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What changed in Granite Ridge Resources, Inc.'s 10-K — 2022 vs 2023

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

+360 added−370 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-27)

Top changes in Granite Ridge Resources, Inc.'s 2023 10-K

360 paragraphs added · 370 removed · 246 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+31 added−12 removed132 unchanged
Biggest changeThe following is a summary of information regarding our assets as of December 31, 2022, including reserves information as estimated by our third-party independent reserve engineers, Netherland, Sewell & Associates, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ ​ Productive Oil Wells ​ Productive Gas Wells ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Daily ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ Proved Reserves ​ ​ ​ % Proved ​ Net Acres ​ Gross Net Gross Net (Boe per day) (MBoe) % Oil Developed Permian 8,662 ​ 448 ​ 40.82 ​ 2 ​ 0.02 ​ 9,150 ​ 25,888 ​ 60% ​ 55% Eagle Ford 6,498 ​ 105 ​ 19.08 ​ 81 ​ 4.26 ​ 2,194 ​ 8,103 ​ 58% ​ 46% Bakken 15,030 ​ 907 ​ 37.73 ​ 1 ​ 0.20 ​ 2,189 ​ 5,337 ​ 76% ​ 89% Haynesville 2,298 ​ — ​ — ​ 62 ​ 12.18 ​ 4,640 ​ 7,862 ​ 0% ​ 64% DJ 1,822 ​ 681 ​ 16.43 ​ 70 ​ 2.16 ​ 1,592 ​ 3,344 ​ 33% ​ 91% Total 34,310 ​ 2,141 114.06 216 18.82 19,765 50,534 50% ​ 61% ​ Business Strategy We are focused on creating long-term stockholder value by recycling cash flow into accretive growth opportunities while paying a quarterly cash dividend and maintaining a healthy balance sheet.
Biggest changeAs of December 31, 2023 Productive Oil Wells Productive Gas Wells Net Acres Gross Net Gross Net Average Daily Production (Boe per day) Proved Reserves (MBoe) % Oil % Proved Developed Permian 9,593 575 46.30 1 — 11,453 32,300 56% 42% Eagle Ford 6,809 120 24.80 93 6.90 2,843 7,874 55% 64% Bakken 13,487 938 39.00 — — 2,326 4,500 73% 96% Haynesville 5,502 — — 117 16.40 5,595 4,834 0% 89% DJ 2,086 967 42.20 15 0.90 2,094 3,963 34% 98% Total 37,477 2,600 152.30 226 24.20 24,311 53,472 51% 58% Business Strategy We are focused on creating long-term stockholder value by recycling cash flow into accretive growth opportunities while paying a quarterly cash dividend and maintaining a healthy balance sheet.
If the permittee or an applicant of a disposal well permit fails to demonstrate that the injected fluids are confined to the disposal zone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the RRC may deny, modify, suspend or terminate the permit application or existing operating permit for that well.
If the permittee or an applicant for a disposal well permit fails to demonstrate that the injected fluids are confined to the disposal zone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the RRC may deny, modify, suspend or terminate the permit application or existing operating permit for that well.
The discharge of pollutants into regulated waters is prohibited except in accordance with a permit issued by the EPA, the United States Army Corps of Engineers (“USACE”), or state agency or tribe with a delegated CWA permit program. For example, permitting of discharges of stormwater associated with oil and gas facility construction or operation activities may also be required.
The discharge of pollutants into regulated waters is prohibited except in accordance with a permit issued by the EPA, the United States Army Corps of Engineers (“USACE”), or state agency or tribe with a delegated CWA permit program. Permitting of discharges of stormwater associated with oil and gas facility construction or operation activities may also be required.
DJ The Denver-Julesburg Basin, also known as the DJ basin, is a geologic basin centered in eastern Colorado stretching into southeast Wyoming, western Nebraska and western Kansas. Development in this area is currently focused on horizontal drilling in the Niobrara and Codell formations. At December 31, 2022, 7% of our total proved reserves were located in the DJ Basin.
DJ The Denver-Julesburg Basin, also known as the DJ basin, is a geologic basin centered in eastern Colorado stretching into southeast Wyoming, western Nebraska and western Kansas. Development in this area is currently focused on horizontal drilling in the Niobrara and Codell formations. At December 31, 2023, 7% of our total proved reserves were located in the DJ Basin.
Restrictions on emissions of methane or carbon dioxide, such as restrictions on venting and flaring of natural gas or increased fuel or energy efficiency requirements, that may be imposed in various states, as well as state and local climate change initiatives, could adversely affect the oil and natural gas industry, and, at this time, 21 ​ Table of Contents it is not possible to accurately estimate how potential future laws or regulations addressing GHG emissions would impact oil and natural gas assets.
Restrictions on emissions of methane or carbon dioxide, such as restrictions on venting and flaring of natural gas or increased fuel or energy efficiency requirements, that may be imposed in various states, as well as state and local climate change initiatives, could adversely affect the oil and natural gas industry, and, at this time, it is not possible to accurately estimate how potential future laws or regulations addressing GHG emissions would impact oil and natural gas assets.
Although operators may take steps to mitigate any such risks, no assurance can be given that they will not have material adverse effect on our business. Human Capital Resources As of December 31, 2022, we had two full time employees.
Although operators may take steps to mitigate any such risks, no assurance can be given that they will not have material adverse effect on our business. Human Capital Resources As of December 31, 2023, we had two full time employees.
From time to time, the EPA may designate additional materials as hazardous substances under CERCLA, which could result in additional investigation and remediation at current Superfund sites, or reopener of Superfund sites that previously received regulatory closure.
From time to time, the EPA may designate additional materials as hazardous substances under CERCLA, which could result in additional investigation and remediation at current Superfund sites, or the reopening of Superfund sites that previously received regulatory closure.
Further, the Inflation Reduction Act (“IRA”), which passed in August 2022, includes a charge for methane emissions from specific types of facilities that emit 25,000 metric tons of carbon dioxide equivalent or more per year, and although the IRA generally provides for a conditional exemption under certain circumstances, the change applies to emissions that exceed an established emissions threshold for each type of covered facility.
Further, the Inflation Reduction Act (“IRA”), which passed in August 2022, includes a charge for methane emissions from specific types of facilities that emit 25,000 metric tons of carbon dioxide equivalent or more per year, and, although the IRA generally provides for a conditional exemption under certain circumstances, the charge applies 20 Table of Contents to emissions that exceed an established emissions threshold for each type of covered facility.
Non-operated working interests constitute the central part of our investment strategy. However, we have also made certain investments in minerals, and certain other oil and natural gas 10 ​ Table of Contents assets that are incidental or ancillary to preserve, protect, or enhance our assets, or are acquired as part of a package with the non-operated working interests.
Non-operated working interests constitute the central part of our investment strategy. However, we have also made certain investments in minerals, and certain other oil and natural gas assets that are incidental or ancillary to preserve, protect, or enhance our assets, or are acquired as part of a package with the non-operated working interests.
In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at market prices, Congress could reenact price controls in the future. 16 ​ Table of Contents Onshore gathering services, which occur upstream of FERC jurisdictional transmission services, are regulated by the states.
In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at market prices, Congress could reenact price controls in the future. Onshore gathering services, which occur upstream of FERC jurisdictional transmission services, are regulated by the states.
Further, 17 ​ Table of Contents the CAA requires that owners and operators of stationary sources producing, processing, and storing extremely hazardous substances have a general duty to identify hazards associated with an accidental release, design and maintain a safe facility, and minimize the consequences of any releases that occur.
Further, the CAA requires that owners and operators of stationary sources producing, processing, and storing extremely hazardous substances have a general duty to identify hazards associated with an accidental release, design and maintain a safe facility, and minimize the consequences of any releases that occur.
If in the future CWA permitting is required for saltwater injection wells as a result of the Supreme Court’s ruling in County of Maui, Hawaii v. Hawaii Wildlife Fund , the costs of permitting and compliance for injection well operations by the companies that operate the Properties could increase.
If in the future CWA permitting is required for saltwater injection wells as a result of the 18 Table of Contents Supreme Court’s ruling in County of Maui, Hawaii v. Hawaii Wildlife Fund , the costs of permitting and compliance for injection well operations by the companies that operate the Properties could increase.
In addition, the EPA has asserted authority under the SDWA to regulate hydraulic fracturing that uses diesel fuel. The EPA directly administers the Underground Injection Control (“UIC”) program in some states, and in others, administration of all or portions of the 18 ​ Table of Contents program is delegated to the state.
In addition, the EPA has asserted authority under the SDWA to regulate hydraulic fracturing that uses diesel fuel. The EPA directly administers the Underground Injection Control (“UIC”) program in some states, and in others, administration of all or portions of the program is delegated to the state.
We, and the Manager that supplies land, accounting, engineering, finance, and other back-office services to us in connection with continued management of the Properties contributed to us as part of the Business Combination, employ a case-based recruiting process to identify talent that has both the ability and desire to have a positive impact on an organization but may have been restricted by the bureaucracy of larger companies.
We, and Grey Rock Administration, LLC (the "Manager") which supplies land, accounting, engineering, finance, and other back-office services to us in connection with continued management of the Properties contributed to us as part of the Business Combination, employ a case-based recruiting process to identify talent that has both the ability and desire to have a positive impact on an organization but may have been restricted by the bureaucracy of larger companies.
The effect of these regulations is to limit the amount of oil and natural gas that can be produced from the wells in which we participate and to limit the number of wells or the locations at which 15 ​ Table of Contents our operating partners can drill.
The effect of these regulations is to limit the amount of oil and natural gas that can be produced from the wells in which we participate and to limit the number of wells or the locations at which our operating partners can drill.
Under the CAA and comparable state laws, the Environmental Protection Agency (“EPA”) and state environmental regulatory agencies have developed stringent regulations governing both permitting of emissions and emissions of certain air pollutants at specified sources, including certain oil and gas sources.
Under the CAA and comparable state laws, the Environmental Protection Agency (“EPA”) and state environmental regulatory agencies have developed stringent 16 Table of Contents regulations governing both permitting of emissions and emissions of certain air pollutants at specified sources, including certain oil and gas sources.
The extensive operating history, favorable operating environment, mature infrastructure, long reserve life, multiple producing horizons, horizontal development potential and liquids-rich reserves make the Permian Basin one of the most prolific oil-producing regions in the United States. At December 31, 2022, 51% of our total proved reserves were located in the Permian Basin.
The extensive operating history, favorable operating environment, mature infrastructure, long reserve life, multiple producing horizons, horizontal development potential and liquids-rich reserves make the Permian Basin one of the most prolific oil-producing regions in the United States. At December 31, 2023, 60% of our total proved reserves were located in the Permian Basin.
Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all similarly situated shippers requesting service on the same terms and under the same rates.
Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all similarly situated shippers requesting service on 15 Table of Contents the same terms and under the same rates.
Lower oil and gas prices not only decrease our revenues, but an extended decline in oil or natural gas prices may affect planned capital expenditures and the oil and natural gas reserves that the Properties can economically produce.
Lower oil and gas prices not only decrease our revenues, but an extended decline in oil or natural gas prices may affect planned capital expenditures and 12 Table of Contents the oil and natural gas reserves that the Properties can economically produce.
While CERCLA does contain an exclusion for petroleum, the exclusion is 19 ​ Table of Contents limited and could ultimately be repealed, and oil and gas facilities often contain hazardous substances subject to regulation under CERCLA.
While CERCLA does contain an exclusion for petroleum, the exclusion is limited and could ultimately be repealed, and oil and gas facilities often contain hazardous substances subject to regulation under CERCLA.
For example, on August 26, 2022, EPA announced a proposal to designate as hazardous substances perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), which have been commonly used in a variety of industrial and consumer products.
For example, on August 26, 2022, EPA announced a proposal to designate as hazardous substances perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), which have been commonly used in a variety of industrial and consumer products. EPA is expected to finalize that proposal in 2024.
During the year ended December 31, 2022, operators completed 19 gross (3.62 net) wells in the Eagle Ford Basin. Bakken The Williston Basin stretches through North Dakota, the northwest part of South Dakota, and eastern Montana and is best known for the Bakken/Three Forks shale formations. The Bakken ranks as one of the largest oil developments in the United States.
During the year ended December 31, 2023, operators completed 24 gross (5.84 net) wells in the Eagle Ford Basin. Bakken The Williston Basin stretches through North Dakota, the northwest part of South Dakota, and eastern Montana and is best known for the Bakken/Three Forks shale formations. The Bakken ranks as one of the largest oil developments in the United States.
The federal government has in recent years undertaken several studies of the oil and gas industry’s potential impacts. For example, in 2016 the EPA published a final report of a four-year study focused on the possible relationship between hydraulic fracturing and drinking water.
Scrutiny of oil and natural gas production activities continues in other ways. The federal government has in recent years undertaken several studies of the oil and gas industry’s potential impacts. For example, in 2016 the EPA published a final report of a four-year study focused on the possible relationship between hydraulic fracturing and drinking water.
Pay a Quarterly Dividend : We believe that a quarterly cash dividend is the cornerstone of a sustainable and resilient business model. We expect that Granite Ridge will initially pay quarterly cash dividends totaling approximately $60 million per fiscal year. Be a Good Partner : As a non-operator, we lean heavily on our operating partners.
Pay a Quarterly Dividend : We believe that a quarterly cash dividend is the cornerstone of a sustainable and resilient business model. We expect that Granite Ridge will initially pay quarterly cash dividends of $0.11 (or $0.44 per fiscal year). Be a Good Partner : As a non-operator, we lean heavily on our operating partners.
We believe that our values, rewarding work environment, and competitive pay help us retain our employees and those of our Manager and minimize employee turnover in a very challenging personnel market. ​ Office Locations Our principal office is located at 5217 McKinney Avenue, Suite 400, Dallas, TX 75205.
We believe that our values, rewarding work environment, and competitive pay help us retain our employees and those of our Manager and minimize employee turnover in a very challenging personnel market. Office Locations, Internet Website and Availability of Public Filings Our principal office is located at 5217 McKinney Avenue, Suite 400, Dallas, TX 75205. Our website address is www.graniteridge.com.
Our website address is www.graniteridge.com. 22 ​ Table of Contents We share a portion of the Manager’s office space (which consists of approximately 11,700 square feet), pursuant to the MSA. We believe our office space is sufficient to meet our needs and that additional office space can be obtained if necessary. ​ 23 ​ Table of Contents
We share a portion of the Manager’s office space (which consists of approximately 11,700 square feet), pursuant to the MSA. We believe our office space is sufficient to meet our needs and that additional office space can be obtained if necessary.
During the year ended December 31, 2022, operators completed 134 gross (12.41 net) wells in the Permian Basin. Eagle Ford The Eagle Ford shale formation stretches across south Texas and includes Austin Chalk and Buda formations. At December 31, 2022, 16% of our total proved reserves were located in the Eagle Ford Basin.
During the year ended December 31, 2023, operators completed 123 gross (13.26 net) wells in the Permian Basin. Eagle Ford The Eagle Ford shale formation stretches across south Texas and includes Austin Chalk and Buda formations. At December 31, 2023, 15% of our total proved reserves were located in the Eagle Ford Basin.
The April 2022 rule promulgation is considered phase one of a two-phase review of the 2020 NEPA Rule that was announced by the Biden Administration to emphasize the need to review federal actions for climate change and environmental justice impacts, among other factors.
The April 2022 rule promulgation is considered phase one of a two-phase review of the 2020 NEPA Rule that was announced by the Biden Administration to emphasize the need to review federal actions for climate change and environmental justice impacts, among other factors. The Council on Environmental Quality ("CEQ") proposed the "Phase 2" revisions to NEPA in July 2023.
At December 31, 2022, 16% of our total proved reserves were located in the Haynesville Basin. During the year ended December 31, 2022, operators completed 9 gross (2.75 net) wells in the Haynesville Basin.
At December 31, 2023, 9% of our total proved reserves were located in the Haynesville Basin. During the year ended December 31, 2023, operators completed 9 gross (1.13 net) wells in the Haynesville Basin.
Operators in the Northern Culberson-Reeves and Stanton SRAs have implemented seismic response plans, which include expanded data collection efforts, contingency responses for future seismicity, and scheduled checkpoint updates with RRC staff.
Operators in the Northern Culberson-Reeves and Stanton SRAs have implemented seismic response plans, which include expanded data collection efforts, contingency responses for future seismicity, and scheduled checkpoint updates with RRC staff. In December 2023, the RRC suspended the permits of 23 deep disposal wells in the Northern Culberson-Reeves SRA.
Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices. We rely on our operating partners to market and sell our production. Our operating partners include a variety of exploration and production companies, from large publicly traded companies to privately-owned companies.
Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices. We rely on our operating partners to market and sell our production.
We then encourage, support, and incentivize our team to develop and implement ideas that make us better. 11 ​ Table of Contents Leverage Data : As an owner in over 2,350 gross wells under 60 operators across seven states and 36 counties/parishes, we have an immense amount of data.
We then encourage, support, and incentivize our team to develop and implement ideas that make us better. Leverage Data : As an owner in over 3,100 gross wells under 66 operators across 7 states and 35 counties/parishes, we have an immense amount of data.
As is customary in the oil and natural gas industry, due diligence investigation of title is made at the time of acquisition of any properties.
We believe that we have satisfactory title to, or rights in, the Properties. As is customary in the oil and natural gas industry, due diligence investigation of title is made at the time of acquisition of any properties.
At December 31, 2022, 10% of our total proved reserves were located in the Bakken Basin. During the year ended December 31, 2022, operators completed 27 gross (0.79 net) wells in the Bakken Basin. 12 ​ Table of Contents Haynesville The Haynesville Basin is a premier natural gas basin located in Northwestern Louisiana and East Texas.
At December 31, 2023, 8% of our total proved reserves were located in the Bakken Basin. During the year ended December 31, 2023, operators completed 34 gross (1.47 net) wells in the Bakken Basin. Haynesville The Haynesville Basin is a premier natural gas basin located in Northwestern Louisiana and East Texas.
At the closing of the Business Combination, we entered into a credit agreement with Texas Capital Bank, as administrative agent, and the lenders named therein (the “Credit Agreement”), secured by a first priority mortgage and security interest in substantially all of our assets. 14 ​ Table of Contents We believe that we have satisfactory title to, or rights in, the Properties.
