10q10k10q10k.net

What changed in SANDRIDGE ENERGY INC's 10-K — 2022 vs 2023

vs

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

+259 added−268 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-15)

Top changes in SANDRIDGE ENERGY INC's 2023 10-K

259 paragraphs added · 268 removed · 204 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

80 edited+21 added−28 removed141 unchanged
Biggest changeProved reserves increased from 71.3 MMBoe at December 31, 2021 to 74.3 MMBoe at December 31, 2022, primarily as a result of positive revisions of 9.1 MMBoe associated with the increase in year-end SEC commodity prices for oil and natural gas, 1.8 MMBoe related to the Company's well reactivation program, and 1.0 MMBoe associated with other commercial improvements.
Biggest changeProved reserves decreased from 74.3 MMBoe at December 31, 2022 to 55.7 MMBoe at December 31, 2023, primarily due to a decrease in year-end SEC commodity prices for oil and natural gas, price realizations and NGL yield which resulted in a decrease of 17.5 MMBoe, as well as 6.2 MMBoe from the Company's production during 2023, 1.4 MMBoe attributable to well shut-ins and other revisions, and 0.1 MMBoe in sales.
Our Business Strategy The Company’s primary strategic focus is to grow the cash value and generation capability of our asset base in a safe, responsible and efficient manner, and will seek to use our net operating loss carry forwards to minimize income taxes and maximize cash flow.
Our Business Strategy The Company’s primary strategic focus is to grow the value and cash generation capability of our asset base in a safe, responsible and efficient manner, and will seek to use our net operating loss carry forwards to minimize income taxes and maximize cash flow.
ENVIRONMENTAL REGULATIONS General Our oil and natural gas development operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing, among other factors, worker safety and health, the discharge and disposal of substances into the environment, and the protection of the environment and natural resources.
ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS General Our oil and natural gas development operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing, among other factors, worker safety and health, the discharge and disposal of substances into the environment, and the protection of the environment and natural resources.
Under these laws, we could be required to investigate, monitor, remove or remediate previously disposed substances or wastes (including substances or wastes disposed of or released by prior owners or operators or third parties whose waste was commingled with ours), to investigate and clean up contaminated property, to perform corrective actions, to prevent future contamination, or to pay some or all of the costs of any such action.
Under these laws, we could be required to investigate, monitor, remove or remediate previously disposed or released substances or wastes (including substances or wastes disposed of or released by prior owners or operators or third parties whose waste was commingled with ours), to investigate and clean up contaminated property, to perform corrective actions, to prevent future contamination, or to pay some or all of the costs of any such action.
Employee Health and Safety Our operations are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes, whose purpose is to protect the health and safety of workers.
Employee Health and Safety Our operations are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes and regulations, whose purpose is to protect the health and safety of workers.
The adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHG from, our equipment and operations could require additional expenditures to reduce emissions of GHGs associated with its operations or could adversely affect demand for the oil and natural gas we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves.
The future adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHG from, our equipment and operations could require additional expenditures to reduce emissions of GHGs associated with its operations or could adversely affect demand for the oil and natural gas we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves.
While we do not believe that compliance with existing environmental laws and regulations and that continued compliance with existing requirements will have an adverse material effect on us, we can provide no assurance that we will not incur substantial costs in the future related to revised or additional environmental regulations that could have a material adverse effect on our business, financial condition, and results of operations.
While we do not believe that compliance with existing environmental laws and regulations and that continued compliance with existing environmental permitting requirements will have an adverse material effect on us, we can provide no assurance that we will not incur substantial costs in the future related to revised or additional environmental laws and regulations or permitting requirements that could have a material adverse effect on our business, financial condition, and results of operations.
Meekins meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines.
Meekins meets and exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines.
We believe we have utilized operating and disposal practices that were standard in the industry at the applicable time, but hazardous substances, hydrocarbons, and wastes may have been disposed or released on, from or under the properties owned, leased, or operated by us or on or under other locations where these substances and wastes have been taken for treatment or disposal.
We believe we have utilized operating and disposal practices that were standard in the industry at the applicable time, but hazardous substances, hydrocarbons, and wastes may have been disposed or released on, from or under the properties owned, leased, or operated by us or on or under other locations where these substances and wastes have been taken for treatment, storage, or disposal.
Key reserve information is reviewed and approved at least annually by the Company’s Chief Executive Officer and Chief Financial Officer. SandRidge’s reserve engineers and the Reservoir Engineering Manager work closely with independent petroleum consultants at each fiscal year end to ensure the integrity, accuracy and timeliness of annual independent reserves estimates.
Key reserve information is reviewed quarterly and approved at least annually by the Company’s Chief Executive Officer and Chief Financial Officer. SandRidge’s reserve engineers and the Reservoir Engineering Manager work closely with independent petroleum consultants at each fiscal year end to ensure the integrity, accuracy and timeliness of annual independent reserves estimates.
