,125 $ 298,723 Natural gas sales 2,612 10,755 NGLs 6,910 9,865 Oil and natural gas sales, net $ 372,647 $ 319,343 Production Data, net: Oil (MBbls) 4,802 3,217 Natural gas (MMcf) 5,865 3,229 NGLs (MBbls) 1,006 444 Total (MBoe) 6,786 4,199 Daily combined volumes (Boe/d) 18,590 11,505 Daily oil volumes (Bbls/d) 13,156 8,814 Average Realized Prices: Oil ($ per Bbl) $ 75.62 $ 92.86 Natural gas ($ per Mcf) 0.45 3.33 NGLs ($ per Bbl) 6.87 22.22 Combined ($ per Boe) $ 54.91 $ 76.05 Average Realized Prices, including derivative settlements: (1) Oil ($ per Bbl) $ 71.93 $ 71.75 Natural gas ($ per Mcf) 0.53 1.06 NGLs ($ per Bbl) 6.87 22.22 Combined ($ per Boe) $ 52.38 $ 58.13 _____________________ (1) The Company's calculation of the effects of derivative settlements includes losses on the settlement of its commodity derivative contracts.
Expenses for compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period.
Expenses for electricity, compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period.
(2) The Company's cost of contract services - related parties represents costs specifically attributable to the master service agreements the Company has in place with the respective related parties. 63 .
(2) The Company's cost of contract services - related parties represents costs specifically attributable to the master service agreements the Company has in place with the respective related parties.
For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which they are performed. Certain operating cost components, such as compression and saltwater disposal associated with completion water, are variable and increase or decrease as hydrocarbon production levels and the volume of completion water disposal increases or decreases.
For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which they are performed. Certain operating cost components, such as saltwater disposal associated with produced water, are variable and increase or decrease as hydrocarbon production levels and the volume of completion water disposal increases or decreases.
These losses are included under other income (expense) on the Company’s consolidated statements of operations. 62 . Table of Contents Oil and Natural Gas Revenues Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing.
These losses are included under other income (expense) on the Company’s consolidated statements of operations. 63 Table of Contents Oil and Natural Gas Revenues Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing.
Different reserve engineers may make different estimates of reserve quantities based on the same data. A third-party consulting firm prepares our reserve report which the estimates are based off of technical and economic data including, but not limited to, well test data, production data, historical price and cost information, and property ownership interests.
Different reserve engineers may make different estimates of reserve quantities based on the same data. A third-party reservoir engineering firm prepares our reserve report, which the estimates are based off of technical and economic data including, but not limited to, well test data, production data, historical price and cost information, and property ownership interests.
The Company utilizes a discounted cash flow model in order to estimate fair value by modeling the present value of future cash flows, net of estimated operating and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with the expected cash flow projected.
The Company utilizes a discounted cash flow model in order to estimate fair value by modeling the present value of future cash flows, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk 70 Table of Contents and current market conditions associated with the expected cash flow projected.
Risk Factors." Overview We operate in the upstream segment of the oil and natural gas industry and are focused on steadily growing conventional reserves, production and cash flow through the acquisition, exploration, development and production of oil, natural gas and NGLs primarily in the Permian Basin in West Texas.
Risk Factors." Overview We operate in the upstream segment of the oil and natural gas industry and are focused on steadily growing conventional reserves, production and cash flow through the acquisition, exploration, development and production of oil, natural gas and NGLs primarily in the Permian Basin in West Texas and Southeastern New Mexico.
General and Administrative Expense ("G&A") G&A expenses include corporate overhead such as payroll and benefits for our corporate staff, equity-based compensation expense, office rent for our headquarters, audit and other fees for professional services and legal compliance. G&A expenses are reported net of overhead recoveries. 65 .
General and Administrative Expense ("G&A") G&A expenses include corporate overhead such as payroll and benefits for our corporate staff, share-based compensation expense, office rent for our headquarters, audit and other fees for professional services and legal compliance. G&A expenses are reported net of overhead recoveries.
Historically, our primary sources of capital funding and liquidity have been our cash on hand, cash flow from operations and borrowings under our revolving credit facility. At times and as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC.
Historically, our primary sources of capital funding and liquidity have been our cash on hand, cash flow from operations, borrowings under our Credit Facility and the issuance of our Senior Notes. At times and as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC.
At the end of each quarter, unproved leasehold costs are assessed for impairment by considering future drilling plans, drilling activity results, commodity price outlooks, planned future sales or expiration of all or a portion of such projects. At December 31, 2022, the Company had approximately $12.8 million of unproved leasehold.
