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What changed in SM Energy Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SM Energy Co'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.

+265 added−271 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in SM Energy Co's 2023 10-K

265 paragraphs added · 271 removed · 223 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+9 added−12 removed186 unchanged
Biggest changeMoreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of wastes, including, but not limited to, produced water, drilling fluids, and other wastes associated with the exploration, development, or production of oil, gas, and NGLs.
Biggest changeMoreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of wastes, including, but not limited to, produced water, drilling fluids, and other wastes associated with the exploration, development, or production of oil, gas, and NGLs. 26 Compliance with environmental regulations, surface use agreements, and permit requirements governing the withdrawal, storage, and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions, or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition.
Oil and gas operations are subject to many risks, including human error and accidents, that could cause personal injury, death, property damage, well blowouts, craterings, explosions, uncontrollable flows of oil, gas and NGLs, or well fluids, releases or spills of completion fluids, spills or releases from facilities and equipment used to deliver or store these materials, spills or releases of brine or other produced or flowback water, subsurface conditions that prevent us from stimulating the planned number of completion stages, accessing the entirety of the wellbore with our tools during completion, or removing materials from the wellbore to allow production to 31 begin, fires, adverse weather such as hurricanes or tornadoes, freezing conditions, wildfires, floods, droughts, formations with abnormal pressures, pipeline ruptures or spills, pollution, seismic events, releases of toxic gas such as hydrogen sulfide, and other environmental risks and hazards.
Oil and gas operations are subject to many risks, including human error and accidents, that could cause personal injury, death, property damage, well blowouts, craterings, explosions, uncontrollable flows of oil, gas and NGLs, or well fluids, releases or spills of completion fluids, spills or releases from facilities and equipment used to deliver or store these materials, spills or releases of brine or other produced or flowback water, subsurface conditions that prevent us from stimulating the planned number of completion stages, accessing the entirety of the wellbore with our tools during completion, or removing materials from the wellbore to allow production to begin, fires, adverse weather such as hurricanes or tornadoes, freezing conditions, wildfires, floods, droughts, formations with abnormal pressures, pipeline ruptures or spills, pollution, seismic events, releases of toxic gas such as hydrogen sulfide, and other environmental risks and hazards.
Deliberate attacks on, or security breaches in our systems, infrastructure, the systems and infrastructure of third-parties, or cloud-based applications could lead to disclosure of confidential information, a corruption or loss of our proprietary data, delays in production or exploration activities, difficulty in completing or settling transactions, challenges in maintaining our books and records, environmental damage, communication or other operational disruptions, and liability to third parties.
Deliberate attacks on, or security 34 breaches in our systems, infrastructure, the systems and infrastructure of third-parties, or cloud-based applications could lead to disclosure of confidential information, a corruption or loss of our proprietary data, delays in production or exploration activities, difficulty in completing or settling transactions, challenges in maintaining our books and records, environmental damage, communication or other operational disruptions, and liability to third parties.
The process of estimating reserves is complex and estimates are based on various assumptions, including geological and geophysical characteristics, future oil, gas, and NGL prices, drilling and completion costs, gathering and transportation costs, operating expenses, capital expenditures, effects of governmental regulation, taxes, timing of operations, and availability of funds. Therefore, these estimates are inherently imprecise.
The process of estimating reserves is complex and estimates are based on various assumptions, including geological and geophysical characteristics, future oil, gas, and NGL prices, drilling, completion and other capital expenditures, gathering and transportation costs, operating expenses, effects of governmental regulation, taxes, timing of operations, and availability of funds. Therefore, these estimates are inherently imprecise.
If the EPA implements further regulations of hydraulic fracturing, we may incur additional costs to comply with such requirements that may be significant in nature, 25 experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells.
If the EPA implements further regulations of hydraulic fracturing, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells.
Write downs for unproved 23 properties are also evaluated for carrying costs in excess of fair value. This evaluation considers the potential for abandonment due to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks.
Write downs for unproved properties are also evaluated for carrying costs in excess of fair value. This evaluation considers the potential for abandonment due to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks.
The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and the majority of states have already taken measures to reduce emissions of GHGs through various measures, including, primarily through the planned development of GHG emission inventories, participation in and/or regional GHG “cap and trade” programs, and/or transition to clean energy.
The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and the majority of states have already taken measures to reduce emissions of GHGs through various measures, including, primarily through the planned development of GHG emission inventories, participation in and/or regional GHG “cap and trade” programs, and/or transition 25 to clean energy.
Our service providers, including those who gather, process, and market our oil, gas, and NGLs, are also increasingly reliant on digital technology. Our and their reliance on this technology increasingly puts us 35 at risk for technology system failures, data or network disruptions, cyberattacks and other breaches in cybersecurity.
Our service providers, including those who gather, process, and market our oil, gas, and NGLs, are also increasingly reliant on digital technology. Our and their reliance on this technology increasingly puts us at risk for technology system failures, data or network disruptions, cyberattacks and other breaches in cybersecurity.
We have a long-term goal to reduce our Scope 1 and 2 GHG emissions intensity by 50 percent by 2030, compared with base year 2019 levels, and we have an annual goal to limit our methane emissions intensity at 0.04 (metric tonnes CH4/MBOE).
We have a long-term goal to reduce our Scope 1 and 2 GHG emissions intensity by 50 percent by 2030, compared with base year 2019 levels, and we have an annual goal to limit our methane emissions intensity to 0.04 (metric tonnes CH4/MBOE).
If any of these types of events occur, we could sustain substantial losses. In response to increased seismic activity in the Permian Basin in Texas, the Railroad Commission of Texas (“RRC”) has developed a seismic review process for injection wells near qualifying seismic activity.
If any of these types of events occur, we could sustain substantial losses. 30 In response to increased seismic activity in the Permian Basin in Texas, the Railroad Commission of Texas (“RRC”) has developed a seismic review process for injection wells near qualifying seismic activity.
These provisions, among other things, provide for non-cumulative voting in 34 the election of members of the Board of Directors and impose procedural requirements on stockholders who wish to make nominations for the election of directors or propose other actions at stockholder meetings.
These provisions, among other things, provide for non-cumulative voting in the election of members of the Board of Directors and impose procedural requirements on stockholders who wish to make nominations for the election of directors or propose other actions at stockholder meetings.
Downgrades of our credit rating levels could have material adverse consequences on our business and future prospects and could: • limit our ability to access capital markets, including for the purpose of refinancing our existing debt; • cause us to refinance or issue debt with less favorable terms and conditions, which debt may restrict, among other things, our ability to make any dividend distributions or repurchase shares; • negatively impact lenders’ willingness to transact business with us, which could impact our ability to obtain favorable terms and conditions under our Credit Agreement; • negatively impact current and prospective customers’ willingness to transact business with us; • impose additional insurance, guarantee, bonding, and collateral requirements; • limit our access to bank and third-party guarantees, surety bonds, and letters of credit; and • cause our suppliers and financial institutions to lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us, thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay outstanding indebtedness.
Downgrades of our credit ratings could have material adverse consequences on our business and future prospects and could: • limit our ability to access capital markets, including for the purpose of refinancing our existing debt; • cause us to refinance or issue debt with less favorable terms and conditions, which may restrict, among other things, our ability to make any dividend payments or repurchase shares; • negatively impact lenders’ willingness to transact business with us, which could impact our ability to obtain favorable terms and conditions under our Credit Agreement; • negatively impact current and prospective customers’ willingness to transact business with us; • impose additional insurance, guarantee, bonding, and collateral requirements; • limit our access to bank and third-party guarantees, surety bonds, and letters of credit; and • cause our suppliers and financial institutions to lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us, thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay outstanding indebtedness.
Any of these or other similar risks could lead to potential adverse short-term or long-term effects on our operating results and may cause us to not be able to realize any or all of the anticipated benefits of the acquisitions. 28 The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production.
Any of these or other similar risks could lead to potential adverse short-term or long-term effects on our operating results and may cause us to not be able to realize any or all of the anticipated benefits of the acquisitions. 27 The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production.
Please refer to Significant Developments in 2022 and Reserves in Part I, Items 1 and 2, Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 in Part II, Item 7, and Note 1 – Summary of Significant Accounting Policies , Note 8 – Fair Value Measurements , and Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 for specific discussion.
Please refer to Significant Developments in 2023 and Reserves in Part I, Items 1 and 2, Comparison of Financial Results and Trends Between 2023 and 2022 and Between 2022 and 2021 in Part II, Item 7, and Note 1 – Summary of Significant Accounting Policies , Note 8 – Fair Value Measurements , and Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 for specific discussion.
Risks Related to Debt, Liquidity, and Access to Capital Lower oil, gas, or NGL prices could limit our ability to borrow under our Credit Agreement. As of December 31, 2022, the borrowing base and aggregate lender commitments under our Credit Agreement were $2.5 billion and $1.25 billion, respectively.
Risks Related to Debt, Liquidity, and Access to Capital Lower oil, gas, or NGL prices could limit our ability to borrow under our Credit Agreement. As of December 31, 2023, the borrowing base and aggregate lender commitments under our Credit Agreement were $2.5 billion and $1.25 billion, respectively.
As of December 31, 2022, we had $1.6 billion of aggregate principal amount outstanding of Senior Notes with maturities through 2028, as further discussed and defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report.
As of December 31, 2023, we had $1.6 billion of aggregate principal amount outstanding of Senior Notes with maturities through 2028, as further discussed and defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report.
Our GHG emissions in 2022 did not exceed the thresholds set forth by the IRA, however, there is no assurance that we will be able to meet our goals or that we will not exceed the thresholds set forth by the IRA in the future.
Our GHG emissions in 2023 did not exceed the thresholds set forth by the IRA, however, there is no assurance that we will be able to meet our goals or that we will not exceed the thresholds set forth by the IRA in the future.
The borrowing base is subject to semi-annual redetermination based on the bank group’s assessment of the value of our proved reserves, which in turn is impacted by oil, gas, and NGL prices. The next borrowing base 32 redetermination date is scheduled for April 1, 2023.
The borrowing base is subject to semi-annual redetermination based on the bank group’s assessment of the value of our proved reserves, which in turn is impacted by oil, gas, and NGL prices. The next borrowing base redetermination date is scheduled for April 1, 2024.
Please refer to Reserves in Part I, Items 1 and 2 of this report for discussion 29 regarding the prices used in estimating the present value of our proved reserves as of December 31, 2022, and to the caption Oil and Gas Reserve Quantities under Critical Accounting Estimates in Part II, Item 7 of this report for additional information.
Please refer to Reserves in Part I, Items 1 and 2 of this report for discussion 28 regarding the prices used in estimating the present value of our proved reserves as of December 31, 2023, and to the caption Oil and Gas Reserve Quantities under Critical Accounting Estimates in Part II, Item 7 of this report for additional information.
The oil and gas industry is increasingly dependent on digital technology in all aspects of our business. We use digital technology to conduct certain aspects of our drilling development, production and gathering activities, manage drilling rigs and completion equipment, gather and interpret seismic data, conduct reservoir modeling, record financial and operating data, and maintain employee and other databases.
The oil and gas industry, and our business, are increasingly dependent on digital technology. We use digital technology to conduct certain aspects of our drilling development, production and gathering activities, manage drilling rigs and completion equipment, gather and interpret seismic data, conduct reservoir modeling, record financial and operating data, and maintain employee and other databases.