CERCLA, also known as the Superfund law, and comparable state laws may impose strict, joint and several liability without regard to fault or legality of conduct on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment.
CERCLA, also known as the Superfund law, and comparable state laws and regulations may impose strict, joint and several liability without regard to fault or legality of conduct on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment.
We will continue to exercise financial discipline and prudent capital allocation to projects we believe provide a high rate of return in the current commodity price environment, and will remain vigilant and maintain optionality for opportunistic, value-accretive acquisitions and business combinations. 6 Table of Contents PRIMARY BUSINESS OPERATIONS A comparative discussion of our 2021 to 2020 operating results can be found in Item 1 “Business” included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022.
We will continue to exercise financial discipline and prudent capital allocation to projects we believe provide a high rate of return in the current commodity price environment, and will remain vigilant and maintain optionality for opportunistic, value-accretive acquisitions and business combinations. 6 Table of Contents PRIMARY BUSINESS OPERATIONS A comparative discussion of our 2022 to 2021 operating results can be found in Item 1 “Business” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 15, 2023.
Allen has been a Registered Professional Engineer in the State of Oklahoma (License No. 29209) and is an active member of the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines.
Allen has been a Registered Professional Engineer in the State of Oklahoma (License No. 29209) and is an active member of the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines. In addition to Mr.
A copy of the report issued by our independent reserve consultant with respect to our oil, natural gas and NGL reserves as of December 31, 2022 is filed with this report as Exhibit 99.1. Cawley, Gillespie & Associates prepared reserves for our Mid-Continent properties located in Kansas and Oklahoma as of December 31, 2022.
A copy of the report issued by our independent reserve consultant with respect to our oil, natural gas and NGL reserves as of December 31, 2023 is filed with this report as Exhibit 99.1. Cawley, Gillespie & Associates prepared reserves for our Mid-Continent properties located in Kansas and Oklahoma as of December 31, 2023.
Marketing We sell our oil, natural gas and NGLs to a variety of customers, including oil and natural gas companies and trading and energy marketing companies. We had two purchasers that each individually accounted for more than 10% of our total revenue during the year ended December 31, 2022.
Marketing We sell our oil, natural gas and NGLs to a variety of customers, including oil and natural gas companies and trading and energy marketing companies. We had two purchasers that each individually accounted for more than 10% of our total revenue during the year ended December 31, 2023.
Notably, several states where we operated as of December 31, 2022, have already adopted rules requiring operators of both new and existing sources to develop and implement an LDAR program and to install devices on certain equipment to capture 95 percent of methane emissions.
Notably, several states where we operated as of December 31, 2023, have already adopted rules requiring operators of both new and existing sources to develop and implement an LDAR program and to install devices on certain equipment to capture 95 percent of methane emissions.
Under CERCLA, these “potentially responsible parties” may be liable for the costs of cleaning up sites where the hazardous substances have been released into the environment, for damages to natural resources resulting from the release and for the costs of certain environmental and health studies.
Under CERCLA, these “potentially responsible parties” may be liable for the costs of investigating, cleaning up, and monitoring sites where the hazardous substances have been released into the environment, for damages to natural resources resulting from the release and for the costs of certain environmental and health studies.
In addition, a number of state and regional efforts are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs.
Moreover, a number of state and regional efforts are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs.
These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with air permit requirements or utilize specific equipment or technologies to control emissions.
These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to emit or significantly increase air emissions, obtain and strictly comply with air permit requirements, or utilize specific equipment or technologies to control emissions.
All prices are held constant throughout the lives of the properties. The index prices and the equivalent weighted average wellhead prices used in the reserve reports are shown on page 10 below. (2) Average daily net production for the year ended December 31, 2022.
All prices are held constant throughout the lives of the properties. The index prices and the equivalent weighted average wellhead prices used in the reserve reports are shown on page 10 below. (2) Average daily net production for the year ended December 31, 2023.
(2) Represents production costs per Boe excluding production and ad valorem taxes. Productive Wells The following table presents the number of productive wells in which we owned a working interest at December 31, 2022. We operate the majority of all wells in which we owned a working interest at December 31, 2022 and 2021.
(2) Represents production costs per Boe excluding production and ad valorem taxes. Productive Wells The following table presents the number of productive wells in which we owned a working interest at December 31, 2023. We operate the majority of all wells in which we owned a working interest at December 31, 2023 and 2022.
We are not able at this time to predict the effects of these regulations or FERC proceedings, if any, on the transportation costs associated with crude oil production from our crude oil producing operations. HUMAN CAPITAL As of March 8, 2023 and December 31, 2022, we had 102 full-time employees, including 87 field employees and 15 corporate employees.