At the closing of the Business Combination, we entered into a credit agreement with Texas Capital Bank, as administrative agent, and the lenders named therein (as amended, the “Credit Agreement”), secured by a first priority mortgage and security interest in substantially all of our and our restricted subsidiaries' assets.
In addition, compliance with CWA requirements could limit the locations where wells, other oil and natural gas facilities, and associated access resources can be constructed.
In addition, compliance with CWA requirements could limit the locations where wells, other oil and natural gas facilities, and associated access resources can be constructed. The scope of regulated waters has been subject to substantial controversy.
Our operating partners coordinate the transportation of our oil and natural gas production from their wells to appropriate pipelines or rail transport facilities pursuant to arrangements that they negotiate and maintain with various parties purchasing the production.
Our operating partners coordinate the transportation of our oil and natural gas production from their wells to appropriate pipelines or rail transport facilities pursuant to arrangements that they negotiate and maintain with various parties purchasing the production. We may, from time to time, enter into financial hedging contracts to help mitigate pricing risk and volatility with respect to differentials.
Commit to Environmental Stewardship : As a non-operator, it is critical that we partner with operators that are proven and responsible environmental stewards. In additional to the moral and ethical drivers, is it a prudent business decision for if an operator with poor ESG standards loses the social license to operate, we may end up with stranded inventory.
In additional to the moral and ethical drivers, it is a prudent business decision because if an operator with poor ESG standards loses the social license to operate, we may end up with stranded inventory.
The following table sets forth the percentage of revenues attributable to third-party operating partners who have accounted for 10% or more of revenues attributable to our assets during the years ended December 31, 2022, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ Major Operators 2022 2021 2020 Operator A * ​ * ​ 11 % Operator B * ​ * ​ 13 % Operator C 12 % 12 % 17 % Operator D * ​ 15 % * ​ Operator E ​ 10 % * ​ * ​ Operator F 10 % * ​ * ​ * Less than 10% ​ No other operator accounted for 10% or more of revenue attributable to our assets on a combined basis in the years ended December 31, 2022, 2021, or 2020.
Major Operators 2023 2022 2021 Operator A 11 % 12 % 12 % Operator B * * 15 % Operator C 12 % 10 % * Operator D * 10 % * __________________________________________ * Less than 10% No other operator accounted for 10% or more of revenue attributable to our assets on a combined basis in the years ended December 31, 2023, 2022, or 2021.
During the year ended December 31, 2022, operators completed 76 gross (1.21 net) wells in the DJ Basin.
During the year ended December 31, 2023, operators completed 124 gross (2.85 net) wells in the DJ Basin.
In addition to entering into hedging derivative instruments tied to the price of oil or natural gas, we actively pursue diversification across hydrocarbon, basin, and operator to mitigate price swings specific to any particular area, company or contract.
In addition to entering into hedging derivative instruments tied to the price of oil or natural gas, we actively pursue diversification across hydrocarbon, basin, and operator to mitigate price swings specific to any particular area, company or contract. 11 Table of Contents Adapt : Be it from technology, macro events, political dynamics or investor sentiment, change is the only constant in the oil and gas industry.
In addition, the OSHA hazard communication standard, the Emergency Planning and Community Right-to-Know Act (“EPCRA”), and comparable state statutes and any implementing regulations thereof may require disclosure of information about hazardous materials stored, used, or produced in operations on the Properties and that such information be provided to employees, state and local governmental authorities, and/or citizens, as applicable.
In addition, the OSHA hazard communication standard, the Emergency Planning and Community Right-to-Know Act (“EPCRA”), and comparable state statutes and any implementing regulations thereof may require disclosure of information about hazardous materials stored, used, or produced in operations on the Properties and that such information be provided to employees, state and local governmental authorities, and/or citizens, as applicable. 19 Table of Contents These regulations and proposals and any other new regulations requiring the installation of more sophisticated pollution control equipment, additional evaluation or assessment, or more stringent permitting or environmental protection measures could have a material adverse impact on our business, results of operations, and financial condition.
The federal Clean Water Act (“CWA”) and comparable state laws and regulations impose strict obligations related to discharges of pollutants and dredge and fill material into regulated bodies of water, including wetlands.
Moreover, failure to comply with these CAA requirements can result in the imposition of substantial fines and penalties as well as costly injunctive relief. The federal Clean Water Act (“CWA”) and comparable state laws and regulations impose strict obligations related to discharges of pollutants and dredge and fill material into regulated bodies of water, including wetlands.
At the closing of the Business Combination, we entered into a Management Services Agreement (“MSA”) with Grey Rock Administration, LLC (the “Manager”), pursuant to which the Manager supplies land, accounting, engineering, finance, and other back-office services to us in connection with continued management of the Properties contributed to us as part of the Business Combination.
At the closing of the Business Combination, we entered into a Management Services Agreement (“MSA”) with the Manager, pursuant to which the Manager supplies land, accounting, engineering, finance, and other back-office services to us in connection with continued management of the Properties contributed to us as part of the Business Combination. 14 Table of Contents Governmental Regulation and Environmental Matters Our operations are subject to various rules, regulations, and limitations impacting the oil and natural gas exploration and production industry as a whole.
Furthermore, in March 2022 the SEC proposed rule amendments that, if adopted, would require public companies to disclose certain climate-related information in their public filings. If adopted, the new requirements would begin to phase-in starting in 2023 and would begin to apply to filings made in 2024.
Furthermore, in March 2022 the SEC proposed rule amendments that, if adopted, would require public companies to disclose certain climate-related information in their public filings. A final rule is expected in 2024. Similarly, certain states have enacted or are otherwise considering disclosure requirements for certain climate-related risks.
Adapt : Be it from technology, macro events, political dynamics or investor sentiment, change is the only constant in the oil and gas industry. With a diversified asset base and limited long-term contracts or drilling obligations (we elect to participate in drilling on a well-by-well basis), our business is built to maximize adaptability.
With a diversified asset base and limited long-term contracts or drilling obligations (we elect to participate in drilling on a well-by-well basis), our business is built to maximize adaptability. Commit to Environmental Stewardship : As a non-operator, it is critical that we partner with operators that are proven and responsible environmental stewards.
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The operators of our Properties include public exploration and production companies and experienced private companies.
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The operators of our Properties include public exploration and production companies and experienced private companies. 10 Table of Contents The following is a summary of information regarding our assets as of December 31, 2023, including reserves information as estimated by our third-party independent reserve engineers, Netherland, Sewell & Associates, Inc.
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We 13 ​ Table of Contents may, from time to time, enter into financial hedging contracts to help mitigate pricing risk and volatility with respect to differentials.
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Our operating partners include a variety of exploration and production companies, from large publicly traded companies to privately-owned companies. 13 Table of Contents The following table sets forth the percentage of revenues attributable to third-party operating partners who have accounted for 10% or more of revenues attributable to our assets during the years ended December 31, 2023, 2022 and 2021.
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Governmental Regulation and Environmental Matters Our operations are subject to various rules, regulations, and limitations impacting the oil and natural gas exploration and production industry as a whole.
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In December 2023, the EPA finalized more stringent methane rules for new, modified, and reconstructed facilities, known as OOOOb, as well as standards for existing sources for the first time ever, known as OOOOc. Under the final rules, states have two years to prepare and submit their plants to impose methane emission controls on existing sources.
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Most recently, on November 2, 2021, the EPA proposed to revise and add to the NSPS program rules, which, if adopted, could have a significant impact on the upstream and midstream oil and gas sectors. The proposed rules would formally reinstate methane emission limitations for new and modified facilities.
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The presumptive standards established under the final rule are generally the same for both new and existing sources and include enhanced leak detection survey requirements using optical gas imaging and other advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions, reduction of emissions by 95% through capture and control systems, zero-emission requirements for certain devices, and the establishment of a "super emitter" response program that would allow third parties to make reports to EPA of large methane emission events, triggering certain investigation and repair requirements.
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The proposed rules also would regulate, for the first time under the NSPS program, existing oil and gas facilities. Specifically, EPA’s proposed new rule would require states to implement plans that meet or exceed federally established emission reduction guidelines for oil and natural gas facilities.
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Fines and penalties for violations of these rules can be substantial. It is likely, however, that the final rule and its requirements will be subject to legal challenges. The requirements of the EPA's final methane rules have the potential to increase the operating costs of our operators and thus may adversely affect our financial results and cash flows.
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Since the term “Waters of the United States” (“WOTUS”) was defined in a joint rulemaking by the EPA and the USACE in May 2015, the meaning of WOTUS has been heavily litigated and subject to further rulemaking. Most recently, on January 24, 2022, the U.S.
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Compliance with permitting requirements could increase the length of time it takes to construct an oil and gas facility, and impose heightened operating standards, which in turn could increase our operators' cost of construction and operation.
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Supreme Court agreed to hear a case to determine the propriety of the “significant nexus” interpretation of the rule, which could further impact the scope of the definition of WOTUS. Sackett v. Env’t Prot. Agency , No. 21-454, 142 S. Ct. 896 (2022). Oral arguments for Sackett were held on October 3, 2022.
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In 2015 and 2020, respectively, the Obama and Trump Administrations each published final rules attempting to define the federal jurisdictional reach over waters of the United States (“WOTUS”). However, both of these rulemakings were subject to legal challenge.
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Regardless, the applicable WOTUS definition affects what CWA permitting or other regulatory obligations may be triggered during development and operation of the Properties, and changes to the WOTUS definition could cause delays in development and/or increase the cost of development and operation of the Properties.
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In January 2023, the EPA and Corps published a final rule based on the pre-2015 definition, with updates to incorporate existing Supreme Court decisions and regulatory guidance. However, the January 2023 rule was challenged and is currently enjoined in 27 states. In May 2023 the U.S. Supreme Court released its opinion in Sackett v.
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These regulations and proposals and any other new regulations requiring the installation of more sophisticated pollution control equipment, additional evaluation or assessment, or more stringent permitting or environmental protection measures could have a material adverse impact on our business, results of operations, and financial condition. Scrutiny of oil and natural gas production activities continues in other ways.
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EPA, which involved issues relating to the legal tests used to determine whether wetlands qualify as WOTUS. The Sackett decision invalidated certain parts of the January 2023 rule and significantly narrowed its scope, resulting in a revised rule being issued in September 2023.
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However, in May 2015, the Texas legislature enacted a bill preempting local bans on hydraulic fracturing. In December 2014, former New York Governor Andrew Cuomo banned hydraulic fracturing 20 ​ Table of Contents state-wide, and this ban was recently codified in the state’s Fiscal Year 2021 budget.
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However, due to 17 Table of Contents the injunction on the January 2023 rule, the implementation of the September 2023 rule currently varies by state.
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In Colorado, the Colorado Supreme Court has ruled the municipal bans were preempted by state law. However, in April 2019 the Colorado legislature subsequently enacted “SB 181” that gave significant local control over oil and gas well head operations.
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In the 27 states subject to the injunction, the agencies are interpreting the definition of WOTUS consistent with the pre-2015 regulatory regime and the changes made by the Sackett decision, which utilizes the “continuous surface connection” test to determine if wetlands qualify as WOTUS.
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Municipalities in Colorado have enacted local rules restricting oil and gas operations based on SB 181; nevertheless, in November 2020, a Colorado district court upheld the prior Colorado Supreme Court ruling in finding that a hydraulic fracking ban in the City of Longmont was preempted by state law.
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In the remaining 23 states, the agencies are implementing the September 2023 rule, which did not define the term “continuous surface connection.” Therefore, some uncertainty remains as to how broadly the September 2023 rule and the Sackett decision will be interpreted by the agencies.
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To the extent the implementation of the final rule, results of the litigation, or any action further expands the scope of the CWA’s jurisdiction, operators could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas.
Added
For example, the Dunes Sagebrush Lizard (“DSL”) is one species that, if listed as endangered or threatened under the ESA, could impact our profitability. The DSL is found in southeastern New Mexico and adjacent portions of Texas. The USFWS proposed to list the DSL as endangered in July 2023.
Added
If the DSL is ultimately listed as an endangered or threatened species, operations in any area that is designated as the DSL’s habitat may be limited, delayed or, in some circumstances, prohibited, and our operators could be required to comply with expensive mitigation measures intended to protect the dunes sagebrush lizard and its habitat.
Added
However, in May 2015, the Texas legislature enacted a bill preempting local bans on hydraulic fracturing. Colorado has also begun to increasingly regulate oil and gas operations with consideration towards GHG emissions and cumulative impacts.
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In January 2024, the Colorado Energy and Carbon Management Commission (formerly the Colorado Oil and Gas Conversation Commission) released draft rules that, if finalized as proposed, would require regulators to consider cumulative impacts of oil and gas operations in permitting decisions and increase scrutiny on the project’s proximity to other industrial sites, residential and school areas, “disproportionately impacted communities,” and “cumulatively impacted communities.” The draft rules would also set GHG emissions intensity targets for oil and gas operators and require regulators to consider such targets in their cumulative impacts analysis, as well as the potential to restrict operations during the summer in Ozone Nonattainment Areas.
Added
In December 2023, the United Arab Emirates hosted the 28th session of the Conference of the Parties ("COP28") where parties signed onto an agreement to transition "away from fossil fuels in energy systems in a just, orderly and equitable manner" and increase renewable energy capacity so as to achieve net zero by 2050, although no timeline for doing so was set.
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There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies may elect in the future to shift some or all of their investments into non-fossil fuel related sectors.
Added
Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.
Added
For example, at COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.
Added
The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero emissions by 2050. There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile the effects of the COVID-19 pandemic have lessened recently in the United States, we cannot predict the duration or future effects of the pandemic, or more contagious and harmful variants of the COVID-19 virus, and such effects may materially adversely affect our results of operations and financial condition in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations. 35 ​ Table of Contents Our operating partners depend on computer and telecommunications systems, and failures in those systems or cybersecurity threats, attacks and other disruptions could significantly disrupt our business operations.
Biggest changeIf we are unsuccessful in competing against other companies, our business, results of operations, financial condition or prospects could be materially adversely affected. Our operating partners depend on computer and telecommunications systems, and failures in those systems or cybersecurity threats, attacks and other disruptions could significantly disrupt our business operations.
In addition, any failure of the Manager to remediate the identified material weakness, or any future failure of the Manager to maintain adequate internal controls over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation, could cause additional material weaknesses or significant deficiencies in our financial reporting and could result in errors or misstatements in our consolidated financial statements that could be material.
In addition, any failure of the Manager to remediate any identified material weakness, or any future failure of the Manager to maintain adequate internal controls over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation, could cause additional material weaknesses or significant deficiencies in our financial reporting and could result in errors or misstatements in our consolidated financial statements that could be material.
Examples of laws and regulations that govern the environmental aspects of the oil and gas business include the following: ● the CAA, which restricts the emission of air pollutants from many sources, imposes various pre-construction, operating, permitting monitoring, control, recordkeeping, and reporting requirements and is relied upon by the EPA as an authority for adopting climate change regulatory initiatives, including relating to GHG emissions; ● the CWA, which regulates discharges of pollutants and dredge and fill material to state and federal waters and establishes the extent to which waterways are subject to federal jurisdiction as protected waters of the United States; ● the OPA, which requires oil spill prevention, control, and countermeasure planning and imposes liabilities for removal costs and damages arising from an oil spill into waters of the United States; 36 ​ Table of Contents ● the SDWA, which protects the quality of the nation’s public drinking water sources through adoption of drinking water standards and control over the subsurface injection of fluids into belowground formations; ● the CERCLA, which imposes liability without regard to fault on certain categories of potentially responsible parties including generators, transporters and arrangers of hazardous substances at sites where hazardous substance releases have occurred or are threatening to occur, as well as on present and certain past owners and operators of sites were hazardous substance releases have occurred or are threatening to occur; ● the RCRA, which imposes requirements for the generation, treatment, storage, transport, disposal and cleanup of non-hazardous and hazardous wastes; ● the Endangered Species Act (“ESA”), which restricts activities that may affect federally identified endangered and threatened species or their habitats through the implementation of operating limitations or restrictions or a temporary, seasonal or permanent ban on operations in affected areas.
Examples of laws and regulations that govern the environmental aspects of the oil and gas business include the following: • the CAA, which restricts the emission of air pollutants from many sources, imposes various pre-construction, operating, permitting monitoring, control, recordkeeping, and reporting requirements and is relied upon by the EPA as an authority for adopting climate change regulatory initiatives, including relating to GHG emissions; • the CWA, which regulates discharges of pollutants and dredge and fill material to state and federal waters and establishes the extent to which waterways are subject to federal jurisdiction as protected waters of the United States; • the OPA, which requires oil spill prevention, control, and countermeasure planning and imposes liabilities for removal costs and damages arising from an oil spill into waters of the United States; • the SDWA, which protects the quality of the nation’s public drinking water sources through adoption of drinking water standards and control over the subsurface injection of fluids into belowground formations; • the CERCLA, which imposes liability without regard to fault on certain categories of potentially responsible parties including generators, transporters and arrangers of hazardous substances at sites where hazardous substance releases have occurred or are threatening to occur, as well as on present and certain past owners and operators of sites were hazardous substance releases have occurred or are threatening to occur; • the RCRA, which imposes requirements for the generation, treatment, storage, transport, disposal and cleanup of non-hazardous and hazardous wastes; • the Endangered Species Act (“ESA”), which restricts activities that may affect federally identified endangered and threatened species or their habitats through the implementation of operating limitations or restrictions or a temporary, seasonal or permanent ban on operations in affected areas.
Any acquisition involves other potential risks, including, among other things: ● the validity of our assumptions about reserves, future production, revenues and costs; ● a decrease in our liquidity by using a significant portion of our cash from operations or borrowing capacity to finance acquisitions; ● a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions; 31 ​ Table of Contents ● the ultimate value of any contingent consideration agreed to be paid in an acquisition; ● the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate; ● “geological risk,” which refers to the risk that hydrocarbons may not be present or, if present, may not be recoverable economically; ● an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; and ● an increase in our costs or a decrease in our revenues associated with any potential royalty owner or landowner claims or disputes, or other litigation encountered in connection with an acquisition.
