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What changed in Permian Resources Corp's 10-K — 2022 vs 2023

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

+350 added−317 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-24)

Top changes in Permian Resources Corp's 2023 10-K

350 paragraphs added · 317 removed · 227 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+32 added−25 removed216 unchanged
Biggest changeIf we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits.
Biggest changeA sustained or extended decline in commodity prices may result in a shortfall in our expected revenues and cash flows and require us to reduce capital spending or borrow funds to cover any such shortfall. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves could be adversely affected.
In September 2022 at the closing of the Merger, we announced an upsized $500 million stock repurchase program, but this repurchase program may be suspended from ti me to time, modified, extended or discontinued by our board of directors at any time.
In September 2022 at the closing of the Colgate Merger, we announced an upsized $500 million stock repurchase program, but this repurchase program may be suspended from ti me to time, modified, extended or discontinued by our board of directors at any time.
As of December 31, 2022, we had entered into derivative contracts covering a portion of our projected oil and gas production through 2023 (refer to Note 8—Derivative Instruments under Part II, Item 8 of this Annual Report for a summary of our derivative instruments as of December 31, 2022).
As of December 31, 2023, we had entered into derivative contracts covering a portion of our projected oil and gas production through 2023 (refer to Note 8—Derivative Instruments under Part II, Item 8 of this Annual Report for a summary of our derivative instruments as of December 31, 2023).
Properties that we decide to drill may not yield oil or natural gas in commercially viable quantities. Properties that we decide to drill that do not yield oil or natural gas in commercially viable quantities will adversely affect our results of operations and financial condition.
Properties that we decide to drill that do not yield oil or natural gas in commercially viable quantities will adversely affect our results of operations and financial condition.
In addition to the risks we face in drilling for and producing oil and natural gas, some factors that may directly or indirectly negatively impact our scheduled operations: • lack of available gathering or transportation facilities or delays in the constructing such facilities; • abnormal pressure or irregularities in geological formations; • shortages of or delays in obtaining equipment, qualified personnel, materials or resources; • equipment failures, accidents or other unexpected operational events; • delays imposed by or resulting from compliance with laws, regulations or litigation, including limitations resulting from wastewater disposal, emission of GHGs and limitations on hydraulic fracturing; 29 Table of Contents • environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; • natural disasters; • personal injuries and death; • terrorist attacks targeting oil and natural gas related facilities and infrastructure; • limited availability of financing at acceptable terms; • title problems; • adverse weather conditions; and • limitations in the market for oil and natural gas.
In addition to the risks we face in drilling for and producing oil and natural gas, some factors that may directly or indirectly negatively impact our scheduled operations: • lack of available gathering or transportation facilities or delays in the constructing such facilities; • abnormal pressure or irregularities in geological formations; • shortages of or delays in obtaining equipment, qualified personnel, materials or resources; • equipment failures, accidents or other unexpected operational events; • delays imposed by or resulting from compliance with laws, regulations or litigation, including limitations resulting from wastewater disposal, emission of GHGs and limitations on hydraulic fracturing; • environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; • natural disasters; • personal injuries and death; • terrorist attacks targeting oil and natural gas related facilities and infrastructure; • limited availability of financing at acceptable terms; • title problems; • adverse weather conditions; and • limitations in the market for oil and natural gas. 29 Table of Contents We are not insured against all risks.
See Note 1—Basis of Presentation and Summary of Significant Accounting Policies under Part II, Item 8 of this Annual Report for significant purchasers that accounted for more than 10% of our revenues for the years ended December 31, 2022, 2021 and 2020. The loss of any of our major purchasers could materially and adversely affect our revenues in the near-term.
See Note 1—Basis of Presentation and Summary of Significant Accounting Policies under Part II, Item 8 of this Annual Report for significant purchasers that accounted for more than 10% of our revenues for the years ended December 31, 2023, 2022 and 2021. The loss of any of our major purchasers could materially and adversely affect our revenues in the near-term.
Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage, the primary term is extended through continuous drilling provisions or the leases are renewed. As of December 31, 2022, over 96% of our total net acreage was held by production.
Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage, the primary term is extended through continuous drilling provisions or the leases are renewed. As of December 31, 2023, over 96% of our total net acreage was held by production.
Any failure by us to satisfy the minimum volume commitments could lead to contractual penalties that could adversely affect our results of operations and financial position. We have entered into certain multi-year supply and service agreements associated with energy purchase agreements.
Any failure by us to satisfy the minimum volume commitments could lead to contractual penalties that could adversely affect our results of operations and financial position. We have entered into certain multi-year supply and service agreements associated with energy and frac sand purchase agreements.
In addition, sustained periods of low commodity prices for oil and natural gas and the resultant effect such prices may have on our drilling economics and our ability to raise capital may require us to re-evaluate and postpone, moderate or eliminate our planned drilling and completions operations, or suspend production from current wells, which could result in the reduction of our expected production and some of our proved undeveloped reserves and related standardized measure.
In addition, sustained periods of low commodity prices for oil and natural gas and the resultant effect such prices may have on our drilling economics and our ability to raise capital may require us to re-evaluate and postpone, moderate or eliminate our planned drilling and completions operations, or suspend production from current wells, which could result in the reduction of our expected production 26 Table of Contents and some of our proved undeveloped reserves and related standardized measure.
In some instances, we have contractual guarantees relating to the transportation of our production through firm transportation arrangements, but third-party systems may be temporarily unavailable due to market conditions, mechanical failures, accidents or other reasons.
In some instances, we have contractual guarantees relating to the transportation of our production through firm transportation arrangements, but third-party systems may be temporarily unavailable due to pressure limitations, market conditions, mechanical failures, accidents or other reasons.
In addition, OpCo’s credit agreement requires us to maintain certain financial ratios or to reduce our indebtedness if we are unable to comply with such ratios. As of December 31, 2022, we were in full compliance with such financial ratios and covenants.
In addition, OpCo’s Credit Agreement requires us to maintain certain financial ratios or to reduce our indebtedness if we are unable to comply with such ratios. As of December 31, 2023, we were in full compliance with such financial ratios and covenants.
In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations Risks Related to Our Common Stock and Capital Structure A negative shift in investor sentiment towards the oil and gas industry could adversely affect our ability to raise equity and debt capital.
In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations. 40 Table of Contents Risks Related to Our Common Stock and Capital Structure A negative shift in investor sentiment towards the oil and gas industry could adversely affect our ability to raise equity and debt capital.
Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition, prospects, or results of operations.
Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving 42 Table of Contents such matters in other jurisdictions, which could adversely affect its business, financial condition, prospects, or results of operations.
OpCo’s revolving credit facility limits the amounts OpCo can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine semiannually in the spring and fall. The borrowing base depends on, among other things, projected revenues from, and asset values of, the oil and natural gas properties securing the loan.
OpCo’s revolving credit facility limits the amounts OpCo can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine semiannually in the spring and fall. The borrowing base depends on, among other things, projected 35 Table of Contents revenues from, and asset values of, the oil and natural gas properties securing the loan.
The threat of climate change continues to attract considerable attention in the United States and around the world. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor, limit, and report existing emissions of greenhouse gases (“GHGs”) as well as to reduce such future emissions. The U.S.
The threat of climate change continues to attract considerable attention in the United States and around the world. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor, limit, and report existing emissions of greenhouse gases as well as to reduce such future emissions.
In connection with certain acquisitions, we could acquire, or be required to provide indemnification against, environmental liabilities that could expose us to material losses. In 38 Table of Contents addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations.
In connection with certain acquisitions, we could acquire, or be required to provide indemnification against, environmental liabilities that could expose us to material losses. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations.
The borrowing base will automatically be 35 Table of Contents decreased by an amount equal to 25% of the aggregate notional amount of permitted senior unsecured notes OpCo may issue in the future. The lenders can unilaterally adjust the borrowing base and the borrowings permitted to be outstanding under OpCo’s revolving credit facility.
The borrowing base will automatically be decreased by an amount equal to 25% of the aggregate notional amount of permitted senior unsecured notes OpCo may issue in the future. The lenders can unilaterally adjust the borrowing base and the borrowings permitted to be outstanding under OpCo’s revolving credit facility.
Also, institutional lenders may, of their own accord, decide not to provide funding for fossil fuel industry companies based on climate change, natural capital, or other ESG related concerns, which could affect our or our access to capital for potential growth 39 Table of Contents projects.
Also, institutional lenders may, of their own accord, decide not to provide funding for fossil fuel industry companies based on climate change, natural capital, or other ESG related concerns, which could affect our or our access to capital for potential growth projects.
In addition, we may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt our operations and limit our growth and revenue. Certain environmental laws impose strict joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.
In addition, we may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt our operations and limit our growth and revenue. 38 Table of Contents Certain environmental laws impose strict joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.
We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects. Risks Related to Our Operations Our development and acquisition projects require substantial capital expenditures.
We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects. 28 Table of Contents Risks Related to Our Operations Our development and acquisition projects require substantial capital expenditures.
In November 2022, the Bureau of Land Management (“BLM”) also issued a proposed rule to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities on federal and American Indian leases. We cannot predict the scope of any resulting legislation or new regulations, which may, in turn, affect our business.
In November 2022, the BLM also issued a proposed rule to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities on federal and American Indian leases. We cannot predict the scope of any resulting legislation or new regulations, which may, in turn, affect our business.
Therefore, our estimated PUDs may not be ultimately developed or produced. As of December 31, 2022, 41% of our total estimated proved reserves were classified as proved undeveloped. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than we currently anticipate.
Therefore, our estimated PUDs may not be ultimately developed or produced. As of December 31, 2023, 24% of our total estimated proved reserves were classified as proved undeveloped. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than we currently anticipate.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform 39 Table of Contents their investment and voting decisions.
The process also requires economic assumptions about matters such as commodity prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. Any significant inaccuracies in our interpretations of this technical data or in making our assumptions could materially affect the estimated quantities and present value of our reserves.
The extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters such as commodity prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. Any significant inaccuracies in our interpretations of this technical data or in making our assumptions could materially affect the estimated quantities and present value of our reserves.
Moreover, the international community gathered again in Glasgow in November 2021 at the 26th Conference of the Parties (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO 2 GHGs.
Moreover, the international community gathered again in Glasgow in November 2021 at the COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO 2 GHGs.
As of December 31, 2022, our aggregate long-term contractual obligation under these agreements was $48.7 million, which represents the gross minimum obligation but does not include amounts that may be due under certain contracts that contain variable pricing or volumetric components as the future obligations cannot be determined.
As of December 31, 2023, our aggregate long-term contractual obligation under these agreements was $120.4 million, which represents the gross minimum obligation but does not include amounts that may be due under certain contracts that contain variable pricing or volumetric components as the future obligations cannot be determined.
As of December 31, 2022, we had approximately $2.1 billion of total long-term debt and additional borrowing capacity of $1.1 billion under OpCo’s revolving credit facility (after giving effect to $5.8 million of outstanding letters of credit ), all of which would be secured if borrowed.
As of December 31, 2023, we had approximately $3.8 billion of total long-term debt and additional borrowing capacity of $2.0 billion under OpCo’s revolving credit facility (after giving effect to $5.7 million of outstanding letters of credit), all of which would be secured if borrowed.
The IRA also includes a methane emissions reduction program that amends the Clean Air 36 Table of Contents Act to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems.
The IRA also includes a methane emissions reduction program that amends the Clean Air Act to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems.
These provisions include: • a classified board of directors, with only approximately one-third of our board of directors elected each year; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • subject to the limited exception available while investment funds affiliated with Riverstone, Pearl and NGP and their respective successors and affiliates continue to collectively own more than 50% of our outstanding shares of common stock; 41 Table of Contents • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that an annual meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officers, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • limiting the liability of, and providing indemnification to, our directors and officers; • controlling the procedures for the conduct and scheduling of stockholder meetings; • providing that directors may be removed prior to the expiration of their terms by stockholders only for cause; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions include: • a classified board of directors, with only approximately one-third of our board of directors elected each year; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that an annual meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officers, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • limiting the liability of, and providing indemnification to, our directors and officers; • controlling the procedures for the conduct and scheduling of stockholder meetings; • providing that directors may be removed prior to the expiration of their terms by stockholders only for cause; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Securities and Exchange Commission (“SEC”) issued a proposed rule in March 2022 that would mandate disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
The SEC issued a proposed rule in March 2022 that would mandate disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
Any increase in the borrowing base requires the consent of the lenders holding 100% of the commitments. In connection with amending the credit agreement in connection with closing the Merger, the elected commitments were increased to $1.5 billion.
Any increase in the borrowing base requires the consent of the lenders holding 100% of the commitments. In connection with amending the Credit Agreement in connection with closing the Earthstone Merger, the elected commitments were increased to $2.0 billion.
These goals were reaffirmed in November 2022 at the COP27. The impacts of these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States’ commitments under the Paris Agreement, the Global Methane Pledge, or other international conventions cannot be predicted at this time.
The impacts of these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States’ commitments under the Paris Agreement, the Global Methane Pledge, or other international conventions cannot be predicted at this time.
Our estimated proved reserves as of December 31, 2022, and related standardized measure were calculated under rules of the SEC using twelve-month trailing average benchmark prices of $90.15 per barrel of oil (WTI Posted) and $6.36 per MMBtu (Henry Hub spot), which may be substantially higher or lower than the available spot prices in 2022.
Our estimated proved reserves as of December 31, 2023, and related standardized measure were calculated under rules of the SEC using twelve-month trailing average benchmark prices of $74.70 per barrel of oil (WTI Posted) and $2.64 per MMBtu (Henry Hub spot), which may be substantially higher or lower than the available spot prices in 2023.
OpCo’s credit agreement and the indentures governing its senior notes contain a number of significant covenants, including restrictive covenants that may limit OpCo’s ability to, among other things: • incur additional indebtedness; • make loans to others; • make investments; • merge or consolidate with another entity; • make certain payments; • hedge future production or interest rates; • incur liens; • sell assets; and • engage in certain other transactions without the prior consent of the lenders.
OpCo’s credit agreement with a syndicate of banks that provides for a five-year secured revolving credit facility, maturing in February 2027 (the “Credit Agreement”) and the indentures governing its senior notes contain a number of significant covenants, including restrictive covenants that may limit OpCo’s ability to, among other things: • incur additional indebtedness; • make loans to others; • make investments; • merge or consolidate with another entity; • make certain payments; • hedge future production or interest rates; • incur liens; • sell assets; and • engage in certain other transactions without the prior consent of the lenders.
As of December 31, 2022, NGP Energy Capital (“NGP”), Pearl Energy Investments (“Pearl”) and Riverstone Investment Group LLC (“Riverstone”) beneficially own approximately 21%, 16% and 13%, respectively, of our voting interests and, along with their affiliates, could limit the ability of our other stockholders to approve transactions they may deem to be in the best interests of our Company or delay or prevent changes in control or changes in our management.