We are not able at this time to predict the effects of these regulations or FERC proceedings, if any, on the transportation costs associated with crude oil production from our crude oil producing operations. HUMAN CAPITAL As of December 31, 2023, we had 102 full-time employees, including 87 field employees and 15 corporate employees.
Commencing in 1985, the FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Currently, interstate pipeline companies are required to provide nondiscriminatory 22 Table of Contents transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company.
Commencing in 1985, the FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Currently, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company.
Air Emissions The federal Clean Air Act (the “CAA”), as amended, and comparable state laws and regulations restrict the emission of air pollutants through emissions standards, construction and operating permitting programs and the imposition of other compliance requirements.
Air Emissions The federal Clean Air Act (the “CAA”), as amended, and comparable state laws and regulations restrict the emission of air pollutants through emissions standards, technology-based standards, construction and operating permitting programs and the imposition of other compliance requirements.
For additional information regarding changes in proved reserves during each of the three years ended December 31, 2022, 2021 and 2020 see “Note 20—Supplemental Information on Oil and Natural Gas Producing Activities” to the accompanying consolidated financial statements in Item 8 of this report. 11 Table of Contents Production and Price History The following table includes information regarding our net oil, natural gas and NGL production and certain price and cost information for each of the periods indicated.
For additional information regarding changes in proved reserves during each of the three years ended December 31, 2023, 2022 and 2021 see “Note 18—Supplemental Information on Oil and Natural Gas Producing Activities” to the accompanying consolidated financial statements in Item 8 of this report. 11 Table of Contents Production and Price History The following table includes information regarding our net oil, natural gas and NGL production and certain price and cost information for each of the periods indicated.
The future regulations concerning the definition of WOTUS may result in an expansion of the scope of the CWA’s jurisdiction, and we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas or other WOTUS in connection with our operations.
Moreover, any future changes to regulations concerning the definition of WOTUS may result in an expansion of the scope of the CWA’s jurisdiction, and we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas or other WOTUS in connection with our operations.
Reporting of Natural Gas Liquids NGLs are recovered through further processing of a portion of our natural gas production stream. At December 31, 2022, NGLs comprised approximately 34% of total proved reserves on a barrel equivalent basis and represented volumes to be produced from properties where we have contracts in place for the extraction and sale of NGLs.
Reporting of Natural Gas Liquids NGLs are recovered through further processing of a portion of our natural gas production stream. At December 31, 2023, NGLs comprised approximately 29% of total proved reserves on a barrel equivalent basis and represented volumes to be produced from properties where we have contracts in place for the extraction and sale of NGLs.
F-693. Within CGA, the technical person primarily responsible for preparing the estimates set forth in the CGA letter dated January 18, 2023, filed as an exhibit to this Annual Report on Form 10-K, was Mr. Zane Meekins. Mr. Meekins has been a practicing consulting petroleum engineer at CGA since 1989. Mr.
F-693. Within CGA, the technical person primarily responsible for preparing the estimates set forth in the CGA letter dated January 17, 2024, filed as an exhibit to this Annual Report on Form 10-K, was Mr. Zane Meekins. Mr. Meekins has been a practicing consulting petroleum engineer at CGA since 1989. Mr.
Similar protections are offered to migratory birds under the federal Migratory Bird Treaty Act and to bald and golden eagles under the Bald and Golden Eagle Protection Act.
Similar protections are offered to migratory birds under the federal Migratory Bird Treaty Act (“MBTA”) and to bald and golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”).
Meekins is a Registered Professional Engineer in the State of Texas (License No. 71055) and has over 35 years of practical experience in petroleum engineering, with over 33 years of experience in the estimation and evaluation of reserves. He graduated from Texas A&M University in 1987 with a Bachelor of Science degree in Petroleum Engineering. Mr.
Meekins is a Registered Professional Engineer in the State of Texas (License No. 71055) and has over 36 years of practical experience in petroleum engineering, with over 34 years of experience in the estimation and evaluation of reserves. He graduated from Texas A&M University in 1987 with a Bachelor of Science degree in Petroleum Engineering. Mr.
COMPETITION We compete with other oil and natural gas companies for leases, equipment, personnel and markets for the sale of oil, natural gas and NGLs. We believe our leasehold acreage position, geographic concentration of operations and technical and operational capabilities enable us to compete with other oil and gas development and production companies.
COMPETITION We compete with other oil and natural gas companies for leases, equipment, personnel and markets for the sale of oil, natural gas and NGLs. We believe our leasehold acreage position, geographic concentration of operations and technical and operational capabilities enable us to compete with other oil and gas development and production companies in the areas in which we operate.
Allen graduated from the University of Oklahoma with a Master’s in Business Administration. Mr. Allen has over 13 years of practical experience in petroleum engineering with 8 of those years having been spent in the estimation and evaluation of reserves. Since 2016, Mr.