Any acquisition involves other potential risks, including, among other things: • the validity of our assumptions about reserves, future production, revenues and costs; 28 Table of Contents • a decrease in our liquidity by using a significant portion of our cash from operations or borrowing capacity to finance acquisitions; • a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions; • the ultimate value of any contingent consideration agreed to be paid in an acquisition; • the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate; • “geological risk,” which refers to the risk that hydrocarbons may not be present or, if present, may not be recoverable economically; • an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; and • an increase in our costs or a decrease in our revenues associated with any potential royalty owner or landowner claims or disputes, or other litigation encountered in connection with an acquisition.
Congress passed in August 2022, includes a charge for methane emissions from specific types of facilities that emit 25,000 metric tons of carbon dioxide equivalent or more per year, and although the IRA generally provides for a conditional exemption under certain circumstances, the change applies to emissions that exceed an established emissions threshold for each type of covered facility.
Congress passed in August 2022, includes a charge for methane emissions from specific types of facilities that emit 25,000 metric tons of carbon dioxide equivalent or more per year, and although the IRA generally provides for a conditional exemption under certain circumstances, the charge applies to emissions that exceed an established emissions threshold for each type of covered facility.
A low commodity price environment may strain our operating partners, which could heighten this risk. The inability or failure of our operating partners to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. Our business depends on third-party transportation and processing facilities and other assets that are owned by third parties.
A low commodity price environment may strain our operating partners, which could heighten this risk. The inability or failure of our operating partners to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. Our business depends on transportation and processing facilities and other assets that are owned by third parties.
We will remain an emerging growth company until the earliest of the last day of the fiscal year (a) following September 18, 2025, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means (1) the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter (2) has been subject to compliance with periodic reporting requirements for a period of at least 12 months, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three year period.
We will remain an emerging growth company until the earliest of the last day of the fiscal year (a) following September 18, 2025, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means (1) the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter (2) has been subject to compliance with periodic reporting requirements for a period of at least 12 months, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three year period.
In addition, drilling and producing operations on our acreage may be curtailed, delayed, or canceled by the operators of the Properties as a result of other factors, including: ● declines in oil or natural gas prices, as occurred in 2020 in connection with the COVID-19 pandemic; ● infrastructure limitations, such as gas gathering and processing constraints; ● the high cost, shortages or delays of equipment, materials and services; ● unexpected operational events, adverse weather conditions and natural disasters, facility or equipment malfunctions, and equipment failures or accidents; ● title problems; ● pipe or cement failures and casing collapses; ● lost or damaged oilfield development and service tools; ● compliance with environmental, health, safety and other governmental requirements; ● increases in severance taxes; ● regulations, restrictions, moratoria and bans on hydraulic fracturing; ● unusual or unexpected geological formations, and pressure or irregularities in formations; ● loss of drilling fluid circulation; ● environmental hazards, such as oil, natural gas or well fluids spills or releases, pipeline or tank ruptures and discharges of toxic gas; ● fires, blowouts, craterings and explosions; ● uncontrollable flows of oil, natural gas or well fluids; and ● pipeline capacity curtailments.
In addition, drilling and producing operations on our acreage may be curtailed, delayed, or canceled by the operators of the Properties as a result of other factors, including: • declines in oil or natural gas prices, as occurred in 2020 in connection with the COVID-19 pandemic; • infrastructure limitations, such as gas gathering and processing constraints; • the high cost, shortages or delays of equipment, materials and services; • unexpected operational events, adverse weather conditions and natural disasters, facility or equipment malfunctions, and equipment failures or accidents; • title problems; • pipe or cement failures and casing collapses; • lost or damaged oilfield development and service tools; • compliance with environmental, health, safety and other governmental requirements; • increases in severance taxes; 25 Table of Contents • regulations, restrictions, moratoria and bans on hydraulic fracturing; • unusual or unexpected geological formations, and pressure or irregularities in formations; • loss of drilling fluid circulation; • environmental hazards, such as oil, natural gas or well fluids spills or releases, pipeline or tank ruptures and discharges of toxic gas; • fires, blowouts, craterings and explosions; • uncontrollable flows of oil, natural gas or well fluids; and • pipeline capacity curtailments.
We and the Manager have entered into agreements with third parties for hardware, software, telecommunications and other information technology services in connection with our business. In addition, we and the Manager have developed or may develop proprietary software systems, management techniques and other information technologies incorporating software licensed from third parties.
We and the Manager have entered into agreements with third parties for hardware, software, telecommunications and other information technology services in connection with our business. In addition, we and the Manager have developed or may develop proprietary software systems, management techniques and other information and operational technologies incorporating software licensed from third parties.
Although we and the Manager utilize various procedures and controls to monitor these threats and mitigate their exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing.
Although we and the Manager utilize various procedures and controls designed to monitor these threats and mitigate their exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing.
In 2020, we were required to write down the carrying value of certain properties that constitute our oil and natural gas properties, and further writedowns could be required by us in the future.
In 2020 and 2023, we were required to write down the carrying value of certain properties that constitute our oil and natural gas properties, and further writedowns could be required by us in the future.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: ● the requirement that a majority of our Board of Directors consist of independent directors; ● the requirement that our director nominations be made, or recommended to the full Board of Directors, by our independent directors or by a nominations committee that is comprised entirely of independent directors and that we adopt a written charter or board resolution addressing the nominations process; and ● the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: • the requirement that a majority of our Board of Directors consist of independent directors; 41 Table of Contents • the requirement that our director nominations be made, or recommended to the full Board of Directors, by our independent directors or by a nominations committee that is comprised entirely of independent directors and that we adopt a written charter or board resolution addressing the nominations process; and • the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
These U.S. laws and their implementing regulations, as well as state counterparts, generally restrict or otherwise regulate the management of hazardous substances and wastes, the level of pollutants emitted to ambient air, discharges to surface water, and disposals or other releases to surface and below-ground soils and groundwater, including through permitting requirements, monitoring and reporting requirements, limitations or prohibitions of operations on certain protected areas, requirements to install certain emissions monitoring or control equipment, spill planning and preparedness requirements, and the application of specific worker health and safety criteria.
These U.S. laws and their implementing regulations, as well as state counterparts, generally restrict or otherwise regulate the management of hazardous substances and wastes, the level of pollutants emitted to ambient air, discharges to surface water, and disposals or other releases to surface and below-ground soils and groundwater, including through permitting requirements, monitoring and reporting requirements, limitations or prohibitions of operations on certain protected areas, requirements to install certain emissions monitoring or control equipment, spill planning and preparedness requirements, and the application of specific worker health and safety criteria (see Item 1.
Such curative work entails expense, and the operator may elect to proceed with a well despite defects to the title identified in the preliminary title opinion. Furthermore, 32 ​ Table of Contents title issues may arise at a later date that were not initially detected in any title review or examination.
Such curative work entails expense, and the operator may elect to proceed with a well despite defects to the title identified in the preliminary title opinion. Furthermore, 29 Table of Contents title issues may arise at a later date that were not initially detected in any title review or examination.
Similar protections are afforded to migratory birds under the Migratory Bird Treaty Act (“MBTA”) and bald and golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”); ● the EPCRA, which requires certain facilities to report toxic chemical uses, inventories, and releases and to disseminate such information to local emergency planning committees and response departments; and ● the OSHA and comparable state statutes, which impose regulations related to the protection of worker health and safety, including requiring employers to implement a hazard communication program and disseminate hazard information to employees.
Similar protections are afforded to migratory birds under the Migratory Bird Treaty Act (“MBTA”) and bald and golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”); 32 Table of Contents • the EPCRA, which requires certain facilities to report toxic chemical uses, inventories, and releases and to disseminate such information to local emergency planning committees and response departments; and • the OSHA and comparable state statutes, which impose regulations related to the protection of worker health and safety, including requiring employers to implement a hazard communication program and disseminate hazard information to employees.
Officers and directors, including those nominated by the funds managed by Grey Rock or its affiliates, may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to affiliates (subject to the MSA that sets forth an allocation of certain acquisition opportunities between us and funds associated with the Manager) or other businesses in which they have invested or are otherwise associated, in which case we may not become aware of or otherwise have the ability to pursue such opportunity.
Officers and directors, including those nominated by the funds managed by Grey Rock or its affiliates, may become 40 Table of Contents aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to affiliates (subject to the MSA that sets forth an allocation of certain acquisition opportunities between us and funds associated with the Manager) or other businesses in which they have invested or are otherwise associated, in which case we may not become aware of or otherwise have the ability to pursue such opportunity.
Additionally, if we or our independent registered public accounting firm were to conclude that third-party internal controls over financial reporting were not effective, any material weaknesses in such internal controls could require significant expense and management time to remediate. 42 ​ Table of Contents The relative lack of public company experience by our management team may put us at a competitive disadvantage.
Additionally, if we or our independent registered public accounting firm were to conclude that third-party internal controls over financial reporting were not effective, any material weaknesses in such internal controls could require significant expense and management time to remediate. The relative lack of public company experience by our management team may put us at a competitive disadvantage.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact us, any future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, operators’ equipment and operations could require them to incur costs to reduce emissions of GHGs 39 ​ Table of Contents associated with their operations.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact us, any future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, operators’ equipment and operations could require them to incur costs to reduce emissions of GHGs associated with their operations.
Furthermore, various third-party resources that we or the Manager rely on, directly or indirectly, in the operation of our business (such as pipelines and other infrastructure) could suffer interruptions or breaches from cyber-attacks or similar events that are entirely outside the control of us or the Manager, and any such events could significantly disrupt our business operations and/or have a material adverse effect on our results of operations.
Furthermore, various third-party resources that we or the Manager rely on, directly or indirectly, in the operation of our business (such as pipelines and other infrastructure) could suffer interruptions or breaches from cyberattacks or similar events that are entirely outside the control of us or the Manager, and any such events could significantly disrupt our business operations and/or have a material adverse effect on our results of operations.
On March 21, 2022, the Biden Administration issued warnings about the potential for Russia to engage in malicious cyber activity against the United States in response to the economic sanctions that have been imposed. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
On March 21, 2022, the Biden Administration issued warnings about the potential for Russia to engage in malicious cyber activity against the United States in response to the economic sanctions that have been imposed. 43 Table of Contents The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
On March 3, 2023, the Audit Committee of our Board of Directors concluded that our previously issued unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022, included in the Company’s Quarterly Report on Form 10-Q filed on November 14, 2022 were materially misstated.
On March 3, 2023, the Audit Committee of our Board of Directors concluded that our previously issued 37 Table of Contents unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022, included in the Company’s Quarterly Report on Form 10-Q filed on November 14, 2022 were materially misstated.
It is possible that we, the Manager, or these third parties, could incur interruptions from cybersecurity attacks, computer viruses or malware, or that third-party service providers could cause a breach of our data.
It is possible that we, the Manager, or these third parties, could incur interruptions from cybersecurity attacks, computer viruses or malware, user error, or that third-party service providers could cause a breach of our data.
In addition to causing curtailments, delays and cancellations of drilling and producing operations, many of these events can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination, loss of wells, regulatory penalties and third party 28 ​ Table of Contents claims.
In addition to causing curtailments, delays and cancellations of drilling and producing operations, many of these events can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination, loss of wells, regulatory penalties and third party claims.
Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves, which could adversely affect our business, results of operations and financial condition. Our future success depends on our ability to replace reserves that our operators produce.
Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves, which could adversely affect our business, results of operations and financial condition. 27 Table of Contents Our future success depends on our ability to replace reserves that our operators produce.
These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry 43 ​ Table of Contents or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their 47 ​ Table of Contents ability to obtain a premium for their shares.
These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
To the extent not addressed by the MSA, we and the Manager intend to implement policies as necessary or appropriate to deal with such potential conflicts. Investment analyses and decisions by the Manager may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
To the extent not addressed by the MSA, we and the Manager intend to implement policies as necessary or appropriate to deal with such potential conflicts. 36 Table of Contents Investment analyses and decisions by the Manager may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
Any person or entity purchasing or otherwise acquiring any interest in our common stock 48 ​ Table of Contents shall be deemed to have notice of and consented to this exclusive forum provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in our common stock shall be deemed to have notice of and consented to this exclusive forum provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning.” We accrue a liability for decommissioning costs associated with its wells; but have not established any cash reserve account for these potential costs in respect of any of the Properties.
Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning.” We accrue a liability for decommissioning costs associated with our operators' wells but have not established any cash reserve account for these potential costs in respect of any of the Properties.
Certain states (including states in which the Properties are located) have begun to consider or adopt laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or in underground disposal wells, and state agencies implementing these requirements may issue 38 ​ Table of Contents orders directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring.
Certain states (including states in which the Properties are located) have begun to consider or adopt laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or in underground disposal wells, and state agencies implementing these requirements may issue orders directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring.
Under the successful efforts method of accounting, capitalized costs related to proved oil and natural gas properties, including wells and related support equipment and 29 ​ Table of Contents facilities, are evaluated for impairment on an annual basis, or more frequently if indicators of impairment exist.
Under the successful efforts method of accounting, capitalized costs related to proved oil and natural gas properties, including wells and related support equipment and facilities, are evaluated for impairment on an annual basis, or more frequently if indicators of impairment exist.
In addition, our wells may be drilled in locations that are serviced to a limited extent, if at all, by gathering and transportation pipelines, which may or may not have sufficient capacity to transport production from all of the wells in the area.
In addition, our wells may be drilled in locations that are serviced to a limited extent, if at all, by gathering and 23 Table of Contents transportation pipelines, which may or may not have sufficient capacity to transport production from all of the wells in the area.
Increasing attention to climate change and any related negative public perception regarding us and/or our industry, for example, may result in demand shifts for our products, increased litigation risk for us, and increased regulatory, legislative 40 ​ Table of Contents and judicial scrutiny, which may, in turn, lead to new state, local, tribal and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
Increasing attention to climate change and any related negative public perception regarding us and/or our industry, for example, may result in demand shifts for our products, increased litigation risk for us, and increased regulatory, legislative and judicial scrutiny, which may, in turn, lead to new state, local, tribal and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and financial condition and results of operations.
“Risk Factors.” Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and financial condition and results of operations.
Fuel and energy conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices, and the increased competitiveness of alternative energy sources could reduce demand for oil and natural gas.
Fuel and energy conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices, and the increased 35 Table of Contents competitiveness of alternative energy sources could reduce demand for oil and natural gas.
We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
We may face additional risks and uncertainties 22 Table of Contents that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
Factors affecting the trading price of our securities may include: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about our operating results; ● success of competitors; ● lack of adjacent competitors; ● our operating results failing to meet the expectation of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning us or the industries in which we operate in general; ● operating and stock price performance of other companies that investors deem comparable to us; ● announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; ● changes in laws and regulations affecting our business; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the volume of shares of our common stock available for public sale; ● any significant change in our Board of Directors or management; ● sales of substantial amounts of our common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; ● general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism; and ● changes in accounting standards, policies, guidelines, interpretations or principles. 45 ​ Table of Contents Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance.
Factors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • lack of adjacent competitors; 42 Table of Contents • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the industries in which we operate in general; • operating and stock price performance of other companies that investors deem comparable to us; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our common stock available for public sale; • any significant change in our Board of Directors or management; • speculation by the press or investment community; • sales of substantial amounts of our common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism; and • changes in accounting standards, policies, guidelines, interpretations or principles.
The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced. Approximately 39% of our estimated net proved reserves volumes were classified as proved undeveloped as of December 31, 2022.
The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced. Approximately 42% of our estimated net proved reserves volumes were classified as proved undeveloped as of December 31, 2023.
Such restrictions and requirements could limit oil and gas well exploration and production activities underlying the investments or increase the cost of those activities if wastewater disposal options become limited.
Such restrictions and requirements could limit oil and gas well exploration and production activities underlying the investments or increase the cost of those activities if wastewater disposal options become limited (see Item 1.
As a company with a class of securities that are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are subject to reporting and other legal, accounting, corporate governance, and regulatory requirements imposed by the Exchange Act or the Sarbanes-Oxley Act.
As a company with a class of securities that are registered under the Exchange Act, we are subject to reporting and other legal, accounting, corporate governance, and regulatory requirements imposed by the Exchange Act or the Sarbanes-Oxley Act.
These factors include, but are not limited to, the following: ● changes in global supply and demand for oil and natural gas; ● the actions of OPEC and other major oil producing countries; ● worldwide and regional economic, political and social conditions impacting the global supply and demand for oil and natural gas, which may be driven by various risks including war, terrorism, political unrest, or health epidemics (such as the global COVID-19 coronavirus outbreak); ● the price and quantity of imports of foreign oil and natural gas; ● political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity, particularly those in the Middle East, Russia, South America and Africa; ● the outbreak or escalation of military hostilities, including between Russia and Ukraine, and the potential destabilizing effect such conflicts may pose for the European continent or the global oil and natural gas markets; ● the level of global oil and natural gas exploration, production activity and inventories; ● changes in U.S. energy policy; ● weather conditions and outbreak of disease; ● technological advances affecting energy consumption; ● domestic and foreign governmental taxes, tariffs and/or regulations; ● proximity and capacity of processing, gathering, storage, oil and natural gas pipelines and other transportation facilities; ● the price and availability of competitors’ supplies of oil and natural gas in captive market areas; and ● the price and availability of alternative fuels.
These factors include, but are not limited to, the following: • changes in global supply and demand for oil and natural gas; • the actions of OPEC and other major oil producing countries; • worldwide and regional economic, political and social conditions impacting the global supply and demand for oil and natural gas, which may be driven by various risks including war, terrorism, political unrest, or health epidemics (such as the global COVID-19 coronavirus outbreak); • the price and quantity of imports of foreign oil and natural gas; • political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity, particularly those in the Middle East, Russia, South America and Africa; 24 Table of Contents • the outbreak or escalation of military hostilities, including between Russia and Ukraine, Israel and Hamas, continued instability in the Middle East, including from the Houthi rebels in Yemen, and the potential destabilizing effect such conflicts may pose for the European continent or the global oil and natural gas markets; • the level of global oil and natural gas exploration, production activity and inventories; • changes in U.S. energy policy; • weather conditions and world health events; • technological advances affecting energy consumption; • domestic, local and foreign governmental taxes, tariffs and/or regulations; • proximity and capacity of processing, gathering, storage, oil and natural gas pipelines and other transportation facilities; • the price and availability of competitors’ supplies of oil and natural gas in captive market areas; and • the price and availability of alternative fuels.