As of December 31, 2023, Pearl Energy Investments (“Pearl”), EnCap Partners GP, LLC (“EnCap”), Riverstone Investment Group LLC (“Riverstone”) and NGP Energy Capital (“NGP”) beneficially own approximately 12%, 10%, 7% and 6%, respectively, of our voting interests and, along with their affiliates, could limit the ability of our other stockholders to approve transactions they may deem to be in the best interests of our Company or delay or prevent changes in control or changes in our management.
The EPA report concluded that hydraulic fracturing activities have not led to widespread, systemic impacts on drinking water resources in the United States, although there are above-and-below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. To date, EPA has taken no further action in response to the December 2016 report.
The EPA report concluded that hydraulic fracturing activities have not led to widespread, systemic impacts on drinking water resources in the United States, although there are above-and-below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources.
These laws and regulations may impose numerous obligations applicable to our operations, including the acquisition of a permit or other approval before conducting regulated activities; the restriction of types, quantities and concentration of materials that can be released into the environment; the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands and other protected areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution resulting from our operations.
These laws and regulations may impose numerous obligations applicable to our operations, including the acquisition of a permit or other approval before conducting regulated activities; the restriction of types, quantities and concentration of materials that can be released into the environment; the requirement to engage in remedial measures to prevent or mitigate pollution from former and ongoing operations, such as requirements to close pits and plug abandoned wells; the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands and other protected areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution resulting from our operations.
The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
Our operations are subject to stringent, complex and evolving federal, state and local laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations or otherwise relating to environmental protection.
Our operations are subject to stringent, complex and evolving federal, state and local laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations or otherwise relating to protection of the environment and natural resources (including threatened and endangered species and their habitats).
In addition, unless production is established within the spacing units covering the undeveloped acres on which some of the drilling 28 Table of Contents locations are obtained, the leases for such acreage will expire. As such, our actual drilling activities may materially differ from those presently identified.
In addition, unless production is established within the spacing units covering the undeveloped acres on which some of the drilling locations are obtained, the leases for such acreage will expire. As such, our actual drilling activities may materially differ from those presently identified. Properties that we decide to drill may not yield oil or natural gas in commercially viable quantities.
As long as NGP, Pearl and Riverstone continue to own or control a significant percentage of outstanding voting power, they may have the ability to strongly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment of our Charter or our second amended and restated bylaws (the “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. 40 Table of Contents In addition, NGP, Pearl and Riverstone and their respective affiliates may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential acquisition candidates or industry partners.
As long as Pearl, EnCap, Riverstone and NGP continue to own or control a significant percentage of outstanding voting power, they may have the ability to strongly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment of our Charter or our second amended and restated bylaws (the “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. The EPA recently issued a proposed rule to implement the waste emissions charge with a proposed effective date in 2025 for reporting year 2024 emissions.
Our producing properties are concentrated in the Delaware Basin, a sub-basin of the Permian Basin, making us vulnerable to risks associated with operating in a single geographic area. Our producing properties are geographically concentrated in the Delaware Basin, a sub-basin of the Permian Basin, primarily in West Texas and New Mexico.
Our producing properties are concentrated in the Permian Basin, making us vulnerable to risks associated with operating in a single geographic area. Our producing properties are geographically concentrated in West Texas and New Mexico in the Permian Basin. At December 31, 2023, all of our total estimated proved reserves were attributable to properties located in this area.
Provisions contained in our Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which may adversely affect the market price of our Common Stock.
Any elimination of, or downward revision in, our stock repurchase program or dividend policy could have an adverse effect on the market price of our common stock. 41 Table of Contents Provisions contained in our Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which may adversely affect the market price of our Common Stock.
Similarly, any dividends, whether fixed or variable, we may declare in the future will be determined by our board of directors in its sole discretion. Any elimination of, or downward revision in, our stock repurchase program or dividend policy could have an adverse effect on the market price of our common stock.
Similarly, any dividends, whether fixed or variable, we may declare in the future will be determined by our board of directors in its sole discretion.
The EPA has issued a supplemental proposed rule that is expected to be finalized in 2023. In addition, the Inflation Reduction Act of 2022 (“IRA”), signed by President Biden in August 2022, provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed at addressing climate change.
In addition, the IRA, signed by President Biden in August 2022, provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed 36 Table of Contents at addressing climate change.
Moreover, to the extent ESG matters negatively impact our or the fossil fuel industry’s reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. Tax laws and regulations may change over time, and any such changes could adversely affect our business and financial condition.
Moreover, to the extent ESG matters negatively impact our or the fossil fuel industry’s reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. Any restrictions on oil and natural gas development on federal lands has the potential to adversely impact our operations.
We are not insured against all risks. Losses and liabilities arising from uninsured and underinsured events, including those operating risks listed above, could materially and adversely affect our business, financial condition or results of operations.
Losses and liabilities arising from uninsured and underinsured events, including those operating risks listed above, could materially and adversely affect our business, financial condition or results of operations. We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented.
These changes could cause our cost of doing business to increase, limit our ability to pursue acquisition opportunities, reduce cash flow used for drilling and place us at a competitive disadvantage. At December 31, 2022, we had $385.0 million in borrowings outstanding under OpCo’s revolving credit facility. Interest is calculated under the terms of OpCo’s credit agreement.
These changes could cause our cost of doing business to increase, limit our ability to pursue acquisition opportunities, reduce cash flow used for drilling and place us at a competitive disadvantage.
If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected.
If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected. 27 Table of Contents Our use of seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations.
Environmental Protection Agency (“EPA”) has adopted regulations pursuant to the CAA that, among other things, require Prevention of Significant Deterioration (“PSD”) preconstruction and Title V operating permits for certain large stationary sources.
In addition, in response to findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment, the EPA has adopted regulations pursuant to the CAA that, among other things, require Prevention of Significant Deterioration preconstruction and Title V operating permits for certain large stationary sources.
The EPA subsequently proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from new and existing operations in the oil and gas sector, but we cannot predict the scope of any final methane regulatory requirements or the cost to comply with such requirements.
The EPA subsequently issued new regulations to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from new and existing operations in the oil and gas sector, which were finalized in December 2023.
For example, if the crude oil and natural gas prices used in our year-end reserve estimates were to increase or decrease by 10%, our proved reserve quantities at December 31, 2022 would increase by 1.1 MMBoe (0.2%) or decrease by 2.0 MMBoe (0.3%), respectively, and the pre-tax PV 10% of our proved reserves would increase by $1.7 billion (15%) or decrease by $1.7 billion (15%), respectively. 27 Table of Contents Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations.
For example, if the crude oil and natural gas prices used in our year-end reserve estimates were to increase or decrease by 10%, our proved reserve quantities at December 31, 2023 would increase by 14.4 MMBoe (1.6%) or decrease by 18.2 MMBoe (2.0%), respectively, and the pre-tax PV 10% of our proved reserves would increase or decrease by $1.9 billion (17%).
Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless we conduct successful ongoing exploration and development activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced.
Unless we conduct successful ongoing exploration and development activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced.
In order to prepare reserve estimates, we must project production rates and timing of development expenditures. We must also analyze available geological, geophysical, seismic, production and engineering data. The extent, quality and reliability of this data can vary.
Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves. The process of estimating oil and natural gas reserves is complex. In order to prepare reserve estimates, we must project production rates and timing of development expenditures. We must also analyze available geological, geophysical, seismic, production and engineering data.
While commodity prices have since improved resulting in no impairments directly relating to prevailing commodity prices in 2021 and 2022, a sustained or extended decline in commodity prices in the future could result in additional impairments of our properties, which could have a material adverse effect on our results of operations for the periods in which such charges are taken.
A sustained or extended decline in commodity prices could require that we recognize impairments of our properties, which could have a material adverse effect on our results of operations for the periods in which such charges are taken. Risks Related to Our Reserves, Leases and Drilling Locations Reserve estimates depend on many assumptions that may turn out to be inaccurate.
Other governmental agencies, including the United States Department of Energy and the United States Department of the Interior, are evaluating various other aspects of hydraulic 37 Table of Contents fracturing. These completed, ongoing, or proposed studies could spur initiatives to further regulate hydraulic fracturing under the federal SDWA or other regulatory mechanisms.
To date, EPA has 37 Table of Contents taken no further action in response to the December 2016 report. Other governmental agencies, including the United States Department of Energy and the United States Department of the Interior, are evaluating various other aspects of hydraulic fracturing.
Risks Related to the Merger The failure to integrate our businesses and operations with those of Colgate successfully in the expected time frame may adversely affect our future results. T he Merger involved the combination of two companies that previously operated as independent companies.
Risks Related to the Earthstone Merger We may be unable to integrate the business of the Company and Earthstone successfully or realize the anticipated benefits of the Earthstone Merger. The Earthstone Merger involved the combination of two companies that operated as independent public companies until November 1, 2023.
Removed
The commodity prices displayed dramatic volatility in 2020, when the COVID-19 pandemic and various governmental actions taken to mitigate the impact of COVID-19 resulted in an unprecedented decline in demand for oil, natural gas and NGLs.
Added
Also, using lower prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits.
Removed
During 2020, the WTI spot price for oil briefly fell to a low of negative $37.63 per barrel and the Henry Hub spot price reached a low of $1.33.
Added
Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations. Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors.
Removed
While worldwide demand for oil, natural gas and NGLs recovered in 2021 and 2022, governmental responses to COVID-19 remain dynamic with certain countries, such as China, continuing to impose periodic lockdowns in response to rising case numbers.
Added
The SEC originally planned to issue a final rule by October 2022, but according to the SEC’s updated rulemaking agenda, a final rule is now expected to be issued in the spring of 2024.
Removed
To the extent strains or variants of COVID-19 resurge, the negative impact to global demand for oil, natural gas and NGLs could be material. 26 Table of Contents A sustained or extended decline in commodity prices may result in a shortfall in our expected revenues and cash flows and require us to reduce capital spending or borrow funds to cover any such shortfall.
Added
The EPA has also issued a proposed rule in July 2023 with a proposed effective date of January 1, 2025, to expand the scope of the EPA’s Mandatory Greenhouse Gas Reporting program and to update reporting requirements . We cannot predict the scope of any final methane or GHG regulatory requirements or the cost to comply with such requirements.
Removed
In 2020, we recognized an impairment of $591.8 million because of the depressed oil and natural gas commodity prices.
Added
These goals were reaffirmed in November 2022 at the COP27 in Sharm-El Sheik. While there were limited announcements at COP27 with respect to the reduction of fossil fuel use, there were negotiations on emissions reduction targets and reduction of fossil fuel use amongst the international community, and such discussions continued at COP28 in Dubai.
Removed
Risks Related to Our Reserves, Leases and Drilling Locations Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves. The process of estimating oil and natural gas reserves is complex.
Added
These completed, ongoing, or proposed studies could spur initiatives to further regulate hydraulic fracturing under the federal SDWA or other regulatory mechanisms. Additionally, from time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the fracturing process.
Removed
Our use of seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations.
Added
We possess leases which are granted by the federal government and administered by the BLM, a federal agency. Operations we conduct on federal leases must comply with numerous additional statutory and regulatory restrictions. These leases contain relatively standardized terms requiring compliance with detailed regulations. Under certain circumstances, the BLM may require operations on federal leases to be suspended or terminated.
Removed
We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable.
Added
Any such suspension or termination of our leases could adversely impact the results of our operations.
Removed
At December 31, 2022, all of our total estimated proved reserves were attributable to properties located in this area.
Added
The Biden administration has proposed certain changes to the leasing and permitting programs for oil and natural gas development on federal lands, including imposing bans on new oil and gas leasing, cancelling issued oil and gas leases, and removing public lands from future oil and gas leasing.
Removed
The SEC originally planned to issue a final rule by October 2022, but most commentators now expect a final rule to be issued in 2023. In addition, i n response to findings that emissions of carbon dioxide (“CO 2 ”), methane and other GHGs present an endangerment to public health and the environment, the U.S.
Added
For example, on June 2, 2023, the Biden administration issued a 20-year ban on new oil and gas leasing within a 10-mile radius of Chaco Culture National Historical Park in Northern New Mexico.
Removed
Under the Charter, prior to the first date on which investment funds affiliated with Riverstone, Pearl and NGP and their respective successors and affiliates cease to collectively have beneficial ownership (directly or indirectly) of more than 50% of our outstanding shares of common stock, any action required to be taken at any annual or special meeting of our stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is approved in advance by our board of directors and is signed by the holders of outstanding shares of common stock having at least the minimum number of votes required to take such action.
Added
Additionally, on September 6, 2023, the Biden administration announced that it is cancelling issued leases for oil and gas in the Arctic National Wildlife Refuge designated for oil and gas development.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−2 removed2 unchanged
Biggest changeExcept as discussed herein, we are not aware of any material environmental claims existing as of December 31, 2022 which have not been provided for or would otherwise have a material impact on our financial statements; however, there can be no assurance that current regulatory requirements will not change or that unknown potential past non-compliance with environmental laws or other environmental liabilities will not be discovered on our properties.
Biggest changeWe are not aware of any material environmental claims existing as of December 31, 2023 which have not been provided for or would otherwise have a material impact on our financial statements; however, there can be no assurance that current regulatory requirements will not change or that unknown potential past non-compliance with environmental laws or other environmental liabilities will not be discovered on our properties.
Removed
In September 2022, we were provided with a request to settle an air emissions issue previously detected by the U.S. Environmental Protection Agency (the “EPA”). To resolve the alleged violations, the EPA and Permian Resources jointly agreed to a Consent Agreement along with the corresponding Final Order (“CAFO”), which assessed penalties in the amount of $610,000.