At the end of each quarter, unproved leasehold costs are assessed for impairment by considering future drilling plans, drilling activity results, commodity price outlooks, planned future sales or expiration of all or a portion of such projects. At December 31, 2023, the Company had approximately $100.2 million of unproved leasehold.
The transaction costs of $2.6 million for the year ended December 31, 2022 primarily relate to a potential business combination and related financing that the Company pursued but ultimately chose not to consummate due to changing market conditions.
The transaction costs of $5.8 million for the year ended December 31, 2023 relate to the New Mexico Acquisition. During the year ended December 31, 2022, the transaction costs of $2.6 million primarily related to a potential business combination and related financing that the Company pursued but ultimately chose not to consummate due to changing market conditions.
Changes in facts and assumptions or the discovery of new information may result in revised estimates. Actual results could differ from these estimates and assumptions used in preparation of the Company’s consolidated financial statements and it is at least reasonably possible these estimates could be revised in the near term and these revisions could be material.
Actual results could differ from these estimates and assumptions used in preparation of the Company’s consolidated financial statements and it is at least reasonably possible these estimates could be revised in the near term and these revisions could be material.
Ad valorem taxes increased for the year ended December 31, 2022 based on higher estimated property values for the current taxable period. 64 . Table of Contents Exploration Expense Exploration expense consists of expiration of unproved leasehold and geological and geophysical costs which include seismic survey costs.
Ad valorem taxes increased for the year ended December 31, 2023 based on higher estimated property values and higher tax rates for the current taxable period. Exploration Costs Exploration costs consist of exploratory well expense, expiration of unproved leasehold, and geological and geophysical costs which include seismic survey costs.
The following table presents the components of the Company's loss on derivatives for the year ended December 31, 2022 and the year ended September 30, 2021: Year Ended December 31, 2022 Year Ended September 30, 2021 (In thousands) Settlements on derivative contracts $ (75,257) $ (16,304) Non-cash gain (loss) on derivatives 23,683 (72,891) Loss on derivatives $ (51,574) $ (89,195) Our earnings are affected by the changes in value of our derivative portfolio between periods and the related cash received or paid upon settlement of our derivatives.
The following table presents the components of the Company's gain (loss) on derivatives, net for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (In thousands) Settlements on derivative contracts $ (17,221) $ (75,257) Non-cash gain on derivatives 23,414 23,683 Gain (loss) on derivatives, net $ 6,193 $ (51,574) Our earnings are affected by the changes in value of our derivative portfolio between periods and the related cash received or paid upon settlement of our derivatives.
See Note 3 - Summary of Significant Accounting Policies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a full discussion of our significant accounting policies.
Exhibits and Financial Statement Schedules" for a full discussion of our acquisitions. See Note 3 - Summary of Significant Accounting Policies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a full discussion of our significant accounting policies. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable.
To the extent the future commodity price outlook declines between periods, we will have mark-to-market gains, while future commodity price increases between measurement periods result in mark-to-market losses. The loss on derivatives for the year ended December 31, 2022 was $51.6 million, which decreased by $37.6 million compared to the year ended September 30, 2021.
To the extent the future commodity price outlook declines between periods, we will have mark-to-market gains, while future commodity price increases between measurement periods result in mark-to-market losses. 67 Table of Contents The gain on derivatives for the year ended December 31, 2023 was $6.2 million compared to a loss on derivatives of $51.6 million for the year ended December 31, 2022.
Table of Contents Total G&A expense increased by $1.2 million for the year ended December 31, 2022 compared to the year ended September 30, 2021. Administrative costs, which include payroll, benefits and non-payroll costs, increased by $4.5 million for the year ended December 31, 2022 compared to the year ended September 30, 2021.
Total G&A expense increased by $11.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Administrative costs, which include payroll, benefits and non-payroll costs, increased by $8.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
During the year ended December 31, 2022, the Company recognized a proved property impairment of $7.3 million related to the oil and natural gas properties in New Mexico. 69 . Table of Contents Oil and Natural Gas Reserves Our estimates of proved and proved developed reserves are a major component of our depletion calculation.
The Company recognized an impairment loss on proved properties of $7.3 million for the year ended December 31, 2022, which related to a decrease in fair value of its historical properties in New Mexico. Oil and Natural Gas Reserves Our estimates of proved and proved developed reserves are a major component of our depletion calculation.