We have not, to our knowledge, experienced any material losses relating to cyber-attacks; however, there can be no assurance that we will not suffer material losses in the future.
We have not, to our knowledge, experienced any material losses relating to cyberattacks; however, there can be no assurance that we will not suffer material losses in the future.
In addition, competitors may have greater financial, technical and personnel resources that allow them to enjoy technological advantages, and that may in the future, allow them to implement new technologies before we or our operating partners can.
In addition, competitors may have greater financial, technical and personnel 26 Table of Contents resources that allow them to enjoy technological advantages, and that may in the future, allow them to implement new technologies before we or our operating partners can.
To the extent commodity prices received from production are insufficient to fund planned capital 27 ​ Table of Contents expenditures, we may be required to reduce spending or borrow or issue additional equity to cover any such shortfall.
To the extent commodity prices received from production are insufficient to fund planned capital expenditures, we may be required to reduce spending or borrow or issue additional equity to cover any such shortfall.
In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and 34 ​ Table of Contents businesses.
In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and businesses.
The Company has incurred and expects to incur additional costs to rectify the material weaknesses or any new issues that may emerge, and the existence of these issues could adversely affect our reputation or investor perceptions.
The Company could incur additional costs to rectify any new issues that may emerge, and the existence of these issues could adversely affect our reputation or investor perceptions.
The additional reporting and other obligations resulting from these material weaknesses, including any litigation or regulatory inquires that may result therefrom, increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities.
The additional reporting and other obligations resulting from such issues, including any litigation or regulatory inquires that may result therefrom, could increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities.
While the proposed rule is not yet effective and is expected to be subject to a lengthy comment process, compliance with the proposed rule as drafted could result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place strain on our personnel, systems and resources.
While the proposed rule is not yet effective, compliance with the proposed rule as drafted could result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place strain on our personnel, systems and resources.
Fluctuations in the price of our securities could contribute to the loss of all or part of your investment. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
General Risks The market price of shares of our common stock may be volatile. Fluctuations in the price of our securities could contribute to the loss of all or part of your investment. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
These developments subject our operations to increased risks. Any future terrorist attack at our operating partners’ facilities, or those of their purchasers or vendors, could have a material adverse effect on our financial condition and operations.
These developments subject our operations to increased risks. Any future terrorist attack at our operating partners’ facilities, or those of their purchasers or vendors, could have a material adverse effect on our financial condition and operations. We are subject to various laws related to data privacy and cybersecurity.
Prolonged unfavorable economic conditions or uncertainty as a result of the military conflict between Russia and Ukraine may adversely affect our business, financial condition, and results of operations. Any of the foregoing may also magnify the impact of other risks described in this Annual Report.
Prolonged unfavorable economic conditions or uncertainty as a result of the military conflict in the Middle East may adversely affect our business, financial condition, and results of operations. Any of the foregoing may also magnify the impact of other risks described in this Annual Report. World health events may materially adversely affect our business.
We filed Amendment No. 1 to the Original Form 10-Q on March 10, 2023 in order to correct the errors by restating our previously issued unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022.
Management and the audit committee concluded that these financial statements should no longer be relied upon. We filed Amendment No. 1 to the Original Form 10-Q on March 10, 2023 in order to correct the errors by restating our previously issued unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022.
In the future, the tax authorities could challenge our interpretation of laws, regulations and treaties, resulting in additional tax liability or adjustment to our income tax provision that could increase our effective tax rate. Changes to tax laws may also adversely affect our ability to attract and retain key personnel. ​ 49 ​ Table of Contents Item 1B.
In the future, the tax authorities could challenge our interpretation of laws, regulations and treaties, resulting in additional tax liability or adjustment to our income tax provision that could increase our effective tax rate which could adversely affect our operating results and cash flows. Changes to tax laws may also adversely affect our ability to attract and retain key personnel.
Specific climate legislation and regulation regarding emissions of carbon dioxide, methane, and other greenhouse gases may develop or be enacted, which could adversely affect the oil and gas industry and demand for the oil and gas produced from the Properties.
"Business - Governmental Regulation and Environmental Matters - Environmental Matters" for further discussion). 34 Table of Contents Specific climate legislation and regulation regarding emissions of carbon dioxide, methane, and other greenhouse gases may develop or be enacted, which could adversely affect the oil and gas industry and demand for the oil and gas produced from the Properties.
Availability under the Credit Agreement is limited to the aggregate commitments of the lenders, which is the least of the aggregate maximum credit amounts of the lenders, the borrowing base and the elected commitment amount chosen by us.
Availability under the Credit Agreement is limited to the aggregate commitments of the lenders, which is the least of the aggregate maximum credit amounts of the lenders, the borrowing base and the elected commitment amount chosen by us and, in the case of an elected commitment increase, consented to by the increasing lender(s).
Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors, could have material adverse impacts on our liquidity and our business, financial condition or results of operations.
Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors, could have material adverse impacts on our liquidity and our business, financial condition or results of operations. Item 1B. Unresolved Staff Comments None. 44 Table of Contents
As of December 31, 2022, we had leases that were not developed that represented 4,845 net acres potentially expiring in 2023, 2,423 net acres potentially expiring in 2024 and 628 net acres potentially expiring in 2025 and beyond. We could experience periods of higher costs as activity levels fluctuate or if commodity prices rise.
As of December 31, 2023, we had leases that were not developed that represented 5,498 net acres potentially expiring in 2024, 1,459 net acres potentially expiring in 2025 and 491 net acres potentially expiring in 2026 and beyond. We could experience periods of higher costs as activity levels fluctuate or if commodity prices rise.
Operators in the Northern Culberson-Reeves and Stanton SRAs were required to develop and implement seismic response plans, which include expanded data collection efforts, contingency responses for future seismicity, and scheduled checkpoint updates with RRC staff.
Operators in the Northern Culberson-Reeves and Stanton SRAs were required to develop and implement seismic response plans, which include expanded data collection efforts, contingency responses for future seismicity, and scheduled checkpoint updates with RRC staff. In December 2023, the RRC suspended the permits of 23 deep disposal wells in a seismic response area in the Northern Culberson-Reeves SRA.
Our exposures to credit risk, in part, are through receivables resulting from the sale of our oil and natural gas production, which operating partners market on our behalf to energy marketing companies, refineries, and their affiliates.
The inability of one or more of our operating partners to meet their obligations to us may adversely affect our financial results. Our exposures to credit risk, in part, are through receivables resulting from the sale of our oil and natural gas production, which operating partners market on our behalf to energy marketing companies, refineries, and their affiliates.
If the Manager were to lose key members of its management team, neither the Manager nor we may be able to replace the knowledge or relationships that they possess, and our ability to execute our business plan could be materially harmed.
If the Manager were to lose key members of its management team, neither the Manager nor we may be able to replace the knowledge or relationships that they possess, and our ability to execute our business plan could be materially harmed. As a result, our operations and financial condition could suffer. Oil and natural gas prices are volatile.
We have filed a registration statement on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to the Incentive Plan.
We have filed a registration statement on Form S-8 under the Securities Act of 1933, as amended (the "Securities Act") to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to the Incentive Plan. Accordingly, shares registered under such registration statements are available for sale in the open market.
The prices we receive for the oil and natural gas production associated with our working interests heavily influence our production, revenue, cash flows, profitability, reserve bookings and access to capital.
Oil and natural gas prices have fluctuated significantly, including periods of rapid and material decline, in recent years. The prices we receive for the oil and natural gas production associated with our working interests heavily influence our production, revenue, cash flows, profitability, reserve bookings and access to capital.
As a result, our operations and financial condition could suffer. 26 ​ Table of Contents Oil and natural gas prices are volatile. Extended declines in such prices have adversely affected, and could in the future adversely affect, our business, financial position, results of operations and cash flow.
Extended declines in such prices have adversely affected, and could in the future adversely affect, our business, financial position, results of operations and cash flow. The oil and natural gas markets are very volatile, and we cannot predict future oil and natural gas prices.
We believe that we and the Manager have positive relations with their information technology vendors and maintain adequate anti-virus and malware software and controls; however, any interruptions to our or the Manager’s arrangements with third parties for their computing and communications infrastructure or any other interruptions to, or breaches of, their information systems could lead to data corruption, communication interruption, loss of sensitive or confidential information or otherwise significantly disrupt our business operations.
We believe that we and the Manager have positive relations with their information and operational technology vendors; however, any interruptions to our or the Manager’s arrangements with third parties for their computing, communications, or operational infrastructure or any other interruptions to, or breaches of, their information or operational systems could lead to data corruption, communication interruption, corruption or loss of sensitive or confidential information, misdirected wire transfers, and an inability to perform services for our customers; complete or settle transactions; maintain our books and records; prevent environmental damage; and maintain communications or operations; or otherwise significantly disrupt our business operations.
In addition, the shares of our common stock reserved for future issuance under the Granite Ridge 2022 Omnibus Incentive Plan (the “Incentive Plan”) will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting requirements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate. 38 Table of Contents In addition, the shares of our common stock reserved for future issuance under the Granite Ridge 2022 Omnibus Incentive Plan (the “Incentive Plan”) will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting requirements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144.
Hydraulic fracturing is used to stimulate production of natural gas and/or oil from dense subsurface rock formations. The EPA has asserted authority over certain hydraulic-fracturing activities that use diesel fuel under the SDWA.
Hydraulic fracturing is an important and commonly used process that we anticipate will be engaged in by some or all opportunities in which it invests. Hydraulic fracturing is used to stimulate production of natural gas and/or oil from dense subsurface rock formations. The EPA has asserted authority over certain hydraulic-fracturing activities that use diesel fuel under the SDWA.
Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock.
Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock.
The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders. The market price of shares of our common stock may be volatile.
In the future, we may also issue securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock.
If not remediated, the material weaknesses could result in further material misstatements in our consolidated financial statements. Management is in the process of implementing steps that it believes will remediate these material weaknesses it has identified. These steps may, however, not be sufficient to remediate the existing weaknesses or prevent a future weakness.
If not remediated, the material weaknesses could result in further material misstatements in our consolidated financial statements. Management implemented steps that remediated these material weaknesses effective as of December 31, 2023. These steps may, however, not be sufficient to prevent a future weakness.
Finally, an operator of the Properties may have the right, if another non-operator fails to pay its share of costs because of its insolvency or otherwise, to require us to pay its proportionate share of the defaulting party’s share of costs. 25 ​ Table of Contents The inability of one or more of our operating partners to meet their obligations to us may adversely affect our financial results.
Finally, an operator of the Properties may have the right, if another non-operator fails to pay its share of costs because of its insolvency or otherwise, to require us to pay its proportionate share of the defaulting party’s share of costs.
Certain of our unaudited financial statements for the three and nine months ended September 30, 2022 were required to be restated, and our management identified material weaknesses in our internal control over financial reporting.
Certain of our unaudited financial statements for the three and nine months ended September 30, 2022 were required to be restated, and our management identified material weaknesses in our internal control over financial reporting. Management implemented steps that remediated these material weaknesses effective as of December 31, 2023. These steps may, however, not be sufficient to prevent a future weakness.
The stock market in general and the NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and the NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected.
This may cause us to restrict our operations, which might severely impact our financial position. The occurrence of a significant event, not fully insured against, could have a material adverse effect on our financial condition and results of operations. We conduct business in a highly competitive industry. The oil and natural gas industry is highly competitive.
We may not be able to secure additional insurance or bonding that might be required by new governmental regulations. This may cause us to restrict our operations, which might severely impact our financial position. The occurrence of a significant event, not fully insured against, could have a material adverse effect on our financial condition and results of operations.
Our business, financial condition, and results of operations may be materially adversely affected by the negative global and economic impact resulting from the conflict in Ukraine or any other geopolitical tensions. U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.
Our business, financial condition, and results of operations may be materially adversely affected by the negative global and economic impact resulting from these conflicts or any other geopolitical tensions.
In addition, a decline in the market price of our common stock could adversely affect our ability to issue additional securities and to obtain additional financing in the future. 46 ​ Table of Contents Future issuances of debt securities and/or equity securities may adversely affect us, including the market price of our common stock, and may be dilutive to our existing stockholders.
Accordingly, holders of our common stock 39 Table of Contents may experience a loss as a result of a decline in the market price of our common stock. In addition, a decline in the market price of our common stock could adversely affect our ability to issue additional securities and to obtain additional financing in the future.
We cannot assure you that we will be able to find or acquire and develop additional reserves at an acceptable cost. 30 ​ Table of Contents We may acquire significant amounts of unproved property to further our development efforts.
Future oil and natural gas production, therefore, is highly dependent upon our level of success in acquiring or finding additional reserves that are economically recoverable. We cannot assure you that we will be able to find or acquire and develop additional reserves at an acceptable cost. We may acquire significant amounts of unproved property to further our development efforts.
The number of shares of our common stock expected to be reserved for future issuance under our equity incentive plans is 6,500,000, which represented approximately 4.9% of the shares of our common stock that are outstanding following the consummation of the Business Combination.
The maximum number of shares of our common stock reserved for issuance to directors, officers, employees and consultants or advisors employed by or providing service to the Company under our equity incentive plans is 6.5 million, which represented approximately 4.9% of the shares of our common stock outstanding following the consummation of the Business Combination.
No assurance can be given that we will be able to maintain insurance in the future at rates that we consider reasonable, and we may elect to maintain minimal or no insurance coverage. We may not be able to secure additional insurance or bonding that might be required by new governmental regulations.
In addition, some forms of insurance may become unavailable in the future or unavailable on terms that we believe are economically acceptable. No assurance can be given that we will be able to maintain insurance in the future at rates that we consider reasonable, and we may elect to maintain minimal or no insurance coverage.
If we do not effectively remediate these material weaknesses or if we otherwise fail to maintain effective disclosure controls and procedures or internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely impacted, which in turn may adversely affect the market price of our common stock. ​ Our management and audit committee concluded that our previously issued unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022, included in the Company’s Quarterly Report on Form 10-Q filed on November 14, 2022 (the “Original Form 10-Q”), were materially misstated.
Our management and audit committee concluded that our previously issued unaudited condensed combined financial statements as of and for the three and nine month periods ended September 30, 2022, included in the Company’s Quarterly Report on Form 10-Q filed on November 14, 2022 (the “Original Form 10-Q”), were materially misstated.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the rules of the NYSE. We could be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in the United States or other jurisdictions.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the rules of the NYSE.

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Item 2. Properties

Properties — owned and leased real estate

31 edited+7 added−1 removed32 unchanged
Biggest changeOur wells within the Eagle Ford Basin are classified as either oil or natural gas wells. ​ 54 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Gross Productive Wells Net Productive Wells ​ Oil Natural Gas Total Oil Natural Gas Total Permian 448 ​ 2 450 40.82 ​ 0.02 40.84 Eagle Ford 105 ​ 81 186 19.08 ​ 4.26 23.34 Bakken 907 ​ 1 908 37.73 ​ 0.20 37.93 Haynesville — ​ 62 62 — ​ 12.18 12.18 DJ 681 ​ 70 751 16.43 ​ 2.16 18.59 Total 2,141 216 2,357 114.06 18.82 132.88 ​ The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Gross Productive Wells Net Productive Wells ​ Oil Natural Gas Total Oil Natural Gas Total Permian 307 ​ 1 308 26.09 ​ 0.19 26.28 Eagle Ford 95 ​ 72 167 16.38 ​ 3.80 20.18 Bakken 866 ​ 1 867 35.96 ​ 0.20 36.16 Haynesville — ​ 53 53 — ​ 9.43 9.43 DJ 557 ​ 68 625 14.50 ​ 2.09 16.59 Total 1,825 195 2,020 92.93 15.71 108.64 ​ The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Gross Productive Wells Net Productive Wells ​ Oil Natural Gas Total Oil Natural Gas Total Permian 260 2 262 18.43 0.39 18.82 Eagle Ford 83 70 153 16.03 3.80 19.83 Bakken 831 — 831 35.31 — 35.31 Haynesville — 50 50 — 8.97 8.97 DJ — — — — — — SCOOP/STACK ​ 41 ​ 8 ​ 49 ​ 0.60 ​ 0.14 ​ 0.74 Total 1,215 130 1,345 70.37 13.30 83.67 ​ Developed and Undeveloped Acreage The following table summarizes our estimated gross and net developed and undeveloped acreage by area at December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Developed Acreage Undeveloped Acreage Total Acreage ​ Gross Net Gross Net Gross Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Permian 40,132 ​ 5,931 ​ 4,486 ​ 2,731 44,618 8,662 Eagle Ford 21,355 ​ 3,196 ​ 11,558 ​ 3,302 32,913 6,498 Bakken 169,897 ​ 13,167 ​ 1,863 ​ 1,863 171,760 15,030 Haynesville 3,884 ​ 2,298 ​ — ​ — 3,884 2,298 DJ 23,426 ​ 1,822 ​ — ​ — 23,426 1,822 Total: 258,694 26,414 17,907 7,896 276,601 34,310 ​ 55 ​ Table of Contents Acreage Expirations As a non-operator, we are subject to lease expirations if an operator does not commence the development of operations within the agreed terms of our leases.
