What changed in PRIMEENERGY RESOURCES CORP's 10-K — 2022 vs 2023

The reserve base includes only proved developed reserves for lease and well equipment costs, which include development costs and successful exploration drilling costs. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are taken into account.

Accordingly, the Company has in place the following swap agreements for oil and natural gas. 2023 2023 Swap Agreements Natural Gas (MMBTU) 377,000 $ 3.87 Oil (barrels) 114,200 $ 74.07 The Company’s activities include development and exploratory drilling.

In 2022 the Company participated with SEM Operating Company, LLC in four horizontal wells in Irion County, Texas with 10.3% interest for approximately $2.35 million and with Ovintiv Mid-Continent, Inc. in four horizontal wells in Canadian County with an average of 9% interest for $1.77 million. All eight wells were put into production in August of 2022.

In the fourth quarter of 2022, we began participation in the drilling of 20 horizontal wells located in West Texas operated by three different operators. In Martin County, we are participating with ConocoPhillips in five 2.5-mile-long horizontal wells in which the Company has 20.83% interest with a planned capital expense of $12.1 million.

In Reagan County we are participating with Hibernia Energy III in 10 two-mile horizontals with 25% interest and an expected investment of $25.6 million. Also in Reagan County, we are participating with Double Eagle (DE IV) in five two-mile-long horizontals with nearly 50% interest, carrying an expected net capital outlay of $23.4 million.

All twenty of these West Texas wells are currently drilling or have been completed. All are expected to be on line in the second quarter of 2023. In January of 2023, the Company joined Ovintiv USA, Inc. in the spudding of three 3-mile-long horizontal wells in Canadian County, Oklahoma with 1.96% interest and an expected investment of $645,000.

Production is expected to begin in May, 2023. In addition, in March of 2023, Apache Corporation has spud two 3-mile-long horizontals in Upton County, Texas in which the Company has 49.4% interest with an expected total capital investment of $16,1 million.

We anticipate completion of these two 15,000’ long horizontals in Upton County in May and production to occur in June of 2023. In total, the Company expects to invest $78 million dollars in these 25 horizontal wells.

We prepaid drilling costs of $32 million in December of 2022 and the remaining $46 million estimated drilling and completion expenditures will occur in 2023. All 25 wells are expected to be completed and on-line in the second quarter of 2023.

We anticipate that success from the 22 horizontals in West Texas described above will lead to additional near-term horizontal drilling covering five leasehold blocks in three counties of West Texas: 29 additional 10,000’ long horizontals in Reagan County with Hibernia, Double Eagle and BTA Oil Producers, ten additional 12,500’ long horizontals in Martin County with ConocoPhillips, and six additional 15,000’ long horizontals in Upton County with Apache.

These anticipated additional 42 drilling proposals will target various proven pay intervals of the Wolfcamp and Spraberry formations and will require an estimated $200 million in net capital investment. In addition, we have more than 200 drilling locations that could potentially be developed.

In West Texas the Company maintains an acreage position of 16,940 gross (9,969 net) acres, primarily in Reagan, Upton, Martin, and Midland counties where our horizontal activity is focused.

We believe this acreage 38 Table of Contents has significant resource potential in as many as 10 reservoirs, including benches of the Spraberry, Jo Mill, and Wolfcamp that support the potential drilling of as many as 200 additional horizontal wells.

In Oklahoma, the Company’s horizontal activity is primarily focused in Canadian, Grady, Kingfisher, Garfield, Major, and Garvin counties where we have approximately 4,113 net leasehold acres in the Scoop/Stack Play.

Of this acreage we believe 2,355 net acres holds significant additional resource potential that could support the drilling of as many as 46 new horizontal wells based on an estimate of four wells per multi-section drilling unit, two in the Mississippian and two in the Woodford Shale.

In the near term, we anticipate nine new drilling proposals to be received with an estimated net expense of $5.2 million covering 338 net leasehold acres. Proposals may be received on the remaining 2,017 acres, however, rather than participate we may choose to sell the acreage or farm-out receiving cash and retaining an over-riding royalty interest.

In addition, in 2022, we sold 240 net acres in Reagan County to BTA Oil Producers for proceeds of $1.8 million, and we sold 353 net acres in Canadian County, Oklahoma to Paloma Partners, IV, Inc. for $1.3 million.

Through three other transactions, we divested a minor tract in Lea County, NM for a nominal cash consideration and assigned nine wellbores in West Texas to a third-party operator in exchange for a reduction in our future plugging liability. In this same year, the Company acquired 3.2 net mineral acres in Upton County, Texas for $16,000.

Our NGL production increased by 1,000 or 0.24% to 417,000 for the year ended December 31, 2022 from 416,000 barrels for the year ended 39 Table of Contents December 31, 2021.

Interest expense decreased $1.1 million, or 55.0% to $0.9 million for the year ended December 31, 2022 from $2.0 million for the year ended December 31, 2021. This decrease reflects the reduced borrowings under our revolving credit agreement offset by an increase in rates.