Wide fluctuations in oil, gas, and NGL prices often result from relatively minor changes in the supply of and demand for oil, gas, and NGLs, market uncertainty, and other factors that are beyond our control, including: • global and domestic supplies of oil, gas, and NGLs, and the productive capacity of the industry as a whole; • the level of consumer demand for oil, gas, and NGLs; • overall global and domestic economic conditions; • inflation and other economic factors that contribute to market volatility; • weather conditions; • the availability and capacity of gathering, transportation, processing, storage, and/or refining facilities in asset-specific or localized areas; • liquefied natural gas deliveries to and from the United States; • the increased demand for, price, and availability of alternative fuels or sources of energy; • technological advances in, and regulations affecting, energy consumption and conservation; • the ability of the members of OPEC+ to maintain effective oil price and production controls; • political instability or armed conflict involving oil or gas producing countries or regions, such as the continued conflict occurring between Russia and Ukraine; • actual or perceived epidemic or pandemic risks; • strengthening and weakening of the United States dollar relative to other currencies; • stockholder activism or activities by non-governmental organizations to limit sources of funding or restrict the exploration and production of oil, gas, and NGLs and related infrastructure; and • governmental regulations and taxes.
Wide fluctuations in oil, gas, and NGL prices often result from relatively minor changes in the supply of and demand for oil, gas, and NGLs, market uncertainty, and other factors that are beyond our control, including: • global and domestic supplies of oil, gas, and NGLs, and the productive capacity of the industry as a whole; • the level of consumer demand for oil, gas, and NGLs; • overall global and domestic economic conditions; • inflation and other economic factors that contribute to market volatility; • weather conditions; • the availability and capacity of gathering, transportation, processing, storage, and/or refining facilities in asset-specific or localized areas; • liquefied natural gas deliveries to and from the United States; • the increased demand for, price, and availability of alternative fuels or sources of energy; • technological advances in, and regulations affecting, energy consumption and conservation; • the ability of the members of OPEC+ to maintain effective oil price and production controls; 22 • political instability or armed conflict involving oil or gas producing countries or regions, such as instability in the Middle East, and the wars between Russia and Ukraine and Israel and Hamas; • shipping channel constraints and disruptions to and from oil and gas producing countries or regions; • actual or perceived epidemic or pandemic risks; • strengthening and weakening of the United States dollar relative to other currencies; • stockholder activism or activities by non-governmental organizations to limit sources of funding or restrict the exploration and production of oil, gas, and NGLs and related infrastructure; and • governmental regulations and taxes.
As an oil, gas, and NGL producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts.
As an oil, gas, and NGL producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts, including armed attacks on shipping channels.
We have committed to a goal of zero routine flaring at all of our operated locations, and non-routine flaring not to exceed one percent of total gas production, each by 2023 based on the full year average. Additionally, we set annual targets to limit our flaring that are tied to compensation for all employees.
We have committed to zero routine flaring at all of our operated locations, and non-routine flaring not to exceed one percent of total annual gas production, based on the full year average. Additionally, we set annual targets to limit our flaring that are tied to compensation for all employees.
ITEM 1A. RISK FACTORS In addition to the other information included in this report, the following risk factors should be carefully considered when evaluating an investment in us.
ITEM 1A. RISK FACTORS In addition to the other information included in this report, the following risk factors should be carefully considered when evaluating an investment in SM Energy.
For example: • inflation has increased the costs of our drilling and completion activities, and the costs of oilfield services, equipment, and materials during 2022 and could continue or worsen and further impact our financial condition, liquidity, and results of operations, and could limit our pool of economic development opportunities; • a potential economic recession could impact demand for oil, gas, and NGLs, and cause commodity price volatility; • the tightening of credit or lack of credit availability to our customers could adversely affect our ability to collect our trade receivables; • the liquidity available under our Credit Agreement could be reduced if one or more of our lenders is unable to fund its commitment; • our ability, or the ability of our suppliers or contractors, to access the capital markets may be restricted or non-existent at a time when we or they would like, or need, to raise capital for our or their business, including for the exploration and/or development of reserves; • our commodity derivative contracts could become economically ineffective if our counterparties are unable to perform their obligations or seek bankruptcy protection; • the Federal Reserve could continue to increase interest rates in an effort to curb inflation, as they have done during 2022 and into 2023, which could result in increased borrowing costs; • variable interest rate spread levels, including for SOFR and the prime rate, could increase significantly, resulting in higher interest costs for unhedged variable interest rate based borrowings under our Credit Agreement; and • changes in tax laws and regulations could require us to adjust our business plan.
For example: • inflation has increased the costs of our drilling and completion activities, and the costs of oilfield services, equipment, and materials in recent years and could continue or worsen and further impact our financial condition, liquidity, and results of operations, and could limit our pool of economic development opportunities; • a potential economic recession could impact demand for oil, gas, and NGLs, and cause commodity price volatility; • the tightening of credit or lack of credit availability to our customers could adversely affect our ability to collect our trade receivables; • the liquidity available under our Credit Agreement could be reduced if one or more of our lenders is unable to fund its commitment; • our ability, or the ability of our suppliers or contractors, to access the capital markets may be restricted or non-existent at a time when we or they would like, or need, to raise capital for our or their business, including for the exploration and/or development of reserves; • our commodity derivative contracts could become economically ineffective if our counterparties are unable to perform their obligations or seek bankruptcy protection; • the Federal Reserve could change interest rates, as they did during 2022 and 2023, which could impact borrowing costs; • variable interest rate spread levels, including for SOFR and the prime rate, could increase significantly, resulting in higher interest costs for unhedged variable interest rate based borrowings under our Credit Agreement; and • changes in tax laws and regulations could require us to adjust our business plan. 23 Global geopolitical tensions may create heightened volatility in oil, gas, and NGL prices and could adversely affect our business, financial condition and results of operations.
These factors may include, but are not limited to: • supply chain issues, including cost increases and availability of equipment or materials; • unexpected adverse drilling or completion conditions; • title problems; • disputes with owners or holders of surface interests on or near areas where we operate; • pressure or geologic irregularities in formations; • engineering and construction delays; • equipment failures or accidents; • hurricanes, tornadoes, flooding, wildfires or other adverse weather conditions; • operational restrictions resulting from seismicity concerns; • governmental permitting delays; • compliance with environmental and other governmental requirements; and 30 • shortages or delays in the availability of or increases in the cost of drilling rigs and crews, fracture stimulation crews and equipment, pipe, chemicals, water, sand, and other supplies.
These factors may include, but are not limited to: • supply chain issues, including cost increases and availability of equipment or materials; • unexpected adverse drilling or completion conditions; • title problems; • disputes with owners or holders of surface interests on or near areas where we operate; • pressure or geologic irregularities in formations; • engineering and construction delays; • equipment failures or accidents; • hurricanes, tornadoes, flooding, wildfires or other adverse weather conditions; • operational restrictions resulting from seismicity concerns; • governmental permitting delays; • compliance with environmental and other governmental requirements; and • shortages or delays in the availability of or increases in the cost of drilling rigs and crews, fracture stimulation crews and equipment, pipe, chemicals, water, sand, and other supplies. 29 The wells we drill may not be productive, and we may not recover all or any portion of our investment in such wells.
Divestitures of additional properties, incurrence of additional debt, or declines in commodity prices could limit our borrowing base and reduce the amount we can borrow under our Credit Agreement, which could in turn impact, among other things, our ability to service our debt, fund our capital program, or compete for the acquisition of new properties.
Divestitures of properties, incurrence of additional debt, or declines in commodity prices could limit our borrowing base and reduce the amount we can borrow under our Credit Agreement, which could in turn impact, among other things, our ability to service our debt, fund our capital program, or compete for the acquisition of new properties. 31 Substantial capital is required to develop and replace our reserves.
Our long-term debt represented 34 percent of our total book capitalization as of December 31, 2022. 33 The amounts of our indebtedness could have important consequences for our operations, including: • making it more difficult for us to obtain additional financing in the future for our operations and potential acquisitions, working capital requirements, capital expenditures, debt service, or other general corporate requirements; • requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of our debt and the service of interest costs associated with our debt, rather than to capital investments; • limiting our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, making acquisitions, and paying dividends; • placing us at a competitive disadvantage compared to our competitors with less debt; and • making us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business.
The amounts of our indebtedness could have important consequences for our operations, including: • making it more difficult for us to obtain additional financing in the future for our operations and potential acquisitions, working capital requirements, capital expenditures, debt service, or other general corporate requirements; • requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of our debt and the service of interest costs associated with our debt, rather than to capital investments; 32 • limiting our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, making acquisitions, and paying dividends; • placing us at a competitive disadvantage compared to our competitors with less debt; and • making us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business.
Risks Related to Oil and Gas Operations and the Industry The loss of personnel could adversely affect our business. We depend to a large extent on the efforts and continued employment of our executive management team, other key personnel, and our general labor force. The loss of their services could adversely affect our business.
We depend to a large extent on the efforts and continued employment of our executive management team, other key personnel, and our general labor force. The loss of their services could adversely affect our business.
These developments have subjected our operations to increased risk and, depending on their occurrence and ultimate magnitude, could have a material adverse effect on our business, financial condition, or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS We have no unresolved comments from the SEC staff regarding our periodic or current reports under the Exchange Act.
Depending on their occurrence and ultimate magnitude, terrorist threats or attacks could have a material adverse effect on our business, financial condition, or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS We have no unresolved comments from the SEC staff regarding our periodic or current reports under the Exchange Act.
As of December 31, 2022, 41 percent, or 219.6 MMBOE, of our estimated proved reserves were proved undeveloped. In order to develop our proved undeveloped reserves, as of December 31, 2022, we estimate approximately $2.8 billion of capital expenditures would be required.
As of December 31, 2023, 44 percent, or 263.6 MMBOE, of our estimated proved reserves were proved undeveloped. In order to develop our net proved undeveloped reserves, as of December 31, 2023, we estimate approximately $2.8 billion of capital expenditures would be required.
Substantial capital is required to develop and replace our reserves. We must make substantial capital expenditures to find, acquire, develop, and produce oil, gas, and NGL reserves.
We must make substantial capital expenditures to find, acquire, develop, and produce oil, gas, and NGL reserves.
As of December 31, 2022, we were contractually committed to deliver a minimum of 18 MMBbl of oil through 2026, 26 Bcf of gas through the first half of 2023, and 11 MMBbl of produced water through 2027. We may enter into additional firm transportation agreements as we expand the development of our resource plays.
As of December 31, 2023, we were contractually committed to deliver a minimum of 5 MMBbl of oil through July of 2026 and 11 MMBbl of produced water through June of 2027. We may enter into additional firm transportation agreements as we expand the development of our resource plays.
The EPA has authority to regulate underground injections that contain diesel in the fluid system under the Safe Drinking Water Act. The EPA also has authority under the Clean Water Act to regulate wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities.
The EPA also has authority under the Clean Water Act to regulate wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities.
Title to the properties in which we have an interest may be impaired by title defects. We generally rely on title due diligence reports when acquiring oil and gas leasehold interests, and we obtain title opinions prior to commencing initial drilling operations on the properties we operate.
We generally rely on title due diligence reports when acquiring oil and gas leasehold interests, and we obtain title opinions prior to commencing initial drilling operations on the properties we operate.
Our total net acreage as of February 9, 2023, that is scheduled to expire over the next three years, represents less than one percent of our total net undeveloped acreage as of December 31, 2022.
