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What changed in TXO Partners, L.P.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TXO Partners, L.P.'s 2023 and 2024 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 2024 report.

+290 added−296 removedSource: 10-K (2025-03-04) vs 10-K (2024-03-05)

Top changes in TXO Partners, L.P.'s 2024 10-K

290 paragraphs added · 296 removed · 240 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

123 edited+26 added−37 removed418 unchanged
Biggest changeAs a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net income for financial accounting purposes. 29 Table of Contents The amount of our quarterly cash distributions from our available cash, if any, may vary significantly both quarterly and annually and will be directly dependent on the performance of our business.
Biggest changeThe amount of our quarterly cash distributions from our available cash, if any, may vary significantly both quarterly and annually and will be directly dependent on the performance of our business. We do not have a minimum quarterly distribution and could pay no distribution with respect to any particular quarter.
If this negative sentiment continues or worsens, it may reduce the availability of capital funding for potential development projects or other strategic or operational purposes, any of which could have a material adverse effect our financial condition, results of operations, cash flows and ability to pay distributions on our common units.
If this negative sentiment continues or worsens, it may reduce the availability of capital funding for potential development projects or other strategic or operational purposes, any of which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to pay distributions on our common units.
Our partnership agreement provides that we distribute each quarter all of our available cash, which we define as cash on hand at the end of the each quarter, less reserves established by our general partner.
Our partnership agreement provides that we distribute each quarter all of our available cash, which we define as cash on hand at the end of each quarter, less reserves established by our general partner.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate corporate opportunities among us and its other affiliates; • whether to exercise its limited call right; • whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the Board; • how to exercise its voting rights with respect to the units it owns; • whether to sell or otherwise dispose of any units or other partnership interests it owns; and • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement. • our general partner will not have any liability to us or our unitholders for breach of any duty in connection with decisions made in its capacity as general partner so long as it acted in good faith (meaning that it subjectively believed that the decision was not adverse to our best interest); • our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors acted in bad faith or engaged in intentional fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • our general partner will not be in breach of its obligations under the partnership agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the Board, although our general partner is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; • determined by the Board to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or • determined by the Board to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate corporate opportunities among us and its other affiliates; • whether to exercise its limited call right; • whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the Board; • how to exercise its voting rights with respect to the units it owns; • whether to sell or otherwise dispose of any units or other partnership interests it owns; and 56 Table of Content s • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement. • our general partner will not have any liability to us or our unitholders for breach of any duty in connection with decisions made in its capacity as general partner so long as it acted in good faith (meaning that it subjectively believed that the decision was not adverse to our best interest); • our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors acted in bad faith or engaged in intentional fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • our general partner will not be in breach of its obligations under the partnership agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the Board, although our general partner is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; • determined by the Board to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or • determined by the Board to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
Our operations could be impaired if we are unable to recycle or dispose of the water we produce in an economical and environmentally safe manner. The effects of climate change may also further exacerbate water scarcity in certain regions, including the areas in which we are active.
Finally, our operations could be impaired if we are unable to recycle or dispose of the water we produce in an economical and environmentally safe manner. The effects of climate change may also further exacerbate water scarcity in certain regions, including the areas in which we are active.
These conflicts include, among others, the following: • Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • Neither our partnership agreement nor any other agreement requires the Founders or their respective affiliates (other than our general partner) to pursue a business strategy that favors us; • The Founders and their affiliates are not limited in their ability to compete with us, including with respect to future acquisition opportunities, and are under no obligation to offer or sell assets to us; 53 Table of Contents • Our general partner determines the amount and timing of our development operations and related capital expenditures, asset purchases and sales, borrowings, issuance of additional partnership interests, other investments, including investment capital expenditures in other partnerships with which our general partner is or may become affiliated, and cash reserves, each of which can affect the amount of cash that is distributed to unitholders; • Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us; • Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; • Our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; • Our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 80% of the common units; • Our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates; and • Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
These conflicts include, among others, the following: • Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • Neither our partnership agreement nor any other agreement requires the Founders or their respective affiliates (other than our general partner) to pursue a business strategy that favors us; • The Founders and their affiliates are not limited in their ability to compete with us, including with respect to future acquisition opportunities, and are under no obligation to offer or sell assets to us; • Our general partner determines the amount and timing of our development operations and related capital expenditures, asset purchases and sales, borrowings, issuance of additional partnership interests, other investments, including investment capital expenditures in other partnerships with which our general partner is or may become affiliated, and cash reserves, each of which can affect the amount of cash that is distributed to unitholders; • Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us; 54 Table of Content s • Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; • Our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; • Our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 80% of the common units; • Our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates; and • Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
Our partnership agreement provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with 58 Table of Contents subject matter jurisdiction) will be the exclusive forum for any claims, suits, actions or proceedings (1) arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us), (2) brought in a derivative manner on our behalf, (3) asserting a claim of breach of a duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners, (4) asserting a claim arising pursuant to any provision of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”) or (5) asserting a claim against us governed by the internal affairs doctrine.
Our partnership agreement provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with subject matter jurisdiction) will be the exclusive forum for any claims, suits, actions or proceedings (1) arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us), (2) brought in a derivative manner on our behalf, (3) asserting a claim of breach of a duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners, (4) asserting a claim arising pursuant to any provision of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”) or (5) asserting a claim against us governed by the internal affairs doctrine.
Further, many factors may curtail, delay or cancel our scheduled drilling projects, including the following: • unexpected or adverse drilling conditions; • delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements including permitting requirements, limitations on or resulting from wastewater discharge and the disposal of exploration and production wastes, including subsurface injections; • elevated pressure or irregularities in geological formations; • shortages of or delays in obtaining equipment and qualified personnel; • facility or equipment failures or accidents; • lack of available gathering facilities or delays in construction of gathering facilities; • lack of available capacity on interconnecting transmission pipelines; • adverse weather conditions, such as hurricanes, lightning storms, flooding, tornadoes, snow or ice storms and changes in weather patterns; • issues related to compliance with, or changes in, environmental and other governmental regulations; 32 Table of Contents • environmental hazards, such as oil and natural gas leaks, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; • declines in oil, natural gas and NGL prices; • the availability and timely issuance of required governmental permits and licenses; and • title defects or legal disputes regarding leasehold rights.
Further, many factors may curtail, delay or cancel our scheduled drilling projects, including the following: • unexpected or adverse drilling conditions; • delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements including permitting requirements, limitations on or resulting from wastewater discharge and the disposal of exploration and production wastes, including subsurface injections; • elevated pressure or irregularities in geological formations; • shortages of or delays in obtaining equipment and qualified personnel; • facility or equipment failures or accidents; • lack of available gathering facilities or delays in construction of gathering facilities; 33 Table of Content s • lack of available capacity on interconnecting transmission pipelines; • adverse weather conditions, such as hurricanes, lightning storms, flooding, tornadoes, snow or ice storms and changes in weather patterns; • issues related to compliance with, or changes in, environmental and other governmental regulations; • environmental hazards, such as oil and natural gas leaks, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; • declines in oil, natural gas and NGL prices; • the availability and timely issuance of required governmental permits and licenses; and • title defects or legal disputes regarding leasehold rights.
For example, during a period of declining commodity prices, we may enter into commodity derivative contracts at relatively unattractive prices in order to mitigate a potential decrease in our borrowing base upon a redetermination. Prior to 2021, our historical impairment of proved properties included $311.5 million of proved property impairments from 2014 through 2020.
For example, during a period of declining commodity prices, we may enter into commodity derivative contracts at relatively unattractive prices in order to mitigate a potential decrease in our borrowing base upon a redetermination. Prior to 2022, our historical impairment of proved properties included $311.5 million of proved property impairments from 2014 through 2021.
Potential impacts of an epidemic, outbreak or other public health event and related events include, but are not limited to, the following: • disruption in the demand for oil, natural gas and other petroleum products; • intentional project delays until commodity prices stabilize; • potentially higher borrowing costs in the future; • a need to preserve liquidity, which could result in reductions, delays or changes in our capital expenditures; • liabilities resulting from operational delays due to decreased productivity resulting from stay-at-home orders affecting our workforce or facility closures; • future asset impairments, including impairment of our natural gas properties, oil properties, and other property and equipment; and • infections and quarantining of our employees and the personnel of vendors, suppliers and other third parties.
Potential impacts of an epidemic, outbreak or other public health event and related events include, but are not limited to, the following: • disruption in the demand for oil, natural gas and other petroleum products; 37 Table of Content s • intentional project delays until commodity prices stabilize; • potentially higher borrowing costs in the future; • a need to preserve liquidity, which could result in reductions, delays or changes in our capital expenditures; • liabilities resulting from operational delays due to decreased productivity resulting from stay-at-home orders affecting our workforce or facility closures; • future asset impairments, including impairment of our natural gas properties, oil properties, and other property and equipment; and • infections and quarantining of our employees and the personnel of vendors, suppliers and other third parties.
Since affiliates of our general partner (including the Founders) collectively own and control the voting of an aggregate of approximately 37% of our outstanding common units, the other unitholders will not have an ability to influence any operating decisions and will not be able to prevent us from entering into any transactions.
Since affiliates of our general partner (including the Founders) collectively own and control the voting of an aggregate of approximately 31% of our outstanding common units, the other unitholders will not have an ability to influence any operating decisions and will not be able to prevent us from entering into any transactions.
For example, in November 2021, the Biden Administration released “The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a 49 Table of Contents roadmap to net zero emissions in the United States by 2050 through, among other things, improving energy efficiency; decarbonizing energy sources via electricity, hydrogen, and sustainable biofuels; and reducing non-CO 2 GHG emissions, such as methane and nitrous oxide.
For example, in November 2021, the Biden Administration released “The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a roadmap to net zero emissions in the United States by 2050 through, among other things, improving energy efficiency; decarbonizing energy sources via electricity, hydrogen, and sustainable biofuels; and reducing non-CO 2 GHG emissions, such as methane and nitrous oxide.
Future activist efforts could result in the following: • delay or denial of drilling permits; • shortening of lease terms and reduction in lease size; • restrictions on installation or operation of production, gathering or processing facilities; • restrictions on the use of certain operating practices, such as hydraulic fracturing, or disposal of related waste materials, such as hydraulic fracking fluids and production; • increased severance and/or other taxes; • cyber-attacks; • legal challenges or lawsuits; • negative publicity about our business or the oil and gas industry in general; • increased costs of doing business; • reduction in demand for our products; and • other adverse effects on our ability to develop our properties and expand production.
Future activist efforts could result in the following: • delay or denial of drilling permits; • shortening of lease terms and reduction in lease size; • restrictions on installation or operation of production, gathering or processing facilities; 49 Table of Content s • restrictions on the use of certain operating practices, such as hydraulic fracturing, or disposal of related waste materials, such as hydraulic fracking fluids and production; • increased severance and/or other taxes; • cyber-attacks; • legal challenges or lawsuits; • negative publicity about our business or the oil and gas industry in general; • increased costs of doing business; • reduction in demand for our products; and • other adverse effects on our ability to develop our properties and expand production.