Allen graduated from the University of Oklahoma with a Master’s in Business Administration. Mr. Allen has over 14 years of practical experience in petroleum engineering with 9 of those years having been spent in the estimation and evaluation of reserves. Since 2016, Mr.
Reserve Quantities, PV-10 and Standardized Measure The following estimates of proved oil, natural gas and NGL reserves are based on reserve reports as of December 31, 2022 and 2021 approximately 95% and over 96%, respectively, of which were prepared by independent reserve engineers. 9 Table of Contents See “Critical Accounting Policies and Estimates” in Item 7 of this report for further discussion of uncertainties inherent to the reserves estimates.
Reserve Quantities, PV-10 and Standardized Measure The following estimates of proved oil, natural gas and NGL reserves are based on reserve reports as of December 31, 2023 and 2022, of which approximately 95% for each year were prepared by independent reserve engineers. 9 Table of Contents See “Critical Accounting Policies and Estimates” in Item 7 of this report for further discussion of uncertainties inherent to the reserves estimates.
Compliance with these and any future air pollution control and permitting requirements has the potential to delay the development of oil and natural gas projects and increase our costs of development and production, which could be significant.
Compliance with this new rule, and any future air pollution control and permitting requirements, has the potential to delay the development of oil and natural gas projects and increase our costs of development and production, which could be significant.
While compliance with the ESA has not had an adverse effect on our exploration, development and production operations in areas where threatened or endangered species or their habitat are known to exist, it may require us to incur increased costs to implement mitigation or protective measures and also may delay, restrict or preclude drilling activities in those areas or during certain seasons, such as breeding and nesting seasons.
While compliance with the ESA, MBTA and BGEPA has not had an adverse effect on our exploration, development and production operations in areas where threatened or endangered or other protected species or their habitat are known to exist, it may require us to incur increased costs to implement mitigation or protective 19 Table of Contents measures and also may delay, restrict or preclude drilling activities in those areas or during certain seasons, such as breeding and nesting seasons.
Our primary operations are the development and acquisition of hydrocarbon resources. The following table presents information concerning our operations as of December 31, 2022.
Our primary operations are the production, development and acquisition of hydrocarbon resources. The following table presents information concerning our operations as of December 31, 2023.
The following table provides a reconciliation of our PV-10 to Standardized Measure: December 31, 2022 2021 (In thousands) PV-10 $ 810,663 $ 432,914 Present value of future income tax discounted at 10% $ (3,798) $ — Standardized Measure of Discounted Net Cash Flows $ 806,865 $ 432,914 Proved Reserves - Mid-Continent .
The following table provides a reconciliation of our PV-10 to Standardized Measure: December 31, 2023 2022 (In thousands) PV-10 $ 296,293 $ 810,663 Present value of future income tax discounted at 10% $ — $ (3,798) Standardized Measure of Discounted Net Cash Flows $ 296,293 $ 806,865 Proved Reserves - Mid-Continent .
The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment.
The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect human health or the environment.
To date, no Company-owned or operated site has been designated as a Superfund site, and we have not been identified as a responsible party for any Superfund site. We also generate wastes that are subject to the requirements of RCRA and comparable state statutes.
To date, no Company-owned or operated site has been designated as a Superfund site, and we have not been identified as a “potentially responsible party” at any Superfund site. We also generate wastes that are subject to the requirements of RCRA and comparable state statutes and regulations.
December 31, 2022 2021 Estimated Proved Reserves (1) Developed Oil (MMBbls) 8.4 7.9 NGL (MMBbls) 25.4 24.3 Natural gas (Bcf) 242.8 234.7 Total proved developed (MMBoe) 74.3 71.3 Undeveloped Oil (MMBbls) — — NGL (MMBbls) — — Natural gas (Bcf) — — Total proved undeveloped (MMBoe) — — Total Proved Oil (MMBbls) 8.4 7.9 NGL (MMBbls) 25.4 24.3 Natural gas (Bcf) 242.8 234.7 Total proved (MMBoe) 74.3 71.3 Standardized Measure of Discounted Net Cash Flows (in millions) (2) $ 806.9 $ 432.9 PV-10 (in millions) (3) $ 810.7 $ 432.9 ____________________ (1) Estimated proved reserves, PV-10 and Standardized Measure were determined using SEC prices, and do not reflect actual prices received or current market prices.