Our total net acreage as of February 8, 2024, that is scheduled to expire over the next three years, represents approximately 19 percent of our total net undeveloped acreage as of December 31, 2023.
The wells we drill may not be productive, and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil, gas, or NGLs are present, or whether they can be produced economically.
The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil, gas, or NGLs are present, or whether they can be produced economically.
In addition, stockholder activism in our industry has been present in recent years, and if investors seek to exert influence or affect changes to our business that we do not believe are in the long-term best interests of our stockholders, such actions could adversely impact our business by, among other things, distracting our Board of Directors and management team, causing us to incur unexpected advisory fees and other related costs, impacting execution of our strategic objectives, and creating unnecessary market uncertainty.
As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price investors are willing to pay in the future for shares of our common stock. 33 In addition, stockholder activism in our industry has been present in recent years, and if investors seek to exert influence or affect changes to our business that we do not believe are in the long-term best interests of our stockholders, such actions could adversely impact our business by, among other things, distracting our Board of Directors and management team, causing us to incur unexpected advisory fees and other related costs, impacting execution of our strategic objectives, and creating unnecessary market uncertainty.
Hydraulic fracturing involves injecting water, sand, and certain chemicals under pressure to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. The process is typically regulated by state oil and gas commissions. However, the EPA and other federal agencies have asserted federal regulatory authority over certain aspects of hydraulic fracturing activities, as outlined below.
Hydraulic fracturing involves injecting water, sand, and certain chemicals under pressure to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. The process is typically regulated by state oil and gas commissions.
In 2021, the EPA proposed requirements for methane emission reductions from existing oil and gas equipment. In 2022, the EPA released 26 a supplemental proposal expanding its initial requirements as well as updating requirements to work in tandem with the programs included in the Inflation Reduction Act (“IRA”).
In 2021, the EPA proposed requirements for methane emission reductions from existing oil and gas equipment. In 2022, the EPA released a supplemental proposal expanding its initial requirements as well as updating requirements, and in 2023, proposed updates to GHG reporting requirements.
Additionally, we had no outstanding balance on our revolving credit facility and $1.2 billion of available borrowing capacity under our Credit Agreement as of December 31, 2022.
We had no outstanding balance on our revolving credit facility and had $1.2 billion of available borrowing capacity under our Credit Agreement as of December 31, 2023. Our long-term debt represented 30 percent of our total book capitalization as of December 31, 2023.
From January 1, 2022, to February 9, 2023, the intraday trading prices per share of our common stock as reported by the New York Stock Exchange ranged from a low of $28.91 per share in January 2022 to a high of $54.97 per share in June 2022.
From January 1, 2023, to February 8, 2024, the intraday trading prices per share of our common stock as reported by the New York Stock Exchange ranged from a low of $24.66 per share in March 2023 to a high of $43.73 per share in October 2023.
Exploratory well costs are initially capitalized, pending the determination of whether proved reserves have been discovered. If commercial quantities of proved reserves are not discovered with an exploratory well, the costs of drilling the well are expensed as dry hole costs.
Exploratory well costs are initially capitalized, pending the determination of whether proved reserves have been discovered. If commercial quantities of proved reserves are not discovered with an exploratory well, the costs initially capitalized are expensed as dry hole costs. During the years ended December 31, 2023, and 2022, we recorded amounts related to certain unsuccessful exploration activity to exploration expense.
In addition, commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise substantially over the price established by the commodity derivative contract, which we experienced in 2022.
In addition, commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise substantially over the price established by the commodity derivative contract. Please refer to Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report for additional detail regarding our commodity derivative contracts.
Please refer to Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional detail regarding our commodity derivative contracts. The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt.
The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt.
We did not experience any material cybersecurity incidents during 2022, however there can be no assurance that the measures we have taken to address information technology and cybersecurity risks will prove effective in the future. Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions.
We did not experience any material cybersecurity incidents during 2023, however there can be no assurance that the measures we have taken to address information technology (“IT”) and cybersecurity risks will prove effective in the future. We are incorporating artificial intelligence technologies into our processes and these technologies may present business, compliance, and reputational risks.
The failure of a third-party service provider to adequately perform operations could delay drilling or completion or reduce production from the property and adversely affect our financial condition and results of operations. Our costs to retain third-party service providers increased during 2022 as a result of inflation, and continued inflation could result in additional cost increases.
The failure of a third-party service provider to adequately perform operations could delay drilling or completion or reduce production from the property and adversely affect our financial condition and results of operations. Title to the properties in which we have an interest may be impaired by title defects.
Compliance with environmental regulations, surface use agreements, and permit requirements governing the withdrawal, storage, and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions, or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition. 27 Our ability to sell oil, gas, and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines, and other transportation systems owned or operated by third-parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL markets.
Our ability to sell oil, gas, and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines, and other transportation systems owned or operated by third-parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL markets.
Although the length, impact, and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, as well as increases in cyberattacks and espionage.
Global geopolitical tensions, including instability in the Middle East, and the wars between Russia and Ukraine and Israel and Hamas, could lead to significant market and other disruptions, including, but not limited to: significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, shipping channel constraints and disruptions, political and social instability, political and economic sanctions, geopolitical shifts, embargoes, changes in consumer or purchaser preferences, the potential destruction of critical oil-related infrastructure, as well as increases in cyberattacks and espionage.
The IRA imposes fees on emissions of GHGs, including methane, exceeding applicable thresholds.
The 2022 and 2023 proposals are meant to work in tandem with the programs included in the Inflation Reduction Act of 2022 (“IRA”). The IRA imposes fees on emissions of GHGs, including methane, that exceed applicable thresholds.
Removed
Global geopolitical tensions, specifically including the ongoing conflict between Russia and Ukraine, may create heightened volatility in oil, gas, and NGL prices and could adversely affect our business, financial condition and results of operations.
Added
These factors could impact our operations and the financial condition of our business as well as the global economy. Risks Related to Oil and Gas Operations and the Industry The loss of personnel could adversely affect our business.
Removed
On February 24, 2022, Russian military forces commenced a military operation in Ukraine and the sustained conflict and disruption in the region that has occurred since this date is expected to continue for the foreseeable future.
Added
However, the EPA and other federal agencies have asserted federal regulatory authority over certain aspects of hydraulic fracturing activities, as outlined below. 24 The EPA has authority to regulate underground injections that contain diesel in the fluid system under the Safe Drinking Water Act.
Removed
While it is not possible at this time to predict or determine the ultimate consequences of the conflict in Ukraine, the conflict is likely to continue for the foreseeable future and could include, among other things: additional sanctions, greater regional instability, embargoes, geopolitical shifts, and other material and adverse effects on macroeconomic conditions, supply chains, financial markets, and hydrocarbon price volatility.
Added
Please refer to Cybersecurity Risk Management, Strategy, and Governance in Item 1C of this report for discussion of the Audit Committee’s role in cybersecurity governance.
Removed
To the extent negotiations of a cease fire between Russia and Ukraine are unsuccessful, the potential destruction of critical oil-related infrastructure in Ukraine, and the implementation of further sanctions and other measures taken by governmental bodies and others, could have a lasting impact on the operations and financial condition of our business and the global economy.
Added
Our business increasingly utilizes artificial intelligence (“AI”), machine learning, and automated decision making to improve our processes.
Removed
The global COVID-19 Pandemic has impacted, and may continue to impact, us and our industry and could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
Added
Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, reputational harm, liability, or other adverse consequences to our business operations, all of which could adversely affect our business, results of operations, and financial condition.
Removed
Beginning in 2020, the Pandemic spread across the globe and disrupted markets and economies around the world, including the oil, gas, and NGL industry in which we operate.
Added
In addition, it is possible that AI and machine learning-technology could, unbeknownst to us, be improperly utilized by employees while carrying out their responsibilities.
Removed
The Pandemic continues to impact certain countries and markets to varying degrees, 24 and as a result, the markets for the commodities produced by our industry remain subject to heightened levels of uncertainty.
Added
The use of AI can lead to unintended consequences, including the unauthorized use or disclosure of confidential and proprietary information, or generating content that appears correct but is factually inaccurate, misleading, or otherwise flawed, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies.
Removed
Volatile market conditions could continue and could impact our business, financial condition, liquidity, results of operations, prospects, or the timing of further recovery, and may require us to adjust our business plan. In addition to risks directly related to the Pandemic, the Pandemic could increase the likelihood and magnitude of the other risk factors described in this section.
Added
It is not possible to predict all of the risks related to the use of AI, machine learning and automated decision making, and developments in the regulatory frameworks governing the use of such technologies and in related stakeholder expectations may adversely affect our ability to develop and use such technologies or subject us to liability.
Removed
As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price investors are willing to pay in the future for shares of our common stock.
Added
If we fail to successfully integrate AI into our business processes, or if we fail to keep pace with rapidly evolving AI technological developments, including attracting and retaining talented data scientists, data engineers, and programmers, we may face a competitive disadvantage. Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions.
Removed
The Audit Committee of our Board of Directors receives a quarterly cybersecurity report and update from management, discusses any relevant issues related thereto, and generally oversees and contributes to our Board of Director’s understanding of information technology and cybersecurity risks, among others that may be relevant at any given time.
Removed
Upon the recommendation of the Audit Committee, we have taken a preventative approach with respect to cybersecurity threats by building a resilient cybersecurity culture through training and other forms of awareness for our employees and by creating and testing various response plans to hypothetical cybersecurity attacks to quickly assess and respond to potential and actual threats.
Removed
While we currently maintain insurance that provides limited coverage against terrorist attacks, such insurance has become increasingly expensive and difficult to obtain. As a result, insurance providers may not continue to offer this coverage to us on terms we consider reasonable, or at all. In addition, this insurance may not cover all of our losses for a terrorist attack.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of the filing of this report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a material adverse effect upon our financial condition, results of operations, or cash flows. ITEM 4. MINE SAFETY DISCLOSURES These disclosures are not applicable to us. 36 PART II
Biggest changeAs of the filing of this report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a material adverse effect upon our financial condition, results of operations, or cash flows. ITEM 4. MINE SAFETY DISCLOSURES These disclosures are not applicable to us. 37 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+4 added−2 removed3 unchanged
Biggest changeThe following table provides information about purchases made by us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the indicated quarters and months, and the year ended December 31, 2022, of shares of our common stock, which is the sole class of equity securities registered by us pursuant to Section 12 of the Exchange Act: PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS Period Total Number of Shares Purchased (1) Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (2) Maximum Number or Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (as of the period end date) (2)(3) First quarter of 2022 623 $ 38.02 — 3,072,184 Second quarter of 2022 — $ — — 3,072,184 Third quarter of 2022 1,086,021 $ 41.75 452,734 $ 479,767,724 10/01/2022 - 10/31/2022 — $ — — $ 479,767,724 11/01/2022 - 11/30/2022 362,521 $ 44.07 362,521 $ 463,792,716 12/01/2022 - 12/31/2022 550,000 $ 38.13 550,000 $ 442,820,671 Total 1,999,165 $ 41.17 1,365,255 ____________________________________________ (1) 633,910 shares purchased by us in 2022 were to offset tax withholding obligations that occurred upon the delivery of outstanding shares underlying Restricted Stock Units (“RSU” or “RSUs”) and Performance Share Units (“PSU” or “PSUs”) issued under the terms of award agreements granted under the Equity Plan.