Added
ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 44 Table of Contents PART II
Removed
We have implemented programs to meet the requirements of the CAFO and are in the process of correcting any identified deficiencies. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

102 edited+59 added−39 removed36 unchanged
Biggest changeThe dividend and distribution, which totaled $27.9 million, was paid on November 29, 2022. 47 Table of Contents Results of Operations For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following table provides the components of our net revenues and net production (net of all royalties, overriding royalties and production due to others) for the periods indicated, as well as each period’s average prices and average daily production volumes: Year Ended December 31, Increase/(Decrease) 2022 2021 $ % Net revenues (in thousands): Oil sales $ 1,622,035 $ 743,069 $ 878,966 118 % Natural gas sales 276,957 149,478 127,479 85 % NGL sales 232,273 137,345 94,928 69 % Oil and gas sales $ 2,131,265 $ 1,029,892 $ 1,101,373 107 % Average sales price: Oil (per Bbl) $ 88.95 $ 63.50 $ 25.45 40 % Effect of derivative settlements on average price (per Bbl) (4.85) (10.19) 5.34 52 % Oil net of hedging (per Bbl) $ 84.10 $ 53.31 $ 30.79 58 % Average NYMEX price for oil (per Bbl) $ 94.24 $ 67.89 $ 26.35 39 % Oil differential from NYMEX (5.29) (4.39) (0.90) (21) % Natural gas (per Mcf) $ 4.64 $ 3.67 $ 0.97 26 % Effect of derivative settlements on average price (per Mcf) (0.53) (0.32) (0.21) (66) % Natural gas net of hedging (per Mcf) $ 4.11 $ 3.35 $ 0.76 23 % Average NYMEX price for natural gas (per Mcf) $ 6.38 $ 3.84 $ 2.54 66 % Natural gas differential from NYMEX (1.74) (0.17) (1.57) (924) % NGL (per Bbl) $ 34.41 $ 36.61 $ (2.20) (6) % Net production: Oil (MBbls) 18,235 11,701 6,534 56 % Natural gas (MMcf) 59,692 40,741 18,951 47 % NGL (MBbls) 6,750 3,752 2,998 80 % Total (MBoe) (1) 34,934 22,243 12,691 57 % Average daily net production: Oil (Bbls/d) 49,958 32,058 17,900 56 % Natural gas (Mcf/d) 163,539 111,619 51,920 47 % NGL (Bbls/d) 18,494 10,278 8,216 80 % Total (Boe/d) (1) 95,708 60,939 34,769 57 % (1) Calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Boe.
Biggest changeThe following table provides the components of our net revenues and net production (net of all royalties, overriding royalties and production due to others) for the periods indicated, as well as each period’s average prices and average daily production volumes: Year Ended December 31, Increase/(Decrease) 2023 2022 $ % Net revenues (in thousands): Oil sales $ 2,696,777 $ 1,622,035 $ 1,074,742 66 % Natural gas sales (1) 142,077 276,957 (134,880) (49) % NGL sales (2) 282,039 232,273 49,766 21 % Oil and gas sales $ 3,120,893 $ 2,131,265 $ 989,628 46 % Average sales prices: Oil (per Bbl) $ 75.84 $ 88.95 $ (13.11) (15) % Effect of derivative settlements on average price (per Bbl) 1.81 (4.85) 6.66 137 % Oil including the effects of hedging (per Bbl) $ 77.65 $ 84.10 $ (6.45) (8) % Average NYMEX WTI price for oil (per Bbl) $ 77.62 $ 94.24 $ (16.62) (18) % Oil differential from NYMEX (1.78) (5.29) 3.51 66 % Natural gas price excluding the effects of GP&T (per Mcf) (1) $ 1.60 $ 4.86 $ (3.26) (67) % Effect of derivative settlements on average price (per Mcf) 0.29 (0.53) 0.82 155 % Natural gas including the effects of hedging (per Mcf) $ 1.89 $ 4.33 $ (2.44) (56) % Average NYMEX Henry Hub price for natural gas (per MMBtu) $ 2.53 $ 6.38 $ (3.85) (60) % Natural gas differential from NYMEX (0.93) (1.52) 0.59 39 % NGL price excluding the effects of GP&T (per Bbl) (2) $ 22.83 $ 35.97 $ (13.14) (37) % Net production: Oil (MBbls) 35,560 18,235 17,325 95 % Natural gas (MMcf) 119,182 59,692 59,490 100 % NGL (MBbls) 15,569 6,750 8,819 131 % Total (MBoe) (3) 70,992 34,934 36,058 103 % Average daily net production: Oil (Bbls/d) 97,424 49,958 47,466 95 % Natural gas (Mcf/d) 326,525 163,539 162,986 100 % NGL (Bbls/d) 42,654 18,494 24,160 131 % Total (Boe/d) (3) 194,499 95,708 98,791 103 % (1) Natural gas sales for the year ended December 31, 2023 include $48.9 million of gathering, processing and transportation costs (“GP&T”) that are reflected as a reduction to natural gas sales and $13.1 million for the year ended December 31, 2022.
Factors that could cause or contribute to such differences include, but are not limited to, future market prices for oil, natural gas and NGLs, future production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, inflation, regulatory changes, the implementation and actual result of the Merger (defined below) and other uncertainties, as well as those factors discussed in “Cautionary Statement Concerning Forward-Looking Statements” and “Item 1A.
Factors that could cause or contribute to such differences include, but are not limited to, future market prices for oil, natural gas and NGLs, future production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, inflation, regulatory changes, the implementation and actual result of the Earthstone Merger (defined below) and other uncertainties, as well as those factors discussed in “Cautionary Statement Concerning Forward-Looking Statements” and “Item 1A.
For the year ended December 31, 2022, cash flows from operating activities and net borrowings under our revolving credit facility were used to fund $771.6 million of drilling and development cash expenditures, finance $496.7 million of net cash consideration paid for the Merger, repay $400.0 million of borrowings outstanding from Colgate’s credit facility that were assumed at closing of the Merger and pay a total cash dividend and distribution to noncontrolling interest owners of $27.9 million.
For the year ended December 31, 2022, cash flows from operating activities and net borrowings under our revolving credit facility were used to fund $771.6 million of drilling and development cash expenditures, finance $496.7 million of net cash consideration paid for the Colgate Merger, repay $400.0 million of borrowings outstanding from Colgate’s credit facility that were assumed at closing of the Colgate Merger and pay a total cash dividend and distribution to noncontrolling interest owners of $27.9 million.
Risk Factors” in this Annual Report, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
Risk Factors” in this Annual Report, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may or may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
We continually make revisions to reserve estimates throughout the year as additional information becomes available, and we make changes to depletion rates in the same reporting period that changes to reserve estimates are made. Business Combinations From time to time, we may acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Merger.
We continually make revisions to reserve estimates throughout the year as additional information becomes available, and we make changes to depletion rates in the same reporting period that changes to reserve estimates are made. Business Combinations From time to time, we may acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Earthstone Merger.
Repurchases may be made from time to time in the open-market or via privately negotiated transactions at the Company’s discretion and will be subject to market conditions, applicable legal requirements, available liquidity, compliance with our debt and other agreements and other factors.
Repurchases may be made from time to time in the open-market or via privately negotiated transactions at our discretion and will be subject to market conditions, applicable legal requirements, available liquidity, compliance with our debt agreements and other factors.
Lower realized prices may also reduce the borrowing base under OpCo’s credit agreement, which is determined at the discretion of the lenders and is based on the collateral value of our proved reserves that have been mortgaged to the lenders.
Lower realized prices may also reduce the borrowing base under our Credit Agreement, which is determined at the discretion of the lenders and is based on the collateral value of our proved reserves that have been mortgaged to the lenders.
As of December 31, 2022, certain conditions have been met, and as a result, noteholders have the right to convert their Convertible Senior Notes during the first quarter of 2023.
As of December 31, 2023, certain conditions have been met, and as a result, noteholders have the right to convert their Convertible Senior Notes during the first quarter of 2023.
For further information on our Convertible Senior Notes and Senior Unsecured Notes, refer to Note 5—Long-Term Debt under Item 8 of this Annual Report. 55 Table of Contents Obligations and Commitments We routinely enter into or extend operating and transportation agreements, office and equipment leases, drilling rig contracts, among others, in the ordinary course of business.
For further information on our Convertible Senior Notes and Senior Unsecured Notes, refer to Note 5—Long-Term Debt under Item 8 of this Annual Report. 57 Table of Contents Obligations and Commitments We routinely enter into or extend operating and transportation agreements, office and equipment leases, drilling rig contracts, among others, in the ordinary course of business.
Unproved properties which are not individually significant are amortized by prospect, based on our historical experience, current drilling plan, existing geological data and average remaining lease terms. Changes in our assumptions as to the estimated nonproductive portion of our undeveloped leases could result in additional impairment charges. 57 Table of Contents
Unproved properties which are not individually significant are amortized by prospect, based on our historical experience, current drilling plan, existing geological data and average remaining lease terms. Changes in our assumptions as to the estimated nonproductive portion of our undeveloped leases could result in additional impairment charges. 59 Table of Contents
See Note 2—Business Combination in Item 8 of this Annual Report on Form 10-K. Impairment of Oil and Natural Gas Properties We assess our proved properties for impairment when events or changes in circumstances indicate that the carrying value of such proved property assets may not be recoverable.
See Note 2—Business Combinations in Item 8 of this Annual Report on Form 10-K. Impairment of Oil and Natural Gas Properties We assess our proved properties for impairment when events or changes in circumstances indicate that the carrying value of such proved property assets may not be recoverable.
We can choose to defer or accelerate a portion of our planned capex depending on a variety of factors, including but not limited to: prevailing and anticipated prices for oil and natural gas; oil storage or transportation constraints; the success of our drilling activities; the availability of necessary equipment, infrastructure and capital; the receipt and timing of required regulatory permits and approvals; seasonal conditions; property or land acquisition costs; and the level of participation by other working interest owners.
Accordingly, we can choose to defer or accelerate a portion of our planned capital expenditures depending on a variety of factors, including but not limited to: prevailing and anticipated prices for oil and natural gas; oil storage or transportation constraints; the success of our drilling activities; the availability of necessary equipment, infrastructure and capital; the receipt and timing of required regulatory permits and approvals; seasonal conditions; property or land acquisition costs; and the level of participation by other working interest owners.
ITEM 6. [Reserved] 44 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” in this Annual Report.
ITEM 6. [Reserved] 46 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” in this Annual Report.
Upon a redetermination, if any borrowings in excess of the revised borrowing capacity were outstanding, we could be forced to immediately repay a portion of the debt outstanding under the credit agreement. 45 Table of Contents Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry.
Upon a redetermination, if any borrowings in excess of the revised borrowing capacity were outstanding, we could be forced to immediately repay a portion of the debt outstanding under the Credit Agreement. Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry.
In connection with the Convertible Senior Notes issuance, OpCo entered into privately negotiated capped call spread transactions (the “Capped Call Transactions”), that are expected to reduce potential dilution to our Class A Common Stock upon a conversion and/or offset any cash payments OpCo is required to make in excess of the principal amount of the Convertible Senior Notes, subject to a cap.
In connection with the Convertible Senior Notes issuance, OpCo entered into privately negotiated capped call spread transactions (the “Capped Call Transactions”), that are expected to reduce potential dilution to our Class A Common Stock upon a conversion and/or offset any cash payments OpCo is required to make in excess of the principal amount of the Convertible Senior 56 Table of Contents Notes, subject to a cap.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Annual Report on Form 10-K filed with the SEC for a discussion of the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2022 Annual Report on Form 10-K filed with the SEC for a discussion of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following table summarizes our obligations and commitments as of December 31, 2022 to make future payments under long-term contracts for the time periods specified below.
The following table summarizes our obligations and commitments as of December 31, 2023 to make future payments under long-term contracts for the time periods specified below.
(2) Consists of an energy purchase agreement to buy a minimum amount of electricity at a fixed price or pay for underutilization as well as a take-or-pay agreement to purchase a minimum volume of frac sand at a fixed price.
(3) Consists of an energy purchase agreement to buy a minimum amount of electricity at a fixed price or pay for underutilization as well as a take-or-pay agreement to purchase a minimum volume of frac sand at a fixed price.
The obligations reported above represent our remaining minimum financial commitments pursuant to the terms of these contracts as of December 31, 2022, however actual expenditures may exceed the minimum commitments presented above.
The obligations reported above represent our remaining minimum financial commitments pursuant to the terms of these contracts as of December 31, 2023, however actual expenditures may exceed the minimum commitments presented above.
Recently Issued Accounting Standards There were no significant new accounting standards adopted or new accounting pronouncements that would have a potential effect on us as of December 31, 2022.
Recently Issued Accounting Standards There were no significant new accounting standards adopted or new accounting pronouncements that would have a potential effect on us as of December 31, 2023.
Please refer to Note 16—Leases under Part II, Item 8 of this Annual Report for details on our operating lease commitments.
Please refer to Note 16—Leases under Part II, Item 8 of this Annual Report for details on our financing lease commitments.
Refer to Note 15—Revenues under Part II, Item 8 of this Annual Report for additional information on our natural gas gathering and processing contracts. 49 Table of Contents Depreciation, Depletion and Amortization.
Refer to Note 15—Revenues under Part II, Item 8 of this Annual Report for additional information on our natural gas gathering and processing contracts. Depreciation, Depletion and Amortization.
As commodity prices rise, costs of oilfield goods and services generally also increase, while during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. In addition, the U.S. inflation rate has been steadily increasing during 2021 and 2022.
As commodity prices rise, costs of oilfield goods and services generally also increase; however, during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. In addition, the U.S. inflation rate has been steadily increasing during 2022 and 2023.
Overview We are an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. Our assets are located in the core of the Delaware Basin.
Overview We are an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. Our assets are mainly located in the core of the Permian Basin.
OpCo was in compliance with these covenants as of December 31, 2022 and through the filing of this Annual Report.
OpCo was in compliance with these covenants as of December 31, 2023 and through the filing of this Annual Report.
In connection with the Merger, we allocated the $2.5 billion of purchase price consideration to the assets acquired and liabilities assumed based on estimated fair values as of the Merger closing date.
In connection with the Earthstone Merger, we allocated the $2.9 billion of purchase price consideration to the assets acquired and liabilities assumed based on estimated fair values as of the Earthstone Merger closing date.
For the year ended December 31, 2022 we generated pre-tax net income of $870.1 million and recorded income tax expense of $120.3 million.
During the year ended December 31, 2022, generated pre-tax net income of $870.1 million and recorded income tax expense of $120.3 million.
Our DD&A rate can fluctuate as a result of finding and development costs incurred, acquisitions, impairments, as well as changes in proved developed and proved undeveloped reserves. DD&A per Boe was $12.73 for the year ended December 31, 2022 compared to $13.00 in 2021.
Our DD&A rate can fluctuate as a result of finding and development costs incurred, acquisitions, impairments, as well as changes in proved developed and proved undeveloped reserves. Our DD&A rate per Boe was $14.19 for the year ended December 31, 2023 compared to $12.73 in 2022.
For the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 Refer to Item 7.
For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Refer to Item 7.
On November 30, 2017, OpCo issued $400.0 million of 5.375% senior notes due 2026 (the “2026 Senior Notes”) and on March 15, 2019, OpCo issued $500.0 million of 6.875% senior notes due 2027 (the “2027 Senior Notes” and, together with the 2026 Senior Notes, the “Senior Unsecured Notes”) in 144A private placements.
On November 30, 2017, OpCo issued $400.0 million of 5.375% senior notes due 2026 (the “2026 5.375% Senior Notes”) and on March 15, 2019, OpCo issued $500.0 million of 6.875% senior notes due 2027 (the “2027 6.875% Senior Notes” and, together with the 2027 8.00% Senior Notes, 2031 Senior Notes, 2032 Senior Notes, 2026 5.375% Senior Notes, 2029 Senior Notes and the 2026 7.75% Senior Notes, the “Senior Unsecured Notes”) in 144A private placements.