If our general partner exercises its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Exchange Act. Affiliates of our general partner own approximately 37% of our common units.
If our general partner exercises its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Exchange Act. Affiliates of our general partner own approximately 31% of our common units.
Additionally, the Federal Trade Commission (“FTC”) has regulations intended to prohibit market manipulation in the petroleum industry with authority to fine violators of the regulations civil penalties of up to $1,426,319 per violation per day, and the Commodity Futures Trading Commission (“CFTC”) prohibits market manipulation in the markets regulated 45 Table of Contents by the CFTC, including similar anti manipulation authority with respect to swaps and futures contracts as that granted to the CFTC with respect to oil purchases and sales.
Additionally, the Federal Trade Commission (“FTC”) has regulations intended to prohibit market manipulation in the petroleum industry with authority to fine violators of the regulations civil penalties of up to $1,426,319 per violation per day, and the Commodity Futures Trading Commission (“CFTC”) prohibits market manipulation in the markets regulated by the CFTC, including similar anti manipulation authority with respect to swaps and futures contracts as that granted to the CFTC with respect to oil purchases and sales.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Derivatives.” By using derivative instruments to economically hedge exposure to changes in commodity prices, we could limit the benefit we would receive from increases in the prices for oil and natural gas, which could have an adverse effect on our financial 36 Table of Contents condition.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Derivatives.” By using derivative instruments to economically hedge exposure to changes in commodity prices, we could limit the benefit we would receive from increases in the prices for oil and natural gas, which could have an adverse effect on our financial condition.
The amount of available cash that we distribute to our unitholders will depend principally on the cash we generate from operations, which will depend on, among other factors: • the amount of oil, natural gas and NGLs we produce; • the prices at which we sell our oil, natural gas and NGL production; • the amount and timing of settlements on our commodity derivative contracts; • the level of our capital expenditures, including scheduled and unexpected maintenance expenditures; • the level of our operating costs, including payments to our general partner and its affiliates for general and administrative expenses; and • the level of our interest expenses, which will depend on the amount of our outstanding indebtedness and the applicable interest rate.
The amount of available cash that we distribute to our unitholders will depend principally on the cash we generate from operations, which will depend on, among other factors: • the amount of oil, natural gas and NGLs we produce; • the prices at which we sell our oil, natural gas and NGL production; • the amount and timing of settlements on our commodity derivative contracts; • the level of our capital expenditures, including scheduled and unexpected maintenance expenditures; • the level of our operating costs, including payments to our general partner and its affiliates for general and administrative expenses; and 30 Table of Content s • the level of our interest expenses, which will depend on the amount of our outstanding indebtedness and the applicable interest rate.
Our development, optimization and exploitation activities and equipment could be adversely affected by extreme weather conditions, such as hurricanes, thunderstorms, tornadoes and snow or ice storms, or other climate-related events such as wild fires, in each case which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.
Our development, optimization and exploitation activities and equipment could be adversely affected by extreme weather conditions, such as hurricanes, thunderstorms, tornadoes and snow or ice storms, or other climate-related events such as wildfires, in each case which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit 36 Table of Content s and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
If we are unable to recover higher costs through higher commodity prices, our current revenue stream could be adversely impacted and result in reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected. 35 Table of Contents We continue to take actions to mitigate inflationary pressures.
If we are unable to recover higher costs through higher commodity prices, our current revenue stream could be adversely impacted and result in reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected. We continue to take actions to mitigate inflationary pressures.
As a result, it may not be possible for tax-exempt entities to 64 Table of Contents utilize losses from an investment in our partnership to offset unrelated business taxable income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor regarding the impact of these rules on an investment in our common units.
As a result, it may not be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated business taxable income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor regarding the impact of these rules on an investment in our common units.
This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and holders of our common units. 54 Table of Contents Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow our reserves and production and make acquisitions.
This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and holders of our common units. Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow our reserves and production and make acquisitions.
The new owner of our general partner would then be in a position to replace the Board and officers of our general partner with their own choices and thereby influence the decisions made by the Board and officers. 57 Table of Contents We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval.
The new owner of our general partner would then be in a position to replace the Board and officers of our general partner with their own choices and thereby influence the decisions made by the Board and officers. We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval.
Climate change is also expected to result in various chronic impacts, such as changes to water levels and to ambient temperature and precipitation patterns. Such changes may also adversely impact our operations, including through the long-term reduction in the availability of water for hydraulic fracturing, changes to operational practices to respond to increased heat levels, or otherwise.
Climate change could result in various chronic impacts, such as changes to water levels and to ambient temperature and precipitation patterns. Such changes may also adversely impact our operations, including through the long-term reduction in the availability of water for hydraulic fracturing, changes to operational practices to respond to increased heat levels, or otherwise.
Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our common units, and a 56 Table of Contents rising interest rate environment could have an adverse impact on our unit price and our ability to issue additional equity or incur debt.
Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our common units, and a rising interest rate environment could have an adverse impact on our unit price and our ability to issue additional equity or incur debt.
Moreover, upon the sale, exchange or other disposition of a common unit by a non-U.S. unitholder, the transferee is generally required to withhold 10% of the amount realized on such sale, exchange or other disposition if any portion of the gain on such sale, exchange or other disposition would be treated as effectively connected with a U.S. trade or business.
Moreover, upon the sale, exchange or other disposition of a common unit by a non-U.S. unitholder, the transferee is generally required to withhold 10% of the amount realized on such sale, exchange or other disposition if any portion of the gain on such sale, exchange or other disposition would be treated as effectively connected with a U.S. trade or business. 65 Table of Content s The U.S.
The U.S. Department of the Treasury and the IRS have issued final regulations providing guidance on the application of these rules for transfers of certain publicly traded partnership interests, including transfers of our common units.
Department of the Treasury and the IRS have issued final regulations providing guidance on the application of these rules for transfers of certain publicly traded partnership interests, including transfers of our common units.
These events could lead to financial losses from remedial actions, loss of business or potential liability. Although we maintain 42 Table of Contents insurance to protect against losses resulting from certain data protection breaches and cyber-attacks, our coverage for protecting against such risks may not be sufficient.
These events could lead to financial losses from remedial actions, loss of business or potential liability. Although we maintain insurance to protect against losses resulting from certain data protection breaches and cyber-attacks, our coverage for protecting against such risks may not be sufficient.
The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects: • our unitholders’ proportionate ownership interest in us will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of our common units may decline.
The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects: • our unitholders’ proportionate ownership interest in us will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; 58 Table of Content s • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of our common units may decline.
Any inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition and results of operations and our ability to make distributions to our unitholders. 38 Table of Contents Our Credit Facility has restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders.
Any inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition and results of operations and our ability to make distributions to our unitholders. Our Credit Facility has restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders.
The tax liability, if any, of a unitholder as a result of such an event may be 61 Table of Contents material to such unitholder and may vary depending on the unitholder’s particular situation and may vary from the tax liability of us or of any affiliates of our general partner who choose to retain their partnership interests in us.
The tax liability, if any, of a unitholder as a result of such an event may be material to such unitholder and may vary depending on the unitholder’s particular situation and may vary from the tax liability of us or of any affiliates of our general partner who choose to retain their partnership interests in us.
See “—Any significant reduction in the borrowing base under our Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.” 31 Table of Contents Currently, our producing properties are concentrated in the Permian and San Juan Basins, making us vulnerable to risks associated with operating in a limited number of geographic areas.
See “—Any significant reduction in the borrowing base under our Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.” Currently, our producing properties are concentrated in the Permian, San Juan and Williston Basins, making us vulnerable to risks associated with operating in a limited number of geographic areas.
These factors include, but are not limited to: • worldwide and regional economic conditions impacting the supply and demand for oil, natural gas and NGLs; • the level of global oil and natural gas exploration and production; • political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; • the ability of and actions taken by members of Organization of the Petroleum Exporting Countries (“OPEC”) and other oil-producing nations in connection with their arrangements to maintain oil prices and production controls; • the impact on worldwide economic activity of an epidemic, outbreak or other public health events, such as COVID-19; • the proximity, capacity, cost and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals; • weather conditions across the globe; • technological advances affecting energy consumption and energy supply; • speculative trading in commodity markets, including expectations about future commodity prices; • the proximity of our natural gas, NGL and oil production to, and capacity, availability and cost of, natural gas pipelines and other transportation and storage facilities, and other factors that result in differentials to benchmark prices; • the impact of energy conservation efforts; • the price and availability of alternative fuels; • stockholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas to minimize the emission of greenhouse gases; • domestic, local and foreign governmental regulation and taxes; and 30 Table of Contents • overall domestic and global economic conditions.
These factors include, but are not limited to: • worldwide and regional economic conditions impacting the supply and demand for oil, natural gas and NGLs; • the level of global oil and natural gas exploration and production; • political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; • the ability of and actions taken by members of Organization of the Petroleum Exporting Countries (“OPEC”) and other oil-producing nations in connection with their arrangements to maintain oil prices and production controls; • the impact on worldwide economic activity of an epidemic, outbreak or other public health events, such as COVID-19; • the proximity, capacity, cost and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals; • weather conditions across the globe; • technological advances affecting energy consumption and energy supply; • speculative trading in commodity markets, including expectations about future commodity prices; • the proximity of our natural gas, NGL and oil production to, and capacity, availability and cost of, natural gas pipelines and other transportation and storage facilities, and other factors that result in differentials to benchmark prices; 31 Table of Content s • the impact of energy conservation efforts; • the price and availability of alternative fuels; • stockholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas to minimize the emission of greenhouse gases; • the impact of tariffs on energy products and other imports to and exports from foreign nations, including Mexico, Canada and China; • domestic, local and foreign governmental regulation and taxes; and • overall domestic and global economic conditions.
If the Permian Basin counties in which we operate were redesignated as nonattainment areas, this could subject us to increased regulatory burdens in the form of more stringent emission controls, emission offset requirements and increased permitting delays and costs. The EPA has also imposed increasingly stringent performance standards on oil and gas operations.
If the Permian Basin counties in which we operate were redesignated as nonattainment areas, this could subject us to increased regulatory burdens in the form of more stringent emission controls, emission offset requirements and increased permitting delays and costs. 46 Table of Content s The EPA has also imposed increasingly stringent performance standards on oil and gas operations.
Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, the imposition of investigatory or remedial obligations, and the issuance of orders limiting or prohibiting some or all of our 44 Table of Contents operations.
Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, the imposition of investigatory or remedial obligations, and the issuance of orders limiting or prohibiting some or all of our operations.
To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations, the impact of which is not clear at this time. 51 Table of Contents We may be involved in legal proceedings that could result in substantial liabilities.
To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations, the impact of which is not clear at this time. We may be involved in legal proceedings that could result in substantial liabilities.
A court may not agree with some or all of the positions we take. As a result, any such contest with 63 Table of Contents the IRS may materially and adversely impact the market for our common units and the price at which our common units trade.