Biggest changeThe following table provides information about purchases made by us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the indicated quarters and months, and the year ended December 31, 2023, of shares of our common stock, which is the sole class of equity securities registered by us pursuant to Section 12 of the Exchange Act: PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS Period Total Number of Shares Purchased (1) Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (2) Maximum Number or Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (as of the period end date) (2) First quarter of 2023 1,413,758 $ 28.32 1,413,758 $ 402,780,476 Second quarter of 2023 2,550,976 $ 26.95 2,550,706 $ 334,036,922 Third quarter of 2023 2,600,605 $ 40.07 2,351,642 $ 237,700,848 10/01/2023 - 10/31/2023 — $ — — $ 237,700,848 11/01/2023 - 11/30/2023 614,729 $ 37.16 614,729 $ 214,854,687 12/01/2023 - 12/31/2023 — $ — — $ 214,854,687 Total 7,180,068 $ 32.85 6,930,835 ____________________________________________ (1) 249,233 shares purchased by us in 2023 were to offset tax withholding obligations that occurred upon the delivery of outstanding shares underlying Restricted Stock Units (“RSU” or “RSUs”) issued under the terms of award agreements granted under the Equity Plan.
A substantially greater number of holders of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. 37 Purchases of Equity Securities by Issuer and Affiliated Purchasers.
A substantially greater number of holders of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. 38 Purchases of Equity Securities by Issuer and Affiliated Purchasers.
Based on our current performance, we do not anticipate that any of these covenants will limit our potential repurchases of our common stock or our payment of dividends at our current rate for the foreseeable future if any dividends are declared by our Board of Directors. ITEM 6. [RESERVED] 38
Based on our current performance, we do not anticipate that any of these covenants will limit our potential repurchases of our common stock or our payment of dividends at our current rate for the foreseeable future if any dividends are declared by our Board of Directors.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS The preceding information under the caption Performance Graph shall be deemed to be furnished, but not filed with the SEC. Holders. As of February 9, 2023, the number of record holders of our common stock was 102.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS The preceding information under the caption Performance Graph shall be deemed to be furnished, but not filed with the SEC. Holders. As of February 8, 2024, the number of record holders of our common stock was 102.
PERFORMANCE GRAPH The following performance graph compares the cumulative return on our common stock, for the period beginning December 31, 2017, and ending December 31, 2022, with the cumulative total returns of the Dow Jones Exploration and Production Index (“DJUSOS”), and the Standard & Poor’s 500 Stock Index (“SPX”).
PERFORMANCE GRAPH The following performance graph compares the cumulative return on our common stock, for the period beginning December 31, 2018, and ending December 31, 2023, with the cumulative total returns of the Dow Jones Exploration and Production Index (“DJUSOS”), and the Standard & Poor’s 500 Stock Index (“SPX”).
The timing, as well as the number and value of shares repurchased under the Stock Repurchase Program, will be determined by certain authorized officers of the Company at their discretion and will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements.
The timing, as well as the number and value of shares repurchased under the Stock Repurchase Program, is determined by certain authorized officers of the Company at their discretion and depends on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements.
The Stock Repurchase Program permits us to repurchase our shares from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of our Credit Agreement and the indentures governing our Senior Notes. We intend to fund repurchases with net cash provided by operating activities.
(2) Our Stock Repurchase Program, which authorizes us to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2024, permits us to repurchase our shares from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of our Credit Agreement and the indentures governing our Senior Notes.
(3) The Stock Repurchase Program terminates and supersedes the August 1998 authorization to repurchase common stock, under which 3,072,184 shares remained available for repurchase prior to termination. Our payment of cash dividends to our stockholders and repurchases of our common stock are each subject to certain covenants under the terms of our Credit Agreement and Senior Notes.
Our payment of cash dividends to our stockholders and repurchases of our common stock are each subject to certain covenants under the terms of our Credit Agreement and Senior Notes.
No assurance can be given that any particular number or dollar value of our shares will be repurchased. During the year ended December 31, 2022, we repurchased and subsequently retired 1,365,255 shares of our common stock under the Stock Repurchase Program at a weighted-average share price of $41.88 for a total cost of $57.2 million, excluding commissions and fees.
During the year ended December 31, 2023, we repurchased and subsequently retired 6,930,835 shares of our common stock under the Stock Repurchase Program at a weighted-average share price of $32.89 for a total cost of $228.0 million, excluding excise taxes, commissions and fees.
Removed
(2) On September 7, 2022, we announced that our Board of Directors approved the Stock Repurchase Program authorizing us to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2024.
Added
No assurance can be given that any particular number or dollar value of our shares will be repurchased.
Removed
Stock repurchases may also be funded with borrowings under our Credit Agreement.
Added
During the year ended December 31, 2023, we paid $71.6 million in dividends to our stockholders. Dividends paid reflects $0.60 per share during the year ended December 31, 2023.
Added
During 2023, our Board of Directors approved a 20 percent increase to our fixed dividend to $0.72 per share annually, to be paid in quarterly increments of $0.18 per share, beginning in the first quarter of 2024.
Added
We currently intend to continue paying dividends to our stockholders for the foreseeable future, subject to our future earnings, our financial condition, covenants under our Credit Agreement and indentures governing each series of our outstanding Senior Notes, and other factors that could arise. The payment and amount of future dividends remain at the discretion of our Board of Directors.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 39 Overview of the Company 39 Financial Results of Operations and Additional Comparative Data 43 Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 46 Overview of Liquidity and Capital Resources 49 Critical Accounting Estimates 54 Accounting Matters 56 Environmental 56 Non-GAAP Financial Measures 57 Item 7A.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 40 Overview of the Company 40 Financial Results of Operations and Additional Comparative Data 44 Comparison of Financial Results and Trends Between 2023 and 2022 , and Between 2022 and 2021 46 Overview of Liquidity and Capital Resources 50 Critical Accounting Estimates 54 Accounting Matters 57 Environmental 57 Non-GAAP Financial Measures 58 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 58 Item 8. Consolidated Financial Statements and Supplementary Data 59
Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Consolidated Financial Statements and Supplementary Data 60

Item 7. Management's Discussion & Analysis

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

160 edited+29 added−34 removed83 unchanged
Biggest changeSelected Performance Metrics For the Three Months Ended December 31, September 30, June 30, March 31, 2022 2022 2022 2022 Average net daily equivalent production (MBOE per day) 142.9 137.8 146.6 153.3 Lease operating expense (per BOE) $ 5.20 $ 5.64 $ 5.11 $ 4.25 Transportation costs (per BOE) $ 2.86 $ 2.87 $ 2.87 $ 2.74 Production taxes as a percent of oil, gas, and NGL production revenue 4.8 % 4.9 % 5.1 % 4.7 % Ad valorem tax expense (per BOE) $ 0.97 $ 0.93 $ 0.69 $ 0.58 Depletion, depreciation, amortization, and asset retirement obligation liability accretion (per BOE) $ 10.93 $ 11.50 $ 11.60 $ 11.56 General and administrative (per BOE) $ 2.50 $ 2.24 $ 2.12 $ 1.81 ____________________________________________ Note: Amounts may not calculate due to rounding. 43 Overview of Selected Production and Financial Information, Including Trends For the Years Ended December 31, Amount Change Between Percent Change Between 2022 2021 2020 2022/2021 2021/2020 2022/2021 2021/2020 Net production volumes: (1) Oil (MMBbl) 24.0 27.9 23.0 (4.0) 4.9 (14) % 21 % Gas (Bcf) 125.9 108.4 103.9 17.6 4.5 16 % 4 % NGLs (MMBbl) 8.0 5.4 6.1 2.6 (0.7) 49 % (12) % Equivalent (MMBOE) 53.0 51.4 46.4 1.6 4.9 3 % 11 % Average net daily production: (1) Oil (MBbl per day) 65.7 76.5 62.9 (10.8) 13.6 (14) % 22 % Gas (MMcf per day) 345.0 296.9 283.9 48.1 13.0 16 % 5 % NGLs (MBbl per day) 21.9 14.7 16.7 7.2 (2.0) 49 % (12) % Equivalent (MBOE per day) 145.1 140.7 126.9 4.4 13.9 3 % 11 % Oil, gas, and NGL production revenue (in millions): (1) Oil production revenue $ 2,270.1 $ 1,891.8 $ 853.6 $ 378.2 $ 1,038.3 20 % 122 % Gas production revenue 790.9 525.5 187.5 265.4 338.0 51 % 180 % NGL production revenue 285.0 180.6 85.2 104.3 95.4 58 % 112 % Total oil, gas, and NGL production revenue $ 3,345.9 $ 2,597.9 $ 1,126.2 $ 748.0 $ 1,471.7 29 % 131 % Oil, gas, and NGL production expense (in millions): (1) Lease operating expense $ 266.5 $ 225.5 $ 184.2 $ 41.0 $ 41.2 18 % 22 % Transportation costs 150.0 139.4 142.0 10.6 (2.6) 8 % (2) % Production taxes 162.6 121.1 46.1 41.5 75.0 34 % 163 % Ad valorem tax expense 41.7 19.4 18.9 22.3 0.5 115 % 3 % Total oil, gas, and NGL production expense $ 620.9 $ 505.4 $ 391.2 $ 115.5 $ 114.2 23 % 29 % Realized price: Oil (per Bbl) $ 94.67 $ 67.72 $ 37.08 $ 26.95 $ 30.64 40 % 83 % Gas (per Mcf) $ 6.28 $ 4.85 $ 1.80 $ 1.43 $ 3.05 29 % 169 % NGLs (per Bbl) $ 35.66 $ 33.67 $ 13.96 $ 1.99 $ 19.71 6 % 141 % Per BOE $ 63.18 $ 50.58 $ 24.26 $ 12.60 $ 26.32 25 % 108 % Per BOE data: (1) Oil, gas, and NGL production expense: Lease operating expense $ 5.03 $ 4.39 $ 3.97 $ 0.64 $ 0.42 15 % 11 % Transportation costs 2.83 2.71 3.06 0.12 (0.35) 4 % (11) % Production taxes 3.07 2.36 0.99 0.71 1.37 30 % 138 % Ad valorem tax expense 0.79 0.38 0.41 0.41 (0.03) 108 % (7) % Total oil, gas, and NGL production expense $ 11.72 $ 9.84 $ 8.43 $ 1.88 $ 1.41 19 % 17 % Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 11.40 $ 15.08 $ 16.91 $ (3.68) $ (1.83) (24) % (11) % General and administrative $ 2.16 $ 2.18 $ 2.14 $ (0.02) $ 0.04 (1) % 2 % Derivative settlement gain (loss) (2) $ (13.42) $ (14.58) $ 7.57 $ 1.16 $ (22.15) 8 % (293) % Earnings per share information (in thousands, except per share data): (3) Basic weighted-average common shares outstanding 122,351 119,043 113,730 3,308 5,313 3 % 5 % Diluted weighted-average common shares outstanding 124,084 123,690 113,730 394 9,960 — % 9 % Basic net income (loss) per common share $ 9.09 $ 0.30 $ (6.72) $ 8.79 $ 7.02 2,930 % 104 % Diluted net income (loss) per common share $ 8.96 $ 0.29 $ (6.72) $ 8.67 $ 7.01 2,990 % 104 % 44 ____________________________________________ (1) Amounts and percentage changes may not calculate due to rounding.