The oil and natural gas industry is cyclical, and it is likely that commodity prices, as well as commodity price differentials, will continue to be volatile due to fluctuations in global supply and demand, inventory levels, the continued effects from COVID-19 and variant strains of the virus, geopolitical events, federal and state government regulations, weather conditions, the global transition to alternative energy sources, supply chain constraints and other factors.
The oil and natural gas industry is cyclical, and it is likely that commodity prices, as well as commodity price differentials, will continue to be volatile due to fluctuations in global supply and demand, inventory levels, geopolitical events, federal and state government regulations, weather conditions, the global transition to alternative energy sources, supply chain constraints and other factors.
Determining fair value requires management’s judgment and involves the use of significant estimates and assumptions with respect to projections of future production volumes, pricing and cash flows, discount rates, expectations regarding customer contracts and relationships, and other management estimates.
Determining fair value requires management’s judgment and involves the use of significant estimates and assumptions with respect to projections of future production volumes, forecasted development costs, pricing and cash flows, discount rates, expectations regarding customer contracts and relationships, reserve risk adjustment factors and other management estimates.
As of February 17, 2023, there were 17 registered holders of record of our Class A Common Stock and 87 registered holders of record of our Class C Common Stock. Stock Performance Graph The following performance graph and related information shall deemed to be furnished, but not filed with the SEC.
As of February 23, 2024, there were 240 registered holders of record of our Class A Common Stock and 55 registered holders of record of our Class C Common Stock. Stock Performance Graph The following performance graph and related information shall deemed to be furnished, but not filed with the SEC.
The senior notes assumed by OpCo included $300 million of 7.75% senior notes due 2026 (the “2026 Colgate Senior Notes”) and $700 million of 5.875% senior notes due 2029 (the “2029 Colgate Senior Notes,” and together with the 2026 Colgate Senior Notes, the “Colgate Senior Notes”).
The senior notes assumed by OpCo included $300 million of 7.75% senior notes due 2026 (the “2026 7.75% Senior Notes”) and $700 million of 5.875% senior notes due 2029 (the “2029 Senior Notes”).
The following table highlights the quarterly average NYMEX price trends for crude oil and natural gas since the first quarter of 2020: 2020 2021 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Crude Oil (per Bbl) $ 46.19 $ 28.00 $ 40.93 $ 42.66 $ 57.84 $ 66.06 $ 70.56 $ 77.09 $ 94.40 $ 108.34 $ 91.56 $ 82.64 Natural Gas (per MMBtu) $ 1.88 $ 1.65 $ 1.95 $ 2.47 $ 3.44 $ 2.88 $ 4.28 $ 4.74 $ 4.60 $ 7.39 $ 7.96 $ 5.55 Lower commodity prices and lower futures curves for oil and gas prices can result in impairments of our proved oil and natural gas properties or undeveloped acreage and may materially and adversely affect our operating cash flows, liquidity, financial condition, results of operations, future business and operations, and/or our ability to finance planned capital expenditures, which could in turn impact our ability to comply with covenants under our credit agreement and senior notes.
The following table highlights the quarterly average price trends for NYMEX WTI spot prices for crude oil and NYMEX Henry Hub index price for natural gas since the first quarter of 2021: 2021 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Crude Oil (per Bbl) $ 57.84 $ 66.06 $ 70.56 $ 77.09 $ 94.40 $ 108.34 $ 91.56 $ 82.64 $ 76.13 $ 73.78 $ 82.26 $ 78.32 Natural Gas (per MMBtu) $ 3.44 $ 2.88 $ 4.28 $ 4.74 $ 4.60 $ 7.39 $ 7.96 $ 5.55 $ 2.67 $ 2.12 $ 2.58 $ 2.74 Lower commodity prices and lower futures curves for oil and gas prices can result in impairments of our proved oil and natural gas properties or undeveloped acreage and may materially and adversely affect our operating cash flows, liquidity, 47 Table of Contents financial condition, results of operations, future business and operations, and/or our ability to finance planned capital expenditures, which could in turn impact our ability to comply with covenants under our Credit Agreement and senior notes.
Severance taxes for the year ended 2022 increased $75.4 million compared to the same 2021 period primarily due to higher oil, natural gas and NGL revenues between periods.
Severance taxes for the year ended 2023 increased $63.4 51 Table of Contents million compared to the same 2022 period primarily due to higher oil, natural gas and NGL revenues between periods.
Analysis of Cash Flow Changes The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities $ 1,371,671 $ 525,619 $ 171,376 Net cash used in investing activities (1,205,049) (226,476) (326,323) Net cash (used in) provided by financing activities (106,625) (297,547) 147,743 Cash Flows from 2022 Compared to 2021.
Analysis of Cash Flow Changes The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 2,213,499 $ 1,371,671 $ 525,619 Net cash used in investing activities (1,578,379) (1,205,049) (226,476) Net cash (used in) provided by financing activities (631,188) (106,625) (297,547) Cash Flows from 2023 Compared to 2022.
The following table summarizes our general and administrative (“G&A”) expenses for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Cash general and administrative expenses $ 60,584 $ 48,269 Stock-based compensation - equity awards 113,759 35,658 Stock-based compensation - liability awards (24,174) 20,662 Stock-based compensation - cash settled awards 9,385 5,865 General and administrative expenses $ 159,554 $ 110,454 G&A expenses for the year ended December 31, 2022 were $159.6 million compared to $110.5 million for the year ended December 31, 2021.
The following table summarizes our general and administrative (“G&A”) expenses for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Cash general and administrative expenses $ 85,978 $ 60,584 Stock-based compensation - equity awards 75,877 113,759 Stock-based compensation - liability awards — (24,174) Stock-based compensation - cash settled awards — 9,385 General and administrative expenses $ 161,855 $ 159,554 G&A expenses for the year ended December 31, 2023 were $161.9 million compared to $159.6 million for the year ended December 31, 2022.
Lease operating expenses (“LOE”) for the year ended December 31, 2022 increased $65.4 million compared to the year ended December 31, 2021.
Lease operating expenses (“LOE”) for the year ended December 31, 2023 increased $201.9 million compared to the year ended December 31, 2022.
Such repurchases would be made at terms and prices determined by us based upon prevailing market conditions, applicable legal requirements, available liquidity, compliance with our debt and other agreements and other factors.
The stock repurchase program can be used to reduce our shares of common stock outstanding. Such repurchases would be made at terms and prices determined by us based upon prevailing market conditions, applicable legal requirements, available liquidity, compliance with our debt agreements and other factors.
The following table presents gains and losses on our derivative instruments for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Realized cash settlement gains (losses) $ (120,105) $ (132,125) Non-cash mark-to-market derivative gain (loss) 77,737 (16,700) Total $ (42,368) $ (148,825) 51 Table of Contents Income Tax (Expense) Benefit: The following table summarizes our pre-tax income (loss) and income tax (expense) benefit for the periods indicated.
The following table presents gains and losses on our derivative instruments for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Realized cash settlement gains (losses) $ 99,410 $ (120,105) Non-cash mark-to-market derivative gain (loss) 14,606 77,737 Total $ 114,016 $ (42,368) Income Tax Expense: The following table summarizes our pre-tax income and income tax expense for the periods indicated.
The Company recorded the Colgate Senior Notes at their fair values as of the Merger closing date, which were equal to 100% of par for the 2026 Colgate Senior Notes and 92.96% of par (a $49.3 million debt discount) for the 2029 Colgate Senior Notes.
We recorded the acquired senior notes at their fair value as of the Colgate Merger closing, which were equal to 100% of par for the 2026 7.75% Senior Notes and 93.68% of par (a $49.3 million debt discount) for the 2029 Senior Notes.
We expect our total drilling, completion and facilities capex budget for 2023 to be between $1.1 billion to $1.2 billion.
We expect our total drilling, completion and facilities cash capital expenditures budget for 2024 to be between $1.9 billion to $2.1 billion.
Year Ended December 31, (in thousands) 2022 2021 Income (loss) before income taxes $ 870,132 $ 138,744 Income tax (expense) benefit (120,292) (569) Our provision for income taxes for the years ended December 31, 2022 and 2021 differs from the amounts that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax book income (loss) primarily due to (i) permanent differences; (ii) state income taxes; and (iii) any changes during the period in our deferred tax asset valuation allowance.
Year Ended December 31, (in thousands) 2023 2022 Income before income taxes $ 1,035,648 $ 870,132 Income tax expense (155,945) (120,292) Our provision for income taxes for the years ended December 31, 2023 and 2022 differs from the amounts that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax book income primarily due to (i) the portion of pre-tax net income that is attributable to our non-controlling interest and which is therefore not taxable to the Company; (ii) other permanent differences; (iii) state income taxes; and (iv) any changes during the period in our deferred tax asset valuation allowance.
The following table summarizes our depreciation, depletion and amortization (“DD&A”) for the periods indicated: Year Ended December 31, (in thousands, except per Boe data) 2022 2021 Depreciation, depletion and amortization $ 444,678 $ 289,122 Depreciation, depletion and amortization per Boe $ 12.73 $ 13.00 For the year ended December 31, 2022, DD&A expense amounted to $444.7 million, an increase of $155.6 million from 2021.
The following table summarizes our depreciation, depletion and amortization (“DD&A”) for the periods indicated: Year Ended December 31, (in thousands, except per Boe data) 2023 2022 Depreciation, depletion and amortization $ 1,007,576 $ 444,678 Depreciation, depletion and amortization per Boe $ 14.19 $ 12.73 For the year ended December 31, 2023, DD&A expense amounted to $1.0 billion, an increase of $562.9 million from 2022.
The “cumulative total return” assumes that $100 was invested, including reinvestment of dividends, if any, in our Class A Common Stock, the S&P 500, and XOP on December 31, 2017 and tracks it through December 31, 2022.
The “cumulative total return” assumes that $100 was invested, including reinvestment of dividends, if any, in our Class A Common Stock, the S&P 500, and XOP on December 31, 2018 and tracks it through December 31, 2023. The results shown in the graph below are not necessarily indicative of future stock price performance.
The following table summarizes exploration and other expenses for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Geological and geophysical costs $ 7,401 $ 3,508 Stock-based compensation — equity awards 2,721 1,883 Stock-based compensation — liability awards — (89) Stock-based compensation — cash settled awards — 314 Other expenses 1,256 2,267 Exploration and other expenses $ 11,378 $ 7,883 50 Table of Contents Exploration and other expenses were $11.4 million for the year ended December 31, 2022 compared to $7.9 million for the year ended December 31, 2021.
The following table summarizes exploration and other expenses for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Geological and geophysical costs $ 11,342 $ 7,401 Stock-based compensation - equity awards 2,541 2,721 Other expenses 5,454 1,256 Exploration and other expenses $ 19,337 $ 11,378 Exploration and other expenses were $19.3 million for the year ended December 31, 2023 compared to $11.4 million for the year ended December 31, 2022.
In May 2020, $110.6 million aggregate principal amount of the 2026 Senior Notes and $143.7 million aggregate principal amount of the 2027 Senior Notes were validly tendered and exchanged by certain eligible bondholders for consideration consisting of $127.1 million aggregate principal amount of 8.00% second lien senior secured notes due (the “Senior Secured Notes”).
In May 2020, $110.6 million aggregate principal amount of the 2026 5.375% Senior Notes and $143.7 million aggregate principal amount of the 2027 6.875% Senior Notes were validly tendered and exchanged by certain eligible bondholders for consideration consisting of $127.1 million aggregate principal amount of 8.00% second lien senior secured notes, which were fully redeemed at par in connection with the Convertible Senior Notes issuance during the second quarter of 2021.
Oil and Natural Gas Reserve Quantities We use the successful efforts method of accounting for our oil and gas producing activities. The successful efforts method inherently relies on the estimation of proved crude oil, natural gas and NGL reserves.
The successful efforts method inherently relies on the estimation of proved crude oil, natural gas and NGL reserves.
A summary of our significant accounting policies can be found in Note 1—Basis of Presentation and Summary of Significant Accounting Policies under Item 8 of this Annual Report. We have outlined certain of our accounting policies below which require the application of significant judgment by our management.
A summary of our significant accounting policies can be found in Note 1—Basis of Presentation and Summary of Significant Accounting Policies under Item 8 of this Annual Report.
We funded our capital expenditures for 2022 entirely from cash flows from operations, and we expect to fund our 2023 capex budget entirely from cash flows from operations given our anticipated level of oil and gas production, current commodity prices and our commodity hedge positions in place.
We funded our capital expenditures for 2023 entirely from cash flows from operations, and we expect to fund our 2024 capital expenditures budget entirely from cash flows from operations given our anticipated level of oil and gas production, current commodity prices and our commodity hedge positions in place. 54 Table of Contents Because we are the operator of a high percentage of our acreage, we can control the amount and timing of our capital expenditures.
Reserve quantities and the related estimates of future net cash flows are used as inputs to our calculation of depletion, evaluation of proved properties for impairment, assessment of the expected realizability of our deferred income tax assets, and the standardized measure of discounted future net cash flows computations. 56 Table of Contents The process of estimating quantities of proved reserves is inherently imprecise and relies on the following: i) interpretations and judgment of available geological, geophysical, engineering and production data; ii) certain economic assumptions, some of which are mandated by the SEC, such as commodity prices; and iii) assumptions and estimates of underlying inputs such as operating expenses, capital expenditures, plug and abandonment costs and taxes.
The process of estimating quantities of proved reserves is inherently imprecise and relies on the following: i) interpretations and judgment of available geological, geophysical, engineering and production data; ii) certain economic assumptions, some of which are mandated by the SEC, such as commodity prices; and iii) assumptions and estimates of underlying inputs such as operating expenses, capital expenditures, plug and abandonment costs and taxes.
To date, our primary use of capital has been for drilling and development capital expenditures and the acquisition of oil and natural gas properties. We continually evaluate our capital needs and compare them to our capital resources.
To date, our primary uses of capital have been for drilling and development capital expenditures and the acquisition of oil and natural gas properties. We continually evaluate our capital needs and compare them to our capital resources. Our total capital expenditures incurred for the year ended December 31, 2023 were $1.5 billion.
The following table sets forth selected operating expense data for the periods indicated: Year Ended December 31, Increase/(Decrease) 2022 2021 Change % Operating costs (in thousands): Lease operating expenses $ 171,867 $ 106,419 $ 65,448 62 % Severance and ad valorem taxes 155,724 67,140 88,584 132 % Gathering, processing, and transportation expense 97,915 85,896 12,019 14 % Operating cost metrics: Lease operating expenses (per Boe) $ 4.92 $ 4.78 $ 0.14 3 % Severance and ad valorem taxes (% of revenue) 7.3 % 6.5 % 0.8 % 12 % Gathering, processing, and transportation expense (per Boe) 2.80 3.86 (1.06) (27) % Lease Operating Expenses.