Of the remaining unproved leasehold costs at December 31, 2022, approximately $0.6 million is scheduled to expire in 2023. The Company will renew or extend the lease if the leasehold expiring in 2023 relates to areas in which the Company is actively drilling. If our drilling is not successful, this leasehold could become partially or entirely impaired.
Of the remaining unproved leasehold costs at December 31, 2023, approximately $2.3 million is scheduled to expire in 2024. The Company expects to renew or extend these leases in 2024. If our drilling is not successful, this leasehold could become partially or entirely impaired.
Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties.
The Company’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties.
Table of Contents Costs and Expenses The following table presents the Company's operating costs and expenses and other (income) expenses: Year Ended December 31, 2022 Year Ended September 30, 2021 Costs and Expenses: (In thousands) Lease operating expenses $ 32,458 $ 21,975 Production and ad valorem taxes $ 19,273 $ 8,636 Exploration costs $ 2,032 $ 9,566 Depletion, depreciation, amortization and accretion $ 32,113 $ 26,015 Impairment of oil and natural gas properties $ 7,325 $ — Administrative costs $ 18,496 $ 13,966 Equity-based compensation 3,439 6,793 General and administrative expense $ 21,935 $ 20,759 Transaction costs $ 2,638 $ 3,732 Interest expense, net $ 1,090 $ 4,534 Loss on derivatives $ 51,574 $ 89,195 Income tax expense $ 32,844 $ 13,016 Lease Operating Expenses ("LOE") LOE are the costs incurred in the operation and maintenance of producing properties.
Costs and Expenses The following table presents the Company's operating costs and expenses and other (income) expenses: Year Ended December 31, 2023 2022 Costs and Expenses: (In thousands) Lease operating expenses $ 58,817 $ 32,458 Production and ad valorem taxes $ 25,559 $ 19,273 Exploration costs $ 4,165 $ 2,032 Depletion, depreciation, amortization and accretion $ 65,055 $ 32,113 Impairment of oil and natural gas properties $ 9,760 $ 7,325 Administrative costs $ 26,569 $ 18,496 Share-based compensation 6,833 3,439 General and administrative expense $ 33,402 $ 21,935 Transaction costs $ 5,817 $ 2,638 Interest expense, net $ 31,816 $ 1,090 (Gain) loss on derivatives, net $ (6,193) $ 51,574 Income tax expense $ 34,461 $ 32,844 Lease Operating Expenses ("LOE") LOE are the costs incurred in the operation and maintenance of producing properties.
The Company’s LOE increased by $10.5 million for the year ended December 31, 2022 compared to the year ended September 30, 2021.
The Company’s LOE increased by $26.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Contract Services - Related Party The following table presents the Company's revenue and costs associated with its contract services - related party transactions: Year Ended December 31, 2022 Year Ended September 30, 2021 (In thousands) Contract services - related parties (1) $ 2,400 $ 2,400 Cost of contract services - related parties (2) 450 477 Gross profit from contract services $ 1,950 $ 1,923 _____________________ (1) The Company’s contract services - related parties revenue is derived from master services agreements with related parties to provide certain administrative support services.
The oil and natural gas properties acquired in the New Mexico Acquisition contributed 451 MBbls to the Company's NGL volumes for the 2023 period. 64 Table of Contents Contract Services - Related Party The following table presents the Company's revenue and costs associated with its contract services - related party transactions: Year Ended December 31, 2023 2022 (In thousands) Contract services - related parties (1) $ 2,400 $ 2,400 Cost of contract services - related parties (2) 579 450 Gross profit from contract services $ 1,821 $ 1,950 _____________________ (1) The Company’s contract services - related parties revenue is derived from master services agreements with related parties to provide certain administrative support services.
If the carrying amount exceeds the estimated undiscounted future cash flows, we adjust the carrying amount of the oil and natural gas properties to estimated fair value. The Company recognized an impairment loss on proved properties of $7.3 million for the year ended December 31, 2022.
If the carrying amount exceeds the estimated undiscounted future cash flows, we adjust the carrying amount of the oil and natural gas properties to estimated fair value. 66 Table of Contents During the year ended December 31, 2023, the Company recognized an impairment loss on proved properties of $9.8 million relating to certain properties in Texas outside of the Company's acreage in the Champions Field.
Revenues from product sales are a function of the volumes produced, product quality, market prices, and gas Btu content. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices.