Biggest changeSelected Performance Metrics For the Three Months Ended December 31, September 30, June 30, March 31, 2023 2023 2023 2023 Average net daily equivalent production (MBOE per day) 153.5 153.7 154.4 146.4 Lease operating expense (per BOE) $ 5.31 $ 5.08 $ 4.98 $ 5.16 Transportation costs (per BOE) $ 2.08 $ 2.07 $ 2.89 $ 2.81 Production taxes as a percent of oil, gas, and NGL production revenue 4.6 % 4.3 % 4.3 % 4.7 % Ad valorem tax expense (per BOE) $ 0.37 $ 0.70 $ 0.83 $ 0.81 Depletion, depreciation, amortization, and asset retirement obligation liability accretion (per BOE) $ 13.39 $ 13.39 $ 11.23 $ 11.70 General and administrative (per BOE) $ 2.60 $ 2.07 $ 1.96 $ 2.10 ____________________________________________ Note: Amounts may not calculate due to rounding. 44 Overview of Selected Production and Financial Information, Including Trends For the Years Ended December 31, Amount Change Between Percent Change Between 2023 2022 2021 2023/2022 2022/2021 2023/2022 2022/2021 Net production volumes: (1) Oil (MMBbl) 23.8 24.0 27.9 (0.2) (4.0) (1) % (14) % Gas (Bcf) 132.4 125.9 108.4 6.4 17.6 5 % 16 % NGLs (MMBbl) 9.7 8.0 5.4 1.7 2.6 21 % 49 % Equivalent (MMBOE) 55.5 53.0 51.4 2.5 1.6 5 % 3 % Average net daily production: (1) Oil (MBbl per day) 65.1 65.7 76.5 (0.6) (10.8) (1) % (14) % Gas (MMcf per day) 362.7 345.0 296.9 17.6 48.1 5 % 16 % NGLs (MBbl per day) 26.4 21.9 14.7 4.5 7.2 21 % 49 % Equivalent (MBOE per day) 152.0 145.1 140.7 6.9 4.4 5 % 3 % Oil, gas, and NGL production revenue (in millions): (1) Oil production revenue $ 1,813.8 $ 2,270.1 $ 1,891.8 $ (456.3) $ 378.2 (20) % 20 % Gas production revenue 327.9 790.9 525.5 (463.0) 265.4 (59) % 51 % NGL production revenue 222.2 285.0 180.6 (62.7) 104.3 (22) % 58 % Total oil, gas, and NGL production revenue $ 2,363.9 $ 3,345.9 $ 2,597.9 $ (982.0) $ 748.0 (29) % 29 % Oil, gas, and NGL production expense (in millions): (1) Lease operating expense $ 284.8 $ 266.5 $ 225.5 $ 18.3 $ 41.0 7 % 18 % Transportation costs 136.2 150.0 139.4 (13.8) 10.6 (9) % 8 % Production taxes 105.1 162.6 121.1 (57.5) 41.5 (35) % 34 % Ad valorem tax expense 37.4 41.7 19.4 (4.3) 22.3 (10) % 115 % Total oil, gas, and NGL production expense $ 563.5 $ 620.9 $ 505.4 $ (57.4) $ 115.5 (9) % 23 % Realized price: Oil (per Bbl) $ 76.28 $ 94.67 $ 67.72 $ (18.39) $ 26.95 (19) % 40 % Gas (per Mcf) $ 2.48 $ 6.28 $ 4.85 $ (3.80) $ 1.43 (61) % 29 % NGLs (per Bbl) $ 23.02 $ 35.66 $ 33.67 $ (12.64) $ 1.99 (35) % 6 % Per BOE $ 42.60 $ 63.18 $ 50.58 $ (20.58) $ 12.60 (33) % 25 % Per BOE data: (1) Oil, gas, and NGL production expense: Lease operating expense $ 5.13 $ 5.03 $ 4.39 $ 0.10 $ 0.64 2 % 15 % Transportation costs 2.46 2.83 2.71 (0.37) 0.12 (13) % 4 % Production taxes 1.89 3.07 2.36 (1.18) 0.71 (38) % 30 % Ad valorem tax expense 0.67 0.79 0.38 (0.12) 0.41 (15) % 108 % Total oil, gas, and NGL production expense (1) $ 10.16 $ 11.72 $ 9.84 $ (1.56) $ 1.88 (13) % 19 % Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 12.44 $ 11.40 $ 15.08 $ 1.04 $ (3.68) 9 % (24) % General and administrative $ 2.18 $ 2.16 $ 2.18 $ 0.02 $ (0.02) 1 % (1) % Net derivative settlement gain (loss) (2) $ 0.49 $ (13.42) $ (14.58) $ 13.91 $ 1.16 104 % 8 % Earnings per share information (in thousands, except per share data): (3) Basic weighted-average common shares outstanding 118,678 122,351 119,043 (3,673) 3,308 (3) % 3 % Diluted weighted-average common shares outstanding 119,240 124,084 123,690 (4,844) 394 (4) % — % Basic net income per common share $ 6.89 $ 9.09 $ 0.30 $ (2.20) $ 8.79 (24) % 2,930 % Diluted net income per common share $ 6.86 $ 8.96 $ 0.29 $ (2.10) $ 8.67 (23) % 2,990 % 45 ____________________________________________ (1) Amounts and percentage changes may not calculate due to rounding.
Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide, performance-based metrics that include key financial, operational, and environmental, health, and safety measures.
Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide, performance-based metrics that include key financial, operational, environmental, health, and safety measures.
Average net daily equivalent production, production revenue, and production expense The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2022, and 2021: Net Equivalent Production Increase (Decrease) Production Revenue Increase Production Expense Increase (MBOE per day) (in millions) (in millions) Midland Basin (13.0) $ 222.0 $ 55.5 South Texas 17.3 526.0 60.0 Total 4.4 $ 748.0 $ 115.5 ____________________________________________ Note: Amounts may not calculate due to rounding.
The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2022, and 2021: Net Equivalent Production Increase (Decrease) Production Revenue Increase Production Expense Increase (MBOE per day) (in millions) (in millions) Midland Basin (13.0) $ 222.0 $ 55.5 South Texas 17.3 526.0 60.0 Total 4.4 $ 748.0 $ 115.5 ____________________________________________ Note: Amounts may not calculate due to rounding.
Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities including open market debt repurchases, debt redemptions, repayment of scheduled debt maturities, our capital expenditures, including acquisitions, and other financing activities, all impact the amount we borrow under our revolving credit facility.
Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities including open market debt repurchases, debt redemptions, repayment of scheduled debt maturities, other financing activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving credit facility.
The rates disclosed in 50 the above table do not reflect certain amounts associated with the repurchase or redemption of Senior Notes, such as the accelerated expense recognition of the unamortized deferred financing costs and unamortized discounts, as these amounts are netted against the associated gain or loss on extinguishment of debt.
The rates disclosed in the above table do not reflect certain amounts associated with the repurchase or redemption of Senior Notes, such as the accelerated expense recognition of the unamortized deferred financing costs and unamortized discounts, as these amounts are netted against the associated gain or loss on extinguishment of debt.
Uses of Cash We use cash for the development, exploration, and acquisition of oil and gas properties; for the payment of operating and general and administrative costs, income taxes, dividends, and debt obligations, including interest and early repayments or redemptions; and for repurchases of shares of our common stock under the Stock Repurchase Program.
Uses of Cash We use cash for the development, exploration, and acquisition of oil and gas properties; for the payment of operating and general and administrative costs, income taxes, debt obligations, including interest and early repayments or redemptions, dividends, and for repurchases of shares of our outstanding common stock under the Stock Repurchase Program.
We make decisions about the amount of our expected production that we cover by derivatives based on the amount of debt on our balance sheet, the level of capital commitments and long-term obligations we have in place, and the terms and futures prices that are made available by our approved counterparties.
We make 43 decisions about the amount of our expected production that we cover by derivatives based on the amount of debt on our balance sheet, the level of capital commitments and long-term obligations we have in place, and the terms and futures prices that are made available by our approved counterparties.
Please refer to Note 1 – Summary of Significant Accounting Policies and Note 8 – Fair Value Measurements in Part II, Item 8 of this report for discussion of impairments of oil and gas properties recorded for the years ended December 31, 2022, 2021, and 2020. Revenue Recognition.
Please refer to Note 1 – Summary of Significant Accounting Policies and Note 8 – Fair Value Measurements in Part II, Item 8 of this report for discussion of impairments of oil and gas properties recorded for the years ended December 31, 2022, and 2021. Revenue Recognition.
Proved oil and gas properties are evaluated for impairment on a pool-by-pool basis and reduced to fair value when events or changes in circumstances indicate that their carrying amount may not be recoverable.
Proved oil and gas properties are evaluated for impairment on a depletion pool-by-pool basis and reduced to fair value when events or changes in circumstances indicate that their carrying amount may not be recoverable.
Our DD&A rate fluctuates as a result of changes in our production mix, changes in our total estimated proved reserve volumes, changes in capital allocation, impairments, divestiture activity, and carrying cost funding and sharing arrangements with third parties.
Our DD&A rate fluctuates as a result of changes in our production mix, changes in our total estimated proved reserve volumes, changes in capital allocation, impairments, acquisition and divestiture activity, and carrying cost funding and sharing arrangements with third parties.
If commodity prices for the products we produce decline as a result of supply and demand fundamentals associated with geopolitical or macroeconomic events, we may experience additional proved and unproved property impairments in the future.
If commodity prices for the products we produce decline as a result of supply and demand fundamentals associated with geopolitical or macroeconomic events, we may experience proved and unproved property impairments in the future.
We periodically review our capital expenditure budget to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors.
We periodically review our capital expenditure budget and guidance to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors.
When we refer to realized oil, gas, and NGL prices below, the disclosed price represents the average price for the respective period, before the effect of derivative settlements.
When we refer to realized oil, gas, and NGL prices below, the disclosed price represents the average price for the respective period, before the effect of net derivative settlements.
To the extent that the interest rate is fixed, interest rate changes will affect the revolving credit facility’s fair value but will not impact results of operations or cash flows.
To the extent that the interest rate is fixed, interest rate changes will affect the revolving credit facility’s fair value but will not affect results of operations or cash flows.
(2) Derivative settlements for the years ended December 31, 2022, 2021, and 2020, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”). (3) Please refer to Note 9 - Earnings Per Share in Part II, Item 8 of this report for additional discussion.
(2) Net derivative settlements for the years ended December 31, 2023, 2022, and 2021, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”). (3) Please refer to Note 9 – Earnings Per Share in Part II, Item 8 of this report for additional discussion.
As a result of the increase in income before income taxes for the year ended December 31, 2022, compared with 2021, the Company’s permanent items, including excess tax benefits from stock-based compensation and limits on expensing of certain individual’s compensation, had less of an impact on the effective tax rate for the year ended December 31, 2022, compared with 2021.
As a result of the increase in income before income taxes for the year ended December 31, 2022, compared with 2021, our permanent items, including excess tax benefits from stock-based compensation and limits on expensing of certain individual’s compensation, had less of an impact on the effective tax rate for the year ended December 31, 2022, compared with 2021.
Conversely, for the portion of the revolving credit facility that has a floating interest rate, interest rate changes will not affect the fair value but will impact future results of operations and cash flows. Changes in interest rates do not impact the amount of interest we pay on our fixed-rate Senior Notes, but can impact their fair values.