The following table sets forth selected operating expense data for the periods indicated: Year Ended December 31, Increase/(Decrease) 2023 2022 Change % Operating costs (in thousands): Lease operating expenses $ 373,772 $ 171,867 $ 201,905 117 % Severance and ad valorem taxes 240,762 155,724 85,038 55 % Gathering, processing, and transportation expense 89,282 97,915 (8,633) (9) % Operating cost metrics: Lease operating expenses (per Boe) $ 5.26 $ 4.92 $ 0.35 7 % Severance and ad valorem taxes (% of revenue) 7.7 % 7.3 % 0.4 % 6 % Gathering, processing, and transportation expense (per Boe) 1.26 2.80 (1.55) (55) % Lease Operating Expenses.
(3) Asset retirement obligations reflect the present value of the estimated future costs associated with the plugging and abandonment of oil and gas wells and the related land restoration in accordance with applicable laws and regulations.
(5) Asset retirement obligations reflect the present value of the estimated future costs associated with the plugging and abandonment of oil and gas wells and the related land restoration in accordance with applicable laws and regulations. (6) Long-term debt consists of the principal amounts of our senior notes due as of December 31, 2023.
The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board of Directors.
Variable dividends are typically declared on or around our quarterly earnings and paid shortly thereafter. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board of Directors.
In connection with the Merger, the Repurchase Program was increased to $500 million and was extended through December 31, 2024. The Repurchase Program can be used to reduce our shares of Class A and Class C Common Stock outstanding.
Stock Repurchase Program Our Board of Directors authorized a stock repurchase program to acquire up to $500 million of our outstanding Common Stock (the “Repurchase Program”), which was approved to run through December 31, 2024. The Repurchase Program can be used to reduce our shares of Class A Common Stock and Class C Common Stock outstanding.
Higher DD&A expense in 2022 was due to the increase in our overall production volumes between periods, which increased DD&A expense by $165.0 million period over period. This increase was slightly offset by a decline in DD&A rates between periods which decreased DD&A expense by $9.4 million.
The primary factor contributing to higher DD&A expense in 2023 was the increase in our overall production volumes between periods, which increased DD&A expense by $459.0 million period over period, while higher DD&A rates between periods increased DD&A expense by $103.9 million.
Merger and integration expense for the year ended December 31, 2022 was $77.4 million. These costs primarily relate to (i) $40.0 million in bankers’ advisory fees, (ii) $24.0 million in severance and related benefits associated with employees that were terminated in connection with the Merger and (iii) legal, accounting and consultancy fees. Impairment and Abandonment Expense.
During the year ended December 31, 2022, merger and integration expense primarily consisted of (i) $40.0 million in bankers’ advisory fees related to the Colgate Merger; (ii) $24.0 million in severance and related benefits associated with employee terminations that occurred in connection with the Colgate Merger; and (iii) legal, accounting and consultancy fees. Exploration and Other Expenses.
As of December 31, 2022, the Company had $385.0 million in borrowings outstanding and $1.1 billion in available borrowing capacity, which was net of $5.8 million in letters of credit outstanding, under its credit facility.
As of December 31, 2023, we had no borrowings outstanding and $2.0 billion in available borrowing capacity, which was net of $5.7 million in letters of credit outstanding.
The oil production volume increase resulted from placing 95 wells on production since December 31, 2021, which added 6,212 MBbls of net oil production to the year ended December 31, 2022 as compared to 42 wells brought online during the year ended December 31, 2021 that added 3,490 MBbls of oil to our 2021 annual production volumes.
The oil production volume increase resulted from placing 183 wells on production since December 31, 2022 as compared to 95 wells brought online during the year ended December 31, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our Class A Common Stock was listed and traded on the NASDAQ under the symbol “CDEV” until the closing of the Merger on September 1, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our Class A Common Stock is currently listed on the New York Stock Exchange under the ticker symbol “PR”.
Severance and ad valorem taxes as a percentage of total net revenues increased to 7.3% for the year ended December 31, 2022 as compared to 6.5% for the year ended December 31, 2021.
Severance and ad valorem taxes as a percentage of total net revenues increased to 7.7% for the year ended December 31, 2023 as compared to 7.3% for the year ended December 31, 2022. This increase in rate was primarily the result of higher ad valorem taxes as discussed above. Gathering, Processing and Transportation Expenses.
The Senior Secured Notes were fully redeemed at par in connection with the Convertible Senior Notes issuance during the second quarter of 2021. The Senior Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Permian Resources and each of OpCo’s current subsidiaries that guarantee OpCo’s Credit Agreement.
The Senior Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and each of OpCo’s current subsidiaries that guarantee OpCo’s Credit Agreement.
As a result of the Merger, our 2022 operational plans and sources and use of capital, among others things, as a combined entity have changed, and such changes include (i) the Company assumed $1.0 billion of Colgate’s senior notes, (ii) the Company refinanced Colgate’s credit facility borrowings outstanding at closing through borrowings under the Company’s Credit Agreement, (iii) borrowings under our Credit Agreement to fund a portion of the $525 million in cash Merger consideration, and (iv) funding of transaction costs incurred related to the Merger.
As a result of the Earthstone Merger, our future operational plans, cash flows and leverage profile, among others things, as a combined entity has changed, and such changes include (i) assuming $1.05 billion of Earthstone’s senior notes, (ii) refinancing Earthstone’s credit facility borrowings outstanding at closing with borrowings under our facility, and (iii) funding of transaction costs incurred related to the Earthstone Merger.
Cash interest expense on the Credit Agreement includes unused commitment fees and assumes no additional principal borrowings, repayments or changes to commitments under the agreement through the instrument due date. (6) Long-term severance and related expenses associated with the Merger.
(7) Cash interest expense on our senior notes is estimated assuming no principal repayment until the maturity of the instruments. Cash interest expense on the Credit Agreement includes unused commitment fees and assumes no additional principal borrowings, repayments or changes to commitments under the agreement through the instrument due date.
These inflationary pressures may also result in increases to the costs of our oilfield goods, services and personnel, which can in turn cause our capital expenditures and operating costs to rise. 2022 Highlights and Future Considerations Colgate Merger On May 19, 2022, we entered into a Business Combination Agreement (the “Merger Agreement”) with CRP, Colgate, and Colgate Energy Partners III MidCo, LLC (the “Colgate Unitholder”).
Inflationary pressures such as these may also result in increases to the costs of our oilfield goods, services and personnel, which can in turn cause our capital expenditures and operating costs to rise. 2023 Highlights and Future Considerations Earthstone Merger On August 21, 2023, we entered into an Agreement and Plan of Merger (“the Merger Agreement”) with Earthstone pursuant to which Permian Resources agreed to acquire Earthstone.
Oil production also benefited from wells acquired in the Merger with Colgate, which added 3,517 MBbls of net oil production to the year ended December 31, 2022. These oil volume increases were partially offset by normal production decline across our existing wells.
Oil production also benefited from wells acquired in the mergers with Colgate and Earthstone, which collectively added 9,852 MBbls of net oil production to the year ended December 31, 2023 compared to 3,517 MBbls of net oil production added from the Colgate Merger to the year ended December 31, 2022.
The following table summarizes interest expense for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Credit Facility $ 15,974 $ 10,771 8.000% Senior Secured Notes due 2025 — 2,908 5.375% Senior Notes due 2026 15,557 15,556 7.750% Senior Notes due 2026 7,750 — 6.875% Senior Notes due 2027 24,500 24,500 3.250% Convertible Senior Notes due 2028 5,525 4,315 5.875% Senior Notes due 2029 13,708 — Amortization of debt issuance costs and debt discount 15,652 4,992 Interest capitalized (3,021) (1,754) Total $ 95,645 $ 61,288 Interest expense was $34.4 million higher for the year ended December 31, 2022 compared to the year ended December 31, 2021 mainly due to (i) $21.5 million in additional interest expense from the senior notes that were assumed in the Merger; (ii) $10.7 million in additional debt issuance costs amortized during the 2022 period mainly related to fees incurred for an incremental commitment letter we entered into in connection with the Merger; and (iii) $5.2 million in higher interest expense incurred on our credit facility due to a higher weighted average effective interest rate during 2022.
The following table summarizes interest expense for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Credit Facility $ 30,049 $ 15,974 5.375% Senior Notes due 2026 15,557 15,557 7.75% Senior Notes due 2026 23,250 7,750 6.875% Senior Notes due 2027 24,500 24,500 8.00% Senior Notes due 2027 7,333 — 3.25% Convertible Senior Notes due 2028 5,525 5,525 5.875% Senior Notes due 2029 41,125 13,708 9.875% Senior Notes due 2031 8,229 — 7.00% Senior Notes due 2032 12,347 — Amortization of debt issuance costs, debt discount and debt premium 16,078 15,652 Interest capitalized (7,813) (3,021) Other interest expense 1,029 — Total $ 177,209 $ 95,645 Interest expense was $81.6 million higher for the year ended December 31, 2023 compared to the year ended December 31, 2022 mainly due to (i) $58.5 million in additional interest expense incurred from the senior notes that were assumed in the Colgate and Earthstone Mergers; (ii) $14.1 million in higher interest expense incurred on our credit facility due to a higher weighted average borrowings outstanding and effective interest rate during 2023; and (iii) $12.3 million in interest incurred on our Senior Notes due 2032 that were issued in September 2023.
We plan to return capital to shareholders through a combination of base dividends plus a variable return program, including variable dividends, share repurchases or a combination of both. In November 2022, we declared a quarterly cash dividend of $0.05 per share of Class A Common Stock and a quarterly cash distribution of $0.05 per common unit of OpCo.
We plan to return capital to shareholders through a combination of base dividends plus a variable return program, including variable dividends, share repurchases or a combination of both.
Market Conditions The demand for oil and natural gas was significantly impacted by the worldwide outbreak of COVID-19 during 2020 and 2021, and global oil and natural gas supplies have been impacted by production curtailment agreements among the Organization of Petroleum Exporting Countries and other oil producing countries (“OPEC+”) and reduced drilling and completion activity from U.S. producers.
Immediately following the COVID-19 pandemic, global oil supply was limited by production curtailment agreements among the Organization of Petroleum Exporting Countries and other oil producing countries (“OPEC+”), in addition to overall reduced drilling and completion activity from U.S. producers.
Natural gas and NGLs are produced concurrently with our crude oil volumes, typically resulting in a high correlation between fluctuations in oil quantities sold and natural gas and NGL quantities sold.
These oil volume increases were partially offset by normal production decline across our existing wells. Natural gas and NGLs are produced concurrently with our crude oil volumes, typically resulting in a high correlation between fluctuations in oil quantities sold and natural gas and NGL quantities sold driving the 100% and 131%, respectively, increase in gas and NGL volumes between periods.
During the year ended December 31, 2021, generated pre-tax net income of $138.7 million and recorded income tax expense of $0.6 million. The primary factors decreasing our income tax expense below the U.S. statutory rate was a $40.1 million reduction to our deferred tax asset valuation allowance for the year ended December 31, 2021.
For the year ended December 31, 2023 we generated pre-tax net income of $1.0 billion and recorded income tax expense of $155.9 million. The primary factors decreasing our income tax expense below the U.S. statutory rate was the portion of pre-tax income that was attributable to our non-controlling interest partners and not taxable to the Company.
In addition, we may, from time to time, seek to retire or purchase our outstanding senior notes through cash purchases and/or exchanges for debt in open-market purchases, privately negotiated transactions or otherwise. Because we are the operator of a high percentage of our acreage, we can control the amount and timing of our capital expenditures.
In addition, we may, from time to time, seek to retire or purchase our outstanding senior notes through cash purchases and/or exchanges for debt in open-market purchases, privately negotiated transactions or otherwise. We cannot ensure that cash flows from operations or other sources of needed capital will be available at acceptable terms or at all.
Similarly, the NYMEX Henry Hub index price for natural gas reached a high of $9.85 per MMBtu on August 23, 2022, from a low of $1.33 per MMBtu on September 22, 2020.
Specifically, NYMEX WTI spot prices for crude oil reached a high of $123.70 per barrel on March 8, 2022, and the NYMEX Henry Hub index price for natural gas reached a high of $9.85 per MMBtu on August 23, 2022.
Our Board of Directors declared and paid a regular cash dividend of $0.05 per share of Class A Common Stock in November 2022. The variable return program is structured to distribute at least 50% of free cash flow after the base dividend through a variable dividend, share repurchases or a combination of both.
The variable return program is structured to distribute at least 50% of free cash flow after the base dividend through a variable dividend, share repurchases or a combination of both. The mix between variable dividends and share repurchases are dependent upon market conditions during a given quarter.
The 40% increase in the average realized oil price was mainly the result of higher NYMEX crude prices between periods, which was minimally offset by wider oil differentials. The average realized sales price of natural gas increased 26% due to higher average NYMEX gas prices between periods, partially offset by wider gas differentials.
The 15% decrease in the average realized oil price was mainly the result of 18% lower NYMEX crude prices between periods, which was slightly offset by improved oil differentials.
The Capped Call Transactions have an initial strike price of $6.28 per share of Class A Common Stock and an initial capped price of $8.4525 per share of Class A Common Stock (each subject to certain customary adjustments per the agreements). 54 Table of Contents Senior Notes On September 1, 2022, in connection with the Merger, OpCo entered into supplemental indentures whereby all of Colgate’s outstanding senior notes were assumed at closing and became the senior unsecured debt of OpCo.
On September 1, 2022, in connection with the Colgate Merger, OpCo entered into supplemental indentures whereby all of Colgate’s outstanding senior notes were assumed at the Colgate Merger closing date and became the senior unsecured debt of OpCo.
However, the main processor of our raw gas operated in partial ethane-recovery during 2022, as compared to operating in full ethane-rejection during 2021, and this resulted in a lower percentage of natural gas volumes and a higher percentage of NGLs being recovered from our wet gas stream during the 2022 period. Operating Expenses.
Additionally, certain processors of our raw gas operated in higher ethane-recovery mode during the year ended December 31, 2023 as compared to the year ended December 31, 2022, which resulted in a higher percentage of NGLs being recovered from our wet gas stream during 2023.
GP&T on a per Boe basis, however, decreased 27% from $3.86 for the year ended December 31, 2021 to $2.80 per Boe for the year ended December 31, 2022.
Gathering, processing and transportation costs (“GP&T”) for the year ended December 31, 2023 decreased $8.6 million compared to the year ended December 31, 2022. Additionally, GP&T decreased on a per Boe basis from $2.80 for the year ended December 31, 2022 to $1.26 per Boe for the year ended December 31, 2023.

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Item 7. Management's Discussion & Analysis

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

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Biggest changeMoreover, depending on the mitigation strategies recommended in the Environmental Assessments or Environmental Impact Statements, we could incur added costs, which may be substantial. However, any such adverse regulatory developments are expected to have no more than a minimal impact on our results, given our limited exposure of leases on federal lands (less than five percent of our total interests).