A court may not agree with some or all of the positions we take. As a result, any such contest with the IRS may materially and adversely impact the market for our common units and the price at which our common units trade.
If so, the unitholder would no 65 Table of Contents longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.
If so, the unitholder would no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.
The potential impacts of climate change and climate change regulations are highly uncertain at this time, and thus we cannot currently anticipate or predict any material adverse effect of climate change-related matters on our consolidated financial condition, results of operations, or how our cash flows may be effected as a result of climate change and climate change regulations.
The potential impacts of climate change and climate change regulations are highly uncertain at this time, and thus we cannot currently anticipate or predict any 48 Table of Content s material adverse effect of climate change-related matters on our consolidated financial condition, results of operations, or how our cash flows may be effected as a result of climate change and climate change regulations.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced. Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced. 64 Table of Content s Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
For example, environmental activists continue to advocate for increased regulations or bans on shale 48 Table of Contents drilling and hydraulic fracturing in the United States, even in jurisdictions that are among the most stringent in their regulation of the industry.
For example, environmental activists continue to advocate for increased regulations or bans on shale drilling and hydraulic fracturing in the United States, even in jurisdictions that are among the most stringent in their regulation of the industry.
We expect to fund our 2024 capital expenditures with cash generated by operations; however, our cash flows from operations and access to capital are subject to a number of variables, including: • our proved reserves; • the volume of hydrocarbons we are able to produce from existing wells; • the prices at which our production is sold; • our ability to acquire, locate and produce new reserves; 43 Table of Contents • the extent and levels of our derivative activities; • the levels of our operating expenses; and • our ability to borrow under our Credit Facility.
We expect to fund our 2025 capital expenditures with cash generated by operations; however, our cash flows from operations and access to capital are subject to a number of variables, including: • our proved reserves; • the volume of hydrocarbons we are able to produce from existing wells; • the prices at which our production is sold; • our ability to acquire, locate and produce new reserves; • the extent and levels of our derivative activities; • the levels of our operating expenses; and • our ability to borrow under our Credit Facility.
These and other factors may lead to a shortage of qualified, entry-level technical personnel and increased compensation 41 Table of Contents costs. The foregoing factors may lead to additional competition from oil and gas companies attempting to meet their hiring needs.
These and other factors may lead to a shortage of qualified, entry-level technical personnel and increased compensation costs. The foregoing factors may lead to additional competition from oil and gas companies attempting to meet their hiring needs.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, abandonment and reclamation costs and we will be responsible for the payment of the balance of such costs. Asset retirement obligations for our oil and gas assets and properties are estimates, and actual costs could vary significantly.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, abandonment and reclamation costs and we will be responsible for the payment of the balance of such costs. 43 Table of Content s Asset retirement obligations for our oil and gas assets and properties are estimates, and actual costs could vary significantly.
This provision entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or 55 Table of Contents factors affecting, us, our affiliates or our limited partners.
This provision entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners.
In addition, our obligations under our Credit Facility are secured by substantially all of our assets, and if we are unable to repay our indebtedness under our Credit Facility, the lenders could seek to foreclose on our assets or force us to seek bankruptcy protection. In addition, our Credit Facility may hinder our ability to effectively execute our hedging strategy.
In addition, our obligations under our Credit Facility are secured by substantially all of our assets, and if we are unable to repay our indebtedness under our Credit Facility, the lenders could seek to foreclose on our assets or force us to seek bankruptcy protection. 40 Table of Content s In addition, our Credit Facility may hinder our ability to effectively execute our hedging strategy.
If our acreage is involuntarily pooled under state forced pooling 34 Table of Contents statutes, it would reduce our control over such acreage and we could lose operatorship over a portion of our acreage that we plan to develop.
If our acreage is involuntarily pooled under state forced pooling statutes, it would reduce our control over such acreage and we could lose operatorship over a portion of our acreage that we plan to develop.
Declines in commodity prices could result in a determination by the lenders to decrease the borrowing base in the future and, in such 39 Table of Contents a case, we could be required to promptly repay any indebtedness in excess of the redetermined borrowing base.
Declines in commodity prices could result in a determination by the lenders to decrease the borrowing base in the future and, in such a case, we could be required to promptly repay any indebtedness in excess of the redetermined borrowing base.
Due to the improvement in commodity pricing environment and industry conditions, we did not record any impairments in 2022 or 2021.
Due to the improvement in commodity pricing environment and industry conditions, we did not record any impairments in 2022 or 2024.
Thus, treatment of us as a corporation could result in a 62 Table of Contents reduction in the anticipated cash-flow and after-tax return to our unitholders, which would cause a reduction in the value of our common units.
Thus, treatment of us as a corporation could result in a reduction in the anticipated cash-flow and after-tax return to our unitholders, which would cause a reduction in the value of our common units.
These suits allege damages for contributions to, or failure to disclose the impact of, climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Similar lawsuits may be filed in other jurisdictions both in the United States and globally.
These suits allege damages for contributions to, or failure to disclose the impact of, climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Similar lawsuits may be filed in other 45 Table of Content s jurisdictions both in the United States and globally.
Judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material. We may incur substantial losses and be subject to substantial liability claims as a result of our operations.
Accruals for such liability, penalties or sanctions may be insufficient. Judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material. We may incur substantial losses and be subject to substantial liability claims as a result of our operations.
Changes in any one or more of these factors could cause our cost of doing business to increase, limit our access to capital, limit our ability to pursue acquisition opportunities, reduce our cash flows available and place us at a competitive disadvantage.
Changes in any one or more of these factors could cause our cost of 34 Table of Content s doing business to increase, limit our access to capital, limit our ability to pursue acquisition opportunities, reduce our cash flows available and place us at a competitive disadvantage.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules or regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by 59 Table of Content s the Securities Act or the rules or regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims.
From time to time, members of Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships or an investment in our common units, including elimination of partnership tax treatment for certain publicly traded partnerships.
From time to time, members of 63 Table of Content s Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships or an investment in our common units, including elimination of partnership tax treatment for certain publicly traded partnerships.
The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not 59 Table of Contents been clearly established in some of the other states in which we do business.
The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business.
It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. 67 Table of Content s
The loss of any one of these purchasers, the inability or failure of our significant purchasers to meet their obligations to us or their insolvency or liquidation could materially adversely affect our financial condition, results of operations and ability to make distributions to our unitholders.
The loss of any one of these purchasers, the inability or failure of our significant purchasers to meet their obligations to us or their 39 Table of Content s insolvency or liquidation could materially adversely affect our financial condition, results of operations and ability to make distributions to our unitholders.
We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions. Reserve estimates depend on many assumptions that may ultimately be inaccurate.
We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions. 38 Table of Content s Reserve estimates depend on many assumptions that may ultimately be inaccurate.
The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction. A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being allocated to our unitholders.
The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction. 66 Table of Content s A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being allocated to our unitholders.
In its rulemaking under the Dodd-Frank Act, the CFTC has adopted rules that place limits on positions in certain core futures and equivalent swaps contracts for or linked to certain physical commodities, subject to exceptions for certain bona fide hedging transactions.
The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act. In its rulemaking under the Dodd-Frank Act, the CFTC has adopted rules that place limits on positions in certain core futures and equivalent swaps contracts for or linked to certain physical commodities, subject to exceptions for certain bona fide hedging transactions.
General economic conditions, commodity prices, and financial, business, and other factors affect our 40 Table of Contents operations and our future performance. Many of these factors are beyond our control.
General economic conditions, commodity prices, and financial, business, and other factors affect our operations and our future performance. Many of these factors are beyond our control.
The vote of the holders of at least 66 2 ⁄ 3 % of all outstanding units voting together as a single class is required to remove our general partner. The Founders own approximately 26% of our outstanding voting units. Control of our general partner may be transferred to a third party without unitholder consent.
The vote of the holders of at least 66.67% of all outstanding units voting together as a single class is required to remove our general partner. The Founders own approximately 22% of our outstanding voting units. Control of our general partner may be transferred to a third party without unitholder consent.
Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to us are not counted for purposes of determining whether a distribution is permitted.
Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to us are not counted for purposes of determining 60 Table of Content s whether a distribution is permitted.
For example, our estimated proved reserves as of December 31, 2023 were calculated under SEC rules using the unweighted arithmetic average first day of the month prices for the prior 12 months of $2.64/MMBtu for natural gas and $78.22/Bbl for oil at December 31, 2023 , which, for certain periods during this period, were substantially different from the available spot prices.
For example, our estimated proved reserves as of December 31, 2024 were calculated under SEC rules using the unweighted arithmetic average first day of the month prices for the prior 12 months of $2.13/MMBtu for natural gas and $75.48/Bbl for oil at December 31, 2024 , which, for certain periods during this period, were substantially different from the available spot prices.
The present value of future net cash flow from our proved reserves, or standardized measure, may not represent the current market value of our estimated proved oil and natural gas reserves.
The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved reserves. The present value of future net cash flow from our proved reserves, or standardized measure, may not represent the current market value of our estimated proved oil, natural gas liquids and natural gas reserves.
For as long as we are an emerging growth company, unlike other public companies, we will not be required to, among other things, (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise or (4) provide certain disclosure regarding executive compensation required of larger public companies.
For as long as we are an emerging growth company, unlike other public companies, we will not be required to, among other things, (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise or (4) provide certain disclosure regarding executive compensation required of larger public companies. 61 Table of Content s Taking advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards applicable to emerging growth companies may make our common units less attractive to investors.
In recent years, the securities market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to the operating performance of these companies.
In recent years, the securities market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to the operating performance of these companies. Future market fluctuations may result in a lower price of our common units.
In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices, which could materially and adversely affect our business, operating results and financial condition. Accruals for such liability, penalties or sanctions may be insufficient.
In addition, it is possible that a resolution of one or more 52 Table of Content s such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices, which could materially and adversely affect our business, operating results and financial condition.
Increases in activity in our operating areas could, in the future, contribute to bottlenecks in processing and transportation that could negatively affect our results of operations, and these adverse effects could be disproportionately severe to us compared to our more geographically diverse competitors. As a result, our business, financial condition and results of operations could be adversely affected.
Increases in activity in our operating areas could, in the future, contribute to bottlenecks in processing and transportation that could negatively affect our results of operations, and these adverse effects could be disproportionately severe to us compared to our more geographically diverse competitors.
Affiliates of our general partner may sell common units in the public markets, which sales could have an adverse impact on the trading price of the common units. Affiliates of our general partner (including the Founders) own 11,470,901 common units, or approximately 37% of our limited partner interest.
Affiliates of our general partner may sell common units in the public markets, which sales could have an adverse impact on the trading price of the common units. Affiliates of our general partner (including the Founders) own 12,947,878 common units, or approximately 31% of our limited partner interest.
However, in June 2022, EPA announced that it is considering a discretionary redesignation for these counties based on current monitoring data and other air quality factors.
However, in June 2022, EPA announced that it is considering a discretionary redesignation for these counties based on current monitoring data and other air quality factors, however EPA has yet to move forward with any redesignation.