Revenues from product sales are a function of the volumes produced, product quality, market prices, gas Btu content, as well as midstream counterparty fees and deducts. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives.
The preparation of financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in facts and assumptions or the discovery of new information may result in revised estimates.
Capitalized costs are depleted using the units of production method. Accretion expense relates to ARO. We record the fair value of the liability for ARO in the period in which the liability is incurred (at the time the wells are drilled or acquired) with the offset to property cost.
We record the fair value of the liability for ARO in the period in which the liability is incurred (at the time the wells are drilled or acquired) with the offset to property cost. The liability accretes each period until it is settled or the well is sold, at which time the liability is removed.
Once a well is drilled, the determination that proved reserves have been discovered may take considerable time and requires both judgment and application of industry experience. Development wells are always capitalized. Costs associated with drilling an exploratory well are initially capitalized, or suspended, pending a determination as to whether proved reserves have been found.
Once a well is drilled, the determination that proved reserves have been discovered may take considerable time and requires both judgment and application of industry experience. At the end of each quarter, the status of all suspended exploratory drilling costs are reviewed to determine whether the costs should continue to remain capitalized or shall be expensed.
Depletion, Depreciation, Amortization and Accretion Expense Depletion, depreciation and amortization is the systematic expensing of the capitalized costs incurred to acquire, explore and develop oil, natural gas and NGLs. All costs incurred in the acquisition, exploration and development of properties (excluding costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and overhead related to exploration activities) are capitalized.
All costs incurred in the acquisition, exploration and development of properties (excluding costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and overhead related to exploration activities) are capitalized. Capitalized costs are depleted using the units-of-production method. Accretion expense relates to ARO.
Similar to the evaluation of suspended exploratory well costs, costs for unproved leasehold, for which reserves have not been proven, must also be evaluated for continued capitalization or impairment.
When making this determination, current activities, near-term plans for additional exploratory or appraisal drilling and the likelihood of reaching a development program is considered. Similar to the evaluation of suspended exploratory well costs, costs for unproved leasehold, for which reserves have not been proven, must also be evaluated for continued capitalization or impairment.
The Company’s activities are primarily focused on the San Andres Formation, a shelf margin deposit on the Northwest Shelf of the Permian Basin. We intend to continue to develop our reserves and increase production through development drilling and exploration activities and through acquisitions that meet our strategic and financial objectives.
We intend to continue to develop our reserves and increase production through development drilling and exploration activities and through acquisitions that meet our strategic and financial objectives.
Table of Contents Cash Flows The following table summarizes the Company’s cash flows from continuing operations: Year Ended December 31, 2022 Year Ended September 30, 2021 (In thousands) Statement of Cash Flows Data from Continuing Operations: Net cash provided by operating activities $ 170,288 $ 86,073 Net cash used in investing activities $ (128,256) $ (59,628) Net cash used in financing activities $ (37,048) $ (14,937) Operating Activities The Company’s net cash provided by operating activities increased by $84.2 million or 98% to $170.3 million for the year ended December 31, 2022 from $86.1 million for the year ended September 30, 2021.
Cash Flows The following table summarizes the Company’s cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (In thousands) Net cash provided by operating activities $ 207,195 $ 170,288 Net cash used in investing activities $ (469,556) $ (128,256) Net cash provided by (used in) financing activities $ 264,379 $ (37,048) Operating Activities The Company’s net cash provided by operating activities increased by $36.9 million, or 22%, to $207.2 million for the year ended December 31, 2023 from $170.3 million for the year ended December 31, 2022.
Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. Upon consummation of the Merger in February 2021, the Company established a $13.6 million provision for deferred income taxes with the conversion to a C-corporation.
Income Tax Expense Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. See Note 11 - Income Taxes in the Company's consolidated financial statements in "Item 15.
Investing Activities The Company's cash flows used in investing activities increased by $68.6 million or 115% to $128.3 million for the year ended December 31, 2022 from $59.6 million for the year ended September 30, 2021.
Investing Activities The Company's cash flows used in investing activities increased by $341.3 million to $469.6 million for the year ended December 31, 2023 from $128.3 million for the year ended December 31, 2022. The increase was primarily due to the $324.7 million for the New Mexico Acquisition.
The Company’s total oil and natural gas revenue, net increased $170.7 million, or 115%, for the year ended December 31, 2022 compared to the year ended September 30, 2021. The Company’s realized average combined price on its production for the year ended December 31, 2022 increased by $28.93 per Boe, or 61% compared to the year ended September 30, 2021.