Biggest changeAuthorizations under NEPA are also subject to protest, appeal or litigation, any or all of which may delay or halt projects. Moreover, depending on the mitigation strategies recommended in the Environmental Assessments or Environmental Impact Statements, we could incur added costs, which may be substantial.
Supreme Court stayed the lower court order except as it applies to the Keystone XL pipeline. In January 2021, the U.S. Army Corps of Engineers released the final version of a rule renewing twelve of its NWPs, including NWP 12.
In July 2020, the U.S. Supreme Court stayed the lower court order except as it applies to the Keystone XL pipeline. In January 2021, the U.S. Army Corps of Engineers released the final version of a rule renewing twelve of its NWPs, including NWP 12.
In the absence of such federal climate legislation, a number of state and regional cap-and-trade programs have emerged that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. The U.S.
In the absence of such federal climate legislation, a number of state and regional cap-and-trade programs have emerged that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs.
In the event that a new, federal level of legal restrictions relating to the hydraulic fracturing process is adopted in areas where we operate, we may incur additional costs to comply with such federal requirements that may be significant in nature, and also could become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.
In the event that a new, federal level of legal restrictions relating to the hydraulic fracturing process is adopted in areas where we operate, we may incur additional costs to comply with such federal requirements that may be significant in nature, and also 22 Table of Contents could become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.
In addition, some of our competitors may have a competitive advantage when responding to factors that affect the supply and demand for oil and natural gas production, such as price fluctuations (including basis differentials), domestic and foreign political conditions, weather conditions, the proximity and 14 Table of Contents capacity of natural gas pipelines and other transportation facilities and overall economic conditions.
In addition, some of our competitors may have a competitive advantage when responding to factors that affect the supply and demand for oil and natural gas production, such as price fluctuations (including basis differentials), domestic and foreign political conditions, weather conditions, the proximity and capacity of natural gas pipelines and other transportation facilities and overall economic conditions.
Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector. These goals were reaffirmed in November 2022 at the 27th Conference of the Parties (“COP27”).
Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector. These goals were reaffirmed in November 2022 at the 27th Conference of the Parties (“COP27”) in Sharm-El Sheik.
After undertaking its review, the EPA concluded in 2019 that it does not need to regulate exploration and production waste, and specifically "drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of oil, gas or geothermal energy." The EPA concluded that states are adequately regulating exploration and production waste under the Subtitle D provisions of RCRA.
After undertaking its review, the EPA concluded in 2019 that it does not need to regulate exploration and production waste, and specifically “drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of oil, gas or geothermal energy.” The EPA concluded that states are adequately regulating exploration and production waste under the Subtitle D provisions of RCRA.
Drilling fluids, produced waters and other wastes associated with the exploration, development and production of oil, natural gas and NGLs, if properly handled, are currently exempt from regulation as hazardous waste under RCRA and, instead, are regulated 17 Table of Contents under RCRA’s less stringent nonhazardous solid waste provisions, state laws or other federal laws.
Drilling fluids, produced waters and other wastes associated with the exploration, development and production of oil, natural gas and NGLs, if properly handled, are currently exempt from regulation as hazardous waste under RCRA and, instead, are regulated under RCRA’s less stringent nonhazardous solid waste provisions, state laws or other federal laws.
We plan to continue to recruit and develop a diverse workforce to ensure that we remain an employer of choice delivering top-tier results. We strive to promote a safe and healthy working environment with a focus on protecting our employees, contractors, the public and the environment in the communities in which we conduct our business.
We plan to continue to recruit and develop a diverse workforce to ensure that we remain an employer of choice delivering top-tier results. 24 Table of Contents We strive to promote a safe and healthy working environment with a focus on protecting our employees, contractors, the public and the environment in the communities in which we conduct our business.
In August 2020, the FWS and the National Marine Fisheries Service issued three rules amending the implementation of the ESA regulations, among other things revising the process for listing species and designating critical habitat. A coalition of states and environmental groups has challenged the three rules and 23 Table of Contents the litigation remains pending.
In August 2020, the FWS and the National Marine Fisheries Service issued three rules amending the implementation of the ESA regulations, among other things revising the process for listing species and designating critical habitat. A coalition of states and environmental groups has challenged the three rules and the litigation remains pending.
In May 2020, the court narrowed its ruling, vacating and enjoining the use of NWP 12 only as it relates to construction of new oil and gas pipelines. The U.S. Army Corps of Engineers appealed the decision to the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”). In July 2020, the U.S.
Army Corps of Engineers for pipelines and utility projects. In May 2020, the court narrowed its ruling, vacating and enjoining the use of NWP 12 only as it relates to construction of new oil and gas pipelines. The U.S. Army Corps of Engineers appealed the decision to the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”).
Once finalized, the regulations are likely to be subject to legal challenge and will also need to be incorporated into the states’ implementation plans, which will need to be approved by the EPA in individual rulemakings that could also be subject to legal challenge. As a result, future implementation of the standards is uncertain at this time.
The regulations are subject to legal challenge and will also need to be incorporated into the states’ implementation plans, which will need to be approved by the EPA in individual rulemakings that could also be subject to legal challenge. As a result, future implementation of the standards is uncertain at this time.
For example, the EPA published final CAA regulations in 2012 and, more recently, in June 2016, establishing performance standards, including standards for the capture of air emissions released during oil and natural gas hydraulic fracturing, leak detection, and permitting (which are subject to revision, as discussed above); published in June 2016 an effluent limitation guideline final rule prohibiting the discharge of wastewater from onshore unconventional oil and natural gas extraction facilities to publicly owned wastewater treatment plants; and issued in 2014 a prepublication version of its Advance Notice of Proposed Rulemaking regarding Toxic Substances Control Act (“TSCA”) reporting of the chemical substances and mixtures used in hydraulic fracturing.
For example, the EPA published final CAA regulations in 2012 and, in June 2016, establishing performance standards, including standards for the capture of air emissions released during oil and natural gas hydraulic fracturing, leak detection, and permitting (which are subject to revision, as discussed above); published in June 2016 an effluent limitation guideline final rule prohibiting the discharge of wastewater from onshore unconventional oil and natural gas extraction facilities to publicly owned wastewater treatment plants; and issued in 2014 an Advance Notice of Proposed Rulemaking regarding Toxic Substances Control Act (“TSCA”) reporting of the chemical substances and mixtures used in hydraulic fracturing.
For example, Wyoming has promulgated rules related to the public disclosure of 22 Table of Contents substances used in hydraulic fluid, testing requirements for water wells near drilling sites and leak detection and repair requirements for fugitive emissions from oil and gas production facilities.
For example, Wyoming has promulgated rules related to the public disclosure of substances used in hydraulic fluid, testing requirements for water wells near drilling sites and leak detection and repair requirements for fugitive emissions from oil and gas production facilities.
The CEA prohibits any person from manipulating or attempting to manipulate the price of any commodity in interstate commerce, as well as the market for financial instruments on 16 Table of Contents such commodity, such as futures, options and swaps.
The CEA prohibits any person from manipulating or attempting to manipulate the price of any commodity in interstate commerce, as well as the market for financial instruments on such commodity, such as futures, options and swaps.
We also face indirect competition from alternative energy sources. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.
We also face indirect competition from alternative energy sources. Our ability to acquire additional prospects and to find and develop reserves in the 14 Table of Contents future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.
The CEA also prohibits knowingly delivering or causing to be delivered false or misleading or knowingly inaccurate reports concerning market information or conditions that affect or tend to affect the price of a commodity.
The CEA also prohibits knowingly delivering or causing to be delivered false or misleading or knowingly inaccurate reports concerning market information or conditions that affect or tend to affect the 16 Table of Contents price of a commodity.
We also have office space in Denver, Colorado; Carlsbad, New Mexico; Eunice, New Mexico; and Pecos, Texas. Available Information Our internet website address is www.permianres.com. We routinely post important information for investors on our website.
We also have office space in Carlsbad, New Mexico; Denver, Colorado; Eunice, New Mexico; Gardendale, Texas; Greenwood, Texas; Pecos, Texas; San Angelo, Texas; and Woodlands, Texas. Available Information Our internet website address is www.permianres.com. We routinely post important information for investors on our website.
However, it is possible that certain oil and natural gas drilling and production wastes now classified as nonhazardous solid wastes could be classified as hazardous wastes in the future.
However, it is possible that certain oil and natural gas drilling and production wastes now classified as nonhazardous solid wastes could be classified as 17 Table of Contents hazardous wastes in the future.
Securities and Exchange Commission (“SEC”) issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
The SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
As of February 7, 2023, we had 218 full-time employees. In addition, we hire independent contractors on an as needed basis but have no collective bargaining or employment agreements with our employees. We believe that our employees give us a sustainable competitive advantage, and we understand the need to attract, retain and train the best team possible.
As of December 31, 2023, we had 461 total employees. In addition, we hire independent contractors on an as needed basis but have no collective bargaining or employment agreements with our employees. We believe that our employees give us a sustainable competitive advantage, and we understand the need to attract, retain and train the best team possible.
Also, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources. The final report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under certain limited circumstances.” To date, EPA has taken no further action in response to the December 2016 report.
The final report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under certain limited circumstances.” To date, EPA has taken no further action in response to the December 2016 report.
We are committed to a diverse workforce because we believe employees with different backgrounds, experiences, interests and skillsets drive superior results. In terms of gender and racial distribution, approximately 36% of our employees identify as 24 Table of Contents female and approximately 22% of our employees identify as non-white.
We are committed to a diverse workforce because we believe employees with different backgrounds, experiences, interests and skillsets drive superior results. In terms of gender and racial distribution, approximately 31% of our employees identify as female and approximately 32% of our employees identify as non-white.
The table below summarizes the purchasers that accounted for 10% or more of our total net revenues for the periods presented: Year Ended December 31, 2022 2021 2020 BP America 34 % 50 % 47 % Shell Trading (US) Company 21 % 22 % 20 % Enterprise Crude Oil, LLC 18 % — % 4 % Eagleclaw Midstream Ventures, LLC 8 % 11 % 8 % During these periods, no other purchaser accounted for 10% or more of our net revenues.
The table below summarizes the purchasers that accounted for 10% or more of our total net revenues for the periods presented: Year Ended December 31, 2023 2022 2021 BP America 20 % 34 % 50 % Shell Trading (US) Company 20 % 21 % 22 % Enterprise Crude Oil, LLC 30 % 18 % — % Kinetik Holdings Inc. 5 % 8 % 11 % During these periods, no other purchaser accounted for 10% or more of our net revenues.
Moreover, New Mexico and Texas impose a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within their jurisdiction. 15 Table of Contents Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations, and as a result we do not expect compliance with such regulatory requirements to affect our operations in any way that is of material difference from our competitors who are similarly situated.
Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations, and as a result we do not expect compliance with such regulatory requirements to affect our operations in any way 15 Table of Contents that is of material difference from our competitors who are similarly situated.
However, the Paris Agreement does not impose any binding obligations on its participants. President Biden has recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
President Biden has recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
The EPA issued its anticipated area designations in November and December 2017. In December 2020, the EPA announced its intention to leave the ozone NAAQS unchanged at 70 ppb rather than lower them further. In October 2021, the EPA announced it will reconsider its December 2020 decision and is targeting to complete its reconsideration by the end of 2023.
The EPA issued its anticipated area designations in November and December 2017. In December 2020, the EPA announced its intention to leave the ozone NAAQS unchanged at 70 ppb rather than lower them further.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. The EPA recently issued a proposed rule to implement the waste emissions charge with a proposed effective date in 2025 for reporting year 2024 emissions.
Increased costs associated with the transportation and disposal of produced water, including the cost of complying with regulations concerning produced water disposal, may reduce our profitability; however, these costs are commonly incurred by all oil, natural gas and NGL producers, and we do not believe that the costs associated with the disposal of produced water will affect our operations in any way that is of material difference from those of our competitors who are similarly situated.
Increased costs associated with the transportation and disposal of produced water, including the cost of complying with regulations concerning produced water disposal, may reduce our profitability; however, these costs are commonly incurred by all oil, natural gas and NGL producers, and we do not believe that the costs associated with the disposal of produced water will affect our operations in any way that is of material difference from those of our competitors who are similarly situated. 19 Table of Contents Air Emissions The federal Clean Air Act (the “CAA”) and comparable state laws restrict the emission of air pollutants from many sources, such as tank batteries, through air emissions standards, construction and operating permitting programs and the imposition of other compliance standards.
We currently have exploration, development and production activities on federal lands. Our proposed exploration, development and production activities are expected to include leasing of federal mineral interests, which will require the acquisition of governmental permits or authorizations that are subject to the requirements of NEPA.
Our proposed exploration, development and production activities are expected to include leasing of federal mineral interests, which will require the acquisition of governmental permits or authorizations that are subject to the requirements of NEPA. This process has the potential to delay or limit, or increase the cost of, the development of natural gas, oil and NGL projects.
The EPA also finalized separate rules under the CAA in June 2016 regarding criteria for aggregating multiple sites into a single source for air-quality permitting purposes applicable to the oil and natural gas industry.
We cannot predict the scope of any resulting legislation or new regulations, which may, in turn, affect our business. 20 Table of Contents The EPA also finalized separate rules under the CAA in June 2016 regarding criteria for aggregating multiple sites into a single source for air-quality permitting purposes applicable to the oil and natural gas industry.
The notice also required disposal well operators to provide injection data to TRRC staff to further analyze seismicity in the area. 19 Table of Contents While we cannot predict the ultimate outcome of this notice, any action that temporarily or permanently restricts the availability of disposal capacity for produced water or other fluids may increase our costs or have other adverse impacts on our operations.
While we cannot predict the ultimate outcome of these actions, any action that temporarily or permanently restricts the availability of disposal capacity for produced water or other fluids may increase our costs or have other adverse impacts on our operations.
Marketing and Customers We market the majority of the production from properties we operate on account of both ourselves and that of the other working interest owners in these properties.
In most cases, we investigate title and obtain title opinions from counsel only when we acquire producing properties or before commencement of drilling operations. Marketing and Customers We market the majority of the production from properties we operate on account of both ourselves and that of the other working interest owners in these properties.
In June and July 2022, the FWS issued final rules rescinding Trump-era regulations concerning the definition of “habitat” and critical habitat exclusions. It is possible those developments could, in the future, affect our operations if the areas in which we operate are designated as critical or suitable habitat.
It is possible those developments could, in the future, affect our operations if the areas in which we operate are designated as critical or suitable habitat.
The Biden Administration is also considering revisions to the leasing and permitting programs for oil and natural gas development on federal lands. Regulation of Production of Oil and Natural Gas The production of oil, natural gas and NGLs is subject to regulation under a wide range of local, state and federal statutes, rules, orders and regulations.