Conversely, for the portion of the revolving credit facility that has a floating interest rate, interest rate changes will not affect the fair value but will affect future results of operations and cash flows. Changes in interest rates do not affect the amount of interest we pay on our fixed-rate Senior Notes, but can affect their fair 53 values.
In accordance with SEC requirements, we based these measures on the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period ended December 31, 2022. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimates.
In accordance with SEC requirements, we based these measures on the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period ended December 31, 2023. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimates.
Our South Texas program benefited from continued successful delineation and development of the Austin Chalk formation in addition to the sustained strong performance of our Eagle Ford shale wells. Our continued success in both our Midland Basin and South Texas programs is attributable to our top-tier assets and our continued commitment to geoscience, technology, and innovation.
Our South Texas program benefited from continued successful delineation and development of the Austin Chalk formation in addition to sustained strong performance of our Eagle Ford shale wells. Our continued success in both our Midland Basin and South Texas programs is attributable to our top-tier assets and technical teams, and our commitment to geoscience, technology, and innovation.
The borrowing base is subject to regular, semi-annual redetermination, and considers the value of both our proved oil and gas properties reflected in our most recent reserve report and commodity derivative contracts, each as determined by our lender group. The next scheduled borrowing base redetermination date is April 1, 2023.
The borrowing base is subject to regular, semi-annual redetermination, and considers the value of both our proved oil and gas properties reflected in our most recent reserve report and commodity derivative contracts, each as determined by our lender group. The next scheduled borrowing base redetermination date is April 1, 2024.
Consequently, we expect to continue experiencing these types of changes. We cannot reasonably predict future commodity prices, although we believe that together, the below analyses provide reasonable information regarding the impact of changes in pricing and trends on total estimated proved reserves.
Consequently, we expect to continue experiencing these types of changes. 55 We cannot reasonably predict future commodity prices, although we believe that together, the below analyses provide reasonable information regarding the impact of changes in pricing and trends on total estimated net proved reserves.
As of December 31, 2022, our outstanding principal amount of fixed-rate debt totaled $1.6 billion and we had no floating-rate debt outstanding. As we had no borrowings under our revolving credit facility during 2022, we had no exposure to variable interest rates during the year ended December 31, 2022.
As of December 31, 2023, our outstanding principal amount of fixed-rate debt totaled $1.6 billion, and we had no floating-rate debt outstanding. As we had no borrowings under our revolving credit facility during 2023, we had no exposure to variable interest rates during the year ended December 31, 2023.
Any such repurchases or redemptions will depend on prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material.
Any such repurchases or redemptions will depend on our business strategy, prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material.
In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, tax law changes, and the timing and results of our exploration and development activities may lead to changes in funding requirements for future development.
In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, tax law and other regulatory changes, and the timing and results of our exploration and development activities may lead to changes in funding requirements for future development.
It should not be assumed that the standardized measure of discounted future net cash flows (GAAP) or PV-10 (non-GAAP) as of December 31, 2022, is the current market value of our estimated proved reserves.
It should not be assumed that the standardized measure of discounted future net cash flows (GAAP) or PV-10 (non-GAAP) as of December 31, 2023, is the current market value of our estimated proved reserves.
(2) The change solely reflects the impact of replacing SEC pricing with the five-year average NYMEX strip pricing as of December 31, 2022, and does not include additional impacts to our estimated proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs.
(2) The change solely reflects the impact of replacing SEC pricing with the five-year average NYMEX strip pricing as of December 31, 2023, and does not include additional impacts to our estimated net proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs.
Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, as well as the presentation of the outstanding balance, total amount of letters of credit, and available borrowing capacity under the Credit Agreement as of February 9, 2023, December 31, 2022, and December 31, 2021.
Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, as well as the presentation of the outstanding balance, total amount of letters of credit, and available borrowing capacity under the Credit Agreement as of February 8, 2024, December 31, 2023, and December 31, 2022.
Please refer to Note 1 – Summary of Significant Accounting Policies and Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. Income Taxes.
Please refer to Note 1 – Summary of Significant Accounting Policies and Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. Income Taxes.
Our weighted-average interest and weighted-average borrowing rates are impacted by the occurrence and timing of long-term debt issuances and redemptions and the average outstanding balance on our revolving credit facility. Additionally, our weighted-average interest rate is impacted by the fees paid on the unused portion of our aggregate lender commitments.
Our weighted-average interest rate and weighted-average borrowing rate are affected by the occurrence and timing of long-term debt issuances and redemptions and the average outstanding balance on our revolving credit facility. Additionally, our weighted-average interest rate is affected by the fees paid on the unused portion of our aggregate lender commitments.
We were in compliance with all financial and non-financial covenants as of December 31, 2022, and through the filing of this report.
We were in compliance with all financial and non-financial covenants as of December 31, 2023, and through the filing of this report.
Future impairments of proved and unproved properties are difficult to predict; however, based on our commodity price assumptions as of February 9, 2023, we do not expect any material oil and gas property impairments in the first quarter of 2023 resulting from commodity price impacts.
Future impairments of proved and unproved properties are difficult to predict; however, based on our commodity price assumptions as of February 8, 2024, we do not expect any material oil and gas property impairments in the first quarter of 2024 resulting from commodity price impacts.
Total interest expense is impacted by, and can vary based on, the timing and amount of borrowings under our revolving credit facility. Please refer to Overview of Liquidity and Capital Resources below, and to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definition of Senior Notes.
Total interest expense can vary based on the timing and amount of borrowings under our revolving credit facility. Please refer to Overview of Liquidity and Capital Resources below, and to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definition of Senior Notes and 2025 Senior Secured Notes.
(3) The change solely reflects a 10 percent decrease in proved undeveloped reserves as of December 31, 2022, and does not include any additional impacts to our estimated proved reserves.
(3) The change solely reflects a 10 percent decrease in net proved undeveloped reserves as of December 31, 2023, and does not include any additional impacts to our estimated net proved reserves.
A one percent change in our effective tax rate would have changed our calculated income tax expense by approximately $14.0 million for the year ended December 31, 2022. Please refer to Note 1 – Summary of Significant Accounting Policies and Note 4 – Income Taxes in Part II, Item 8 of this report for additional discussion.
A one percent change in our effective tax rate would have changed our calculated income tax expense by approximately $9.1 million for the year ended December 31, 2023. Please refer to Note 1 – Summary of Significant Accounting Policies and Note 4 – Income Taxes in Part II, Item 8 of this report for additional discussion.
Despite any amount of future impairment being difficult to predict, based on our commodity price assumptions as of February 9, 2023, we do not expect any material oil and gas property impairments in the first quarter of 2023 resulting from commodity price impacts.
Despite any amount of future impairment being difficult to predict, based on our commodity price assumptions as of February 8, 2024, we do not expect any material oil and gas property impairments in the first quarter of 2024 resulting from commodity price impacts.
These issues have contributed to inflation, supply chain disruptions, a rise in interest rates, and could have further industry-specific impacts, which may require us to adjust our business plan. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control.
These circumstances have contributed to inflation, instances of supply chain disruptions, and a rise in interest rates, and could have further industry-specific impacts that may require us to adjust our business plan. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control.
Net gain (loss) on extinguishment of debt For the Years Ended December 31, 2022 2021 2020 (in millions) Net gain (loss) on extinguishment of debt $ (67.6) $ (2.1) $ 280.1 48 The redemption of our 2025 Senior Secured Notes during 2022 resulted in a net loss on extinguishment of debt of $67.2 million, which included $33.5 million of premium paid, $26.3 million of accelerated expense recognition of the unamortized debt discount, and $7.4 million of accelerated expense recognition of the unamortized deferred financing costs.
Loss on extinguishment of debt For the Years Ended December 31, 2023 2022 2021 (in millions) Loss on extinguishment of debt $ — $ (67.6) $ (2.1) The redemption of our 2025 Senior Secured Notes during 2022 resulted in a net loss on extinguishment of debt of 49 $67.2 million, which included $33.5 million of premium paid, $26.3 million of accelerated expense recognition of the unamortized debt discount, and $7.4 million of accelerated expense recognition of the unamortized deferred financing costs.
The following table reflects the estimated MMBOE change and percentage change to our total reported estimated proved reserve volumes from the described hypothetical changes: For the year ended December 31, 2022 MMBOE Change Percentage Change 10 percent decrease in SEC pricing (1) (3.7) (1) % Average NYMEX strip pricing as of fiscal year end (2) (14.3) (3) % 10 percent decrease in proved undeveloped reserves (3) (22.0) (4) % ____________________________________________ (1) The change solely reflects the impact of a 10 percent decrease in SEC pricing to the total reported estimated proved reserve volumes as of December 31, 2022, and does not include additional impacts to our estimated proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs.
The following table reflects the estimated MMBOE change and percentage change to our total reported estimated proved reserve volumes from the described hypothetical changes: For the year ended December 31, 2023 MMBOE Change Percentage Change 10 percent decrease in SEC pricing (1) (14.3) (2) % Average NYMEX strip pricing as of fiscal year end (2) 2.5 — % 10 percent decrease in net proved undeveloped reserves (3) (26.4) (4) % ____________________________________________ (1) The change solely reflects the impact of a 10 percent decrease in SEC pricing to the total reported estimated net proved reserve volumes as of December 31, 2023, and does not include additional impacts to our estimated net proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs.
If commodity prices had been 10 percent lower, our net derivative settlements for the year ended December 31, 2022, would have offset the declines in oil, gas, and NGL production revenue by approximately $157.9 million. We enter into commodity derivative contracts in order to reduce the risk of fluctuations in commodity prices.
If commodity prices had been 10 percent lower, our net derivative settlements for the year ended December 31, 2023, would have offset the declines in oil, gas, and NGL production revenue by approximately $61.2 million. We enter into commodity derivative contracts in order to reduce the risk of fluctuations in commodity prices.
In December 2022, the EPA issued a supplemental proposal to update, strengthen, and expand the 2021 proposed rules. The EPA is expected to finalize the rule in 2023. States are also required to comply with the NAAQS.
In December 2022, the EPA issued a supplemental proposal to update, strengthen, and expand the 2021 proposed rules. The EPA finalized the rule in December 2023. States are also required to comply with the NAAQS.
Our asset portfolio is comprised of high-quality assets in the Midland Basin of West Texas and in the Maverick Basin of South Texas that are capable of generating strong returns in the current macroeconomic environment, and present resilience to commodity price risk.
Our asset portfolio is comprised of high-quality assets in the Midland Basin of West Texas and in the Maverick Basin of South Texas that we believe are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility.
Please refer to Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 for additional discussion of operating expenses. 45 Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 Please refer to Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K, filed with the SEC on February 25, 2022, for a detailed discussion of certain comparisons of our financial results and trends for the year ended December 31, 2021, compared with the year ended December 31, 2020.
Comparison of Financial Results and Trends Between 2023 and 2022 and Between 2022 and 2021 Please refer to Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 in 46 Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2022 Annual Report on Form 10-K, filed with the SEC on February 23, 2023, for a detailed discussion of certain comparisons of our financial results and trends for the year ended December 31, 2022, compared with the year ended December 31, 2021.
Please refer to Note 3 - Equity in Part II, Item 8 of this report for additional discussion. During 2022, we redeemed all of the aggregate principal amount outstanding of our 2024 Senior Notes and our 2025 Senior Secured Notes.
During 2022, we redeemed all of the aggregate principal amount outstanding of our 2024 Senior Notes and our 2025 Senior Secured Notes. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions.