The Company’s realized average combined price on its production for the year ended December 31, 2023 decreased by $21.14 per Boe, or 28% compared to the year ended December 31, 2022. Oil revenues • For the year ended December 31, 2023, oil revenues increased by $64.4 million, or 22%, compared to the year ended December 31, 2022.
Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to grow and even sustain production. The Company’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations.
Liquidity and Capital Resources The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to grow and even sustain production.
The increase in administrative costs was primarily attributable to increased employee count, professional services, insurance, technology, investor relations, and costs related to transitioning fiscal year-ends. Equity-based compensation expense decreased by $3.3 million for the year ended December 31, 2022 compared to the year ended September 30, 2021.
The increase in administrative costs was primarily attributable to increased employee count, professional services, insurance, technology and office costs, which were impacted by additional needs as a result of the New Mexico Acquisition. Share-based compensation expense increased by $3.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase in the loss on settlements on derivatives was due to the increase in oil and natural gas prices for the year ended December 31, 2022 compared to the year ended September 30, 2021.
The change was primarily driven by a $58.0 million decrease in the cash payments on settlements of derivatives due to the decrease in oil and natural gas prices for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our current derivative assets and liabilities represent the mark-to-market value as of December 31, 2022 of future commodity production which will settle on a monthly basis through the end of their contractual terms. This aligns with the receipt of oil and natural gas revenues on a monthly basis. 67 .
We utilize our Credit Facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits. Our current derivative assets and liabilities represent the mark-to-market value as of December 31, 2023 of future commodity production 68 Table of Contents which will settle on a monthly basis through the end of their contractual terms.
Additionally, interest expense decreased due to the Company settling the remaining open position on its interest rate swap resulting in a settlement of $1.5 million during 2022. Gain/Loss on Derivatives The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component within other income (expense) on its consolidated statements of operations.
Additionally, interest expense decreased during 2022 as a result of the Company settling the remaining open position on its previous interest rate swap resulting in a settlement benefit of $1.5 million.
Distributions For the year ended December 31, 2022, the Company authorized and declared a quarterly dividend totaling approximately $25.3 million, with $24.7 million paid in cash and $0.6 million payable to restricted shareholders upon vesting. 68 .
Exhibits and Financial Statement Schedules" for a full discussion of our long-term debt. 69 Table of Contents Distributions For the year ended December 31, 2023, the Company authorized and declared quarterly dividends totaling approximately $27.9 million, with $27.3 million paid in cash and $0.6 million payable to holders of restricted stock upon vesting.
Financial and Operating Highlights Financial and operating results reflect the following: • Increased total net equivalent production by 33% to 11.5 MBoe/d for the year ended December 31, 2022, as compared to the year ended September 30, 2021 • During the year ended December 31, 2022, 15 gross (11.8 net) horizontal wells brought online to production • Realized average combined price on production sold of $76.05 per Boe, before derivative settlements, during the year ended December 31, 2022, including $92.86 per barrel for oil • Generated cash flow from operations of $170.3 million for the year ended December 31, 2022 • Incurred total accrual (activity based) capital expenditures before acquisitions of $123.1 million for the year ended December 31, 2022 as compared to $71.3 million for the year ended September 30, 2021 59 .
Financial and Operating Highlights Financial and operating results reflect the following: • Increased total net equivalent production by 62% to 18.6 MBoe/d for the year ended December 31, 2023, as compared to the year ended December 31, 2022 • During the year ended December 31, 2023, 24 gross (18.2 net) horizontal wells were brought online to production • Realized average combined price on production sold of $54.91 per Boe, before derivative settlements, during the year ended December 31, 2023, including $75.62 per barrel for oil • Generated cash flow from operations of $207.2 million for the year ended December 31, 2023 • Incurred total accrual (activity based) capital expenditures before acquisitions of $135.8 million for the year ended December 31, 2023 as compared to $123.1 million for the year ended December 31, 2022 • Paid cash dividends on common shares of $27.7 million during the year ended December 31, 2023 • $15.3 million in cash and $356.0 million in total debt as of December 31, 2023 61 Table of Contents Recent Developments Market Conditions, Commodity Prices and Interest Rates The U.S. and global economies and markets have experienced heightened volatility following impactful geopolitical events, the effects of widespread inflation and the impact of significantly higher interest rates.
These proceeds were primarily used to paydown amounts outstanding on the revolving credit facility. There was no equity issued in 2022. During the year ended December 31, 2022, the Company had a net paydown on its revolving credit facility of $9.0 million, which compares to a net paydown of $41.0 million for the same period in 2021.