Regulation of Production of Oil and Natural Gas The production of oil, natural gas and NGLs is subject to regulation under a wide range of local, state and federal statutes, rules, orders and regulations. Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations.
In November 2022, the BLM issued a proposed rule to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities on federal and American Indian leases. We cannot predict the scope of any resulting legislation or new regulations, which may, in turn, affect our business.
In November 2022, the BLM issued a proposed rule to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities on federal and American Indian leases. The comment period for this rule has closed and the rule is in the process of being finalized.
The SEC originally planned to issue a final rule by October 2022, but most commentators now expect a final rule to be issued in 2023. In addition, the United Nations-sponsored Paris Agreement calls for countries to set their own GHG emissions targets and be transparent about the measures each country will take to achieve its GHG emissions targets.
In addition, the United Nations-sponsored Paris Agreement calls for countries to set their own GHG emissions targets and be transparent about the measures each country will take to achieve its GHG emissions targets. However, the Paris Agreement does not impose any binding obligations on its participants.
The CWA also prohibits the discharge of dredge and fill material into regulated waters, including wetlands, unless authorized by permit. The EPA and the U.S. Army Corps of Engineers (the “Corps”) issued final rules attempting to clarify the federal jurisdictional reach over Waters of the United States in 2015 (“WOTUS rule”).
The CWA also prohibits the discharge of dredge and fill material into regulated waters, including wetlands, unless authorized by permit. The EPA and the U.S.
An executive order also established an Interagency Working Group on the Social Cost of Greenhouse Gases (“Working Group”), which is called on to, among other things, develop methodologies for calculating the “social cost of carbon,” “social cost 21 Table of Contents of nitrous oxide,” and “social cost of methane.” The Working Group published interim values for three specific metrics (the Social cost of Carbon, Social Cost of Nitrous Oxide, and Social Cost of Methane) in February 2021, based on Obama-era estimates, and is now working to revise those values.
An executive order also established an Interagency Working Group on the Social Cost of Greenhouse Gases (“Working Group”), which is called on to, among other things, develop methodologies for calculating the “social cost of carbon,” “social cost of nitrous oxide,” and “social cost of methane.” The EPA published a final report in December 2023 with the social cost of carbon at $190 per metric ton of carbon dioxide emitted in 2020 at a 2% discount rate.
In addition, the New Mexico state legislature in 2019 considered House Bill 206, which, if passed, would have enacted an Environmental Review Act comparable to NEPA.
However, any such adverse regulatory developments are expected to have no more than a minimal impact on our results, given our limited exposure of leases on federal lands. In addition, the New Mexico state legislature in 2019 considered House Bill 206, which, if passed, would have enacted an Environmental Review Act comparable to NEPA.
Affected methane and VOC sources include hydraulically fractured (or re-fractured) oil and natural gas well completions, fugitive emissions from well sites and compressors, and pneumatic pumps. In September 2018, the EPA proposed amendments to the 2016 rules that would reduce the 2016 rules’ fugitive emissions monitoring requirements and expand exceptions to controlling methane emissions from pneumatic pumps, among other changes.
Affected methane and VOC sources include hydraulically fractured (or re-fractured) oil and natural gas well completions, fugitive emissions from well sites and compressors, and pneumatic pumps.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation in this Annual Report, as amounts therein are reflected net of all royalties, overriding royalties and production due to others. (2) The oil volume commitments listed above represent our total crude oil takeaway capacity that has been contracted with third party carriers.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation in this Annual Report, as amounts therein are reflected net of all royalties, overriding royalties and production due to others. These total oil volumes committed are subject to financial ship-or-pay penalties if such physical delivery commitments are not met.
Therefore, if our production is not sufficient to satisfy the firm delivery commitments above, we believe we can purchase sufficient volumes in the market at index-related prices to satisfy our commitments. Title to Properties We believe that we have satisfactory title to substantially all of our producing properties in accordance with generally accepted industry standards.
We believe our current production and reserves are sufficient to fulfill these physical delivery commitments, and production under the agreements is not tied to any specific property. Therefore, if our production is not sufficient to satisfy the firm delivery commitments above, we believe we can purchase sufficient volumes in the market at index-related prices to satisfy our commitments.
Individual properties may be subject to burdens such as royalty, overriding royalty, working and other outstanding interests customary in the industry. In most cases, we investigate title and obtain title opinions from counsel only when we acquire producing properties or before commencement of drilling operations.
Title to Properties We believe that we have satisfactory title to substantially all of our producing properties in accordance with generally accepted industry standards. Individual properties may be subject to burdens such as royalty, overriding royalty, working and other outstanding interests customary in the industry.
On December 30, 2022, the EPA and the Corps finalized the “Revised Definition of ‘Waters of the United States’” rule, which will be effective on March 20, 2023. As such, uncertainty remains with respect to future implementation of the rule and any resulting litigation. The process for obtaining permits under the CWA also has the potential to impact our operations.
As such, uncertainty remains with respect to future implementation of the rule and any resulting litigation. The process for obtaining permits under the CWA also has the potential to impact our operations. In April 2020, the U.S. District Court for the District of Montana vacated Nationwide Permit (“NWP”) 12, the general permit issued by the U.S.
The rule finalizes a narrow set of changes to generally restore regulatory provisions that were in effect for decades before the 2020 rule modified them for the first time. The impact of changes to the NEPA regulations and statutory text therefore remains uncertain and could have an effect on our operations and our ability to obtain governmental permits.
In July 2023, the CEQ issued the proposed Phase 2 Rule. The impact of changes to the NEPA regulations and statutory text therefore remains uncertain and could have an effect on our operations and our ability to obtain governmental permits. We currently have exploration, development and production activities on federal lands.
Removed
Of these total oil volumes committed, however, only 29,000 Bbls/d from January 2023 through May 2025 are subject to a financial ship-or-pay penalties if such physical delivery commitments are not met. We believe our current production and reserves are sufficient to fulfill these physical delivery commitments, and production under the agreements is not tied to any specific property.
Added
The Biden administration has also proposed certain changes to the leasing and permitting programs for oil and natural gas development on federal lands, including imposing bans on new oil and gas leasing, cancelling issued oil and gas leases, and removing public lands from future oil and gas leasing.
Removed
Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations.
Added
Moreover, New Mexico and Texas impose a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within their jurisdiction.
Removed
However, in 2017, President Trump issued an executive order directing the EPA and the U.S. Army Corps of Engineers to review the WOTUS rule and, if the agencies’ reviews find that the rule does not meet the executive order’s goal of promoting economic growth while reducing regulatory uncertainty, to initiate a new rulemaking to repeal or revise the rule.
Added
Army Corps of Engineers (the “Corps”) have issued rules attempting to clarify the federal jurisdictional reach over Waters of the United States since 2015 (“WOTUS rule”), including the Navigable Waters Protection Rule during the Trump administration, rules reverting back to the 1986 WOTUS definition during the Biden administration, and rules reinstating the pre-2015 definition in January 2023.
Removed
The EPA and the U.S. Army Corps of Engineers formally repealed the WOTUS rule in September 2019. In January 2020, the Trump administration published a final replacement rule, called the Navigable Waters Protection Rule, that purports to expressly define which categories of water may be federally regulated under 18 Table of Contents the CWA.
Added
However, in May 2023, the Supreme Court decided Sackett v. EPA , which sharply curtailed the EPA’s and Corps’ jurisdictional reach by limiting the types of wetlands that fell under WOTUS.
Removed
A coalition of states and cities, environmental groups, and agricultural groups challenged the Navigable Waters Protection Rule, which was vacated by a federal district court in August 2021. In addition, in an April 2020 decision defining the scope of the CWA, the U.S.
Added
Sackett codified the definition of WOTUS as only “geographical features” that are described in ordinary parlance as “streams, oceans, rivers, and lakes” and to adjacent wetlands that are “indistinguishable” from those bodies of water due to a continuous surface connection.
Removed
Supreme Court held that, in certain cases, discharges from a point source to groundwater could fall within the scope of the CWA and require a permit. The U.S. Supreme Court rejected assertions by the EPA and the U.S. Army Corps of Engineers that groundwater should be totally excluded from CWA jurisdiction.
Added
In September 2023, the EPA and the Corps published a direct-to-final rule redefining WOTUS to amend the January 2023 rule and align with the decision in Sackett .
Removed
In August 2021, a federal judge in the District of Arizona struck down the Navigable Waters Protection Rule. Soon after, the Biden administration and the U.S. Army Corps of Engineers announced that they have stopped enforcing the Navigable Waters Protection Rule nationwide and that they are reverting back to the 1986 WOTUS definition. In November 2021, the EPA and U.S.
Added
The final rule eliminated the “significant nexus” test from consideration 18 Table of Contents when determining federal jurisdiction and clarified that the CWA only extends to relatively permanent bodies of water and wetlands that have a continuous surface connection with such bodies of water. The final rule is currently subject to challenges in federal district courts.
Removed
Army Corps of Engineers issued prepublication notice of a proposed rule to revise the definition of “waters of the United States” to put back into place the pre-2015 definition, updated to reflect consideration of Supreme Court decisions.
Added
The notice also required disposal well operators to provide injection data to TRRC staff to further analyze seismicity in the area.
Removed
In April 2020, the U.S. District Court for the District of Montana vacated Nationwide Permit (“NWP”) 12, the general permit issued by the U.S. Army Corps of Engineers for pipelines and utility projects.
Added
As of May 1, 2023, operators in the Midland area began to implement the Operator Response Plan for the Gardendale Seismic Response Area (“SRA”), revised August 18, 2023, to prevent the occurrence of seismic events at or above magnitude 3.5 within the Gardendale SRA. Similar response plans have been developed for other SRAs in Texas.
Removed
Air Emissions The federal Clean Air Act (the “CAA”) and comparable state laws restrict the emission of air pollutants from many sources, such as tank batteries, through air emissions standards, construction and operating permitting programs and the imposition of other compliance standards.
Added
Additionally, in July 2023, the EPA issued a proposed rule to expand the scope of its Greenhouse Gas Reporting Program for certain petroleum and natural gas facilities.
Removed
Various industry and environmental groups have separately challenged both the original 2016 methane requirements and EPA’s attempt to delay the implementation of the rule. Further, in August 2019, the EPA proposed two options for rescinding the Subpart OOOOa standards.
Added
The proposed rule would make the reach of the program both broader and more granular, creating reporting obligations for a wider set of methane and other gas emissions events and requiring increased technical detail for certain other preexisting reporting obligations.
Removed
The EPA issued a supplemental proposed rule in November 2022 to update, strengthen and expand its November 2021 proposed rule. The supplemental proposed rule would impose more stringent requirements on the natural gas and oil industry. It is currently expected to be finalized in 2023.
Added
The proposed rule indicated an intended effective date of January 1, 2025, but the final rule remains pending at this time and any final effective date thus remains uncertain. Should this rule go into effect without major changes, it could raise our costs of regulatory compliance.
Removed
In July 2020 a federal district court in California vacated the 2018 rescission rule. BLM filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit; however, the federal district court in California entered a final judgment vacating the 20 Table of Contents September 2018 rescission rule in October 2020.
Added
The EPA announced a final rule on December 2, 2023, which, among other things, requires the phase out of routine flaring of natural gas from new oil wells and routine leak monitoring at all well sites and compressor stations.
Removed
While a draft assessment released in April 2022 indicates that EPA staff have reached a preliminary conclusion that the December 2020 decision will stand, EPA is targeting the end of 2023 to complete its decision-making on its reconsideration.
Added
Notably, the EPA updated the applicability date for Subparts OOOOb and OOOOc to December 6, 2022, meaning that sources constructed prior to that date will be considered existing sources with later compliance dates under state plans.
Removed
The EPA published a draft report in September 2022 with the social cost of carbon at $190 per metric ton of carbon dioxide emitted in 2020 at a 2% discount rate.
Added
The final rule gives states, along with federal tribes that wish to regulate existing sources, two years to develop and submit their plans for reducing methane from existing sources. The final emissions guidelines under Subpart OOOOc provide three years from the plan submission deadline for existing sources to comply.
Removed
Also, in March 2015, the BLM adopted rules establishing stringent standards relating to hydraulic fracturing on federal and American Indian lands. In June 2016, a federal district court judge in Wyoming struck down this final rule, finding that the BLM lacked authority to promulgate the rule. That ruling was appealed, but in September 2017 the U.S.
Added
In October 2021, the EPA announced it will reconsider its December 2020 decision; however, in August 2023, the EPA announced a new review of the ozone NAAQS after considering advice provided by the Clean Air Scientific Advisory Committee (“CASAC”).
Removed
Court of Appeals for the Tenth Circuit dismissed the appeal and remanded with directions to vacate the lower court’s opinion, leaving the final rule in place. However, following the issuance of an executive order by President Trump to review rules related to the energy industry, the BLM initiated a rulemaking to rescind the final rule in December 2017.
Added
As part of its new review, the EPA is seeking information from the scientific community and the public to guide CASAC’s development of the Integrated Science Assessment prior to the EPA’s expected release of its Integrated Review Plan in the fall of 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

20 edited+5 added−3 removed4 unchanged
Biggest changeAssuming no change in the amount outstanding, the impact on interest expense of a 1.0% increase or decrease in the weighted average interest rate would have been approximately $3.9 million per year. We do not currently have or intend to enter into any derivative hedge contracts to protect against fluctuations in interest rates that are applicable to our outstanding indebtedness.
Biggest changeWe do not currently have or intend to enter into any derivative hedge contracts to protect against fluctuations in interest rates applicable to our outstanding indebtedness. The long-term debt balance of $3.8 billion consists of our senior notes, which have fixed interest rates; therefore, this balance is not affected by interest rate movements.
These instruments provide only partial price protection against declines in oil and natural gas prices, but alternatively they partially limit our potential gains from future increases in price. Our Amended Credit Agreement limits our ability to enter into commodity hedges covering greater than 85% of our reasonably anticipated, projected production from proved properties.
These instruments provide only partial price protection against declines in oil and natural gas prices, but alternatively they partially limit our potential gains from future increases in prices. Our Credit Agreement limits our ability to enter into commodity hedges covering greater than 85% of our reasonably anticipated, projected production from proved properties.
(4) These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price. Period Volume (MMBtu) Volume (MMBtu/d) Wtd. Avg.
(5) These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price. Period Volume (MMBtu) Volume (MMBtu/d) Wtd. Avg.
(2) These natural gas collars are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
(4) These natural gas collars are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.
(3) These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices, during each applicable monthly settlement period.
(4) These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices, during each applicable monthly settlement period.
(3) These natural gas basis swap contracts are settled based on the difference between the inside FERC’s West Texas WAHA price and the NYMEX price of natural gas, during each applicable monthly settlement period.
(2) These natural gas basis swap contracts are settled based on the difference between the Inside FERC’s West Texas WAHA price and the NYMEX price of natural gas during each applicable monthly settlement period.