Biggest changeDecember 31, 2023 Gross Productive Wells Net Productive Wells Oil Natural Gas Total Oil Natural Gas Total Permian 575 1 576 46.30 — 46.30 Eagle Ford 120 93 213 24.80 6.90 31.70 Bakken 938 — 938 39.00 — 39.00 Haynesville — 117 117 — 16.40 16.40 DJ 967 15 982 42.20 0.90 43.10 Total 2,600 226 2,826 152.30 24.20 176.50 The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2022: December 31, 2022 Gross Productive Wells Net Productive Wells Oil Natural Gas Total Oil Natural Gas Total Permian 448 2 450 40.82 0.02 40.84 Eagle Ford 105 81 186 19.08 4.26 23.34 Bakken 907 1 908 37.73 0.20 37.93 Haynesville — 62 62 — 12.18 12.18 DJ 681 70 751 16.43 2.16 18.59 Total 2,141 216 2,357 114.06 18.82 132.88 The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2021: December 31, 2021 Gross Productive Wells Net Productive Wells Oil Natural Gas Total Oil Natural Gas Total Permian 307 1 308 26.09 0.19 26.28 Eagle Ford 95 72 167 16.38 3.80 20.18 Bakken 866 1 867 35.96 0.20 36.16 Haynesville — 53 53 — 9.43 9.43 DJ 557 68 625 14.50 2.09 16.59 Total 1,825 195 2,020 92.93 15.71 108.64 51 Table of Contents Developed and Undeveloped Acreage The following table summarizes our estimated gross and net developed and undeveloped acreage by area at December 31, 2023.
NSAI is a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies. NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699. Within NSAI, the technical expert primarily responsible for preparing the estimates set forth in the NSAI 2022 Reserve Report is Mr. Nathan Shahan.
NSAI is a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies. NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699. Within NSAI, the technical expert primarily responsible for preparing the estimates set forth in the NSAI 2023 Reserve Report is Mr. Nathan Shahan.
Drilling and Development Activities The following table sets forth the number of gross and net productive wells drilled in the years ended December 31, 2022, 2021 and 2020. The number of wells drilled refers to the number of wells completed at any time during the fiscal year, regardless of when drilling was initiated.
Drilling and Development Activities The following table sets forth the number of gross and net productive wells drilled in the years ended December 31, 2023, 2022 and 2021. The number of wells drilled refers to the number of wells completed at any time during the fiscal year, regardless of when drilling was initiated.
In preparing its reports, NSAI evaluated properties representing all of our proved reserves at December 31, 2022 in accordance with the rules and regulations of the SEC applicable to companies involved in oil and natural gas producing activities.
In preparing its reports, NSAI evaluated properties representing all of our proved reserves at December 31, 2023 in accordance with the rules and regulations of the SEC applicable to companies involved in oil and natural gas producing activities.
The following table provides a reconciliation of the pre-tax PV10% value of our SEC Pricing Proved Reserves as of December 31, 2022, 2021 and 2020 to the Standardized Measure of Discounted Future Net Cash Flows.
The following table provides a reconciliation of the pre-tax PV10% value of our SEC Pricing Proved Reserves as of December 31, 2023, 2022 and 2021 to the Standardized Measure of Discounted Future Net Cash Flows.
Shahan meets or exceeds 52 ​ Table of Contents the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.
Shahan meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.
With 65% of the PV-10 value of our total proved reserves supported by producing wells, we believe we will have sufficient cash flows and adequate liquidity to execute our development plan.
With 72% of the PV-10 value of our total proved reserves supported by producing wells, we believe we will have sufficient cash flows and adequate liquidity to execute our development plan.
In those instances, we, together with the Manager, still review each lease and drilling opportunity on a lease-by-lease basis and well-by-well basis to ensure that the package as a whole meets our acquisition criteria and drilling expectations. See Note 5 of the Notes to the Consolidated Financial Statements regarding our recent acquisition activity. ​
In those instances, we, together with the Manager, still review each lease and drilling opportunity on a lease-by-lease basis and well-by-well basis to ensure that the package as a whole meets our acquisition criteria and drilling expectations. See Note 5 of the Notes to the Consolidated Financial Statements regarding our recent acquisition activity. 52 Table of Contents
The following discussion of our properties should be read in conjunction with the accompanying audited consolidated financial statements and related notes included elsewhere in this Annual Report. Please see the section entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Results of Operations” for information on our production, prices, and production cost.
The following discussion of our properties should be read in conjunction with the accompanying audited consolidated financial statements and related notes included elsewhere in this Annual 45 Table of Contents Report. Please see the section entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Results of Operations” for information on our production, prices, and production cost.
Estimated Net Proved Reserves The tables below summarize our estimated net proved reserves at December 31, 2022, based on reports prepared by Netherland, Sewell & Associates, Inc. (“NSAI”), our third-party independent reserve engineers.
Estimated Net Proved Reserves The tables below summarize our estimated net proved reserves at December 31, 2023, based on reports prepared by Netherland, Sewell & Associates, Inc. (“NSAI”), our third-party independent reserve engineers.
We use this measure when assessing the potential return on investment related to our oil and natural gas properties. PV-10, however, is not a substitute for the Standardized Measure of discounted future net cash flows.
We use this measure when assessing the potential return on investment related to our oil and natural gas properties. PV-10, however, is not a substitute for the 46 Table of Contents Standardized Measure of discounted future net cash flows.
In addition, estimates of reserves are subject to revision based upon actual production, results of future development and exploration activities, prevailing oil and natural gas prices, operating costs and other factors. The revisions may be material.
In addition, estimates of reserves are subject to revision based 48 Table of Contents upon actual production, results of future development and exploration activities, prevailing oil and natural gas prices, operating costs and other factors. The revisions may be material.
(3) Pre-tax PV10% or “PV-10”, is a non-GAAP financial measure and is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable U.S. GAAP measure. The amounts disclosed in the table above include net abandonment costs of $16.0 million as of December 31, 2022. See “Reconciliation of PV-10 to Standardized Measure” below.
(3) Pre-tax PV10% or “PV-10”, is a non-GAAP financial measure and is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable U.S. GAAP measure. The amounts disclosed in the table above include net abandonment costs of $22.7 million as of December 31, 2023. See “Reconciliation of PV-10 to Standardized Measure” below.
Based on SEC pricing as of December 31, 2022, estimated future development costs required for the development of proved undeveloped reserves are projected to be approximately $233.7 million over the next five years. Independent Petroleum Engineers We have engaged NSAI to independently prepare our estimated net proved reserves.
Based on SEC pricing as of December 31, 2023, estimated future development costs required for the development of proved undeveloped reserves are projected to be approximately $343.9 million over the next five years. Independent Petroleum Engineers We have engaged NSAI to independently prepare our estimated net proved reserves.
See Note 5 of the Notes to the Consolidated Financial Statements for additional discussion of acquisitions during 2022. ● Conversion to proved developed reserves. In 2022, development of oil and natural gas properties resulted in the conversion of 13,831 MBoe from proved undeveloped reserves to proved developed reserves.
See Note 5 of the Notes to Consolidated Financial Statements for additional discussion of acquisitions during 2023. • Conversion to proved developed reserves. In 2023, development of oil and natural gas properties resulted in the conversion of 9,562 MBoe from proved undeveloped reserves to proved developed reserves.
All of our recorded proved undeveloped reserves are scheduled to be drilled within five years of the date of their initial recognition. At December 31, 2022, the PV-10 value of our proved undeveloped reserves amounted to 34% of the PV-10 value of our total proved reserves. There are numerous uncertainties regarding the proved and undeveloped reserves.
All of our recorded proved undeveloped reserves are scheduled to be drilled within five years of the date of their initial recognition. 47 Table of Contents At December 31, 2023, the PV-10 value of our proved undeveloped reserves amounted to 28% of the PV-10 value of our total proved reserves. There are numerous uncertainties regarding the proved and undeveloped reserves.
During the year ended December 31, 2022, we incurred development costs of approximately $ 150.7 million related to these locations. ● Revisions of previous estimates .
During the year ended December 31, 2023, we incurred development costs of approximately $79 million related to these locations. • Revisions of previous estimates .
The table above assumes prices and costs discounted using an annual discount rate of 10% without future escalation, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, or federal income taxes.
The table above assumes prices and costs discounted using an annual discount rate of 10% without future escalation, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, or federal income taxes. The information in the table above does not give any effect to or reflect our commodity derivatives.
PV-10 is a computation of the Standardized Measure of discounted future net cash flows on a pre-tax basis. PV-10 is equal to the Standardized Measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent.
PV-10 is equal to the Standardized Measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent.
See Note 2 of the Notes to the Consolidated Financial Statements for additional discussion of our proved reserves. 51 ​ Table of Contents Proved Undeveloped Reserves At December 31, 2022, we had approximately 19,648 MBoe of proved undeveloped reserves as compared to 23,008 MBoe at December 31, 2021.
See Note 2 of the Notes to the Consolidated Financial Statements for additional discussion of our proved reserves. Proved Undeveloped Reserves At December 31, 2023, we had approximately 22,361 MBoe of proved undeveloped reserves as compared to 19,648 MBoe at December 31, 2022.
In 2022, proved undeveloped reserves increased by 7,512 MBoe as a result of new proved undeveloped locations added primarily in the Permian and Eagle Ford Basins. ● Acquisition of Reserves . In 2022, acquisitions of proved undeveloped reserves of 4,068 MBoe were primarily attributable to the acquisitions of oil and natural gas properties in the Permian Basin.
In 2023, proved undeveloped reserves increased by 11,144 MBoe as a result of new proved undeveloped locations added primarily in the Permian Basin. • Acquisition of Reserves . In 2023, acquisitions of proved undeveloped reserves of 4,207 MBoe were primarily attributable to the acquisitions of oil and natural gas properties in the Permian Basin.
In 2022, revisions of previous estimates decreased proved undeveloped reserves by 1,109 MBoe primarily due to the removal of undeveloped drilling locations as they were no longer expected to be developed within five years of their initial recognition. The decrease was partially offset by an increase in proved undeveloped reserves due to higher oil and natural gas prices.
In 2023, revisions of previous estimates decreased proved undeveloped reserves by 2,580 MBoe primarily due to the removal of undeveloped drilling locations as they were no longer expected to be developed within five years of their initial recognition as well as lower oil and natural gas prices.
Standardized Measure Reconciliation ​ ​ ​ ​ ​ (in thousands) December 31, 2022 Pre-tax present value of estimated future net revenues (Pre-Tax PV10%) ​ $ 1,559,123 Future income taxes, discounted at 10% (323,197) Standardized measure of discounted future net cash flows ​ $ 1,235,926 ​ ​ ​ ​ ​ (in thousands) December 31, 2021 Pre-tax present value of estimated future net revenues (Pre-Tax PV10%) ​ $ 778,230 Future income taxes, discounted at 10% (3,879) Standardized measure of discounted future net cash flows ​ $ 774,351 ​ ​ ​ ​ ​ (in thousands) December 31, 2020 Pre-tax present value of estimated future net revenues (Pre-Tax PV10%) ​ $ 197,146 Future income taxes, discounted at 10% (1,563) Standardized measure of discounted future net cash flows ​ $ 195,583 ​ Uncertainties are inherent in estimating quantities of proved reserves, including many risk factors beyond our control.
Standardized Measure Reconciliation December 31, (in thousands) 2023 2022 2021 Pre-tax present value of estimated future net revenues (Pre-Tax PV10%) $ 856,428 $ 1,559,123 $ 778,230 Future income taxes, discounted at 10% (134,520) (293,196) (3,879) Standardized measure of discounted future net cash flows $ 721,908 $ 1,265,927 $ 774,351 Uncertainties are inherent in estimating quantities of proved reserves, including many risk factors beyond our control.
A significant majority of our wells in the Permian, Bakken, and DJ Basins, and wells we historically owned in the SCOOP/STACK Basins are classified as oil wells, although they also produce natural gas and condensate. All of our wells in the Haynesville Basin are classified as natural gas wells.
A significant majority of our wells in the Permian, Bakken, and DJ Basins are classified as oil wells, 50 Table of Contents although they also produce natural gas and condensate. All of our wells in the Haynesville Basin are classified as natural gas wells. Our wells within the Eagle Ford Basin are classified as either oil or natural gas wells.
As a non-operator, we do not invest in exploratory wells, and instead invest exclusively in development wells. While there is the potential that development wells may yield dry holes, we have not encountered this.
As a non-operator, we do not invest in exploratory wells, and instead invest exclusively in development wells. While there is the potential that development wells may yield dry holes, we have not encountered this, other than mechanical dry holes. Therefore, drilling activity related to exploratory wells and dry holes was not applicable to us in the years presented below.
These wells are not included in the table above. The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2022.
At December 31, 2023, we had 212 gross (15.99 net) wells for which drilling was either in-progress or were pending completion. These wells are not included in the table above. The following table summarizes our cumulative gross and net productive oil and natural gas wells by basin at December 31, 2023.
The information in the table above does not give any effect to or reflect our commodity derivatives. 50 ​ Table of Contents Reconciliation of PV-10 to Standardized Measure PV-10 is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable U.S. GAAP financial measure for proved reserves calculated using SEC pricing.
Reconciliation of PV-10 to Standardized Measure PV-10 is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable U.S. GAAP financial measure for proved reserves calculated using SEC pricing. PV-10 is a computation of the Standardized Measure of discounted future net cash flows on a pre-tax basis.
A reconciliation of the change in proved undeveloped reserves during 2022 is as follows: ​ ​ ​ ​ MBoe Estimated proved undeveloped reserves at 12/31/2021 23,008 Extensions and discoveries 7,512 Acquisition of reserves 4,068 Divestiture of reserves — Conversion to proved developed reserves (13,831) Revisions of previous estimates (1,109) Estimated proved undeveloped reserves at 12/31/2022 19,648 ● Extensions and discoveries .
A reconciliation of the change in proved undeveloped reserves during 2023 is as follows: MBoe Estimated proved undeveloped reserves at December 31, 2022 19,648 Extensions and discoveries 11,144 Acquisition of reserves 4,207 Divestiture of reserves (496) Conversion to proved developed reserves (9,562) Revisions of previous estimates (2,580) Estimated proved undeveloped reserves at December 31, 2023 22,361 __________________________________________ • Extensions and discoveries .
The following table sets forth the future expiration amounts of our gross and net undeveloped acreage at December 31, 2022 by area: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2024 2025 and Thereafter ​ Gross Net Gross Net Gross Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Permian — ​ — ​ 1,845 ​ 2,103 ​ 2,641 ​ 628 Eagle Ford (1) 11,558 ​ 3,302 ​ — ​ — ​ — ​ — Bakken 1,543 ​ 1,543 ​ 320 ​ 320 ​ — ​ — Haynesville — ​ — ​ — ​ — ​ — ​ — DJ — ​ — ​ — ​ — ​ — ​ — Total: 13,101 4,845 2,165 2,423 2,641 628 (1) These acres are subject to continuous drilling obligations.
The following table sets forth the future expiration amounts of our gross and net undeveloped acreage at December 31, 2023 by area: 2024 2025 2026 and Thereafter Gross Net Gross Net Gross Net Permian 2,245 2,147 3,352 1,229 1,680 455 Eagle Ford (1) 6,305 2,845 — — 282 28 Bakken 320 320 — — — — Haynesville 4,549 186 3,859 230 854 8 DJ — — — — — — Total: 13,419 5,498 7,211 1,459 2,816 491 __________________________________________ (1) These acres are subject to continuous drilling obligations.
The Manager’s EVP — Engineering has a degree in petroleum engineering from the University of Calgary, and has over 20 years of oil and gas experience, with more than 15 years focused on reservoir engineering. 53 ​ Table of Contents The Manager’s technical team meets with our independent third-party engineering firm to review properties and discuss evaluation methods and assumptions used in the proved reserves estimates, in accordance with the Manager’s prescribed internal control procedures.
The Manager’s technical team meets with our independent third-party engineering firm to review properties and discuss evaluation methods and assumptions used in the proved reserves estimates, in accordance with the Manager’s prescribed internal control procedures.
The following table sets forth summary information by reserve category with respect to estimated proved reserves at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SEC Pricing Proved Reserves (1) ​ ​ Reserve Volumes ​ PV-10 (3) ​ Oil Natural Gas Total Amount ​ Reserve Category (MBbls) (MMcf) (MBoe) (2) % ​ (in thousands) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved developed producing 15,376 ​ 89,418 30,279 60% ​ $ 1,008,786 65% Proved developed non-producing 338 ​ 1,616 607 1% ​ ​ 21,779 1% Proved undeveloped 9,780 ​ 59,205 19,648 39% ​ ​ 528,558 34% Total proved 25,494 150,239 50,534 100% ​ $ 1,559,123 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total proved developed 15,714 91,034 30,886 61% ​ $ 1,030,565 66% (1) The SEC Pricing Proved Reserves table above values oil and natural gas reserve quantities and related discounted future net cash flows as of December 31, 2022 based on average prices of $94.14 per barrel of oil and $6.36 per MMbtu of natural gas.
The following table sets forth summary information by reserve category with respect to estimated proved reserves at December 31, 2023: SEC Pricing Proved Reserves (1) Reserve Volumes PV-10 (3) Reserve Category Oil (MBbls) Natural Gas (MMcf) Total (MBoe) (2) % Amount (in thousands) % Proved developed producing 14,947 96,746 31,071 58 % $ 616,220 72 % Proved developed non-producing 25 87 40 — % 1,218 — % Proved undeveloped 12,345 60,095 22,361 42 % 238,990 28 % Total proved 27,317 156,928 53,472 100 % $ 856,428 100 % Total proved developed 14,972 96,833 31,111 58 % $ 617,438 72 % __________________________________________ (1) The SEC Pricing Proved Reserves table above values oil and natural gas reserve quantities and related discounted future net cash flows as of December 31, 2023 based on average prices of $78.21 per barrel of oil and $2.64 per MMbtu of natural gas.
Removed
Therefore, drilling activity related to exploratory wells and dry holes was not applicable to us in the years presented below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 2020 ​ Gross Net Gross Net Gross Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Productive development wells 265 ​ 20.78 ​ 213 ​ 14.18 ​ 113 ​ 10.54 ​ At December 31, 2022, we had 147 gross (16.73 net) wells for which drilling was either in-progress or were pending completion.
Added
The Manager’s EVP — Engineering has a degree in petroleum engineering from the University of Calgary, and has over 20 years of oil and gas experience, with more than 15 years focused on reservoir engineering.
Added
Selected Oil and Natural Gas Information Production, Price and Cost Data The price that the Company receives for the oil and natural gas it produces is largely a function of market supply and demand. Demand has historically been affected by global economic conditions, including recession concerns, conflicts involving oil producing regions, and weather and other seasonal conditions.