During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy. We expect relatively higher inflation to continue in 2024 resulting in higher costs.
During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy.
Oil prices steadily increased through 2021 due to continued recovery in demand before increasing drastically in the first half of 2022 due to further demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Oil prices increased drastically in the first half of 2022 due to demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Distributions to non-U.S. unitholders may also be subject to additional withholding under these rules to the extent a portion of a distribution is attributable to an amount in excess of our cumulative net income that has not previously been distributed. The U.S.
Distributions to non-U.S. unitholders may also be subject to additional withholding under these rules to the extent a portion of a distribution is attributable to an amount in excess of our cumulative net income that has not previously been distributed. Non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units.
Loss of our information and computer systems could adversely affect our business. We are dependent on our information systems and computer-based programs, including our well operations information, seismic data, electronic data processing and accounting data.
We are dependent on our information systems and computer-based programs, including our well operations information, seismic data, electronic data processing and accounting data.
Our inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could adversely impact our exploration and production operations and have a corresponding adverse effect on our business, results of operations and financial condition. In addition, treatment and disposal of water is becoming more highly regulated and restricted.
Our inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could adversely impact our exploration and production operations and have a corresponding adverse effect on our business, results of operations and financial condition.
For example, during the period from January 1, 2021 through December 31, 2023, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $47.62 per Bbl and $1.99 per MMBtu, respectively.
For example, during the period from January 1, 2022 through December 31, 2024, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $65.75 per Bbl and $1.58 per MMBtu, respectively.
Additionally, the Inflation Reduction Act, adopted in 2022, imposes several new requirements on oil and gas operators, including a fee for leaks or venting of methane, starting at $900 per ton in 2024 and rising to $1,500 per ton in and after 2026, from certain facilities. The act also appropriates significant federal funding for renewable energy initiatives.
Additionally, the Inflation Reduction Act, adopted in 2022, imposes several new requirements on oil and gas operators, including a fee for leaks or venting of methane, starting at $900 per ton in 2024 and rising to $1,200 per ton in 2025, and to 47 Table of Content s $1,500 per ton in and after 2026, from certain facilities.
For the year ended December 31, 2023, Chevron USA and CIMA Energy together accounted for more than 42% of our total revenues, excluding the impact of our commodity derivatives. For the year ended December 31, 2022, Chevron USA and Phillips 66 Company together accounted for more than 35% of our total revenues, excluding the impact of our commodity derivatives.
For the year ended December 31, 2024, Chevron USA and Gunvor USA together accounted for almost 46% of our total revenues, excluding the impact of our commodity derivatives. For the year ended December 31, 2023, Chevron USA and CIMA Energy together accounted for more than 42% of our total revenues, excluding the impact of our commodity derivatives.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDue to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment-related disputes.
Biggest changeDue to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims 68 Table of Content s and employment-related disputes.
In the opinion of our management, none of these other pending litigation matters, disputes or claims against us, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations. Item 4. Mine Safety Disclosures None. 67 Table of Contents Part II
In the opinion of our management, none of these other pending litigation matters, disputes or claims against us, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations. Item 4. Mine Safety Disclosures None. 69 Table of Content s Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments. 2023 Distribution per Unit Payment Date First Quarter $ 0.50 May 30, 2023 Second Quarter $ 0.48 August 25, 2023 Third Quarter $ 0.52 November 27, 2023 Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Biggest changeDistribution per Unit Payment Date First Quarter, 2023 $ 0.50 May 30, 2023 Second Quarter, 2023 $ 0.48 August 25, 2023 Third Quarter, 2023 $ 0.52 November 27, 2023 Fourth Quarter, 2023 $ 0.58 March 28, 2024 First Quarter, 2024 $ 0.65 May 29, 2024 Second Quarter, 2024 $ 0.57 August 27, 2024 Third Quarter, 2024 $ 0.58 November 22, 2024 Recent Sales of Unregistered Securities None.
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter: less , the amount of cash reserves established by our general partner to: • provide for the proper conduct of our business, which could include, but is not limited to, amounts reserved for capital expenditures, working capital and operating expenses; • comply with applicable law, any of our debt instruments or other agreements; or • provide funds for distributions to our unitholders for any one or more of the next four quarters; plus , all cash on hand on the date of determination resulting from dividends or distributions received after the end of the quarter from equity interests in any person other than a subsidiary in respect of operations conducted by such person during the quarter; 68 Table of Contents plus , if our general partner so determines, all or a portion of cash on hand on the date of determination resulting from working capital borrowings made after the end of the quarter.
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter: less , the amount of cash reserves established by our general partner to: • provide for the proper conduct of our business, which could include, but is not limited to, amounts reserved for capital expenditures, working capital and operating expenses; • comply with applicable law, any of our debt instruments or other agreements; or 70 Table of Content s • provide funds for distributions to our unitholders for any one or more of the next four quarters; plus , all cash on hand on the date of determination resulting from dividends or distributions received after the end of the quarter from equity interests in any person other than a subsidiary in respect of operations conducted by such person during the quarter; plus , if our general partner so determines, all or a portion of cash on hand on the date of determination resulting from working capital borrowings made after the end of the quarter.
Item 5. Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common units are listed and traded on the New York Stock Exchange under the symbol “TXO.” As of March 5, 2024, there were 98 record holders. Our common units began publicly trading on the NYSE on January 27, 2023.
Item 5. Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common units are listed and traded on the New York Stock Exchange under the symbol “TXO.” As of March 4, 2025, there were 108 record holders. Our common units began publicly trading on the NYSE on January 27, 2023.
Cash Distribution Policy Our partnership agreement requires us to distribute all of our available cash each quarter. Our cash distribution policy reflects a basic judgment that our unitholders generally will be better served by us distributing our available cash, after expenses and reserves, rather than retaining it.
Issuer Purchases of Equity Securities None. Cash Distribution Policy Our partnership agreement requires us to distribute all of our available cash each quarter. Our cash distribution policy reflects a basic judgment that our unitholders generally will be better served by us distributing our available cash, after expenses and reserves, rather than retaining it.
Prior to that time, there was no public market for our common units. Since the closing of our initial public offering on January 31, 2023, we have made distributions for the first three quarters of 2023 as indicated in the table below.
Prior to that time, there was no public market for our common units. Since the closing of our initial public offering on January 31, 2023, we have made the following quarterly distributions as indicated in the table below.
Our fourth quarter distribution of $0.58 per unit with respect to cash available for distribution for the three months ended December 31, 2023, was declared on March 05, 2024 and will be paid on March 28, 2024 to unitholders of record on March 15, 2024.
Our fourth quarter distribution of $0.61 per unit with respect to cash available for distribution for the three months ended December 31, 2024, was declared on March 04, 2025 and will be paid on March 21, 2025 to unitholders of record on March 14, 2025.
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See the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAdditionally, because Adjusted EBITDAX and cash available for distribution may be defined differently by other companies in our industry, our definition of Adjusted EBITDAX and cash available for distribution may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 75 Table of Contents Reconciliation of Adjusted EBITDAX and Cash Available for Distribution to GAAP Financial Measures For the Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) $ (103,987) $ (7,668) $ 52,475 Interest expense 4,423 8,198 5,870 Interest income (461) (143) (16) Depreciation, depletion and amortization 44,288 41,364 39,889 Impairment of long-lived assets 223,384 — — Accretion of discount in asset retirement obligation 8,644 6,055 4,670 Exploration expense 151 360 124 Unrealized (gain)/loss on derivatives (106,247) 113,217 (8,977) Non-cash incentive compensation 3,470 — 2,400 Non-cash gain on forgiveness of debt — — — (9,152) Non-recurring (gain)/loss $ 209 $ 23 $ (1,935) Adjusted EBITDAX $ 73,874 $ 161,406 $ 85,348 Cash Interest expense (3,677) (7,506) (4,520) Cash Interest income 461 143 16 Exploration expense (151) (360) (124) Development costs (35,799) (23,720) (8,372) Cash Available for Distribution $ 34,708 $ 129,963 $ 72,348 Net cash provided by operating activities $ 77,150 $ 136,380 $ 73,726 Changes in operating assets and liabilities (6,643) 17,303 6,994 Development costs (35,799) (23,720) (8,372) Cash Available for Distribution $ 34,708 $ 129,963 $ 72,348 76 Table of Contents Results of Operations For the year ended December 31, 2023 2022 2021 (in thousands) Revenues: Oil and condensate sales $ 182,733 $ 160,864 $ 69,971 Natural gas liquids sales 29,193 41,731 27,875 Gas sales 168,792 43,802 130,498 Total revenues 380,718 246,397 228,344 Expenses: Production 144,730 127,661 69,256 Exploration 151 360 124 Taxes, transportation, and other 75,415 94,991 58,040 Depreciation, depletion and amortization 44,288 41,364 39,889 Impairment of long-lived assets 223,384 — — Accretion of discount in asset retirement obligation 8,644 6,055 4,670 General and administrative 7,887 1,646 12,175 Total expenses 504,499 272,077 184,154 Operating (loss) income (123,781) (25,680) 44,190 Other income (expense): Other income 23,756 26,067 14,139 Interest income 461 143 16 Interest expense (4,423) (8,198) (5,870) Total other income 19,794 18,012 8,285 Net (loss) income $ (103,987) $ (7,668) $ 52,475 77 Table of Contents The following table provides a summary of our sales volumes, average prices (both including and excluding the effects of derivatives) and operating expenses on a per Boe basis for the periods indicated: For the year ended December 31, 2023 2022 2021 Sales: Oil and condensate sales (MBbls) 2,376 2,206 1,033 Natural gas liquids sales (MBbls) 1,232 1,334 1,089 Natural gas sales (MMcf) 28,739 29,557 30,590 Total (MBoe) 8,397 8,466 7,220 Total (MBoe/d) 23 23 20 Average sales prices: Oil and condensate excluding the effects of derivatives (per Bbl) $ 75.94 $ 93.69 $ 67.41 Oil and condensate (per Bbl) (1) $ 76.92 $ 72.93 $ 67.74 Natural gas liquids excluding the effects of derivatives (per Bbl) $ 22.53 $ 35.47 $ 25.16 Natural gas liquids (per Bbl) (2) $ 23.70 $ 31.28 $ 25.60 Natural gas excluding the effects of derivatives (per Mcf) $ 5.20 $ 6.62 $ 4.00 Natural gas (per Mcf) (3) $ 5.87 $ 1.48 $ 4.27 Expense per Boe: Production $ 17.24 $ 15.08 $ 9.59 Taxes, transportation and other $ 8.98 $ 11.22 $ 8.04 Depreciation, depletion and amortization $ 5.27 $ 4.89 $ 5.52 General and administrative expenses $ 0.94 $ 0.19 $ 1.69 __________________________________ (1) Oil and condensate prices include both realized and unrealized losses from derivatives.