December 31, 2023 2022 Estimated Proved Reserves (1) Developed Oil (MMBbls) 7.1 8.4 Natural gas (Bcf) 194.4 242.8 NGL (MMBbls) 16.2 25.4 Total proved developed (MMBoe) 55.7 74.3 Undeveloped Oil (MMBbls) — — Natural gas (Bcf) — — NGL (MMBbls) — — Total proved undeveloped (MMBoe) — — Total Proved Oil (MMBbls) 7.1 8.4 Natural gas (Bcf) 194.4 242.8 NGL (MMBbls) 16.2 25.4 Total proved (MMBoe) 55.7 74.3 Standardized Measure of Discounted Net Cash Flows (in millions) (2) $ 296.3 $ 806.9 PV-10 (in millions) (3) $ 296.3 $ 810.7 ____________________ (1) Estimated proved reserves, PV-10 and Standardized Measure were determined using SEC prices, and do not reflect actual prices received or current market prices.
These properties and the substances or wastes disposed or released on them may be subject to the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (“CERCLA”), the federal Resource Conservation and Recovery Act, (“RCRA”), and analogous state laws.
These properties and the substances or wastes that may have been generated, stored, transported, treated, disposed or released on them may be subject to the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (“CERCLA”), the federal Resource Conservation and Recovery Act, (“RCRA”), and analogous state laws.
During 2022, our experience and continuing focus on workplace safety has enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic. 23 Table of Contents
During 2023, our experience and continuing focus on workplace safety has enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe. 23 Table of Contents
We encourage ongoing professional education for our engineers and analysts on new technologies and industry advancements as well as refresher training on basic skill sets. 8 Table of Contents In order to ensure the reliability of reserves estimates, SandRidge has a comprehensive SEC-compliant internal controls framework and set of policies to determine, estimate and report proved reserves including: • confirming that we include reserves estimates for all properties owned and that they are based upon proper working and net revenue interests; • ensuring the information provided by other departments within the Company such as Accounting is accurate and complete; • communicating, collaborating, and analyzing with technical personnel; • comparing and reconciling the internally generated reserves estimates to those prepared by third parties; • utilizing experienced reservoir engineers or those under their direct supervision to prepare reserve estimates; and • ensuring compensation for the reserve engineers is not tied to the amount of reserves recorded.
In order to ensure the reliability of reserves estimates, SandRidge has a comprehensive SEC-compliant internal controls framework and set of policies to determine, estimate and report proved reserves including: • confirming that we include reserves estimates for all properties owned and that they are based upon proper working and net revenue interests; • ensuring the information provided by other departments within the Company such as Accounting is accurate and complete; • communicating, collaborating, and analyzing with technical personnel; • comparing and reconciling the internally generated reserves estimates to those prepared by third parties; • utilizing experienced reservoir engineers or those under their direct supervision to prepare reserve estimates; and • ensuring compensation for the reserve engineers is not tied to the amount of reserves recorded.
Associated proved reserves at December 31, 2022 totaled 74.3 MMBoe, all of which were proved developed reserves. Our interests in the Mid-Continent as of December 31, 2022 included 1,471 gross (856 net) producing wells with an average working interest of 58.2%. The interests are largely aggregated across the Mississippian Lime, Meramec and Osage formations.
Associated proved reserves at December 31, 2023 totaled 55.7 MMBoe, all of which were proved developed reserves. Our interests in the Mid-Continent as of December 31, 2023 included 1,453 gross (849 net) producing wells with an average working interest of 58.4%. The interests are largely aggregated across the Mississippian Lime, Meramec and Osage formations.
Any changes in or more stringent enforcement of these laws and regulations that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements could have a material adverse effect on the Company.
Any issuance of new environmental laws or regulations or changes in or more stringent enforcement of existing environmental laws and regulations that result in delays or restrictions in permitting or development of projects or more stringent or costly compliance or cleanup obligations related to construction, drilling, water management, or well-completion activities or waste handling, storage, transport, remediation, disposal or discharge requirements could have a material adverse effect on the Company.
On December 31, 2020, EPA published its decision to retain the 2015 ozone standards; however, the Biden Administration has announced that it intends to review this rule under President Biden’s Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.
On December 31, 2020, EPA published its decision to retain the 2015 ozone standards; however, in October 2021 the Biden Administration announced that was reconsidering this decision under President Biden’s Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.
The Biden Administration announced that it intends to review the September 2020 rules under President Biden’s Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.
The Biden Administration undertook a review of the September 2020 rules under President Biden’s Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.
We had 101 full-time employees, including 85 field employees and 16 corporate employees at December 31, 2021. Health, Safety and Environment Our people are a key driver to our success in Health, Safety and Environment ("HSE") related outcomes.
We had 102 full-time employees, including 87 field employees and 15 corporate employees at December 31, 2022. Health, Safety and Environment Our people are a key driver to our success in Health, Safety and Environment ("HSE") related outcomes.
These are SEC prices calculated by using trailing 12 month average from the first trading day close of each calendar month. (b) Average adjusted volume-weighted wellhead product prices reflect adjustments for transportation, quality, gravity, regional price differentials and excludes any impact of derivatives. (2) Standardized Measure differs from PV-10 as standardized measure includes the effect of future income taxes.