Added
The following table sets forth production, price and cost data with respect to the Company's properties. These amounts represent the Company's historical results of operations without making pro forma adjustments for any acquisitions, divestitures or drilling activity that occurred during the respective years.
Added
Due to normal production declines, increases or decreases in drilling activity and the effects of 49 Table of Contents acquisitions or divestitures, the historical information presented below should not be interpreted as being indicative of future results.
Added
Year Ended December 31, 2023 2022 2021 Net Production: Oil (MBbl) 4,162 3,656 3,413 Natural gas (MMcf) 28,266 21,351 14,861 Total (MBoe) (1) 8,873 7,215 5,890 Average Daily Production: Oil (Bbl) 11,404 10,016 9,351 Natural gas (Mcf) 77,442 58,496 40,715 Total (Boe) (1) 24,311 19,765 16,137 Average Sales Prices: Oil (per Bbl) $ 76.18 $ 92.50 $ 63.70 Natural gas and related product sales (per Mcf) 2.72 7.46 5.04 Realized price (per Boe) 44.41 68.94 49.27 Costs and Expenses (per Boe): Lease operating expenses $ 6.82 $ 6.19 $ 4.47 Production and ad valorem taxes $ 3.12 $ 4.24 $ 3.07 Depletion and accretion $ 18.11 $ 14.66 $ 16.07 General and administrative $ 3.15 $ 1.97 $ 1.73 __________________________________________ (1) Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.
Added
December 31, 2023 2022 2021 Gross Net Gross Net Gross Net Productive development wells 314 24.55 265 20.78 213 14.18 Dry development wells (1) 2 0.57 — — — — (1) The dry hole category includes 2 (0.57 net) wells that were unsuccessful due to mechanical issues for the years ended December 31, 2023.
Added
Developed Acreage Undeveloped Acreage Total Acreage Gross Net Gross Net Gross Net Permian 44,738 6,462 6,166 3,131 50,904 9,593 Eagle Ford 24,025 3,936 6,587 2,873 30,612 6,809 Bakken 169,897 13,167 320 320 170,217 13,487 Haynesville 49,248 5,077 9,262 425 58,510 5,502 DJ 21,564 2,086 — — 21,564 2,086 Total: 309,472 30,728 22,335 6,749 331,807 37,477 Acreage Expirations As a non-operator, we are subject to lease expirations if an operator does not commence the development of operations within the agreed terms of our leases.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−1 removed0 unchanged
Biggest changeItem 3. Legal Proceedings Our Company was not a party to any material legal proceedings during the year ended December 31, 2022. In the future, the Company may be subject from time to time to litigation claims and governmental and regulatory proceedings arising in the ordinary course of business. ​ Item 4.
Biggest changeItem 3. Legal Proceedings Our Company was not a party to any material legal proceedings during the year ended December 31, 2023. In the future, the Company may be subject from time to time to litigation claims and governmental and regulatory proceedings arising in the ordinary course of business. Item 4. Mine Safety Disclosures Not applicable. PART II
Removed
Mine Safety Disclosures Not applicable. ​ 56 ​ Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−6 removed0 unchanged
Biggest changeThe following table sets forth our share repurchase activity for each period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate dollar value ​ ​ ​ ​ ​ ​ ​ ​ of shares that may yet ​ ​ ​ ​ ​ ​ Total number of shares ​ be purchased under ​ ​ Total number of ​ Average price ​ purchased as part of ​ the plans or programs Period shares purchased paid per share publicly announced plans (in millions) October 1, 2022 - October 31, 2022 ​ — ​ — ​ — ​ — November 1, 2022 - November 30, 2022 — — ​ — ​ — December 1, 2022 - December 31, 2022 25,920 $ 8.80 ​ 25,920 ​ $49.8 ​
Biggest changeThe following table sets forth our share repurchase activity for each period presented: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) October 1, 2023 - October 31, 2023 1,009,656 $ 6.14 1,009,656 $ — November 1, 2023 - November 30, 2023 1,316,575 $ 6.15 1,316,575 $ — December 1, 2023 - December 31, 2023 1,510,969 $ 6.10 1,510,969 $ — Item 6. [RESERVED]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities Market Information Our common stock and warrants are listed and traded on the New York Stock Exchange under the symbols “GRNT” and “GRNT.WS,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities Market Information Our common stock is listed and traded on the New York Stock Exchange under the symbols “GRNT”. As of March 5, 2024, there were 74 holders of record of our common stock.
Repurchases of Equity Securities In December 2022, the Company announced that its Board of Directors approved a share repurchase program for up to $50.0 million of the Company’s common stock through December 31, 2023.
Dividend Policy We expect that Granite Ridge will pay quarterly cash dividends totaling approximately $60 million per fiscal year. For information about dividends, see "Item 8. Financial Statements and Supplementary Data." Repurchases of Equity Securities In December 2022, the Company announced that its Board of Directors approved a share repurchase program for up to $50.0 million of the Company’s common.
Removed
As of March 22, 2023, there were 76 holders of record of our common stock and one holder of record of our warrants. Dividend Policy During the fourth quarter of 2022, our Board of Directors declared a dividend of $0.08 per share of our common stock.
Added
The stock repurchase program terminated on December 31, 2023.
Removed
The dividend was payable on December 15, 2022 to stockholders of record on December 1, 2022. The initial common dividend was prorated to October 24, 2022, the effective date of our Business Combination, which equaled $0.08 per common share for the quarter.
Removed
On February 21, 2023, our Board of Directors declared a cash dividend of $0.11 per share for the first quarter of 2023 that was paid on March 15, 2023 to stockholders of record as of March 1, 2023. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board of Directors.
Removed
Our Board of Directors’ determination with respect to any such dividends, including the record date, the payment date and the actual amount of the dividend, will depend upon our profitability and financial condition, contractual restrictions (including restrictions under our Credit Agreement), restrictions imposed by applicable law and other factors that the Board of Directors deems relevant at the time of such determination.
Removed
Under the stock repurchase program, the Company will repurchase shares of its common stock from time to time in open market transactions or in privately negotiated transactions as permitted under applicable rules and regulations.
Removed
The Board of Directors of the Company may limit or terminate the stock repurchase program at any time without prior notice, but, with no further action of the Board of Directors of the Company, the stock repurchase program will terminate on December 31, 2023.

Item 7. Management's Discussion & Analysis

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

76 edited+42 added−56 removed60 unchanged
Biggest changeBecause of normal production declines, increased or decreased drilling activities, fluctuations in commodity prices and the effects of acquisitions and divestitures, the historical information presented below should not be interpreted as being indicative of future results. 62 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Net Sales (in thousands): ​ ​ ​ ​ ​ ​ Oil sales ​ $ 338,163 ​ $ 215,250 Natural gas and related product sales ​ ​ 159,254 ​ ​ 74,943 Revenues ​ ​ 497,417 ​ ​ 290,193 ​ ​ ​ ​ ​ ​ ​ Net Production: ​ ​ ​ ​ ​ ​ Oil (MBbl) ​ ​ 3,656 ​ ​ 3,413 Natural gas (MMcf) ​ ​ 21,351 ​ ​ 14,861 Total (MBoe) (1) ​ ​ 7,215 ​ ​ 5,890 ​ ​ ​ ​ ​ ​ ​ Average Daily Production: ​ ​ ​ ​ ​ ​ Oil (Bbl) ​ ​ 10,016 ​ ​ 9,351 Natural gas (Mcf) ​ ​ 58,496 ​ ​ 40,715 Total (Boe) (1) ​ ​ 19,765 ​ ​ 16,137 ​ ​ ​ ​ ​ ​ ​ Average Sales Prices: ​ ​ ​ ​ ​ ​ Oil (per Bbl) ​ $ 92.50 ​ $ 63.07 Effect of loss on settled oil derivatives on average price (per Bbl) ​ ​ (6.48) ​ ​ (5.58) Oil net of settled oil derivatives (per Bbl) ​ ​ 86.02 ​ ​ 57.49 ​ ​ ​ ​ ​ ​ ​ Natural gas and related product sales (per Mcf) ​ ​ 7.46 ​ ​ 5.04 Effect of loss on settled natural gas derivatives on average price (per Mcf) ​ ​ (0.88) ​ ​ (0.42) Natural gas and related product sales net of settled natural gas derivatives (per Mcf) ​ ​ 6.58 ​ ​ 4.62 ​ ​ ​ ​ ​ ​ ​ Realized price on a Boe basis excluding settled commodity derivatives ​ ​ 68.94 ​ ​ 49.27 Effect of loss on settled commodity derivatives on average price (per Boe) ​ ​ (5.88) ​ ​ (4.28) Realized price on a Boe basis including settled commodity derivatives ​ ​ 63.06 ​ ​ 44.99 ​ ​ ​ ​ ​ ​ ​ Operating Expenses (in thousands): ​ ​ ​ ​ ​ ​ Lease operating expenses ​ $ 44,678 ​ $ 26,333 Production and ad valorem taxes ​ ​ 30,619 ​ ​ 18,066 Depletion and accretion expense ​ ​ 105,752 ​ ​ 94,661 General and administrative ​ ​ 14,223 ​ ​ 10,179 ​ ​ ​ ​ ​ ​ ​ Costs and Expenses (per Boe): ​ ​ ​ ​ ​ ​ Lease operating expenses ​ $ 6.19 ​ $ 4.47 Production and ad valorem taxes ​ ​ 4.24 ​ ​ 3.07 Depletion and accretion ​ ​ 14.66 ​ ​ 16.07 General and administrative ​ ​ 1.97 ​ ​ 1.73 ​ ​ ​ ​ ​ ​ ​ Net Producing Wells at Period-End: ​ ​ 132.88 ​ ​ 108.64 (1) Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas. ​ Oil, Natural Gas and Related Product Sales Our revenues vary from year to year primarily due to changes in realized commodity prices and production volumes.
Biggest changeYear Ended December 31, 2023 2022 Net Sales (in thousands): Oil sales $ 317,099 $ 338,163 Natural gas and related product sales 76,970 159,254 Revenues 394,069 497,417 Net Production: Oil (MBbl) 4,162 3,656 Natural gas (MMcf) 28,266 21,351 Total (MBoe) (1) 8,873 7,215 Average Daily Production: Oil (Bbl) 11,404 10,016 Natural gas (Mcf) 77,442 58,496 Total (Boe) (1) 24,311 19,765 Average Sales Prices: Oil (per Bbl) $ 76.18 $ 92.50 Effect of gain (loss) on settled oil derivatives on average price (per Bbl) 1.10 (6.48) Oil net of settled oil derivatives (per Bbl) (2) 77.28 86.02 Natural gas and related product sales (per Mcf) 2.72 7.46 Effect of gain (loss) on settled natural gas derivatives on average price (per Mcf) 0.65 (0.88) Natural gas and related product sales net of settled natural gas derivatives (per Mcf) (2) 3.37 6.58 Realized price on a Boe basis excluding settled commodity derivatives 44.41 68.94 Effect of gain (loss) on settled commodity derivatives on average price (per Boe) 2.58 (5.88) Realized price on a Boe basis including settled commodity derivatives (2) 46.99 63.06 Operating Expenses (in thousands): Lease operating expenses $ 60,521 $ 44,678 Production and ad valorem taxes 27,707 30,619 Depletion and accretion expense 160,662 105,752 Impairments of long-lived assets 26,496 — General and administrative 27,920 14,223 Costs and Expenses (per Boe): Lease operating expenses $ 6.82 $ 6.19 Production and ad valorem taxes $ 3.12 $ 4.24 Depletion and accretion $ 18.11 $ 14.66 Impairments of long-lived assets $ 2.99 $ — General and administrative $ 3.15 $ 1.97 Net Producing Wells at Period-End: 176.50 132.88 __________________________________________ (1) Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.
In addition, the expected future cash flows to be generated by producing properties used for testing impairment, also in part, rely on estimates of quantities of net reserves. Depletion and accretion of oil and natural gas producing properties is determined using the units-of-production method.
In addition, the expected future cash flows to be generated by producing properties used for testing impairment, also in part, rely on estimates of quantities of net reserves. Depletion of oil and natural gas producing properties is determined using the units-of-production method.
Please read “ Cautionary Note Regarding Forward ‑ Looking Statements. ” Also, please read the risk factors and other cautionary statements described under “ Part I, Item 1A. Risk Factors. ” We assume no obligation to update any of these forward ‑ looking statements, except as required by applicable law.
Please read “Cautionary Note Regarding Forward ‑ Looking Statements.” Also, please read the risk factors and other cautionary statements described under “ Part I, Item 1A. Risk Factors. ” We assume no obligation to update any of these forward ‑ looking statements, except as required by applicable law.
The Company did not recognize an impairment expense for the years ended December 31, 2022, 2021 and 2020 related to its unproved oil and natural gas properties. Derivative Instruments – Commodity Derivatives In order to reduce uncertainty around commodity prices received for our oil and natural gas operators’ production, we enter into commodity price derivative contracts from time to time.
The Company did not recognize an impairment expense for the years ended December 31, 2023, 2022 and 2021 related to its unproved oil and natural gas properties. Derivative Instruments – Commodity Derivatives In order to reduce uncertainty around commodity prices received for our oil and natural gas operators’ production, we enter into commodity price derivative contracts from time to time.
The third- party independent reserve engineers, NSAI, evaluated 100% of our estimated proved reserve quantities and their related pre-tax future net cash flows as of December 31, 2022. Oil and Natural Gas Properties Oil and natural gas producing activities are accounted for under the successful efforts method of accounting.
The third-party independent reserve engineers, NSAI, evaluated 100% of our estimated proved reserve quantities and their related pre-tax future net cash flows as of December 31, 2023. Oil and Natural Gas Properties Oil and natural gas producing activities are accounted for under the successful efforts method of accounting.
Fund I, Fund II and Fund III are collectively referred to herein as, the “Funds.” 58 ​ Table of Contents Business Combination On October 24, 2022 (the “Closing Date”), Granite Ridge and ENPC consummated the business combination pursuant to the terms of the Business Combination Agreement, dated as of May 16, 2022 (the “Business Combination Agreement”), by and among ENPC, Granite Ridge, ENPC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Granite Ridge (“ENPC Merger Sub”), GREP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Granite Ridge (“GREP Merger Sub”), and Granite Ridge Holdings, LLC, a Delaware limited liability company formerly known as GREP Holdings, LLC, (“GREP”).
Fund I, Fund II and Fund III are collectively referred to herein as, the “Funds.” Business Combination On October 24, 2022 (the “Closing Date”), Granite Ridge and ENPC consummated the business combination pursuant to the terms of the Business Combination Agreement, dated as of May 16, 2022 (the “Business Combination Agreement”), by and among ENPC, Granite Ridge, ENPC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Granite Ridge (“ENPC Merger Sub”), GREP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Granite Ridge (“GREP Merger Sub”), and Granite Ridge Holdings, LLC, a Delaware limited liability company formerly known as GREP Holdings, LLC, (“GREP”).
The borrowing base is scheduled to be redetermined semiannually on or about April 1 and October 1 of each calendar year, commencing April 1, 2023, and is subject to additional adjustments from time to time, including for asset sales, elimination or reduction of hedge positions and incurrence of other debt.
The borrowing base is scheduled to be redetermined semiannually on or about April 1 and October 1 of each calendar year, and is subject to additional adjustments from time to time, including for asset sales, elimination or reduction of hedge positions and incurrence of other debt.
We also pay a commitment fee on unused elected commitment amounts under its facility of 50 basis points. We may repay any amounts borrowed under the Credit Agreement prior to the maturity date without any premium or penalty.
We also pay a commitment fee on unused elected commitment amounts under our facility of 50 basis points. We may repay any amounts borrowed under the Credit Agreement prior to the maturity date without any premium or penalty.
Differences between our estimates and the actual amounts received for oil and natural gas sales are recorded in the month that payment is received from the third party. 76 ​ Table of Contents Recently Issued or Adopted Accounting Pronouncements For discussion of recently issued or adopted accounting pronouncements, see Note 2 of the Notes to the Consolidated Financial Statements.
Differences between our estimates and the actual amounts received for oil and natural gas sales are recorded in the month that payment is received from the third party. Recently Issued or Adopted Accounting Pronouncements For discussion of recently issued or adopted accounting pronouncements, see Note 2 of the Notes to the Consolidated Financial Statements.
When the judgments used to estimate the initial fair value of the asset retirement obligation change, an adjustment is recorded to both the obligation and the carrying amount of the related long-lived asset. Historically, there have been no significant revisions to our initial estimates once future results became known.
When the judgments used to estimate the initial fair value of the asset retirement obligation change, an adjustment is recorded to both the obligation and the carrying amount of the related long-lived asset. Historically, there have been no significant revisions to our initial estimates once future results became 68 Table of Contents known.
World-wide supply in terms of output, especially production from properties within the United States, the production quota set by OPEC, and the strength of the U.S. dollar can adversely impact oil prices. Historically, commodity prices have been volatile, and we expect the volatility to continue in the future.
Worldwide supply in terms of output, especially production from properties within the United States, the production quota set by OPEC, and the strength of the U.S. dollar can adversely impact oil prices. Historically, commodity prices have been volatile, and we expect the volatility to continue in the future.
From time to time, we expect that we may hedge a portion of our commodity price risk to mitigate the impact of price volatility on our business. ​ Prices for various quantities of natural gas and oil that we produce significantly impact our revenues and cash flows.
From time to time, we expect that we may hedge a portion of our commodity price risk to mitigate the impact of price volatility on our business. 56 Table of Contents Prices for various quantities of natural gas and oil that we produce significantly impact our revenues and cash flows.
Although we cannot predict the occurrence of events that may affect future commodity prices, or the degree to which these prices will be affected, the prices for any commodity that we produce will generally approximate current market 61 ​ Table of Contents prices in the geographic region of the production.
Although we cannot predict the occurrence of events that may affect future commodity prices, or the degree to which these prices will be affected, the prices for any commodity that we produce will generally approximate current market prices in the geographic region of the production.
The Credit Agreement is guaranteed by our restricted subsidiaries and is secured by a first priority mortgage and security interest in substantially all of our assets and our restricted subsidiaries. Borrowings under the Credit Agreement may be base rate loans or secured overnight financing rate (“SOFR”) loans.