Biggest changeReconciliation of Adjusted EBITDAX and Cash Available for Distribution to GAAP Financial Measures For the Year Ended December 31, 2024 2023 2022 (in thousands) Net income (loss) $ 23,496 $ (103,987) $ (7,668) Interest expense 7,873 4,423 8,198 Interest income (1,078) (461) (143) Depreciation, depletion and amortization 52,409 44,288 41,364 Impairment of long-lived assets — 223,384 — Accretion of discount in asset retirement obligation 11,623 8,644 6,055 Exploration expense 373 151 360 Unrealized (gain)/loss on derivatives 7,399 (106,247) 113,217 Non-cash incentive compensation 6,165 3,470 — Non-recurring (gain)/loss $ 394 $ 209 $ 23 Adjusted EBITDAX $ 108,654 $ 73,874 $ 161,406 Cash Interest expense (6,974) (3,677) (7,506) Cash Interest income 1,078 461 143 Exploration expense (373) (151) (360) Development costs (23,242) (35,799) (23,720) Cash Available for Distribution $ 79,143 $ 34,708 $ 129,963 Net cash provided by operating activities $ 109,299 $ 77,150 $ 136,380 Changes in operating assets and liabilities (6,914) (6,643) 17,303 Development costs (23,242) (35,799) (23,720) Cash Available for Distribution $ 79,143 $ 34,708 $ 129,963 78 Table of Content s Results of Operations For the year ended December 31, 2024 2023 2022 (in thousands) Revenues: Oil and condensate sales $ 198,324 $ 182,733 $ 160,864 Natural gas liquids sales 29,430 29,193 41,731 Gas sales 55,056 168,792 43,802 Total revenues 282,810 380,718 246,397 Expenses: Production 150,295 144,730 127,661 Exploration 373 151 360 Taxes, transportation, and other 60,442 75,415 94,991 Depreciation, depletion and amortization 52,409 44,288 41,364 Impairment of long-lived assets — 223,384 — Accretion of discount in asset retirement obligation 11,623 8,644 6,055 General and administrative 14,529 7,887 1,646 Total expenses 289,671 504,499 272,077 Operating (loss) income (6,861) (123,781) (25,680) Other income (expense): Other income 37,152 23,756 26,067 Interest income 1,078 461 143 Interest expense (7,873) (4,423) (8,198) Total other income 30,357 19,794 18,012 Net income (loss) $ 23,496 $ (103,987) $ (7,668) 79 Table of Content s The following table provides a summary of our sales volumes, average prices (both including and excluding the effects of derivatives) and operating expenses on a per Boe basis for the periods indicated: For the year ended December 31, 2024 2023 2022 Sales: Oil and condensate sales (MBbls) 2,716 2,376 2,206 Natural gas liquids sales (MBbls) 1,211 1,232 1,334 Natural gas sales (MMcf) 27,790 28,739 29,557 Total (MBoe) 8,559 8,397 8,466 Total (MBoe/d) 23 23 23 Average sales prices: Oil and condensate excluding the effects of derivatives (per Bbl) $ 72.92 $ 75.94 $ 93.69 Oil and condensate (per Bbl) (1) $ 73.01 $ 76.92 $ 72.93 Natural gas liquids excluding the effects of derivatives (per Bbl) $ 24.30 $ 22.53 $ 35.47 Natural gas liquids (per Bbl) (2) $ 24.30 $ 23.70 $ 31.28 Natural gas excluding the effects of derivatives (per Mcf) $ 2.08 $ 5.20 $ 6.62 Natural gas (per Mcf) (3) $ 1.98 $ 5.87 $ 1.48 Expense per Boe: Production $ 17.56 $ 17.24 $ 15.08 Taxes, transportation and other $ 7.06 $ 8.98 $ 11.22 Depreciation, depletion and amortization $ 6.12 $ 5.27 $ 4.89 General and administrative expenses $ 1.70 $ 0.94 $ 0.19 __________________________________ (1) Oil and condensate prices include both realized and unrealized losses from derivatives.
The impairment is related to our assets in the Texas Permian Basin, that is within our Cross Timbers joint venture, primarily due to a lower net commodity price environment and higher costs as well as a change in our development plans to reduce the duration of the proved undeveloped reserves from five years to two years.
The impairment was related to our assets in the Texas Permian Basin, that is within our Cross Timbers joint venture, primarily due to a lower net commodity price environment and higher costs as well as a change in our development plans to reduce the duration of the proved undeveloped reserves from five years to two years.
The impairment is related to our assets in the Texas Permian Basin, that is within our Cross Timbers joint venture, primarily due to a lower net commodity price environment, increased costs as well as a change in our development plans to reduce the duration of the proved undeveloped reserves from five years to two years.
The impairment was related to our assets in the Texas Permian Basin, that is within our Cross Timbers joint venture, primarily due to a lower net commodity price environment, increased costs as well as a change in our development plans to reduce the duration of the proved undeveloped reserves from five years to two years.
While there is judgment involved in management’s estimate of future product prices, the potential impact on impairment has not been significant recently since product prices have been substantially higher than our net acquisition and development costs per Boe. Prior to 2021, our historical impairment of proved properties included $311.5 million of proved property impairments from 2014 through 2020.
While there is judgment involved in management’s estimate of future product prices, the potential impact on impairment has not been significant recently since product prices have been substantially higher than our net acquisition and development costs per Boe. Prior to 2022, our historical impairment of proved properties included $311.5 million of proved property impairments from 2014 through 2021.
Factors Affecting the Comparability of Our Financial Condition and Results of Operations Our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, primarily for the following reasons: Property acquisitions We have completed three significant acquisitions in the past two years that affect the comparability of results of operations between 2021, 2022 and 2023 to some extent.
Factors Affecting the Comparability of Our Financial Condition and Results of Operations Our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, primarily for the following reasons: Property acquisitions We have completed three significant acquisitions in the past two years that affect the comparability of results of operations between 2022, 2023 and 2024 to some extent.
Other factors impacting supply and demand include weather conditions, pipeline capacity constraints, inventory storage levels, basis differentials, export capacity, strength of the U.S. dollar as well as other factors, the majority of which are outside of our control. As a result of these external factors, we expect global commodity price volatility will continue throughout 2024.
Other factors impacting supply and demand include weather conditions, pipeline capacity constraints, inventory storage levels, basis differentials, export capacity, strength of the U.S. dollar as well as other factors, the majority of which are outside of our control. As a result of these external factors, we expect global commodity price volatility will continue throughout 2025.
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial markets and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our distributions, meet our debt obligations and fund our 2024 capital development programs from cash flow from operations. If cash flow from operations does not meet our expectations, we may reduce our expected level of capital expenditures and/or distributions to unitholders.
Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our distributions, meet our debt obligations and fund our 2025 capital development programs from cash flow from operations. If cash flow from operations does not meet our expectations, we may reduce our expected level of capital expenditures and/or distributions to unitholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our audited financial statements as of and for the years ended December 31, 2023, 2022 and 2021 and related notes thereto, included in Item 8. Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our audited financial statements as of and for the years ended December 31, 2024, 2023 and 2022 and related notes thereto, included in Item 8. Financial Statements.
The following tables summarize our open oil, NGL and natural gas hedging positions as of December 31, 2023. Prices to be realized for hedged production will be less than these NYMEX prices because of location, quality and other adjustments.
The following tables summarize our open oil, NGL and natural gas hedging positions as of December 31, 2024. Prices to be realized for hedged production will be less than these NYMEX prices because of location, quality and other adjustments.
If conditions indicate that proved properties may be impaired, the carrying value of property is compared to management’s future estimated pre-tax undiscounted cash flow from properties generally aggregated on a field-level basis. If impairment is necessary, the asset carrying value is written down to fair value, typically a discounted present value of 85 Table of Contents estimated future cash flows.
If conditions indicate that proved properties may be impaired, the carrying value of property is compared to management’s future estimated pre-tax undiscounted cash flow from properties generally aggregated on a field-level basis. If impairment is necessary, the asset carrying value is written down to fair value, typically a discounted present value of estimated future cash flows.
These goals include the highest projected economic returns on our capital budget, acquisition opportunities that fulfill our strategy, and cash distributions for the life of our legacy assets. From time to time, we may choose to amortize the repayment of debt incurred in modest acquisitions to support the longer-term financial stewardship of our business.
These goals include the highest projected economic returns on our capital budget, acquisition opportunities that fulfill our strategy, and cash distributions for the life of our legacy assets. From time to time, we may choose to prioritize the repayment of debt incurred in acquisitions to support the longer-term financial stewardship of our business.
For the comparison of the years ended December 31, 2022 and 2021 , see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 .
For the comparison of the years ended December 31, 2023 and 2022 , see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 .
Contractual obligations and commitments We have not guaranteed the debt or obligations of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses. 83 Table of Contents Derivative contracts We have entered into derivative instruments to hedge our exposure to commodity price fluctuations.
Contractual obligations and commitments We have not guaranteed the debt or obligations of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses. Derivative contracts We have entered into derivative instruments to hedge our exposure to commodity price fluctuations.
For the Year Ended December 31, 2023 2022 2021 Crude oil sales 63 % 48 % 32 % Natural gas sales 27 % 40 % 56 % Natural gas liquid sales 10 % 12 % 12 % Revenue excluding the unrealized effects of commodity derivative contracts is a non-GAAP supplemental financial measure that management and external users of our combined financial statements, such as investors, lenders and others (including industry analysts and rating agencies who will be using such measure), may use for the periods presented to more effectively evaluate our operating performance and our results of operation from period to period without giving effect to non-cash gains and losses.
For the Year Ended December 31, 2024 2023 2022 Crude oil sales 66 % 63 % 48 % Natural gas sales 24 % 27 % 40 % Natural gas liquid sales 10 % 10 % 12 % Revenue excluding the unrealized effects of commodity derivative contracts is a non-GAAP supplemental financial measure that management and external users of our combined financial statements, such as investors, lenders and others (including industry analysts and rating agencies who will be using such measure), may use for the periods presented to more effectively evaluate our operating performance and our results of operation from period to period without giving effect to non-cash gains and losses.
How We Evaluate Our Operations We use a variety of financial and operational metrics to assess the performance of our operations, including: • production volumes; 74 Table of Contents • realized prices on the sale of oil, NGLs and natural gas; • production expenses; • acquisition and development expenditures • Adjusted EBITDAX; and • Cash Available for Distribution.
How We Evaluate Our Operations We use a variety of financial and operational metrics to assess the performance of our operations, including: • production volumes; • realized prices on the sale of oil, NGLs and natural gas; • production expenses; • acquisition and development expenditures • Adjusted EBITDAX; and • Cash Available for Distribution.
Interest expense can fluctuate with our level of indebtedness as well as changes in interest rates. Income tax Texas does not currently impose a personal income tax on individuals, but it does impose an entity level tax (to which we will be subject) on corporations and other entities.
Interest expense can fluctuate with our level of indebtedness as well as changes in interest rates. Income tax Texas does not currently impose a personal income tax on individuals, but it does impose an entity level tax (to which we are subject) on corporations and other entities.
If we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted. We are taking actions to mitigate inflationary pressures.