These are SEC prices calculated by using trailing 12 month average from the first trading day close of each calendar month. (b) Average adjusted volume-weighted wellhead product prices reflect adjustments for transportation, quality, gravity, regional price differentials and excludes any impact of derivatives.
If finalized, the proposed rule would require various technology upgrades, impose limits related to flaring, and require LDAR plans. The final rule is expected to be announced later this year.
If finalized, the proposed rule would require various technology upgrades, impose limits related to flaring, and require LDAR plans. The final rule was not issued in 2023 as initially expected but is expected to be announced later this year.
In addition, certain of our federal and state leases may contain stipulations that require us to take measures to safeguard certain species. 19 Table of Contents The designation of previously unprotected species as threatened or endangered in areas where we operate could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have an adverse impact on our ability to develop and produce our reserves.
The designation of previously unprotected species as threatened or endangered in areas where we operate could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have an adverse impact on our ability to develop and produce our reserves.
The index prices and the equivalent weighted average wellhead prices used in the reserve reports are shown in the table below: Index prices (a) Weighted average wellhead prices (b) Oil (per Bbl) Natural gas (per MMBtu) Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) December 31, 2022 $ 93.67 $ 6.36 $ 93.73 $ 33.42 $ 4.76 December 31, 2021 $ 66.56 $ 3.60 $ 64.95 $ 19.26 $ 2.56 ____________________ (a) Index prices are based on average WTI Cushing spot prices for oil and average Henry Hub spot market prices for natural gas.
The index prices and the equivalent weighted average wellhead prices used in the reserve reports are shown in the table below: Index prices (a) Weighted average wellhead prices (b) Oil (per Bbl) Natural gas (per MMBtu) Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) December 31, 2023 $ 78.22 $ 2.64 $ 76.65 $ 21.53 $ 1.62 December 31, 2022 $ 93.67 $ 6.36 $ 93.73 $ 33.42 $ 4.76 ____________________ (a) Index prices are based on average WTI Cushing spot prices for oil and average Henry Hub spot market prices for natural gas.
On November 8, 2022, EPA issued a supplemental notice of proposed rulemaking that would impose standards for certain sources that were not addressed in the November 2021 proposal, revise the previously proposed emissions standards, and establish a “super emitter response program” allowing local regulatory agencies and EPA-certified third parties to issue notices to owners and operators of regulated facilities when they detect a so-called “super-emitting event.” The EPA is expected to finalize the rulemaking in late 2023.
On November 8, 2022, EPA issued a supplemental notice of proposed rulemaking that would impose standards for certain sources that were not addressed in the November 2021 proposal, revise the previously proposed emissions standards, and establish a “super emitter response program” allowing local regulatory agencies and EPA-certified third parties to issue notices to owners and operators of regulated facilities when they detect a so-called “super-emitting event.” After considering comments on the November 2021 and November 2022 proposed rulemakings, on December 2, 2023, the EPA announced its final rule under the CAA to reduce methane emissions from the oil and natural gas industry.
On October 22, 2019, EPA and the Corps published a final rule repealing the 2015 WOTUS rule, and EPA and the Corps promulgated the Navigable Waters Protection Rule on April 21, 2020, which provides a revised definition of WOTUS and became effective on June 22, 2020.
On October 22, 2019, EPA and the Corps published a final rule repealing the 2015 WOTUS rule, and EPA and the Corps promulgated the Navigable Waters Protection Rule on April 21, 2020, which provides a revised definition of WOTUS and became effective on June 22, 2020. These regulations were challenged in federal court, and on August 30, 2021 the U.S.
The OPA also subjects owners and operators of facilities to strict, joint and several liability for all containment and cleanup costs and certain other damages arising from a spill.
The OPA also subjects owners and operators of facilities to strict, joint and several liability for all containment and cleanup costs and certain other damages arising from a spill. We have developed and implemented SPCC plans for properties as required under the CWA.
Year Ended December 31, 2022 2021 Production data (in thousands) Oil (MBbls) 949 957 NGL (MBbls) 1,997 2,267 Natural gas (MMcf) 21,101 21,417 Total volumes (MBoe) 6,463 6,793 Average daily total volumes (MBoe/d) 17.7 18.6 Average prices—as reported (1) Oil (per Bbl) $ 92.21 $ 65.10 NGL (per Bbl) $ 31.88 $ 22.42 Natural gas (per Mcf) $ 4.88 $ 2.60 Total (per Boe) $ 39.34 $ 24.86 Expenses per Boe Production costs (2) $ 6.39 $ 5.30 __________________ (1) Prices represent actual average prices for the periods presented and do not include effects of derivative transactions.