The Credit 64 Table of Contents Agreement is guaranteed by our restricted subsidiaries and is secured by a first priority mortgage and security interest in substantially all of our assets and of our restricted subsidiaries. Borrowings under the Credit Agreement may be base rate loans or secured overnight financing rate (“SOFR”) loans.
Further, these estimates and other factors, including those outside of management’s control could have significant adverse impact to the financial condition, results of operations and cash flows of the Company. Use of Estimates The preparation of financial statements under U.S.
Further, these estimates and other factors, including those outside of management’s control could have significant adverse impact to the financial condition, results of operations and cash flows of the Company. 66 Table of Contents Use of Estimates The preparation of financial statements under U.S.
Thus, our operating results are also affected by changes in the oil and natural gas price differentials between the applicable benchmark and the sales prices we receive for our oil and natural gas production. Our oil price differential to the NYMEX benchmark price during 2022, 2021 and 2020 was $(1.89) per barrel, $(5.00) per barrel and $(1.94) per barrel, respectively.
Thus, our operating results are also affected by changes in the oil and natural gas price differentials between the applicable benchmark and the sales prices we receive for our oil and natural gas production. Our oil price differential to the NYMEX benchmark price during 2023, 2022 and 2021 was $(1.40) per barrel, $(1.89) per barrel and $(5.00) per barrel, respectively.
Our natural gas price differential during 2022, 2021 and 2020 was $0.91 per Mcf, $1.32 per Mcf and $(0.55) per Mcf, respectively. Market Conditions The price that we receive for the oil and natural gas our operators produce is largely a function of market supply and demand.
Our natural gas price differential during 2023, 2022 and 2021 was $0.19 per Mcf, $0.91 per Mcf and $1.32 per Mcf, respectively. Market Conditions The price that we receive for the oil and natural gas our operators produce is largely a function of market supply and demand.
In addition, as the prices of oil and natural gas and cost levels change from year to year, the economics of producing our reserves may change and therefore the estimate of proved reserves may also change. As of December 31, 2022, approximately 39% of our total proved reserves were categorized as proved undeveloped reserves.
In addition, as the prices of oil and natural gas and cost levels change from year to year, the economics of producing our reserves may change and therefore the estimate of proved reserves may also change. As of December 31, 2023, approximately 42% of our total proved reserves were categorized as proved undeveloped reserves.
We cannot assure you that any additional capital will be available to us on favorable terms or at all. Capital commitments Our recent capital commitments have been to fund the development and acquisition of oil and natural gas properties.
However, we may seek additional access to capital and liquidity. We cannot assure you that any additional capital will be available to us on favorable terms or at all. Capital commitments Our recent capital commitments have been to fund the development and acquisition of oil and natural gas properties.
SOFR loans bear interest at SOFR plus an applicable margin ranging from 250 to 350 basis points, depending on the percentage of the borrowing base utilized, plus an additional 10, 15 or 20 basis point credit spread adjustment for a one, three or six month interest period, respectively.
Prior to the effectiveness of the First Amendment, SOFR loans accrued interest at SOFR plus an applicable margin ranging from 250 to 350 basis points, depending on the percentage of the borrowing base utilized, plus an additional 10, 15 or 20 basis point credit spread adjustment for a one, three or six month interest period, respectively.
Our primary use of capital has been for the development and acquisition of oil and natural gas properties. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position. As of December 31, 2022, we had no outstanding debt under our Credit Agreement.
Our primary use of capital has been for the development and acquisition of oil and natural gas properties. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position. As of December 31, 2023, we had $110.0 million of debt outstanding under our Credit Agreement.
The Credit Agreement provides for aggregate elected commitments of $150.0 million, an initial borrowing base of $325.0 million and an aggregate maximum revolving credit amount of $1,000.0 million.
The Credit Agreement provided for aggregate elected commitments of $150.0 million, an initial borrowing base of $325.0 million and an aggregate maximum revolving credit amount of $1.0 billion.
We did not incur any 75 ​ Table of Contents impairment expense related to our proved oil and natural gas properties during the years ended December 31, 2022 and 2021.
We did not incur any impairment expense related to our proved oil and natural gas properties during the years ended December 31, 2022 or 2021.
Cash Flows from Investing Activities For the year ended December 31, 2022, our net cash used in investing activities was $230.6 million, which consisted primarily of our investment of $185.5 million for additions to oil and natural gas properties and $49.2 million of acquisitions of oil and natural gas properties.
For the year ended December 31, 2022, our net cash used in investing activities was $230.6 million, which consisted primarily of $185.5 million of capital expenditures for oil and natural gas properties and $49.2 million of acquisitions of oil and natural gas properties.
We entered into the MSA with the Manager in which we will pay the Manager an annual services fee of $10.0 million and will reimburse the Manager for certain Granite Ridge group costs related to the operation of our oil and gas assets and other properties. See Note 10 of the Notes to the Consolidated Financial Statements.
See Note 8 of the Notes to the Consolidated Financial Statements for information regarding future interest payment obligations on our Credit Agreement. • We entered into the MSA with the Manager in which we will pay the Manager an annual services fee of $10.0 million and will reimburse the Manager for certain Granite Ridge group costs related to the operation of our oil and gas assets and other properties.
The change in income tax expense during the year ended December 31, 2022, compared with 2021, was due to the fact that the Funds were treated as partnerships for U.S. federal income tax purposes and, as such, the partners of the Funds reported their share of the Fund’s income or loss on their respective income tax returns.
The increase in income tax expense during the year ended December 31, 2023, compared with 2022, was due to the fact that the Funds were treated as partnerships for U.S. federal income tax purposes prior to the Business Combination and, as such, the partners of the Funds reported their share of the Fund’s income or loss on their respective income tax returns for the applicable tax year (or portion thereof).
Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the U.S. prime rate as published by the Wall Street Journal; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 150 to 250 basis points, depending on the percentage of the borrowing base utilized.
Base rate loans accrued interest at a rate per annum equal to the greatest of: (i) the U.S. prime rate as published by the Wall Street Journal; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted SOFR rate for a one-month interest period plus 100 basis points, plus, in the case of this clause (iii), an additional 10 basis point credit spread adjustment, plus, in the case of any base rate loan, an applicable margin ranging from 150 to 250 basis points, depending on the percentage of the borrowing base utilized.
With our cash on hand, cash flow from operations, and borrowing capacity under the Credit Agreement, we believe that we will have sufficient cash flow and liquidity to fund our budgeted capital expenditures and operating expenses for at least the next twelve months. However, we may seek additional access to capital and liquidity.
See Note 8 to the Notes to the Consolidated Financial Statements for additional information. With our cash on hand, cash flow from operations, and borrowing capacity under the Credit Agreement, we believe that we will have sufficient cash flow and liquidity to fund our budgeted capital expenditures and operating expenses for at least the next twelve months.
At December 31, 2022, our estimates of commodity prices for purposes of determining undiscounted future cash flows, which are based on the NYMEX strip, ranged from a 2023 price of $79.12 per barrel of oil decreasing to a 2027 price of $64.14 per barrel of oil.
At December 31, 2023, our estimates of commodity prices for purposes of determining undiscounted future cash flows, which are based on the NYMEX strip, ranged from a 2024 price of $71.68 per barrel of oil decreasing to a 2028 price of $62.02 per barrel of oil.
The effective income tax rate differs from the statutory rate primarily due to the allocation of profits and losses to the partners of the Funds for the period prior to the Business Combination.
The effective income tax rate differs from the statutory rate in 2023 primarily due to the impact of certain discrete items and state income taxes. The effective income tax rate differs from the statutory rate in 2022 primarily due to the allocation of profits and losses to the partners of the Funds for the period prior to the Business Combination.
We seek to take full advantage of all credits and exemptions in our various taxing jurisdictions. In general, the production taxes we pay correlate to the changes in oil and natural gas revenues. Depletion and accretion expense Depletion and accretion include the systematic expensing of the capitalized costs incurred to acquire, explore and develop oil and natural gas.
In general, the production taxes we pay correlate to the changes in oil and natural gas revenues. Depletion and accretion expense Depletion and accretion include the systematic expensing of the capitalized costs incurred to acquire, explore and develop oil and natural gas.
Selected Factors That Affect Our Operating Results Our revenues, cash flows from operations and future growth depend substantially upon: ● the timing and success of drilling and production activities by our operating partners; ● the prices and the supply and demand for oil and natural gas; ● the quantity of oil and natural gas production from the wells in which we participate; ● changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil and natural gas; ● our ability to continue to identify and acquire high-quality acreage and drilling opportunities; and ● the level of our operating expenses.
Gain (loss) on derivative contracts is comprised of (i) cash gains and losses we recognize on settled commodity derivatives during the period, and (ii) non-cash mark-to-market gains and losses we incur on commodity derivative instruments outstanding at period-end. 55 Table of Contents Selected Factors That Affect Our Operating Results Our revenues, cash flows from operations and future growth depend substantially upon: • the timing and success of drilling and production activities by our operating partners; • the prices and the supply and demand for oil and natural gas; • the quantity of oil and natural gas production from the wells in which we participate; • changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil and natural gas; • our ability to continue to identify and acquire high-quality acreage and drilling opportunities; and • the level of our operating expenses.
See Note 3 in the Notes to the Consolidated Financial Statements for additional information on the common stock warrants. Income Tax Expense (Benefit) We recognized an income tax expense of $12.9 million in 2022. There was no income tax expense (benefit) in 2021.
See Note 3 and Note 9 in the Notes to the Consolidated Financial Statements for additional information on the common stock warrants and the Warrant Exchange. Income Tax Expense (Benefit) We recorded an income tax expense of $24.5 million and $12.9 million in 2023 and 2022, respectively.
Any payment of future dividends will be at the discretion of the Company’s Board of Directors. Stock repurchase program In December 2022, we announced that our Board of Directors approved a stock repurchase program for up to $50 million of our common stock through December 31, 2023.
Stock repurchase program In December 2022, we announced that our Board of Directors approved a stock repurchase program for up to $50.0 million of our common stock through December 31, 2023. The stock repurchase program terminated on December 31, 2023.
For these periods, the Funds have been presented on a combined historical basis due to their prior common ownership and control; and (2) as it pertains to the periods subsequent to the completion of the Business Combination, the accounts of Granite Ridge Resources, Inc. as well as its wholly owned subsidiaries which include, Granite Ridge Holdings, LLC (formerly known as GREP Holdings, LLC) and Executive Network Partnership Corporation (“ENPC”), and all other subsidiaries created in connection with the Business Combination.
For these periods, the Funds have been presented on a combined historical basis due to their prior common ownership and control; and (2) as it pertains to the periods subsequent to the completion of the Business Combination, the accounts of Granite Ridge Resources, Inc. as well as its wholly owned subsidiaries which include, Granite Ridge Holdings, LLC (formerly known as GREP Holdings, LLC) and Executive Network Partnership Corporation (“ENPC”), and all other subsidiaries created in connection with the Business Combination. 53 Table of Contents The following discussion contains “ forward ‑ looking statements ” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position.
However, a sensitivity analysis is not practicable, given the numerous assumptions required to calculate proved reserves. In addition, any unfavorable adjustments to some of the above listed assumptions (e.g. commodity prices) would likely be offset by favorable adjustments in other assumptions (e.g. lower costs) as we have historically seen in our industry.
In addition, any unfavorable adjustments to some of the 67 Table of Contents above listed assumptions (e.g. commodity prices) would likely be offset by favorable adjustments in other assumptions (e.g. lower costs) as we have historically seen in our industry.
Realized production from oil and gas properties increases through drilling success and acquisition of additional net revenue interests. This increase in production is offset by the natural decline of the production rate of existing oil and natural gas wells. The number of wells we participated increased from 83.67 net wells in 2020 to 108.64 net wells in 2021.
Production from oil and gas properties increased because of drilling success and the acquisition of additional net revenue interests. This increase in production is offset by the natural decline of the production rate of existing oil and natural gas wells. The number of wells we participated in increased from 132.88 net wells in 2022 to 176.50 net wells in 2023.
Our net cash provided by operating activities included a reduction of $26.9 million and a benefit of $6.7 million for the years ended December 31, 2021 and 2020, respectively, associated with changes in working capital items.
Our net cash provided by operating activities included a benefit of $4.6 million and a reduction of $17.2 million for the years ended December 31, 2023 and 2022, respectively, associated with changes in working capital items. Changes in working capital items adjust for the timing of receipts and payments of actual cash.
Material changes in prices also impact our current revenue stream, estimates of future reserves, borrowing base calculations of bank loans, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions.
Conversely, in a period of declining prices, associated cost declines are likely to lag and may not adjust downward in proportion. Material changes in prices also impact our current revenue stream, estimates of future reserves, borrowing base calculations of bank loans, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions.
To the extent the future commodity price outlook declines between measurement periods, we will have mark-to-market gains; while to the extent future commodity price outlook increases between measurement periods, we will have mark-to-market losses. 65 ​ Table of Contents Interest Expense Interest expense was $2.0 million in 2022 compared to $2.4 million in 2021.
To the extent the future commodity price outlook declines between measurement periods, we will have mark-to-market gains; while to the extent future commodity price outlook increases between measurement periods, we will have mark-to-market losses. Interest Expense Interest expense was $5.3 million for the year ended December 31, 2023 compared to $2.0 million for 2022.
We have contractual commitments that may require us to make payments upon future settlement of our commodity derivative contracts. See Note 3 of the Notes to the Consolidated Financial Statements. We have future obligations related to the abandonment of our oil and natural gas properties. See Note 6 of the Notes to the Consolidated Financial Statements.
See Note 10 of the Notes to the Consolidated Financial Statements. 65 Table of Contents • We have contractual commitments that may require us to make payments upon future settlement of our commodity derivative contracts.
The amount of the borrowing base is determined by the lenders in their sole discretion and consistent with the oil and gas lending criteria of the lenders at the time of the relevant redetermination.
The Company and the Required Lenders (as defined in the Credit Agreement) may each request one unscheduled redetermination of the borrowing base between each scheduled redetermination. The amount of the borrowing base is determined by the lenders in their sole discretion and consistent with the oil and gas lending criteria of the lenders at the time of the relevant redetermination.
We made net payments of $51.1 million on our credit facilities and paid $10.7 million of dividends during 2022. In addition, we paid $18.5 million of expenses related to the formation of Granite Ridge and $3.2 million of deferred financing cost related to the Credit Agreement.
In addition, we paid $18.5 million of expenses related to the formation of Granite Ridge and $3.2 million of deferred financing cost related to the Credit Agreement.
Gain/(Loss) on Derivatives – Commodity Derivatives The following table sets forth the loss on derivatives for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2022 2021 Loss on commodity derivatives: ​ ​ ​ ​ ​ ​ Oil derivatives ​ $ (14,985) ​ $ (24,885) Natural gas derivatives ​ (10,339) ​ (7,504) Total ​ $ (25,324) ​ $ (32,389) ​ The following table represents our net cash payments on derivatives for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2022 2021 Net payments on commodity derivatives: ​ ​ ​ ​ ​ ​ Oil derivatives ​ $ (23,695) ​ $ (19,034) Natural gas derivatives ​ (18,742) ​ (6,185) Total ​ $ (42,437) ​ $ (25,219) ​ Our earnings are affected by the changes in the value of our derivatives portfolio between periods and the related cash settlements of those derivatives, which could be significant.
See Note 13 in the Notes to the Consolidated Financial Statements for additional information on stock-based compensation. 61 Table of Contents Gain/(Loss) on Derivatives – Commodity Derivatives The following table sets forth the gain (loss) on derivatives for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Gain (loss) on commodity derivatives Oil derivatives $ 6,459 $ (14,985) Natural gas derivatives 19,085 (10,339) Total $ 25,544 $ (25,324) The following table represents our net cash receipts from (payments on) derivatives for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Net cash receipts from (payments on) commodity derivatives Oil derivatives $ 4,576 $ (23,695) Natural gas derivatives 18,319 (18,742) Total $ 22,895 $ (42,437) Our earnings are affected by the changes in the value of our derivatives portfolio between periods and the related cash settlements of those derivatives, which could be significant.
Source of Our Revenues We derive our revenues from our interests in the sale of oil and natural gas production. Revenues are a function of production, the prevailing market price at the time of sale, oil quality, and transportation costs to market.
Revenues are a function of production, the prevailing market price at the time of sale, oil quality, and transportation costs to market. We use derivative instruments to hedge future sales prices on a portion of our oil and natural gas production.
This was partially offset by the aggregate investment received by ENPC of $6.8 million in connection with the Business Combination, which represents total risk capital contributed by ENPC, including working capital loans that were forgiven. For the years ended December 31, 2021 and 2020, our net cash provided from financing activities was $8.5 million and $52.1 million, respectively.
This was partially offset by the aggregate investment received by ENPC of $6.8 million in connection with the Business Combination, which represents total risk capital contributed by ENPC, including working capital loans that were forgiven.
The Credit Agreement also contains certain financial covenants, including the maintenance of the following financial ratios: (i) a current ratio, which is the ratio of our consolidated current assets (including unused commitments under the Credit Agreement and excluding non-cash asset retirement and derivative assets) to our consolidated current liabilities (excluding the current portion of long-term debt under the Credit Agreement and non-cash asset retirement and derivative liabilities), of not less than 1.00 to 1.00; and 72 ​ Table of Contents (ii) a leverage ratio, which is the ratio of Consolidated Total Debt to EBITDAX (each as defined in the Credit Agreement), subject to certain adjustments, of not greater than 3.00 to 1.00.
The Credit Agreement also contains certain financial covenants, including the maintenance of the following financial ratios: (i) a Current Ratio, (as defined in the Credit Agreement) of not less than 1.00 to 1.00 as of the last day of each fiscal quarter; and (ii) a leverage ratio, which is the ratio of Consolidated Total Debt to EBITDAX (each as defined in the Credit Agreement), of not greater than 3.00 to 1.00 as of the last day of each fiscal quarter.
We had $200.8 million of liquidity as of December 31, 2022, consisting of $150.0 million of committed borrowing availability under the Credit Agreement and $50.8 million of cash on hand.
We had $140.1 million of liquidity as of December 31, 2023, consisting of $129.7 million of committed borrowing availability under the Credit Agreement and $10.4 million of cash on hand.