During the year ended December 31, 2023, the Company had net borrowings on its Credit Facility of $129.0 million and proceeds from issuance of its Senior Notes, net of repayments, of $173.0 million, compared to a net paydown of $9.0 million on its Credit Facility for the same period in 2022.
Production and ad valorem taxes increased by $10.6 million for the year ended December 31, 2022 compared to the year ended September 30, 2021. Production taxes increased primarily due to increases in our oil and natural gas sales, net, as discussed above.
Production and ad valorem taxes increased by $6.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The Company cannot estimate the length or gravity of the future impact these events will have on the Company's results of operations, financial position, liquidity and the value of oil and natural gas reserves. 61 . Table of Contents Results of Operations Comparison for the years ended December 31, 2022 and September 30, 2021.
Any such recession could prolong market volatility or cause a decline in commodity prices, among other potential impacts. The Company cannot estimate the length or gravity of the future impact these events will have on the Company's results of operations, financial position, liquidity and the value of oil and natural gas reserves.
Volumes increased by 37%, while realized prices increased by 59% compared to the year ended September 30, 2021. • Oil volumes increased during the year ended December 31, 2022 due to production from new wells and workovers performed on existing wells.
The oil and natural gas properties acquired in the New Mexico Acquisition contributed $2.1 million to the Company's natural gas revenues for the 2023 period. • Natural gas sales volumes increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to oil and natural gas properties acquired in the New Mexico Acquisition, production from new wells and workovers performed on existing wells.
During the year ended September 30, 2021, the transaction costs of $3.7 million primarily relate to costs incurred on the Merger with Tengasco in February 2021. Interest Expense Interest expense decreased by $3.4 million during the year ended December 31, 2022 when compared to the year ended September 30, 2021.
Interest Expense Interest expense increased by $30.7 million during the year ended December 31, 2023 when compared to the year ended December 31, 2022.
As of December 31, 2022, we had a working capital deficit of $25.3 million compared to a deficit of $32.8 million as of December 31, 2021. The working capital deficit at December 31, 2022 reflects $16.5 million in current derivative liabilities compared to $31.0 million in current derivative liabilities at December 31, 2021.
As of December 31, 2023, we had a working capital deficit of $31.1 million compared to a deficit of $25.3 million as of December 31, 2022. The current portion of our Senior Notes, which includes our regularly scheduled principal payments of $5 million per quarter, accounts for $20.0 million of our working capital deficit at December 31, 2023.
The combination of geopolitical events, inflation and the rising rate environment has led to increasing forecasts of a U.S. or global recession. Any such recession could prolong market volatility or cause a decline in commodity prices, among other potential impacts.
Prices for oil and natural gas are determined primarily by prevailing market conditions, which have been and could continue to be volatile. The combination of geopolitical events, inflation and the rising interest rate environment has led to increasing forecasts of a U.S. or global recession.
In addition, the Company distributed an additional $6.8 million of dividends on common stock during the year ended December 31, 2022 compared to the same period in 2021. Revolving Credit Facility The Company's borrowing base was $225 million with outstanding borrowings of $56 million on December 31, 2022, representing available borrowing capacity of $169 million.
The increase in proceeds from borrowings was primarily attributable to the New Mexico Acquisition. In addition, the Company distributed an additional $2.6 million of dividends on common stock during the year ended December 31, 2023 compared to the same period in 2022 as a result of higher outstanding share count and a higher dividend per share.
During the year ended December 31, 2022, we brought online 15 gross (11.8 net) horizontal wells. • The average WTI price increased by $35.50 per Bbl during the year ended December 31, 2022 when compared to the year ended September 30, 2021, respectively.
During the year ended December 31, 2023, we brought online 24 gross (18.2 net) horizontal wells. The New Mexico Acquisition contributed oil volumes of approximately 931 MBbls for the 2023 period. • The average WTI price decreased by $17.32 per Bbl during the year ended December 31, 2023 when compared to the year ended December 31, 2022.
Volumes increased by 24%, while realized prices increased by $0.45 per Mcf compared to the year ended September 30, 2021. • Natural gas sales volumes increased during the year ended December 31, 2022 compared to the year ended September 30, 2021 due to production from new wells and workovers performed on existing wells. • The average Henry Hub price increased by $3.11 per Mcf during the year ended December 31, 2022 compared to the year ended September 30, 2021.