If we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment 72 Table of Content s assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted. We are taking actions to mitigate inflationary pressures.
Please see “Risk Factors—Risks Related to the Natural Gas, NGL and Oil Industry and Our Business—Commodity prices are volatile—A sustained decline in commodity prices may adversely affect our business, 84 Table of Contents financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.” Public company expenses We incurred in 2023 and expect to incur in 2024 incremental costs related to our transition to a publicly traded partnership, including the costs associated with the initial implementation of our internal controls implementation and testing.
Please see “Risk Factors—Risks Related to the Natural Gas, NGL and Oil Industry and Our Business—Commodity prices are volatile—A sustained decline in commodity prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.” 86 Table of Content s Public company expenses We incurred in 2023 and 2024 and expect to incur in 2025 incremental costs related to our transition to a publicly traded partnership, including the costs associated with the initial implementation of our internal controls and testing.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended December 31, 2023 and 2022 .
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended December 31, 2024 and 2023 .
Our Credit Facility contains certain customary representations, warranties and covenants, including but not limited to, limitations on incurring debt and liens, limitations on merging or consolidating with another company, limitations on making certain restricted payments, limitations on investments, limitations on paying distributions on, redeeming, or 82 Table of Contents repurchasing common units, limitations on entering into transactions with affiliates, and limitations on asset sales.
Our Credit Facility contains certain customary representations, warranties and covenants, including but not limited to, limitations on incurring debt and liens, limitations on merging or consolidating with another company, limitations on making certain restricted payments, limitations on investments, limitations on paying distributions on, redeeming, or repurchasing common units, limitations on entering into transactions with affiliates, and limitations on asset sales.
The Credit Facility also contains customary events of default, including non-payment, breach of covenants, materially incorrect representations, cross-default, bankruptcy and change of control. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the Credit Facility to be immediately due and payable.
The Credit Facility also contains customary events of default, including non-payment, breach of covenants, materially incorrect 84 Table of Content s representations, cross-default, bankruptcy and change of control. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the Credit Facility to be immediately due and payable.
We record any impairments to accumulated depreciation, depletion and amortization on the balance sheets. Cash flow pricing estimates are based on estimated reserves and production information and pricing assumptions that management believes are reasonable. The impairment assessment process is primarily dependent upon the estimate of proved reserves.
We record any impairments to accumulated depreciation, depletion and amortization on the balance sheets. Cash flow pricing estimates are based on estimated reserves and production information and pricing assumptions that management believes are reasonable. 87 Table of Content s The impairment assessment process is primarily dependent upon the estimate of proved reserves.
The realized gains were $0.4 million for the year ended December 31, 2023, realized losses were $4.6 million for the year ended December 31, 2022 and $0.0 million for the year ended December 31, 2021. (3) Natural gas prices include both realized and unrealized losses from derivatives.
The realized gains were $0.5 million for the year ended December 31, 2024 and $0.4 million for the year ended December 31, 2023 and realized losses were $4.6 million for the year ended December 31, 2022. (3) Natural gas prices include both realized and unrealized losses from derivatives.
The unrealized gains were $1.0 million for the year ended December 31, 2023, unrealized losses were $1.0 million for the year ended December 31, 2022 and unrealized gains were $0.5 million for the year ended December 31, 2021.
The unrealized losses were $0.5 million for the year ended December 31, 2024, unrealized gains were $1.0 million for the year ended December 31, 2023 and unrealized losses were $1.0 million for the year ended December 31, 2022.
We follow the successful efforts method of accounting, capitalizing costs of successful acquisitions and exploratory wells, which are then allocated to each unit of production using the unit of production method, and expensing costs of unsuccessful exploratory wells. Exploratory geological and geophysical costs are expensed as incurred. All developmental costs are capitalized.
We follow the successful efforts method of accounting, capitalizing costs of successful acquisitions and exploratory wells, which are then allocated to each unit of production using the unit of production method, and expensing costs of unsuccessful exploratory wells. Exploratory geological and geophysical costs 76 Table of Content s are expensed as incurred. All developmental costs are capitalized.
Our ability to add reserves through development projects and acquisitions is dependent on many factors, including our ability to raise capital, obtain regulatory approvals, procure contract drilling rigs and personnel, and successfully identify and consummate 71 Table of Contents acquisitions.
Our ability to add reserves through development projects and acquisitions is dependent on many factors, including our ability to raise capital, obtain regulatory approvals, procure contract drilling rigs and personnel, and successfully identify and consummate acquisitions.
The following table 70 Table of Contents presents the breakdown of our revenues including both the realized and unrealized effects of our commodity derivative contracts for the periods specified below: For the Year Ended December 31, 2023 2022 2021 Crude oil sales 48 % 65 % 31 % Natural gas sales 44 % 18 % 57 % Natural gas liquid sales 8 % 17 % 12 % The following table presents that breakdown of our revenues for the periods specified below excluding the unrealized effects of our commodity derivative contracts.
The following table presents the breakdown of our revenues including both the realized and unrealized effects of our commodity derivative contracts for the periods specified below: For the Year Ended December 31, 2024 2023 2022 Crude oil sales 70 % 48 % 65 % Natural gas sales 20 % 44 % 18 % Natural gas liquid sales 10 % 8 % 17 % The following table presents that breakdown of our revenues for the periods specified below excluding the unrealized effects of our commodity derivative contracts.
The unrealized gains were $95.8 million for the year ended December 31, 2023, unrealized gains losses $99.2 million for the year ended December 31, 2022 and unrealized gains were $8.2 million for the year ended December 31, 2021.
The unrealized losses were $12.8 million for the year ended December 31, 2024, unrealized gains were $95.8 million for the year ended December 31, 2023 and unrealized losses were $99.2 million for the year ended December 31, 2022.
The following is a summary of our significant acquisition activity that occurred from the beginning of 2021 to the date of this Annual Report on Form 10-K: • Vacuum Acquisition .
The following is a summary of our significant acquisition activity that occurred from the beginning of 2022 to the date of this Annual Report on Form 10-K: • Additional Interest Vacuum Acquisition .
Any negative effect on production volumes could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution.
Any negative effect on production volumes could have a material adverse effect on our business, financial condition, results of 73 Table of Content s operations and cash available for distribution.
On a per unit basis, taxes, transportation, and other decreased from $11.22 per Boe sold for the year ended December 31, 2022 to $8.98 per Boe sold for the year ended December 31, 2023. The decrease is primarily attributable to the decrease in oil, NGLs and natural gas prices.
On a per unit basis, taxes, transportation, and other decreased from $8.98 per Boe sold for the year ended December 31, 2023 to $7.06 per Boe sold for the year ended December 31, 2024. The decrease is primarily attributable to the decrease in oil, NGLs and natural gas prices.
The realized losses were $7.1 million for the year ended December 31, 2023, $32.8 million for the year ended December 31, 2022 and $0.0 million for the year ended December 31, 2021. (2) Natural gas liquids prices include both realized and unrealized losses from derivatives.
The realized losses were $5.6 million for the year ended December 31, 2024, $7.1 million for the year ended December 31, 2023 and $32.8 million for the year ended December 31, 2022. (2) Natural gas liquids prices include both realized and unrealized losses from derivatives.
The weighted average interest rate on Credit Facility borrowings was 8.4% in 2023 . The effective borrowing rate under our Credit Facility was 8.6% as of December 31, 2023 .
The weighted average interest rate on Credit Facility borrowings was 8.6% in 2024 . The effective borrowing rate under our Credit Facility was 8.3% as of December 31, 2024 .
Asset Retirement Obligation At December 31, 2023 , we had asset retirement obligations of $154.0 million inclusive of a current portion of $1.8 million. For further information on asset retirement obligations, see Note 7 in the financial statements included in Item 8. Financial Statements and Supplementary Data.
Asset Retirement Obligation At December 31, 2024 , we had asset retirement obligations of $190.9 million inclusive of a current portion of $2.0 million. For further information on asset retirement obligations, see Note 7 in the financial statements included in Item 8. Financial Statements and Supplementary Data.
The following is a comparison of average pricing excluding and including the effects of derivatives: For the Year Ended December 31, 2023 2022 2021 Average prices: Oil (Bbl) Average NYMEX Price $ 77.60 $ 94.33 $ 68.11 Average Realized Price (excluding derivatives) $ 75.94 $ 93.69 $ 67.41 Average Realized Price (including derivatives) $ 76.92 $ 72.93 $ 67.74 Differential to NYMEX $ (1.66) $ (0.64) $ (0.70) Natural Gas (Mcf) Average NYMEX Price $ 2.66 $ 6.55 $ 3.71 Average Realized Price (excluding derivatives) $ 5.20 $ 6.62 $ 4.00 Average Realized Price (including derivatives) $ 5.87 $ 1.48 $ 4.27 Differential to NYMEX $ 2.54 $ 0.07 $ 0.29 Natural gas liquids (Bbl) Average Realized Price (excluding derivatives) $ 22.53 $ 35.47 $ 25.16 Average Realized Price (including derivatives) $ 23.70 $ 31.28 $ 25.60 High and low NYMEX prices: Oil (Bbl) High $ 93.68 $ 123.70 $ 84.65 Low $ 66.74 $ 71.02 $ 47.62 Natural gas (MMBtu) High $ 4.17 $ 9.68 $ 6.31 Low $ 1.99 $ 3.72 $ 2.45 72 Table of Contents Hedging activities To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in commodity prices, from time to time we enter into derivative arrangements for our production.
The following is a comparison of average pricing excluding and including the effects of derivatives: For the Year Ended December 31, 2024 2023 2022 Average prices: Oil (Bbl) Average NYMEX Price $ 75.76 $ 77.60 $ 94.33 Average Realized Price (excluding derivatives) $ 72.92 $ 75.94 $ 93.69 Average Realized Price (including derivatives) $ 73.01 $ 76.92 $ 72.93 Differential to NYMEX $ (2.84) $ (1.66) $ (0.64) Natural Gas (Mcf) Average NYMEX Price $ 2.41 $ 2.66 $ 6.55 Average Realized Price (excluding derivatives) $ 2.08 $ 5.20 $ 6.62 Average Realized Price (including derivatives) $ 1.98 $ 5.87 $ 1.48 Differential to NYMEX $ (0.33) $ 2.54 $ 0.07 Natural gas liquids (Bbl) Average Realized Price (excluding derivatives) $ 24.30 $ 22.53 $ 35.47 Average Realized Price (including derivatives) $ 24.30 $ 23.70 $ 31.28 High and low NYMEX prices: Oil (Bbl) High $ 86.91 $ 93.68 $ 123.70 Low $ 65.75 $ 66.74 $ 71.02 Natural gas (MMBtu) High $ 3.95 $ 4.17 $ 9.68 Low $ 1.58 $ 1.99 $ 3.72 Hedging activities To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in commodity prices, from time to time we enter into derivative arrangements for our production.
The unrealized gains were $9.5 million for the year ended December 31, 2023, unrealized losses were $13.0 million for the year ended December 31, 2022 and unrealized gains were $0.3 million for the year ended December 31, 2021.