Our derivative instruments allow us to reduce, but not eliminate, the variability in cash flows that can emanate from fluctuations in oil and natural gas prices, and they thereby provide increased certainty of cash flows for our drilling program and debt service requirements.
Our derivative instruments allow us to reduce, but not eliminate, the potential effects of the variability in cash flows that can emanate from fluctuations in oil and natural gas prices, and thereby provide increased certainty of cash flows for our drilling program and debt service requirements.
The table below summarizes the terms of the derivative contracts we had in place as of December 31, 2022 and additional contracts entered into through February 17, 2023. Refer to Note 8—Derivative Instruments under Item 8 of this Annual Report for open derivative positions as of December 31, 2022. Period Volume (Bbls) Volume (Bbls/d) Wtd. Avg.
The table below summarizes the terms of the derivative contracts we had in place as of December 31, 2023 and additional contracts entered into through February 23, 2024. Refer to Note 8—Derivative Instruments under Item 8 of this Annual Report for open derivative positions as of December 31, 2023. Period Volume (Bbls) Volume (Bbls/d) Wtd. Avg.
Due to this volatility, we have historically used and will continue to selectively use, commodity derivative instruments (such as collars, swaps and basis swaps) to mitigate the price risk associated with a portion of our anticipated production.
Due to this volatility, we have historically used, and we may elect to continue to selectively use, commodity derivative instruments (such as collars, swaps, puts and basis swaps) to mitigate price risk associated with a portion of our anticipated production.
Based on our production for the year ended December 31, 2022, our oil and gas sales for the year ended December 31, 2022 would have moved up or down $162.2 million for each 10% change in oil prices per Bbl, $27.7 million for each 10% change in NGL prices per Bbl, and $23.2 million for each 10% change in natural gas prices per Mcf.
Based on our production for the year ended December 31, 2023, our oil and gas sales for the year ended December 31, 2023 would have moved up or down $269.7 million for each 10% change in oil prices per Bbl, $14.2 million for each 10% change in gas prices per Mcf, and $28.2 million for each 10% change in NGL prices per Bbl.
Changes in the fair value of derivative contracts from December 31, 2021 to December 31, 2022, are presented below: (in thousands) Commodity derivative asset (liability) Net fair value of oil and gas derivative contracts outstanding as of December 31, 2021 $ (34,910) Commodity hedge contract settlement payments, net of any receipts 120,105 Fair value of commodity hedge contracts acquired in the Merger 71,639 Cash and non-cash mark-to-market losses on commodity hedge contracts (1) (42,368) Net fair value of oil and gas derivative contracts outstanding as of December 31, 2022 $ 114,466 (1) At inception, new derivative contracts entered into by us have no intrinsic value.
Changes in the fair value of derivative contracts from December 31, 2022 to December 31, 2023, are presented below: (in thousands) Commodity derivative asset (liability) Net fair value of oil and gas derivative contracts outstanding as of December 31, 2022 $ 114,466 Commodity hedge contract settlement payments, net of any receipts (99,410) Fair value of commodity hedge contracts acquired in the Earthstone Merger (35,499) Cash and non-cash mark-to-market gains (losses) on commodity hedge contracts (1) 114,016 Net fair value of oil and gas derivative contracts outstanding as of December 31, 2023 $ 93,573 (1) At inception, new derivative contracts entered into by us have no intrinsic value.
OpCo’s Credit Agreement interest rate is based on a SOFR spread, which exposes us to interest rate risk to the extent we have borrowings outstanding under this credit facility. At December 31, 2022, we had $385.0 million of debt outstanding under our Credit Agreement, with a weighted average interest rate of 6.4%.
OpCo’s Credit Agreement interest rate is based on a SOFR spread, which exposes us to interest rate risk to the extent we have borrowings outstanding under this credit facility. As of December 31, 2023, we had no borrowings outstanding under the Credit Agreement.
Differential ($/Bbl) (4) Crude oil roll differential swaps January 2023 - March 2023 1,350,000 15,000 $1.34 April 2023 - June 2023 1,365,000 15,000 1.25 July 2023 - September 2023 1,380,000 15,000 1.23 October 2023 - December 2023 1,380,000 15,000 1.22 January 2024 - March 2024 637,000 7,000 0.75 April 2024 - June 2024 637,000 7,000 0.74 July 2024 - September 2024 644,000 7,000 0.73 October 2024 - December 2024 644,000 7,000 0.72 (1) These crude oil swap transactions are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
Differential ($/Bbl) (5) Crude oil roll differential swaps January 2024 - March 2024 3,148,600 34,600 $0.45 April 2024 - June 2024 3,385,018 37,198 0.45 July 2024 - September 2024 3,404,000 37,000 0.45 October 2024 - December 2024 3,404,000 37,000 0.45 January 2025 - March 2025 1,575,000 17,500 0.37 April 2025 - June 2025 1,592,500 17,500 0.37 July 2025 - September 2025 1,610,000 17,500 0.37 October 2025 - December 2025 1,610,000 17,500 0.37 (1) These crude oil swap transactions are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
A hypothetical upward or downward shift of 10% per Bbl in the NYMEX forward curve for crude oil as of December 31, 2022 would cause a $94.4 million increase or $94.7 million decrease, respectively, in this fair value position, and a hypothetical upward or downward shift of 10% per Mcf in the NYMEX forward curve for natural gas as of December 31, 2022 would cause a $3.6 million increase or $3.9 million decrease, respectively, in this same fair value position.
A hypothetical upward or downward shift of 10% per Bbl in the NYMEX forward curve for crude oil as of December 31, 2023 would cause a $124.5 million increase or $125.1 million decrease, respectively, in this fair value position, and a hypothetical upward or downward shift of 10% per Mcf in the NYMEX forward curve for natural gas as of December 31, 2023 would cause a $8.6 million increase or $9.0 million decrease, respectively, in this same fair value position. 62 Table of Contents Interest Rate Risk Our ability to borrow and the rates offered by lenders can be adversely affected by deteriorations in the credit markets and/or downgrades in our credit rating.
Avg. Collar Price Ranges ($/Bbl) (2) Crude oil collars January 2023 - March 2023 810,000 9,000 $75.56 - $91.15 April 2023 - June 2023 819,000 9,000 75.56 - 91.15 July 2023 - September 2023 644,000 7,000 76.43 - 92.70 October 2023 - December 2023 644,000 7,000 76.43 - 92.70 58 Table of Contents Period Volume (Bbls) Volume (Bbls/d) Wtd. Avg.
Avg. Collar Price Ranges ($/Bbl) (2) Crude oil collars January 2024 - March 2024 182,000 2,000 $60.00 - $76.01 April 2024 - June 2024 182,000 2,000 60.00 - 76.01 July 2024 - September 2024 184,000 2,000 60.00 - 76.01 October 2024 - December 2024 184,000 2,000 60.00 - 76.01 Period Volume (Bbls) Volume (Bbls/d) Wtd. Avg.
The remaining long-term debt balance of $1.8 billion consists of our senior notes, which have fixed interest rates; therefore, this balance is not affected by interest rate movements. For additional information regarding our debt instruments, see Note 5—Long-Term Debt in Item 8 of this Annual Report. 61 Table of Contents
For additional information regarding our debt instruments, see Note 5—Long-Term Debt in Item 8 of this Annual Report. 63 Table of Contents
Differential ($/MMBtu) (3) Natural gas basis differential swaps January 2023 - March 2023 6,075,000 67,500 $(1.10) April 2023 - June 2023 6,142,500 67,500 (1.30) July 2023 - September 2023 6,210,000 67,500 (1.30) October 2023 - December 2023 6,210,000 67,500 (1.30) January 2024 - March 2024 1,820,000 20,000 (0.59) April 2024 - June 2024 1,820,000 20,000 (0.67) July 2024 - September 2024 1,840,000 20,000 (0.66) October 2024 - December 2024 1,840,000 20,000 (0.64) (1) These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
Collar Price Ranges ($/MMBtu) (4) Natural gas collars January 2024 - March 2024 6,815,081 74,891 $2.93 - $6.81 April 2024 - June 2024 5,013,679 55,095 2.68 - 5.04 July 2024 - September 2024 5,090,612 55,333 2.68 - 5.06 October 2024 - December 2024 5,106,101 55,501 2.75 - 5.29 (1) These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.
Gas Price ($/MMBtu) (1) Natural gas swaps January 2023 - March 2023 1,670,157 18,557 $7.64 April 2023 - June 2023 1,572,752 17,283 4.70 July 2023 - September 2023 1,486,925 16,162 4.70 October 2023 - December 2023 1,413,628 15,366 4.90 January 2024 - March 2024 464,919 5,109 5.01 April 2024 - June 2024 446,321 4,905 3.93 July 2024 - September 2024 429,388 4,667 4.01 October 2024 - December 2024 413,899 4,499 4.32 59 Table of Contents Period Volume (MMBtu) Volume (MMBtu/d) Wtd.
Gas Price ($/MMBtu) (1) Natural gas swaps January 2024 - March 2024 4,104,919 45,109 $3.77 April 2024 - June 2024 5,906,321 64,905 3.29 July 2024 - September 2024 5,949,388 64,667 3.43 October 2024 - December 2024 5,933,899 64,499 3.86 January 2025 - March 2025 3,600,000 40,000 4.32 April 2025 - June 2025 3,640,000 40,000 3.65 July 2025 - September 2025 3,680,000 40,000 3.83 October 2025 - December 2025 3,680,000 40,000 4.20 61 Table of Contents Period Volume (MMBtu) Volume (MMBtu/d) Wtd.
Crude Price ($/Bbl) (1) Crude oil swaps January 2023 - March 2023 1,575,000 17,500 $90.58 April 2023 - June 2023 1,592,500 17,500 87.64 July 2023 - September 2023 1,472,000 16,000 86.36 October 2023 - December 2023 1,472,000 16,000 84.11 January 2024 - March 2024 1,092,000 12,000 78.46 April 2024 - June 2024 1,092,000 12,000 77.30 July 2024 - September 2024 1,104,000 12,000 76.21 October 2024 - December 2024 1,104,000 12,000 75.27 Period Volume (Bbls) Volume (Bbls/d) Wtd.
Crude Price ($/Bbl) (1) Crude oil swaps January 2024 - March 2024 2,919,100 32,078 $77.10 April 2024 - June 2024 2,975,500 32,698 76.24 July 2024 - September 2024 2,990,000 32,500 75.40 October 2024 - December 2024 2,990,000 32,500 74.61 January 2025 - March 2025 1,575,000 17,500 73.33 April 2025 - June 2025 1,592,500 17,500 72.27 July 2025 - September 2025 1,610,000 17,500 71.25 October 2025 - December 2025 1,610,000 17,500 70.34 Period Volume (Bbls) Volume (Bbls/d) Wtd.
Differential ($/Bbl) (3) Crude oil basis differential swaps January 2023 - March 2023 729,999 8,111 $0.55 April 2023 - June 2023 739,499 8,126 0.55 July 2023 - September 2023 749,000 8,141 0.52 October 2023 - December 2023 749,002 8,141 0.52 January 2024 - March 2024 637,000 7,000 0.43 April 2024 - June 2024 637,000 7,000 0.43 July 2024 - September 2024 644,000 7,000 0.43 October 2024 - December 2024 644,000 7,000 0.43 Period Volume (Bbls) Volume (Bbls/d) Wtd.
Differential ($/Bbl) (4) Crude oil basis differential swaps January 2024 - March 2024 3,148,600 34,600 $0.94 April 2024 - June 2024 3,385,018 37,198 0.95 July 2024 - September 2024 3,404,000 37,000 0.95 October 2024 - December 2024 3,404,000 37,000 0.95 January 2025 - March 2025 1,575,000 17,500 1.09 April 2025 - June 2025 1,592,500 17,500 1.09 July 2025 - September 2025 1,610,000 17,500 1.09 October 2025 - December 2025 1,610,000 17,500 1.09 Period Volume (Bbls) Volume (Bbls/d) Wtd.
Removed
Collar Price Ranges ($/MMBtu) (2) Natural gas collars January 2023 - March 2023 7,104,843 78,943 $4.67 - $10.33 April 2023 - June 2023 6,389,748 70,217 3.64 - 7.62 July 2023 - September 2023 6,563,075 71,338 3.64 - 7.52 October 2023 - December 2023 6,636,372 72,134 3.66 - 8.22 January 2024 - March 2024 3,175,081 34,891 3.36 - 9.44 April 2024 - June 2024 1,373,679 15,095 3.00 - 6.45 July 2024 - September 2024 1,410,612 15,333 3.00 - 6.52 October 2024 - December 2024 1,426,101 15,501 3.25 - 7.30 Period Volume (MMBtu) Volume (MMBtu/d) Wtd.
Added
Put Price ($/Bbl) (3) Deferred Premium ($/Bbl) (3) Deferred premium puts January 2024 - March 2024 227,500 2,500 $65.00 $4.96 April 2024 - June 2024 227,500 2,500 65.00 4.96 July 2024 - September 2024 230,000 2,500 65.00 4.96 October 2024 - December 2024 230,000 2,500 65.00 4.96 60 Table of Contents Period Volume (Bbls) Volume (Bbls/d) Wtd. Avg.
Removed
By using derivative instruments to economically hedge exposures to changes in commodity prices, we also expose ourselves to credit risk. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk.
Added
(3) These crude oil deferred premium puts are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual put prices for the volumes stipulated.
Removed
To minimizes this credit risk in derivative instruments, we: (i) limit our exposure to any single counterparty; and (ii) only entering into hedging arrangements with counterparties that are also participants in OpCo’s Credit Agreement, all of which have investment-grade credit ratings. 60 Table of Contents Interest Rate Risk Our ability to borrow and the rates offered by lenders can be adversely affected by deteriorations in the credit markets and/or downgrades in our credit rating.
Added
Differential ($/MMBtu) (2) Natural gas basis differential swaps January 2024 - March 2024 12,740,000 140,000 $(0.90) April 2024 - June 2024 10,920,000 120,000 (0.99) July 2024 - September 2024 11,040,000 120,000 (0.99) October 2024 - December 2024 11,040,000 120,000 (0.98) January 2025 - March 2025 3,600,000 40,000 (0.74) April 2025 - June 2025 3,640,000 40,000 (0.74) July 2025 - September 2025 3,680,000 40,000 (0.74) October 2025 - December 2025 3,680,000 40,000 (0.74) Period Volume (MMBtu) Volume (MMBtu/d) Wtd.
Added
Avg. Differential ($/MMBtu) (3) Natural gas basis differential swaps January 2024 - March 2024 3,640,000 40,000 $0.00 Period Volume (MMBtu) Volume (MMBtu/d) Wtd. Avg.
Added
(3) These natural gas basis swap contracts are settled based on the difference between the Houston Ship Channel (“HSC”) price and the NYMEX price of natural gas during each applicable monthly settlement period.

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