Please refer to Note 8 – Fair Value Measurements in Part II, Item 8 of this report for additional discussion on the fair values of our Senior Notes. The Federal Reserve increased short-term interest rates throughout 2022 and into early 2023. These increases, and any future increases, could impact the cost and our ability to borrow funds.
Please refer to Note 8 – Fair Value Measurements in Part II, Item 8 of this report for additional discussion on the fair values of our Senior Notes. The Federal Reserve increased short-term interest rates during 2023 and 2022. These increases, and any future increases, are likely to increase the cost of and affect our ability to borrow funds.
We continue to manage the duration and level of our drilling and completion service commitments in order to maintain flexibility with regard to our activity level and capital expenditures. Sources of Cash We expect our 2023 capital expenditure and return of capital programs to be funded by cash flows from operations.
We continue to manage the duration and level of our drilling and completion service commitments in order to maintain flexibility with regard to our activity level and capital expenditures. Sources of Cash We expect our 2024 capital expenditure and return of capital programs to be funded with cash flows from operating activities and cash on hand.
Please refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income (loss) and net cash provided by operating activities. • Total estimated proved reserves as of December 31, 2022, increased nine percent from December 31, 2021, to 537.4 MMBOE, of which, 56 percent were liquids (oil and NGLs) and 59 percent were proved developed reserves.
Please refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income and net cash provided by operating activities. • Total estimated net proved reserves as of December 31, 2023, increased 13 percent from December 31, 2022, to 604.9 MMBOE, of which, 58 percent were liquids (oil and NGLs) and 56 percent were proved developed reserves.
Total production expense for the year ended December 31, 2021, increased 29 percent compared with 2020, primarily as a result of increased production taxes and LOE. Please refer to Overview of Selected Production and Financial Information, Including Trends for additional discussion, including discussion of trends on a per BOE basis.
Oil, gas, and NGL production expense for the year ended December 31, 2022, increased 23 percent, compared with 2021, primarily as a result of increased production taxes and LOE. Please refer to Overview of Selected Production and Financial Information, Including Trends above for additional discussion, including discussion of trends on a per BOE basis.
Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: For the Year Ended December 31, 2022 (in millions) Development costs $ 810.5 Exploration costs 147.0 Acquisitions Proved properties — Unproved properties 4.2 Total, including asset retirement obligations (1) $ 961.7 ____________________________________________ (1) Please refer to the caption Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report.
Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: For the Year Ended December 31, 2023 (in millions) Development costs $ 931.8 Exploration costs 172.6 Acquisitions Proved properties 65.0 Unproved properties 65.6 Total, including asset retirement obligations (1) $ 1,235.0 ____________________________________________ (1) Please refer to the caption Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report.
Operational activities during the year ended December 31, 2022, resulted in the following financial and operational results: • Net cash provided by operating activities of $1.7 billion for the year ended December 31, 2022, compared with $1.2 billion for 2021. • Net income of $1.1 billion, or $8.96 per diluted share, for the year ended December 31, 2022, compared with net income of $36.2 million, or $0.29 per diluted share for 2021. • Adjusted EBITDAX, a non-GAAP financial measure, for the year ended December 31, 2022, of $1.9 billion, compared with $1.2 billion for 2021.
Operational activities during the year ended December 31, 2023, resulted in the following: • Net cash provided by operating activities of $1.6 billion, compared with $1.7 billion for 2022. • Net income of $817.9 million, or $6.86 per diluted share, compared with net income of $1.1 billion, or $8.96 per diluted share for 2022. • Adjusted EBITDAX, a non-GAAP financial measure, of $1.7 billion, compared with $1.9 billion for 2022.
Net equivalent production increased three percent for the year ended December 31, 2022, compared with 2021, comprised of a 37 percent increase from our South Texas assets, partially offset by a 14 percent decrease from our Midland Basin assets.
Net equivalent production increased five percent for the year ended December 31, 2023, compared with 2022, comprised of a 20 percent increase from our South Texas assets, partially offset by a seven percent decrease from our Midland Basin assets.
Net cash used in investing activities during the year ended December 31, 2021, was funded by net cash provided by operating activities.
Net cash used in investing activities during the years ended December 31, 2023, 2022, and 2021, was funded by net cash provided by operating activities.
The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the development and implementation of the Company’s ESG policies, programs and initiatives, and, together with management, reports to our Board of Directors regarding such matters.
The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the effectiveness of our ESG policies, programs and initiatives, monitors and responds to emerging issues, and, together with management, reports to our Board of Directors regarding such matters.
Operating Activities For the Years Ended December 31, Amount Change Between 2022 2021 2020 2022/2021 2021/2020 (in millions) Net cash provided by operating activities $ 1,686.4 $ 1,159.8 $ 790.9 $ 526.6 $ 368.9 Net cash provided by operating activities increased for the year ended December 31, 2022, compared with 2021, primarily as a result of an $833.2 million increase in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, partially offset by an increase in cash paid for LOE and G&A expense of $70.7 million and an increase of $69.2 million in cash paid on settled derivative trades.
Operating Activities For the Years Ended December 31, Amount Change Between 2023 2022 2021 2023/2022 2022/2021 (in millions) Net cash provided by operating activities $ 1,574.4 $ 1,686.4 $ 1,159.8 $ (112.0) $ 526.6 Net cash provided by operating activities decreased for the year ended December 31, 2023, compared with 2022, primarily as a result of a $937.3 million decrease in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes and an increase of $44.5 million in cash paid for LOE and ad valorem taxes, partially offset by a decrease of $749.3 million in cash paid on settled derivative trades and a $45.5 million decrease in cash paid for interest. 52 Net cash provided by operating activities increased for the year ended December 31, 2022, compared with 2021, primarily as a result of an $833.2 million increase in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, partially offset by an increase in cash paid for LOE and G&A expense of $70.7 million and an increase of $69.2 million in cash paid on settled derivative trades.
All of our sources of liquidity can be affected by the general conditions of the broader economy, force majeure events, 49 fluctuations in commodity prices, operating costs, interest rate changes, tax law changes, and volumes produced, all of which affect us and our industry. Our credit ratings impact the availability of and cost for us to borrow additional funds.
All of our sources of liquidity can be affected by the general conditions of the broader economy, force majeure events, fluctuations in commodity prices, operating costs, interest rate changes, tax law changes, and volumes produced, all of which affect us and our industry.
As of December 31, 2022, a 10 percent increase or decrease in the forward curves associated with our oil and gas commodity derivative instruments would have changed our net derivative positions for these products by approximately $61.1 million and $1.9 million, respectively.
As of December 31, 2023, a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative instruments would have changed our net derivative positions for these products by approximately $30.0 million, $5.2 million, and $0.7 million, respectively.
Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definitions of Exchange Offers, Old Notes, 2025 Senior Secured Notes, 2022 Senior Notes, and 2024 Senior Notes.
Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definition of 2025 Senior Secured Notes.
Average net daily equivalent production volumes for the year ended December 31, 2021, increased 11 percent compared with 2020, comprised of a 19 percent increase from our Midland Basin assets, partially offset by a two percent decrease from our South Texas assets.
Average net daily equivalent production volumes for the year ended December 31, 2023, increased five percent compared with 2022, comprised of a 20 percent increase from our South Texas assets, partially offset by a seven percent decrease from our Midland Basin assets.
Please refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of G&A expense.
Please refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of DD&A expense on a per BOE basis.
Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions.
Please refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion of our Stock Repurchase Program and Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions related to our debt transactions.
This amount differs from the costs incurred amount of $961.7 million for the year ended December 31, 2022, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, acquisitions of oil and gas properties, and exploration overhead amounts.
This amount differs from the costs incurred amount of $1.2 billion for the year ended December 31, 2023, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, and exploration overhead amounts.
Commodity Price Risk The prices we receive for our oil, gas, and NGL production directly impact our revenue, profitability, access to capital, ability to execute our Stock Repurchase Program and pay dividends, and future rate of growth.
Commodity Price Risk The prices we receive for our oil, gas, and NGL production directly affect our revenue, profitability, access to capital, ability to return capital to our stockholders, and future rate of growth.
While the CAMT is not currently applicable to us, it and other future legislation could reduce our net cash provided by operating activities over time, and could therefore result in a reduction of funding available for the items discussed above.
Current and future legislation could reduce our net cash provided by operating activities over time, and could therefore result in a reduction of funding available for the items discussed above.
Changes to the Internal Revenue Code (“IRC“), such as the CAMT enacted pursuant to the IRA, effective for tax years beginning after December 31, 2022, could increase the corporate income tax rate and could eliminate or reduce current tax deductions for intangible drilling costs, depreciation of equipment costs, and other deductions which currently reduce our taxable income.
Changes to the Internal Revenue Code (“IRC“), could increase the corporate income tax rate and could eliminate or reduce current tax deductions for intangible drilling costs, depreciation of equipment costs, and other deductions which currently reduce our taxable income.
In addition, if we are in default under our revolving credit facility and are unable to obtain a waiver of that default from our lenders, lenders under that facility and under the indentures governing each series of our outstanding Senior Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, would be entitled to exercise all of their remedies for default. 57 The following table provides reconciliations of our net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to adjusted EBITDAX (non-GAAP) for the periods presented: For the Years Ended December 31, 2022 2021 2020 (in thousands) Net income (loss) (GAAP) $ 1,111,952 $ 36,229 $ (764,614) Interest expense 120,346 160,353 163,892 Income tax expense (benefit) 283,818 9,938 (192,091) Depletion, depreciation, amortization, and asset retirement obligation liability accretion 603,780 774,386 784,987 Exploration (1) 50,978 35,346 37,541 Impairment 7,468 35,000 1,016,013 Stock-based compensation expense 18,772 18,819 14,999 Net derivative (gain) loss 374,012 901,659 (161,576) Derivative settlement gain (loss) (710,700) (748,958) 351,261 Net (gain) loss on extinguishment of debt 67,605 2,139 (280,081) Other, net (9,743) 507 5,074 Adjusted EBITDAX (non-GAAP) 1,918,288 1,225,418 975,405 Interest expense (120,346) (160,353) (163,892) Income tax (expense) benefit (283,818) (9,938) 192,091 Exploration (1)(2) (36,810) (35,346) (37,541) Amortization of debt discount and deferred financing costs 10,281 17,275 17,704 Deferred income taxes 269,057 9,565 (192,540) Other, net 1,817 (4,260) (11,874) Net change in working capital (72,063) 117,411 11,591 Net cash provided by operating activities (GAAP) $ 1,686,406 $ 1,159,772 $ 790,944 ____________________________________________ (1) Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying statements of operations.