The unrealized gains were $5.8 million for the year ended December 31, 2024 and $9.5 million for the year ended December 31, 2023 and unrealized losses were $13.0 million for the year ended December 31, 2022.
The realized losses were $76.4 million for the year ended December 31, 2023 and $52.6 million for the year ended December 31, 2022 and $0.0 million for the year ended December 31, 2021.
The realized gains were $10.0 million for the year ended December 31, 2024 and realized losses were $76.4 million for the year ended December 31, 2023 and $52.6 million for the year ended December 31, 2022.
Impairment of long-lived assets We recorded an impairment of long-lived assets of $223.4 million for the year ended December 31, 2023.
Impairment of long-lived assets We did not record an impairment of long-lived assets for the year ended December 31, 2024. We recorded an impairment of long-lived assets of $223.4 million for the year ended December 31, 2023 .
Such amortized expenses are recorded as interest expense on the statements of operations. As of December 31, 2023 , we had $21 million in borrowings outstanding under our Credit Facility and $144 million in availability.
Such amortized expenses are recorded as interest expense on the statements of operations. As of December 31, 2024 , we had $150 million in borrowings outstanding under our Credit Facility and $125 million in availability.
As a result, when commodity prices increase above the fixed price in the derivative contracts, we will be required to pay the derivative counterparty the difference between the fixed price in the derivative contract and the market price before we receive the proceeds from the sale of the hedged production. If this occurs, we may borrow to fund our distributions.
As a result, when commodity prices increase above the fixed price in the derivative contracts, we will be required to pay the derivative counterparty the difference between the fixed price in the derivative contract and the market price before we receive the proceeds from the sale of the hedged production.
Such variations may be significant and quarterly distributions paid to our unitholders may be zero. Our fourth quarter distribution of $0.58 per unit with respect to cash available for distribution for the three months ended December 31, 2023, was declared on March 05, 2024 and will be paid on March 28, 2024 to unitholders of record on March 15, 2024.
Such variations may be significant and quarterly distributions paid to our unitholders may be zero. Our fourth quarter distribution of $0.61 per unit with respect to cash available for distribution for the three months ended December 31, 2024, was declared on March 04, 2025 and will be paid on March 21, 2025 to unitholders of record on March 14, 2025.
The following table presents historical production volumes for our properties for the periods specified below: The following table presents historical production volumes for our properties for the periods specified below: For the Year Ended December 31, 2023 2022 2021 Oil and condensate (MBbls) 2,376 2,206 1,033 Natural gas liquids (MBbls) 1,232 1,334 1,089 Natural gas (MMcf) 28,739 29,557 30,590 Total (MBoe) 8,397 8,466 7,220 Average net sales (MBoe/day) 23 23 20 Sales volumes directly impact our results of operations.
The following table presents historical production volumes for our properties for the periods specified below: For the Year Ended December 31, 2024 2023 2022 Oil and condensate (MBbls) 2,716 2,376 2,206 Natural gas liquids (MBbls) 1,211 1,232 1,334 Natural gas (MMcf) 27,790 28,739 29,557 Total (MBoe) 8,559 8,397 8,466 Average net sales (MBoe/day) 23 23 23 Sales volumes directly impact our results of operations.
During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy. We expect relatively higher inflation to continue in 2024 resulting in higher costs.
During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy.
If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract counterparties. As of December 31, 2023 , the current liability related to such contracts was $4.0 million and the non-current liability was $0.0 million.
If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract 85 Table of Content s counterparties. As of December 31, 2024 , the current liability related to such contracts was $5.8 million and the non-current liability was $8.0 million.
Oil prices steadily increased through 2021 due to continued recovery in demand before increasing drastically in the first half of 2022 due to further demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Oil prices increased drastically in the first half of 2022 due to demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Taxes, transportation, and other Taxes, transportation, and other decreased $19.6 million, or 21%, from $95.0 million for the year ended December 31, 2022 to $75.4 million for the year ended December 31, 2023. The decrease is primarily attributable to the decrease in oil, NGLs and natural gas prices as well as decreased NGLs and natural gas volumes.
Taxes, transportation, and other Taxes, transportation, and other decreased $15.0 million, or 20%, from $75.4 million for the year ended December 31, 2023 to $60.4 million for the year ended December 31, 2024. The decrease is primarily attributable to the decrease in oil, NGLs and natural gas prices as well as decreased NGLs and natural gas volumes.
Outstanding borrowings under our Credit Facility were $21.0 million at December 31, 2023 and $113.0 million at December 31, 2022, and the remaining availability under our Credit Facility was $144.0 million at December 31, 2023 and $52.0 million at December 31, 2022.
Outstanding borrowings under our Credit Facility were $150.0 million at December 31, 2024 and $21.0 million at December 31, 2023, and the remaining availability under our Credit Facility was $125.0 million at December 31, 2024 and $144.0 million at December 31, 2023.
Oil and natural gas prices have historically been volatile. During the period from January 1, 2021 through December 31, 2023, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $47.62 per Bbl and $1.99 per MMBtu, respectively.
Oil and natural gas prices have historically been volatile. During the period from January 1, 2022 through December 31, 2024, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $65.75 per Bbl and $1.58 per MMBtu, respectively.
Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $14.1 million at December 31, 2023 and $20.7 million at December 31, 2022.
Additionally, we had negative net working capital (including cash and excluding the effects of derivative instruments) of $2.5 million at December 31, 2024 and positive net working capital of $14.1 million at December 31, 2023.
During the period from January 1, 2021 through December 31, 2023, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $47.62 per Bbl and $1.99 per MMBtu, respectively.
During the period from January 1, 2022 through December 31, 2024, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $65.75 per Bbl and $1.58 per MMBtu, respectively.
Downward revisions of proved reserves result in an acceleration of DD&A expense, while upward revisions tend to lower the rate of DD&A expense recognition. During 2023 , net downward revisions to proved reserves on a Boe basis occurred, which will result in an increase in DD&A expense of 26% in 2024.
Downward revisions of proved reserves result in an acceleration of DD&A expense, while upward revisions tend to lower the rate of DD&A expense recognition. During 2024 , net downward revisions to proved reserves on a Boe basis occurred, which, assuming no other changes to reserves, would result in an increase in DD&A expense of 14% in 2025 .
Successful drill well costs are transferred to proved properties generally within one month of the well completion date. Depreciation, depletion and amortization (DD&A) of proved producing properties is computed on the unit-of- production method based on estimated proved oil and gas reserves. Repairs and maintenance are expensed, while renewals and betterments are generally capitalized.
Depreciation, depletion and amortization (DD&A) of proved producing properties is computed on the unit-of- production method based on estimated proved oil and gas reserves. Repairs and maintenance are expensed, while renewals and betterments are generally capitalized.
We have entered into basis swap agreements that effectively fix the basis adjustment for our delivery locations. In the year ended December 31, 2023, all of our hedging activities increased oil revenue $2.3 million, NGL revenue $1.4 million and gas revenue $19.4 million.
We have entered into basis swap agreements for a portion of our gas production that effectively fix the basis adjustment for our delivery locations. In the year ended December 31, 2024, all of our hedging activities increased oil revenue $0.2 million and decreased NGL revenue $0.0 million and gas revenue $2.8 million.
In the year ended December 31, 2022, all of our hedging activities decreased oil revenue $45.8 million, NGL revenue $5.6 million and gas revenue $151.8 million. In the year ended December 31, 2021, all of our hedging activities increased oil revenue $0.3 million, NGL revenue $0.5 million and gas revenue $8.2 million.
In the year ended December 31, 2023, all of our hedging 75 Table of Content s activities increased oil revenue $2.3 million, NGL revenue $1.4 million and gas revenue $19.4 million. In the year ended December 31, 2022, all of our hedging activities decreased oil revenue $45.8 million, NGL revenue $5.6 million and gas revenue $151.8 million.
On a per unit basis, G&A expense increased from $0.19 per Boe sold for the year ended December 31, 2022 to $0.94 per Boe sold for the year ended December 31, 2023. The increase is primarily related to increased costs and decreased production.
On a per unit basis, G&A expense increased from $0.94 per Boe sold for the year ended December 31, 2023 to $1.70 per Boe sold for the year ended December 31, 2024. The increase is primarily related to increased costs partially offset by increased production.
Oil prices steadily 69 Table of Contents increased through 2021 due to continued recovery in demand before increasing drastically in the first half of 2022 due to further demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Oil prices increased drastically in the first half of 2022 due to demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
We recorded an impairment of long-lived assets of $223.4 million for the year ended December 31, 2023.
We did not recognize an impairment of long-lived assets for the years ended December 31, 2024 and 2022. We recorded an impairment of long-lived assets of $223.4 million for the year ended December 31, 2023 .
The increase is primarily attributable to higher personnel costs of $4.2 million due in part to amortization of unit awards and additional expenses related to the initial public offering in January 2023.
The increase is primarily attributable to higher personnel costs of $4.8 million due in part to amortization of unit awards and additional expenses related to being a public company.
We expect to fund these capital expenditures from cash flow from operations. The amount and timing of these capital expenditures is substantially within our control and subject to management’s discretion.
The amount and timing of these capital expenditures is substantially within our control and subject to management’s discretion.
As of October 25, 2023, the last date of redetermination, our borrowing base was $165 million. Redetermination of the borrowing base under the Credit Facility is based primarily on reserve reports that reflect commodity prices at such time and occurs semi-annually, in March and September, as well as upon requested interim redeterminations by the lenders at their sole discretion.
Redetermination of the borrowing base under the Credit Facility is based primarily on reserve reports that reflect commodity prices at such time and occurs semi-annually, in March and September, as well as upon requested interim redeterminations by the lenders at their sole discretion. We also have the right to request additional borrowing base redeterminations each year at our discretion.
If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation such as a change in our future capital plans, we may incur proved property impairments in future periods. We recorded an impairment of long-lived assets of $223.4 million for the year ended December 31, 2023.
If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation such as a change in our future capital plans, we may incur proved property impairments in future periods.
We did not recognize an impairment of long-lived assets during the years ended December 31, 2022 and 2021 . We believe that a sensitivity analysis regarding the effect of changes in assumptions on estimated impairment is impracticable to provide because of the number of assumptions and variables involved which have interdependent effects on the potential outcome.
We believe that a sensitivity analysis regarding the effect of changes in assumptions on estimated impairment is impracticable to provide because of the number of assumptions and variables involved which have interdependent effects on the potential outcome.
The facility has a maturity date of November 1, 2025. In connection with entering into the Credit Facility, as of December 31, 2023, we incurred financing fees and expenses of approximately $3.0 million before accumulated amortization of $1.5 million . These costs are being amortized over the life of the Credit Facility.
In connection with entering into the Credit Facility, as of December 31, 2024, we incurred financing fees and expenses of approximately $6.2 million before accumulated amortization of $2.5 million . These costs are being amortized over the life of the Credit Facility. We incurred $3.1 million of financing fees and expenses in conjunction with Amendment No. 4.