The oil and natural gas properties acquired in the New Mexico Acquisition contributed $5.3 million to the Company's NGL revenues for the 2023 period. • NGL sales volumes increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to the New Mexico Acquisition, production from new wells and workovers performed on existing wells.
We have oil and natural gas derivative contracts, including fixed price swaps, basis swaps and collars, that settle against various indices.
Gain/Loss on Derivatives The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component within other income (expense) on its consolidated statements of operations. We have oil and natural gas derivative contracts, including fixed price swaps, basis swaps and collars, that settle against various indices.
Oil revenues • For the year ended December 31, 2022, oil revenues increased by $162.3 million, or 119%, compared to the year ended September 30, 2021. Of the increase, $111.2 million was attributable to an increase in our realized price and $51.1 million was attributable to an increase in volume.
Of the increase, $147.2 million was attributable to an increase in volume, which was partially offset by $82.7 million attributable to a decrease in our realized price. Volumes increased by 49%, while realized prices decreased by 19% as compared to the year ended December 31, 2022.
The liability accretes each period until it is settled or the well is sold, at which time the liability is removed. Depletion, depreciation, amortization and accretion expense increased by $6.1 million for the year ended December 31, 2022, respectively, compared to the year ended September 30, 2021.
Depletion, depreciation, amortization and accretion expense increased by $32.9 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.
See further discussion in Note 9 - Revolving Credit Facility to the Company's consolidated financial statements included herein.
See Note 9 - Long-Term Debt in the Company's consolidated financial statements in "Item 15.
Natural gas liquids revenues • For the year ended December 31, 2022, NGL revenues increased by $5.2 million, compared to the year ended September 30, 2021, to $9.9 million from $4.7 million.
Financing Activities Net cash flow provided by financing activities increased by $301.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Volumes increase by 17%, while realized prices increased $9.81 per Bbl compared to the year ended September 30, 2021. • NGL sales volumes increased during the year ended December 31, 2022 compared to the year ended September 30, 2021 due to production from new wells and workovers performed on existing wells.
The oil and natural gas properties acquired in the New Mexico Acquisition contributed $71.9 million to the Company's oil revenues for the 2023 period. • Oil volumes increased during the year ended December 31, 2023 due to oil and natural gas assets acquired in the New Mexico Acquisition, production from new wells and workovers performed on existing wells.
Natural gas revenues • For the year ended December 31, 2022, natural gas revenues increased by $3.3 million, compared to the year ended September 30, 2021, to $10.8 million from $7.5 million.
Natural gas revenues • For the year ended December 31, 2023, natural gas revenues decreased by $8.1 million, or 76%, compared to the year ended December 31, 2022. Realized natural gas prices decreased by 87% partially offset by an increase in volumes of 82% as compared to the year ended December 31, 2022.
The increase was primarily due to higher capital spending of $53.3 million related to the Company's increased drilling and completion activity and activity on its EOR Project during the year ended December 31, 2022 compared to the year ended September 30, 2021, in addition to $15.3 million for the purchase of land during the year ended December 31, 2022.
Investing activities also increased due to higher year-over-year capital spending for additions to oil and natural gas properties of $23.1 million, or 21%, related to the Company's increased drilling and completion activity during the year ended December 31, 2023 compared to the year ended December 31, 2022, partially attributable to the larger asset base following the New Mexico Acquisition.
The increase was primarily driven by an increase in revenues of $170.7 million, partially offset by an increase of $59.0 million on settlements for commodity derivative contracts and an increase in operating expenses of $24.4 million, which excludes non-cash expenses such as equity-based compensation, expiration of unproved leasehold costs, impairment of oil and natural gas properties and depreciation, depletion, accretion and amortization expense.
The increase was primarily driven by a decrease of $58.0 million in payments to settle commodity derivative contracts and an increase in revenues, partially offset by an increase in operating expenses.
Removed
Table of Contents • Paid cash dividends on common shares of $25.1 million during the year ended December 31, 2022, and announced latest dividend of $0.34 per share with a record date of January 25, 2023, which was paid on February 8, 2023, for a total of $6.7 million • Exited the year with $13.3 million in cash and $56.0 million drawn on our revolving credit facility 60 .
Added
New Mexico Acquisition On April 3, 2023, the Company completed the New Mexico Acquisition from Pecos for an adjusted purchase price of $325 million. The New Mexico Acquisition was funded through a combination of borrowings under the Company's Credit Facility and proceeds from the issuance of $200 million of Senior Notes.