Year Ended December 31, 2023 2022 Production data (in thousands) Oil (MBbls) 1,047 949 Natural gas (MMcf) 20,403 21,101 NGL (MBbls) 1,705 1,997 Total volumes (MBoe) 6,152 6,463 Average daily total volumes (MBoe/d) 16.9 17.7 Average prices—as reported (1) Oil (per Bbl) $ 74.69 $ 92.21 Natural gas (per Mcf) $ 1.71 $ 4.88 NGL (per Bbl) $ 20.83 $ 31.88 Total (per Boe) $ 24.16 $ 39.34 Expenses per Boe Production costs (2) $ 6.80 $ 6.39 __________________ (1) Prices represent actual average prices for the periods presented and do not include effects of derivative transactions.
These regulations have been challenged in federal court, and on August 30, 2021 the U.S. District Court for the District of Arizona vacated and remanded the Navigable Waters Protection Rule. On December 7, 2021, EPA and the Corps issued a proposed rule to revise the definition of WOTUS.
District Court for the District of Arizona vacated and remanded the Navigable Waters Protection Rule. On December 7, 2021, EPA and the Corps issued a proposed rule to again revise the definition of WOTUS.
To establish reasonable certainty with respect to our estimated proved reserves, the independent and internal reserve engineers employed technologies that have been demonstrated to yield results with consistency and repeatability.
Allen's preparation of the reserve estimates, those estimates are further reviewed by the executive team and the Audit Committee. To establish reasonable certainty with respect to our estimated proved reserves, the independent and internal reserve engineers employed technologies that have been demonstrated to yield results with consistency and repeatability.
On June 30, 2021, Congress issued a joint resolution pursuant to the Congressional Review Act disapproving the September 2020 rule, and on November 15, 2021, EPA issued a proposed rule to revise the Quad Oa regulations that, if finalized, would require methane emissions reductions and implementation of a fugitive emissions monitoring and repair program.
On June 30, 2021, Congress issued a joint resolution pursuant to the Congressional Review Act disapproving the September 2020 rule, and on November 15, 2021, EPA issued a proposed rule to revise the Quad Oa regulations.
Further, several states and local governments remain committed to the principles of the Paris Agreement in their effectuation of policy and regulations. It is not possible at this time to predict how or when the United States might impose restrictions on GHGs as a result of the Paris Agreement.
It is not possible at this time to predict how or when the United States might impose further restrictions on GHGs as a result of the Paris Agreement, and the full impact of actions at COP28 remain uncertain at this time.
Neither PV-10 nor Standardized Measure represents an estimate of fair market value of our oil and natural gas properties. PV-10 is used by the industry and by management as a reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities.
PV-10 is used by the industry and by management as a reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities.
Also, in June 2016, the EPA issued a final rule implementing wastewater pretreatment standards that prohibit onshore unconventional oil and natural gas extraction facilities from sending wastewater to publicly-owned treatment works. This restriction of disposal options for hydraulic fracturing waste and other changes to CWA requirements may result in increased costs.
Also, in June 2016, the EPA issued a final rule implementing wastewater pretreatment standards that prohibit onshore unconventional oil and natural gas extraction facilities from sending wastewater to publicly owned treatment works.
Climate Change In December 2009, the EPA published its findings that emissions of CO 2 , methane and certain other “greenhouse gases” ("GHGs") present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes.
In addition, we could find ourselves subject to third party lawsuits alleging damages resulting from seismic events that occur in our areas of operation. 17 Table of Contents Climate Change In December 2009, the EPA published its findings that emissions of CO 2 , methane and certain other “greenhouse gases” ("GHGs") present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes.
As of December 31, 2022, the gross and net acres subject to leases in the undeveloped acreage above are set to expire as follows: Acres Expiring Gross Net Twelve Months Ending December 31, 2023 158 13 December 31, 2024 162 140 December 31, 2025 475 316 December 31, 2026 and later 566 305 Total (1) 1,361 774 ____________________ (1) The Company has 61,835 gross (26,237 net) undeveloped acres not subject to expiration.
As of December 31, 2023, the gross and net acres subject to leases in the undeveloped acreage above are set to expire as follows: Acres Expiring Gross Net Twelve Months Ending December 31, 2024 — — December 31, 2025 — — December 31, 2026 246 19 December 31, 2027 and later — — Total (1) 246 19 ____________________ (1) The Company has 60,932 gross (26,051 net) undeveloped acres not subject to expiration.
December 31, 2022 2021 Cawley, Gillespie & Associates, Inc. 95.0 % 96.2 % Total 95.0 % 96.2 % The remaining 5.0% and 3.8% of estimated proved reserves as of December 31, 2022 and 2021, respectively, were based on internally prepared estimates.
The percentage of total proved reserves prepared by the independent petroleum consultants is shown in the table below. December 31, 2023 2022 Cawley, Gillespie & Associates, Inc. 95.2 % 95.0 % Total 95.2 % 95.0 % The remaining 4.8% and 5.0% of estimated proved reserves as of December 31, 2023 and 2022 were based on internally prepared estimates.