In addition, if we are in default under our revolving credit facility and are unable to obtain a waiver of that default from our lenders, lenders under that facility and under the indentures governing each series of our outstanding Senior Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, would be entitled to exercise all of their remedies for default. 58 The following table provides reconciliations of our net income (GAAP) and net cash provided by operating activities (GAAP) to adjusted EBITDAX (non-GAAP) for the periods presented: For the Years Ended December 31, 2023 2022 2021 (in thousands) Net income (GAAP) $ 817,880 $ 1,111,952 $ 36,229 Interest expense 91,630 120,346 160,353 Interest income (19,854) (5,774) (1,716) Income tax expense 96,322 283,818 9,938 Depletion, depreciation, amortization, and asset retirement obligation liability accretion 690,481 603,780 774,386 Exploration (1) 55,333 50,978 35,346 Impairment — 7,468 35,000 Stock-based compensation expense 20,250 18,772 18,819 Net derivative (gain) loss (68,154) 374,012 901,659 Net derivative settlement gain (loss) 26,921 (710,700) (748,958) Loss on extinguishment of debt — 67,605 2,139 Other, net 1,497 (3,969) 2,223 Adjusted EBITDAX (non-GAAP) 1,712,306 1,918,288 1,225,418 Interest expense (91,630) (120,346) (160,353) Interest income 19,854 5,774 1,716 Income tax expense (96,322) (283,818) (9,938) Exploration (1) (2) (46,467) (36,810) (35,346) Amortization of debt discount and deferred financing costs 5,486 10,281 17,275 Deferred income taxes 88,256 269,057 9,565 Other, net (12,538) (3,957) (5,976) Net change in working capital (4,551) (72,063) 117,411 Net cash provided by operating activities (GAAP) $ 1,574,394 $ 1,686,406 $ 1,159,772 ____________________________________________ (1) Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying statements of operations.
The markets for oil, gas, and NGLs have been volatile, especially over the last decade, and remain subject to high levels of uncertainty and volatility related to the ongoing conflict between Russia and Ukraine, the economic and trade sanctions that certain countries have imposed on Russia, production output from OPEC+, and the associated potential impacts of these issues on global commodity and financial markets.
The markets for oil, gas, and NGLs have been volatile, especially over the last decade, and remain subject to high levels of uncertainty and volatility related to production output from OPEC+, global shipping channel constraints and disruptions, instability in the Middle East, economic and trade sanctions associated with the wars between Russia and Ukraine and Israel and Hamas, and the potential impacts of these issues on global commodity and financial markets.
For the Years Ended December 31, 2022 2021 2020 MMBOE Change Revisions resulting from performance (11.1) 3.4 3.6 Removal of proved undeveloped reserves no longer in our five-year development plan (19.9) (40.6) (65.0) Revisions resulting from price changes 9.5 37.2 (32.6) Total (21.5) — (94.0) ____________________________________________ Note: Amounts may not calculate due to rounding. 54 As previously noted, commodity prices are volatile and estimates of reserves are inherently imprecise.
For the Years Ended December 31, 2023 2022 2021 MMBOE Change Revisions resulting from performance (1) 37.2 (11.1) 3.4 Removal of net proved undeveloped reserves no longer in our five-year development plan (30.8) (19.9) (40.6) Revisions resulting from price changes (28.4) 9.5 37.2 Total (22.0) (21.5) — ____________________________________________ Note: Amounts may not calculate due to rounding.
The payment and amount of future dividends remains at the discretion of our Board of Directors. Analysis of Cash Flow Changes Between 2022 and 2021 and Between 2021 and 2020 The following tables present changes in cash flows between the years ended December 31, 2022, 2021, and 2020, for our operating, investing, and financing activities.
Analysis of Cash Flow Changes Between 2023 and 2022 and Between 2022 and 2021 The following tables present changes in cash flows between the years ended December 31, 2023, 2022, and 2021, for our operating, investing, and financing activities.
We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion.
Please refer to Comparison of Financial Results and Trends Between 2023 and 2022 and Between 2022 and 2021 below for additional discussion. We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion.
The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2021, and 2020: Net Equivalent Production Increase (Decrease) Production Revenue Increase Production Expense Increase (MBOE per day) (in millions) (in millions) Midland Basin 14.9 $ 1,148.8 $ 95.0 South Texas (1.0) 322.9 19.2 Total 13.9 $ 1,471.7 $ 114.2 ____________________________________________ Note: Amounts may not calculate due to rounding.
Average net daily equivalent production, production revenue, and production expense The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2023, and 2022: Net Equivalent Production Increase (Decrease) Production Revenue Decrease Production Expense Decrease (MBOE per day) (in millions) (in millions) Midland Basin (6.0) $ (726.8) $ (44.3) South Texas 13.0 (255.3) (13.1) Total 6.9 $ (982.0) $ (57.4) ____________________________________________ Note: Amounts may not calculate due to rounding.
General and administrative (“G&A”) expense on a per BOE basis remained relatively flat for the year ended December 31, 2022, compared with 2021. For 2023, we expect G&A expense per BOE and on an absolute basis to increase compared with 2022, primarily as a result of expected increases in compensation expense.
General and administrative (“G&A”) expense on a per BOE basis remained relatively flat for the year ended December 31, 2023, compared with 2022, as an increase in G&A expense on an absolute basis related to compensation expense was mostly offset by an increase in production volumes.
Although we expect cash flows from operations to be sufficient to fund our 2023 programs, we may also use borrowings under our revolving credit facility or raise funds through new debt or equity offerings or from other sources of financing.
We may also use borrowings under our revolving credit facility or raise funds through new debt or equity offerings or from other sources of financing.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion includes forward-looking statements. Please refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements. Overview of the Company General Overview Our strategy is to be a premier operator of top-tier oil and gas assets.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion includes forward-looking statements. Please refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements.
Interest expense For the Years Ended December 31, 2022 2021 2020 (in millions) Interest expense $ (120.3) $ (160.4) $ (163.9) Interest expense decreased 25 percent for the year ended December 31, 2022, compared with 2021, as a result of the reduction in the aggregate principal amount of our Senior Notes through various transactions in 2022 and 2021.
Interest expense For the Years Ended December 31, 2023 2022 2021 (in millions) Interest expense $ (91.6) $ (120.3) $ (160.4) Interest expense decreased 24 percent for the year ended December 31, 2023, compared with 2022, as a result of the reduction in the aggregate principal amount of our Senior Notes through various transactions in 2022, including the redemption of our 2024 Senior Notes on February 14, 2022, and the redemption of our 2025 Senior Secured Notes on June 17, 2022.
Please refer to Note 3 - Equity in Part II, Item 8 of this report for additional discussion of our Stock Repurchase Program. 52 During the year ended December 31, 2021, we paid $385.3 million, including net premiums, to fund the Tender Offer and the 2022 Senior Notes Redemption, and we received net cash proceeds of $392.8 million from the issuance of our 2028 Senior Notes.
During the year ended December 31, 2021, we paid $385.3 million, including net premiums, to fund the Tender Offer and the 2022 Senior Notes Redemption, and we received net cash proceeds of $392.8 million from the issuance of our 2028 Senior Notes.
The table below presents the disaggregation of our net production volumes by product type for each of our assets for the year ended December 31, 2022: Midland Basin South Texas Total Net production volumes: Oil (MMBbl) 19.1 4.9 24.0 Gas (Bcf) 63.5 62.5 125.9 NGLs (MMBbl) — 8.0 8.0 Equivalent (MMBOE) 29.7 23.2 53.0 Average net daily equivalent (MBOE per day) 81.4 63.7 145.1 Relative percentage 56 % 44 % 100 % ____________________________________________ Note: Amounts may not calculate due to rounding.
The table below presents the disaggregation of our net production volumes by product type for each of our assets for the year ended December 31, 2023: Midland Basin South Texas Total Net production volumes: Oil (MMBbl) 17.5 6.3 23.8 Gas (Bcf) 59.8 72.6 132.4 NGLs (MMBbl) — 9.6 9.7 Equivalent (MMBOE) 27.5 28.0 55.5 Average net daily equivalent (MBOE per day) 75.4 76.7 152.0 Relative percentage 50 % 50 % 100 % ____________________________________________ Note: Amounts may not calculate due to rounding.
These redemptions were made using cash on hand. Additionally, we paid $57.2 million to repurchase and subsequently retire 1,365,255 shares of our common stock under the Stock Repurchase Program, $25.1 million for the net share settlement of employee and director stock awards, and $19.6 million in dividends to our stockholders.
Additionally, we paid $57.2 million, including commission and fees, to repurchase and subsequently retire 1.4 million shares of our common stock under the Stock Repurchase Program, $25.1 million for the net share settlement of employee stock awards, and $19.6 million of dividends paid to our stockholders.
We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes.
We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes, which is generally driven by fluctuations in commodity prices, and can be impacted by changes in tax laws.
Income tax (expense) benefit For the Years Ended December 31, 2022 2021 2020 (in millions, except tax rate) Income tax (expense) benefit $ (283.8) $ (9.9) $ 192.1 Effective tax rate 20.3 % 21.5 % 20.1 % The decrease in the effective tax rate for the year ended December 31, 2022, compared with 2021, primarily resulted from the release of the valuation allowance recorded against the derivative deferred tax asset recognized in prior periods.
The decrease in the effective tax rate for the year ended December 31, 2022, compared with 2021, primarily resulted from the release of the valuation allowance recorded against the derivative deferred tax asset recognized in prior periods.
Based on our 2022 production, a 10 percent decrease in our average realized prices for oil, gas, and NGLs, would have reduced our oil, gas, and NGL production revenues by approximately $227.0 million, $79.1 million, and $28.5 million, respectively.
Based on our 2023 production, a 10 percent decrease in our average realized prices for oil, gas, and NGLs, would have reduced our oil, gas, and NGL production revenues by approximately $181.4 million, $32.8 million, and $22.2 million, respectively.
Financial Results of Operations and Additional Comparative Data The tables below provide information regarding selected production and financial information for the three months ended December 31, 2022, and the preceding three quarters: For the Three Months Ended December 31, September 30, June 30, March 31, 2022 2022 2022 2022 (in millions) Production (MMBOE) 13.1 12.7 13.3 13.8 Oil, gas, and NGL production revenue $ 669.3 $ 827.6 $ 990.4 $ 858.7 Oil, gas, and NGL production expense $ 150.7 $ 160.0 $ 165.6 $ 144.7 Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 143.6 $ 145.9 $ 154.8 $ 159.5 Exploration $ 10.8 $ 14.2 $ 20.9 $ 9.0 General and administrative $ 32.8 $ 28.4 $ 28.3 $ 25.0 Net income $ 258.5 $ 481.2 $ 323.5 $ 48.8 ____________________________________________ Note: Amounts may not calculate due to rounding.
Financial Results of Operations and Additional Comparative Data The tables below provide information regarding selected production and financial information for the three months ended December 31, 2023, and the preceding three quarters: For the Three Months Ended December 31, September 30, June 30, March 31, 2023 2023 2023 2023 (in millions) Production (MMBOE) 14.1 14.1 14.1 13.2 Oil, gas, and NGL production revenue $ 606.9 $ 639.7 $ 546.6 $ 570.8 Oil, gas, and NGL production expense $ 137.3 $ 138.3 $ 145.6 $ 142.3 Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 189.1 $ 189.4 $ 157.8 $ 154.2 Exploration $ 15.8 $ 10.2 $ 15.0 $ 18.4 General and administrative $ 36.6 $ 29.3 $ 27.5 $ 27.7 Net income $ 247.1 $ 222.3 $ 149.9 $ 198.6 ____________________________________________ Note: Amounts may not calculate due to rounding.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is provided under the captions Interest Rate Risk and Commodity Price Risk in Item 7 above, as well as under the section entitled Summary of Oil, Gas, and NGL Derivative Contracts in Place in Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report and is incorporated herein by reference. 58
Biggest changeQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is provided under the captions Interest Rate Risk and Commodity Price Risk in Item 7 above, as well as under the section entitled Summary of Oil, Gas, and NGL Derivative Contracts in Place in Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report and is incorporated herein by reference. 59

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