Removed
Table of Contents Recent Developments Fiscal Year Change On August 16, 2022, the Company's Board acting by written consent resolved to amend and restate the Company's Second Amended and Restated Bylaws to change the Company's fiscal year period from October 1st through September 30th each year to January 1st through December 31st each year commencing with the 2022 calendar year.
Added
Power Joint Venture In January 2023, the Company entered into an agreement to form a joint venture created for the purpose of constructing a new power infrastructure for onsite, baseload power generation using produced natural gas for its Champions Field.
Removed
On August 19, 2022, the holders of approximately 75% of our outstanding Common Stock acting by written consent approved Bylaws Restatement and adopted the Third Amended and Restated Bylaws. In accordance with Rule 14c-2 under the Exchange Act, the aforementioned actions taken by written consent became effective on September 23, 2022.
Added
The Company has an initial 30% investment in the joint venture company, RPC Power LLC, and is committed to providing its portion of capital.
Removed
As a result, the Company's 2022 fiscal year was the period from January 1, 2022 to December 31, 2022. Market Conditions, Commodity Prices and Interest Rates U.S. and global markets are experiencing heightened volatility following impactful geopolitical events, consistent evidence of widespread inflation, as well as increased fears of an economic recession.
Added
Our revenues may vary significantly from period to period as a result of changes in the volume of production sold or changes in commodity prices. The Company’s total oil and natural gas revenue, net increased $53.3 million, or 17%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Removed
However, commodity prices have continued to remain high during 2022 due to OPEC+ and other oil and natural gas producers not rapidly increasing production levels, as well as from the recovery in demand related to the COVID-19 pandemic.
Added
The New Mexico Acquisition contributed 2,179 MMcf to the Company's natural gas volumes for the 2023 period. • The average Henry Hub price decreased by $3.92 per Mcf during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Removed
The full-scale military invasion of Ukraine by Russian troops has continued unabated since February 2022 coupled with related economic sanctions imposed on Russia further exacerbating supply shortages, leading to disruptions in the credit and capital markets, including significant uncertainty in commodity prices, during 2022. In addition, global markets are experiencing significant inflation attributable to a number of factors.
Added
NGLs revenues • For the year ended December 31, 2023, NGL revenues decreased by $3.0 million, or 30%, compared to the year ended December 31, 2022. Realized prices decreased by 69%, partially offset by an increase in volumes of 126% as compared to the year ended December 31, 2022.
Removed
Certain of our capital expenditures and expenses are affected by general inflation and we expect costs for 2023 to continue to be a function of supply and demand. Specifically, costs for oilfield equipment and services continue to experience impacts from significant inflation, which we expect to continue for the foreseeable future. In response to inflation concerns, the U.S.
Added
For the year ended December 31, 2023, the increase was driven by a $20.0 million increase due to higher production, including $13.3 million attributable to the New Mexico Acquisition, and a $10.1 million increase due to higher 65 Table of Contents workover expense, including $7.6 million attributable to the New Mexico Acquisition, partially offset by a $3.7 million decrease primarily related to lower utility rates.
Removed
Federal Reserve initiated a monetary tightening policy in 2022, increasing interest rates in June, July, September and November 2022 with public estimates of potential further increases in the future. The Company's floating-rate credit facility is impacted by such rate increases.
Added
Production taxes increased primarily due to increases in our oil and natural gas sales, net, including revenues from production associated with the oil and natural gas properties acquired in the New Mexico Acquisition, partially offset by lower commodity prices.
Removed
For the year ended December 31, 2022, $5.4 million of the increase was due to higher workover expense as additional workovers were performed in the 2022 period, and $4.2 million of the increase was due to electricity and chemical rate increases, increase in field payroll, saltwater disposal charges, and new wells coming online.
Added
The following table presents exploration costs for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (In thousands) Exploratory well expense (1) $ 3,447 $ — Expiration of unproved leasehold 696 1,953 Geological and geophysical costs 22 79 Total exploration costs $ 4,165 $ 2,032 _____________________ (1) The Company determined that an exploratory well was not capable of producing commercial quantities and expensed the associated drilling costs during the year ended December 31, 2023, Depletion, Depreciation, Amortization and Accretion Expense Depletion, depreciation and amortization is the systematic expensing of the capitalized costs incurred to acquire, explore and develop oil, natural gas and NGLs.

… 47 more changes not shown on this page.

Other REPX 10-K year-over-year comparisons