These prices have been very volatile and experience large swings, sometimes on a day-to-day or week-to-week basis. We expect the crude oil and natural gas markets will continue to be volatile in the future. Our revenue, profitability and future growth are highly dependent on the prices we receive for our oil and natural gas production.
We expect the crude oil and natural gas markets will continue to be volatile in the future. Our revenue, profitability and future growth are highly dependent on the prices we receive for our oil and natural gas production.
The price we receive for our oil and natural gas production is generally different than the NYMEX price because of adjustments for delivery location (“basis”), relative quality and other factors. For example, most of our gas is sold in the San Juan Basin. As such, our revenues are sensitive to the price of the underlying commodity to which they relate.
The price we receive for our oil and natural gas production is generally different than the NYMEX price because of adjustments for delivery location (“basis”), relative quality and other factors. For example, most of our gas is sold at the San Juan basis.
Overview We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America. Our properties are predominately located in the Permian Basin of New Mexico and Texas and the San Juan Basin of New Mexico and Colorado.
Overview We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America.
See Note 1 of the notes to the audited financial statements included in Item 8. Financial Statements and Supplementary Data for an expanded discussion of our significant accounting policies and estimates made by management. Property and equipment A majority of the property costs reflected in the accompanying balance sheet are from the acquisition of proved properties.
Financial Statements and Supplementary Data for an expanded discussion of our significant accounting policies and estimates made by management. Property and equipment A majority of the property costs reflected in the accompanying balance sheet are from the acquisition of proved properties. Successful drill well costs are transferred to proved properties generally within one month of the well completion date.
Depreciation, depletion, and amortization Depreciation, depletion, and amortization increased $2.9 million, or 7%, from $41.4 million for the year ended December 31, 2022 to $44.3 million for the year ended December 31, 2023.
Depreciation, depletion, and amortization Depreciation, depletion, and amortization increased $8.1 million, or 18%, from $44.3 million for the year ended December 31, 2023 to $52.4 million for the year ended December 31, 2024.
We also have the right to request additional borrowing base redeterminations each year at our discretion. Significant declines in commodity prices may result in a decrease in the borrowing base. These borrowing base declines can be offset by any commodity price hedges we enter.
Significant declines in commodity prices may result in a decrease in the borrowing base. These borrowing base declines can be offset by any commodity price hedges we enter.
You should not infer from our presentation of Adjusted EBITDAX that its results will be unaffected by unusual or non-recurring items. You should not consider Adjusted EBITDAX or cash available for distribution in isolation or as a substitute for analysis of our results as reported under GAAP.
You should not consider Adjusted EBITDAX or cash available for distribution in isolation or as a substitute for analysis of our results as reported under GAAP.
The decrease is primarily attributable to the decreased borrowings due in part to the January 2023 initial public offering partially offset by a higher interest rate and increased commitment fees. Liquidity and Capital Resources Our primary sources of liquidity and capital are cash flows generated by operating activities and borrowings under our Credit Facility.
The increase is primarily attributable to increased borrowings due to the Williston Basin acquisitions and a higher interest rate. Liquidity and Capital Resources Our primary sources of liquidity and capital are cash flows generated by operating activities and borrowings under our Credit Facility.
Discounted future net cash flows are calculated using a 10% rate. Changes in any of these assumptions could have a significant impact on the standardized measure.
Discounted future net cash flows are calculated using a 10% rate. Changes in any of these assumptions could have a significant impact on the standardized measure. Accordingly, the standardized measure does not represent management’s estimated current market value of proved reserves. 88 Table of Content s
Market Outlook The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2021 through December 31, 2023, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $47.62 per Bbl and $1.99 per MMBtu, respectively.
For example, during the period from January 1, 2022 through December 31, 2024, prices for crude oil and natural gas reached a high of $123.70 per Bbl and $9.68 per MMBtu, respectively, and a low of $65.75 per Bbl and $1.58 per MMBtu, respectively.
Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness obligations or to refinance our indebtedness will depend on our ability to generate cash in the future.
We expect to be able to issue additional equity and debt securities from time to time as market conditions allow to facilitate future acquisitions. Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness obligations or to refinance our indebtedness will depend on our ability to generate cash in the future.
Additionally, we believe we have adequate liquidity to continue as a going concern for at least the next twelve months from the date of this report.
Under the terms of the Credit Facility, we were in compliance with all of our debt covenants as of December 31, 2024 and December 31, 2023. Additionally, we believe we have adequate liquidity to continue as a going concern for at least the next twelve months from the date of this report.
Cash flows The following table summarizes our cash flows for the periods indicated (in thousands): For the Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 77,150 $ 136,380 $ 73,726 Net cash used in investing activities (46,220) (86,670) (227,801) Net cash (used by) provided by financing activities (35,629) (48,053) 139,689 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net cash provided by operating activities Net cash provided by operating activities decreased $59.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily as a result of lower oil and natural gas prices in 2023 compared to 2022, increased costs and decreased production. 81 Table of Contents Net cash used by investing activities Net cash used by investing activities decreased $40.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to a decrease in proved property and other property acquisitions of $52.9 million partially offset by an increase in development costs of $12.1 million and a decrease in proceeds from sale of property of $0.3 million.
Cash flows The following table summarizes our cash flows for the periods indicated (in thousands): For the Year Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 109,299 $ 77,150 $ 136,380 Net cash used in investing activities (288,283) (46,220) (86,670) Net cash (used by) provided by financing activities 181,784 (35,629) (48,053) Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net cash provided by operating activities Net cash provided by operating activities increased $32.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily as a result of increased production and lower expenses partially offset by lower oil and natural gas prices in 2024 compared to 2023.
The remainder of the increase is primarily due to increased maintenance and energy costs. On a per unit basis, production expenses increased from $15.08 per Boe sold for the year ended December 31, 2022 to $17.24 per Boe sold for the year ended December 31, 2023.
This increase was partially offset by decreased maintenance and energy costs on our historical properties. On a per unit basis, production expenses increased from $17.24 per Boe sold for the year ended December 31, 2023 to $17.56 per Boe sold for the year ended December 31, 2024.
Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs for the year ended December 31, 2023 compared to the year ended December 31, 2022. While prices appear to have stopped increasing as rapidly, we do not expect these cost increases to reverse in the short term.
Nevertheless, we expect for the foreseeable future to experience inflationary pressure on our cost structure. Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. We do not expect these cost increases to reverse in the short term.
Cash Available for Distribution Although we have not quantified cash available for distribution on a historical basis, we intend to use cash available for distribution to assess our ability to internally fund our exploration and development activities, pay distributions, and to service or incur additional debt.
Cash Available for Distribution We use cash available for distribution to assess our ability to internally fund our exploration and development activities, pay distributions, and to service or incur additional debt. We define cash available for distribution as Adjusted EBITDAX less cash interest expense, exploration expense and development costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−1 removed9 unchanged
Biggest changeWe manage and control this risk by investing these funds in major financial institutions. We often have balances in excess of the federally insured limits. We sell oil, NGL and natural gas production to various types of customers. Credit is extended based on an evaluation of the customer’s financial condition and historical payment record.
Biggest changeCounterparty and customer credit risk Our cash and cash equivalents are exposed to concentrations of credit risk. We manage and control this risk by investing these funds in major financial institutions. We often have balances in excess of the federally insured limits. We sell oil, NGL and natural gas production to various types of customers.
See “Business—Operations—Marketing and Customers.” We do not believe the loss of any single purchaser would materially impact our operating results because oil, NGLs and natural gas are fungible products with well-established markets and numerous purchasers. At December 31, 2023 , we had commodity derivative contracts with counterparties.
See “Business—Operations—Marketing and Customers.” We do not believe the loss of any single purchaser would materially impact our operating results because oil, NGLs and natural gas are fungible products with well-established markets and numerous purchasers. 89 Table of Content s At December 31, 2024 , we had commodity derivative contracts with counterparties.
Sales to two purchasers for the year ended December 31, 2023, two purchasers for the year ended December 31, 2022, and three purchasers for the year ended December 31, 2021, were greater than 10% of total revenues .
Sales to two purchasers for the year ended December 31, 2024, two purchasers for the year ended December 31, 2023, and two purchasers for the year ended December 31, 2022, were greater than 10% of total revenues .
Based upon our open commodity derivative positions at December 31, 2023 , a hypothetical 10% change in the NYMEX WTI and Henry Hub prices, OPIS prices and basis prices would change our net oil, NGL and natural gas derivative liability by approximately $4.2 million.
Based upon our open commodity derivative positions at December 31, 2024 , a hypothetical 10% change in the NYMEX WTI and Henry Hub prices and basis prices would change our net oil and natural gas derivative liability by approximately $20.6 million.
As of December 31, 2023 , the fair market value of our oil, NGL and natural gas derivative contracts was a net asset of $2.0 million.
As of December 31, 2024 , the fair market value of our oil, NGL and natural gas derivative contracts was a net liability of $5.4 million.
Additionally, we use master netting arrangements to minimize credit risk exposure. The creditworthiness of our counterparties is subject to periodic review. Interest rate risk At December 31, 2023 , we had $21.0 million of variable rate debt outstanding. Based on this and the expected borrowing levels in 2024, a change in interest rates would be de minimus.
Additionally, we use master netting arrangements to minimize credit risk exposure. The creditworthiness of our counterparties is subject to periodic review. Interest rate risk At December 31, 2024 , we had $150.0 million of variable rate debt outstanding.
The future availability of a ready market for our production depends on numerous factors outside of our control, none of which can be predicted with certainty.
Credit is extended based on an evaluation of the customer’s financial condition and historical payment record. The future availability of a ready market for our production depends on numerous factors outside of our control, none of which can be predicted with certainty.
(in thousands) Fair Value at December 31, 2023 Hypothetical Price Increase or Decrease of 10% Derivative asset (liability) – Crude Oil $ (3,163) $ 2,619 Derivative asset (liability) – Natural Gas Liquids $ 477 $ 220 Derivative asset (liability) – Natural Gas $ 4,693 $ 1,398 $ 2,007 $ 4,237 The hypothetical change in fair value could be a gain or loss depending on whether prices increase or decrease. 87 Table of Contents Counterparty and customer credit risk Our cash and cash equivalents are exposed to concentrations of credit risk.
(in thousands) Fair Value at December 31, 2024 Hypothetical Price Increase or Decrease of 10% Derivative asset (liability) – Crude Oil $ 2,678 $ (8,947) Derivative asset (liability) – Natural Gas Liquids $ — $ — Derivative asset (liability) – Natural Gas $ (8,069) $ (11,691) $ (5,391) $ (20,638) The hypothetical change in fair value could be a gain or loss depending on whether prices increase or decrease.
Removed
See “—Liquidity and Capital Resources—Revolving credit agreement.” 88 Table of Contents
Added
Assuming no change in the amount outstanding, the impact on interest expense of a 1% increase or decrease in the average interest rate would be approximately $1.5 million per year . See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving credit agreement.” 90 Table of Content s

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