For the year ended December 31, 2020, our net cash used in investing activities was $116.7 million, which consisted primarily of our investment of $99.5 million of additions to oil and natural gas properties and $17.9 million of acquisitions of oil and natural gas properties. 71 ​ Table of Contents Cash Flows from Financing Activities For the year ended December 31, 2022, our net cash used in financing activities was $76.8 million.
Cash Flows from Investing Activities For the year ended December 31, 2023, our net cash used in investing activities was $356.7 million, which consisted primarily of $282.4 million of capital expenditures for oil and natural gas properties and $76.8 million of acquisitions of oil and natural gas properties.
In 2022, our oil and natural gas sales increased 71% from 2021, driven by an increase in realized prices, excluding the effect of settled commodity derivatives, and an increase in production volumes.
In 2023, our oil and natural gas sales decreased 21% from 2022, driven by the decrease in realized prices, excluding the effect of settled commodity derivatives, partially offset by the increase in production. The lower average realized prices were driven by lower average NYMEX oil and natural gas prices.
Holding all other factors constant, if proved reserves are revised downward, the rate at which we record depletion and accretion expense would increase, reducing net income. Conversely, if proved reserves are revised upward, the rate at which we record depletion and accretion expense would decrease.
In addition, a decline in proved reserve estimates may impact the outcome of our assessment of our proved properties for impairment. Holding all other factors constant, if proved reserves are revised downward, the rate at which we record depletion and accretion expense would increase, reducing net income.
Expenses for field employees’ salaries, saltwater disposal, repairs and maintenance comprise the most significant portion of our lease operating expenses. Certain items, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period.
Certain items, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. A portion of our operating cost components are variable and change in correlation to production levels.
The amount we are able to borrow under the Credit Agreement is subject to compliance with the financial covenants, satisfaction of various conditions precedent to borrowing and other provisions of the Credit Agreement. As of December 31, 2022, we did not have any borrowings or letters of credit outstanding under the Credit Agreement, resulting in availability of $150.0 million.
The amount we are able to borrow under the Credit Agreement is subject to compliance with the financial covenants, satisfaction of various conditions precedent to borrowing and other provisions of the Credit Agreement.
However, there can be no assurance that any additional capital will be available to us on favorable terms or at all. 73 ​ Table of Contents Effects of Inflation and Pricing The oil and natural gas industry is typically very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry put extreme pressure on the economic stability and pricing structure within the industry.
Effects of Inflation and Pricing The oil and natural gas industry is typically very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry put extreme pressure on the economic stability and pricing structure within the industry. Typically, as prices for oil and natural gas increase, so do all associated costs.
Common stock dividends We paid dividends of $10.7 million, or $0.08 per share during the fourth quarter of 2022. On February 21, 2023, our Board of Directors declared a cash dividend of $0.11 per share for the first quarter of 2023 that was paid on March 15, 2023 to stockholders of record as of March 1, 2023.
On February 15, 2024, our Board of Directors declared a cash dividend of $0.11 per share for the first quarter of 2024 that will be paid on March 15, 2024 to stockholders of record as of March 1, 2024. Any payment of future dividends will be at the discretion of the Company’s Board of Directors.
As of December 31, 2022, we owned an interest in 2,357 gross (132.88 net) producing wells, 258,694 gross (26,414 net) developed acres, and 17,907 gross (7,896 net) undeveloped acres, all located in the United States. Our average daily production for the year ended December 31, 2022 was 19,765 Boe per day.
As of December 31, 2023, we owned an interest in 2,826 gross (176.50 net) producing wells, 309,472 gross (30,728 net) developed acres, and 22,335 gross (6,749 net) undeveloped acres, all located in the United States. Our average daily production for the year ended December 31, 2023 was 24,311 Boe per day.
The following discussion contains “ forward ‑ looking statements ” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward ‑ looking statements due to a number of factors.
Actual results and the timing of events may differ materially from those contained in these forward ‑ looking statements due to a number of factors.
We expect to fund planned capital expenditures with cash generated from operations and, if required, borrowings under our Credit Agreement. The amount, timing and allocation of capital expenditures are largely discretionary and subject to change based on a variety of factors.
The amount, timing and allocation of capital expenditures are largely discretionary and subject to change based on a variety of factors.
Natural gas prices ranged from a 2023 price of $4.26 per Mcf of natural gas increasing to a 2027 price of $4.50 per Mcf. Both oil and natural gas commodity prices for this purpose were held flat after 2027.
Natural gas prices ranged from a 2024 price of $2.67 per Mcf of natural gas increasing to a 2028 price of $3.80 per Mcf. Both oil and natural gas commodity prices for this purpose were held flat after 2028. During the year ended December 31, 2023, we recognized an impairment expense of $26.5 million.
On an absolute dollar basis, the increase in our lease operating expenses in 2022 compared to 2021 was primarily due to an increase in well count due to acquisitions and additional wells successfully drilled and completed, higher transportation and gathering expenses related to certain take-in kind arrangements and overall increased cost of services.
The increase was primarily due to an increase in well count due to acquisitions and additional wells successfully drilled and completed, higher repair and maintenance costs and overall increased cost of services.
As of December 31, 2022, we were in compliance with all covenants required by the Credit Agreement Known Contractual and Other Obligations; Planned Capital Expenditures Contractual and Other Obligations On October 24, 2022, the Funds terminated their revolving credit facilities, and we entered into a new credit agreement.
As of December 31, 2023, we were in compliance with all covenants required by the Credit Agreement Known Contractual and Other Obligations; Planned Capital Expenditures Contractual and Other Obligations • As of December 31, 2023, we had $110.0 million of debt outstanding under our Credit Agreement.
A portion of our operating cost components are variable and change in correlation to production levels. Production and ad valorem taxes Production taxes are paid on produced oil and natural gas. Ad valorem taxes are paid on the value of our properties in certain states.
Production and ad valorem taxes Production taxes are paid on produced oil and natural gas. Ad valorem taxes are paid on the value of our properties in certain states. We seek to take full advantage of all credits and exemptions in our various taxing jurisdictions.
The decrease in interest expense was primarily due to lower average outstanding balance on the revolving credit facilities during 2022 as compared to 2021. Gain on Derivatives – Common Stock Warrants We recognized a gain of $0.4 million during 2022 from the change in fair value of the warrant liability.
Gain (Loss) on Derivatives – Common Stock Warrants We recognized a loss of $5.7 million and a gain of $0.4 million during 2023 and 2022, respectively, from the change in fair value of the warrant liability.
The increase in interest expense for 2021 as compared to 2020 was primarily due to an increase in the outstanding balance on the revolving credit facility. Liquidity and Capital Resources Our main sources of liquidity and capital resources as of the periods covered by this report have been internally generated cash flow from operations and credit facility borrowings.
See Note 7 to the Notes to the Consolidated Financial Statements for additional discussion of income taxes. 62 Table of Contents Liquidity and Capital Resources Our main sources of liquidity and capital resources as of the periods covered by this report have been internally generated cash flow from operations and credit facility borrowings.
During the years ended December 31, 2022, 2021 and 2020, we recognized depletion and accretion expense of $105.8 million, $94.7 million and $79.9 million, respectively. Any reduction in proved reserves could result in an acceleration of future depletion expense.
During the years ended December 31, 2023, 2022, and 2021, we recognized depletion expense of $160.2 million, $105.3 million and $94.2 million, respectively. Any reduction in proved reserves could result in an acceleration of future depletion expense. Such a decline may result from lower commodity prices, which may make it uneconomical to drill for and produce higher cost fields.
With respect to all of these items, except for our commitments under our debt agreements, we cannot determine with accuracy the amount and/or timing of such payments. Planned Capital Expenditures For 2023, we are budgeting approximately $260 million to $270 million in total planned capital expenditures, including approximately $46 million of acquisitions of oil and natural gas properties.
See Note 6 of the Notes to the Consolidated Financial Statements. • With respect to all of these items, except for our commitments under our debt agreements, we cannot determine with accuracy the amount and/or timing of such payments.
The use of derivative instruments has in the past, and may in the future, prevent us from realizing the full benefit of upward price movements but also mitigates the effects of declining price movements. Principal Components of Our Cost Structure Lease operating expenses Lease operating expenses are the costs incurred in the operation of producing properties, including workover costs.
We expect our derivative activities will help us achieve more predictable cash flows and reduce our exposure to downward price fluctuations. The use of derivative instruments has in the past, and may in the future, prevent us from realizing the full benefit of upward price movements but also mitigates the effects of declining price movements.
The increase in net cash provided by operating activities was primarily due to an increase in total operating revenues attributable to an increase in production and higher realized oil and natural gas prices. The increase was partially offset by $25.2 million of settlements paid on commodity derivatives during 2021 as compared to $11.9 million of cash receipts during 2020.
The $43.5 million decrease in operating cash flows during the year ended December 31, 2023 as compared to 2022 was primarily due to the decrease in oil and natural gas sales and higher operating costs, partially offset by $22.9 million of settlements received from commodity derivatives during 2023, as compared to $42.4 million of settlements paid on commodity derivatives during 2022.
As of December 31, 2022, we had repurchased 25,920 shares under the program at an aggregate cost of $0.2 million.
As of December 31, 2023, the Company had repurchased a total of 5,677,627 shares since the inception of the program at an aggregate cost of $36.3 million.
On an absolute dollar basis, the 29% increase in our lease operating expenses in 2021 compared to 2020 was primarily due to an increase in well count due to acquisitions and additional wells successfully drilled and completed. Production and Ad Valorem Taxes We pay production taxes based on realized oil and natural gas sales.
The increase in lease operating expenses per Boe was primarily due to higher saltwater disposal costs, repair and maintenance costs and workover activity, partially offset by the increase in production. Production and Ad Valorem Taxes We generally pay production taxes based on realized oil and natural gas sales.
The following table sets forth information regarding our oil and natural gas production by basin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Net Production: ​ ​ Oil (MBbl) ​ ​ Permian ​ 2,347 ​ 1,961 Eagle Ford ​ 467 ​ 422 Bakken ​ 616 ​ 778 Haynesville ​ — ​ — DJ ​ 226 ​ 236 SCOOP/STACK ​ — ​ 16 Total ​ 3,656 ​ 3,413 Natural Gas (MMcf) ​ ​ ​ ​ Permian ​ 5,957 ​ 5,019 Eagle Ford ​ 2,001 ​ 1,705 Bakken ​ 1,101 ​ 1,798 Haynesville ​ 10,161 ​ 3,460 DJ ​ 2,131 ​ 2,759 SCOOP/STACK ​ — ​ 120 Total ​ 21,351 ​ 14,861 Total (MBoe) ​ ​ ​ ​ Permian ​ 3,339 ​ 2,797 Eagle Ford ​ 801 ​ 706 Bakken ​ 800 ​ 1,078 Haynesville ​ 1,694 ​ 577 DJ ​ 581 ​ 696 SCOOP/STACK ​ — ​ 36 Total ​ 7,215 ​ 5,890 ​ ​ ​ ​ ​ ​ ​ ​ Lease Operating Expenses Lease operating expenses were $44.7 million in 2022 compared to $26.3 million in 2021.
Year Ended December 31, 2023 2022 Net Production: Oil (MBbl) Permian 2,656 2,347 Eagle Ford 529 467 Bakken 665 616 Haynesville — — DJ 312 226 Total 4,162 3,656 Natural Gas (MMcf) Permian 9,146 5,957 Eagle Ford 3,055 2,001 Bakken 1,105 1,101 Haynesville 12,251 10,161 DJ 2,709 2,131 Total 28,266 21,351 Total (MBoe) Permian 4,180 3,339 Eagle Ford 1,038 801 Bakken 849 800 Haynesville 2,042 1,694 DJ 764 581 Total 8,873 7,215 Lease Operating Expenses Lease operating expenses were $60.5 million ($6.82 per Boe) for the year ended December 31, 2023, an increase of 35% from $44.7 million ($6.19 per Boe) for 2022.
Production and Ad Valorem Taxes We pay production taxes based on realized oil and natural gas sales. Production taxes were $26.9 million in 2022 compared to $17.1 million in 2021. As a percentage of oil and natural gas sales, our production taxes were 5% and 6% in 2022 and 2021, respectively.
As a percentage of oil and natural gas sales, our production taxes were 6% and 5% in 2023 and 2022, respectively. 60 Table of Contents Production taxes generally fluctuate with the market value of our production sold, while ad valorem taxes are generally based on the valuation of our oil and natural gas properties at the beginning of the year, which vary across the different areas in which we operate.
However, production taxes as a percent of total oil and natural gas sales are consistent with historical trends. Ad valorem taxes increased by $2.7 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to additional wells drilled and completed and new wells acquired.
Ad valorem taxes decreased during the year ended December 31, 2023 as compared to 2022, primarily due to additional wells drilled and completed and new wells acquired. Depletion and Accretion Depletion and accretion was $160.7 million ($18.11 per Boe) for the year ended December 31, 2023, an increase of 52% from $105.8 million ($14.66 per Boe) in 2022.
The extent to which we repurchase our shares of common stock, and the timing of such repurchases, will depend upon market conditions and other considerations as may be considered in our sole discretion. 70 ​ Table of Contents Cash Flows Our cash flows for the years ended December 31, 2022, 2021 and 2020 are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities ​ $ 346,389 ​ $ 181,181 ​ $ 66,806 Net cash used in investing activities ​ ​ (230,562) ​ ​ (186,024) ​ ​ (116,743) Net cash (used in) provided by financing activities ​ ​ (76,848) ​ ​ 8,489 ​ ​ 52,071 Net change in cash ​ $ 38,979 ​ $ 3,646 ​ $ 2,134 ​ Cash Flows from Operating Activities Our operating cash flow is sensitive to many variables, the most significant of which are the volatility of prices for oil and natural gas and the volume of oil and natural gas sold by our producers.
Cash Flows Our cash flows for the years ended December 31, 2023, 2022 and 2021 are presented below: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 302,867 $ 346,389 $ 181,181 Net cash used in investing activities (356,676) (230,562) (186,024) Net cash provided by (used in) financing activities 13,406 (76,848) 8,489 Net change in cash $ (40,403) $ 38,979 $ 3,646 Cash Flows from Operating Activities The primary factors impacting our cash flows from operating activities generally include: (i) levels of production from our oil and natural gas properties, (ii) prices we receive from sales of oil and natural gas production, including settlement proceeds or payments related to our commodity derivatives, (iii) operating costs of our oil and natural gas properties, (iv) 63 Table of Contents costs of our general and administrative activities and (v) interest expense.
The fluctuation in our average production tax rate from year to year is primarily due to 64 ​ Table of Contents changes in our oil sales as a percentage of our total oil and natural gas sales and the mix of our production volumes by basin.
This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community. 59 Table of Contents Oil, Natural Gas and Related Product Sales Our revenues vary from year to year primarily due to changes in realized commodity prices and production volumes.
The following table lists average NYMEX prices for oil and natural gas for the years ended December 31, 2022, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 2020 Average NYMEX Prices (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Oil (per Bbl) ​ $ 94.39 ​ $ 68.07 ​ $ 39.34 Natural gas (per Mcf) ​ ​ 6.55 ​ ​ 3.72 ​ ​ 2.13 (1) Based on average NYMEX closing prices. ​ The average 2022 NYMEX oil pricing was $94.39 per barrel of oil or 39% higher than the average NYMEX price per barrel in 2021.
The following table lists average NYMEX prices for oil and natural gas for the years ended December 31, 2023, 2022 and 2021.
Removed
For additional information on the Business Combination See Note 1 in the Notes to the Consolidated Financial Statements. Impacts of COVID-19 Pandemic and Geopolitical Factors The global spread of COVID-19 since early 2020 has created significant market volatility and economic uncertainty and disruption.
Added
For additional information on the Business Combination See Note 1 in the Notes to the Consolidated Financial Statements. 54 Table of Contents Source of Our Revenues We derive our revenues from our interests in the sale of oil and natural gas production.
Removed
The virus created unprecedented challenges for our industry, including a drastic decline in demand for crude oil and natural gas. This, combined with OPEC actions in early 2020, led to spot and future prices of crude oil falling to historic lows during the second quarter of 2020 and remaining depressed through much of 2020.
Added
Principal Components of Our Cost Structure Lease operating expenses Lease operating expenses are the costs incurred in the operation of producing properties, including workover costs. Expenses for field employees’ salaries, saltwater disposal, repairs and maintenance comprise the most significant portion of our lease operating expenses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−1 removed5 unchanged
Biggest changeWe had no indebtedness under the Credit Agreement at December 31, 2022. ​ We may utilize interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense related to existing debt issues. Interest rate derivatives are used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio.
Biggest changeInterest rate derivatives are used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio. We had no outstanding interest rate derivative contracts at December 31, 2023. 69 Table of Contents Item 8.
Our commodity price risk management arrangements are recorded at fair value and thus changes to the future commodity prices will have an impact on our earnings. For the year ended December 31, 2022, a 10% increase in average commodity prices would have decreased the fair value of commodity derivatives by $7.8 million.
Our commodity price risk management arrangements are recorded at fair value and thus changes to the future commodity prices will have an impact on our earnings. For the year ended December 31, 2023, a 10% increase in average commodity prices would have decreased the fair value of commodity derivatives by $10.4 million.
Interest Rate Risk At December 31, 2022, our exposure to interest rate changes related primarily to the borrowings under the Credit Agreement. The interest we pay on these borrowings is set periodically based upon market rates.
Interest Rate Risk At December 31, 2023, our exposure to interest rate changes related primarily to the borrowings under the Credit Agreement. The interest we pay on these borrowings is set periodically based upon market rates. We had total indebtedness of $110.0 million outstanding under our Credit Agreement at December 31, 2023.
Removed
We had no outstanding interest rate derivative contracts at December 31, 2022. ​
Added
The impact of a one percent increase in interest rates on this amount of debt would result in increased annual interest expense of approximately $1.1 million. We may utilize interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense related to existing debt issues.
Added
Financial Statements and Supplementary Data The financial statements and supplementary financial information required by this item are included on the pages immediately following the Index to Financial Statements appearing on page F-1. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.

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