Developed Acreage Undeveloped Acreage Gross Net Gross Net Geographic Area Mid-Continent 487,402 338,176 63,196 27,011 12 Table of Contents Less than 5% of the leases included in the undeveloped acreage above will expire at the end of their respective primary terms.
Developed and Undeveloped Acreage The following table presents information regarding our developed and undeveloped acreage at December 31, 2023. Developed Acreage Undeveloped Acreage Gross Net Gross Net Geographic Area Mid-Continent 487,717 338,131 61,178 26,070 12 Table of Contents Less than 5% of the leases included in the undeveloped acreage above will expire at the end of their respective primary terms.
While no additional regulatory actions have been taken in Kansas with respect to induced seismicity concerns since 2017, permit applications for new saltwater disposal well facilities have faced increased local opposition. 17 Table of Contents Evaluation of seismic incidents and whether or to what extent those events are induced by the injection of saltwater into disposal wells continues to evolve, as governmental authorities consider new and/or past seismic incidents in areas where salt water disposal activities occur or are proposed to be performed.
Evaluation of seismic incidents and whether or to what extent those events are induced by the injection of saltwater into disposal wells continues to evolve, as governmental authorities consider new and/or past seismic incidents in areas where salt water disposal activities occur or are proposed to be performed.
The FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which we may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas and release of our natural gas pipeline capacity.
The CFTC also holds substantial enforcement authority, including the ability to assess civil penalties in excess of one million dollars per day per violation. 22 Table of Contents The FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which we or our purchasers may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas and release of our natural gas pipeline capacity.
Although petroleum, natural gas and natural gas liquids are excluded from the definition of "hazardous substance" under CERCLA, despite this so-called "petroleum exclusion,” certain products used in the course of our operations may be regulated as CERCLA hazardous substances.
CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment from a hazardous substance release and to pursue recovery of costs incurred for those actions from “potentially responsible parties.” Although petroleum, natural gas and natural gas liquids are excluded from the definition of "hazardous substance" under CERCLA, despite this so-called "petroleum exclusion,” certain products used in the course of our operations may be regulated as CERCLA hazardous substances.
As of December 31, 2022, we had an interest in 1,471 gross (856 net) producing wells, approximately 992 of which we operate, and approximately 551,000 gross (365,000 net) total acres under lease. As of December 31, 2022, we had one rig drilling. Total estimated proved reserves as of December 31, 2022, were 74.3 MMBoe, all of which were proved developed.
As of December 31, 2023, we had an interest in 1,453 gross (849 net) producing wells, approximately 958 of which we operate, and 548,895 gross (364,201 net) total acres under lease. As of December 31, 2023, we had no active drilling rigs. Total estimated proved reserves as of December 31, 2023, were 55.7 MMBoe, all of which were proved developed.
Estimated Proved Reserves (MMBoe) (1) Daily Production (MBoe/d)(2) Reserves/ Production (Years)(3) Gross Acreage Net Acreage Capital Expenditures (In millions) (4) Geographic Area Mid-Continent 74.3 17.7 11.5 551,000 365,000 50.6 ____________________ (1) Estimated proved reserves were determined using SEC prices, and do not reflect actual prices received or current market prices.
Estimated Proved Reserves (MMBoe) (1) Daily Production (MBoe/d)(2) Reserves/ Production (Years)(3) Weighted Average Economic Reserve Life (Years)(4) Gross Acreage Net Acreage Geographic Area Mid-Continent 55.7 16.9 9.0 29.8 548,895 364,201 ____________________ (1) Estimated proved reserves were determined using SEC prices, and do not reflect actual prices received or current market prices.
Finally, the Oil Pollution Act of 1990 (“OPA”), which amends the CWA, establishes standards for prevention, containment and cleanup of oil spills into waters of the United States. The OPA requires measures to be taken to prevent the accidental discharge of oil into waters of the United States from onshore production facilities.
The OPA requires measures to be taken to prevent the accidental discharge of oil into waters of the United States from onshore production facilities.
(3) Estimated proved reserves as of December 31, 2022 divided by net production for the year ended December 31, 2022. (4) Capital expenditures for the year ended December 31, 2022, on an accrual basis and including acquisitions. Properties Mid-Continent We held interests in approximately 551,000 gross (365,000 net) leasehold acres located primarily in Oklahoma and Kansas at December 31, 2022.
(3) Estimated proved reserves as of December 31, 2023 divided by net production for the year ended December 31, 2023. (4) Average economic reserve life using SEC prices and weighted for reserve volumes at December 31, 2023. Properties Mid-Continent We held interests in 548,895 gross (364,201 net) leasehold acres located primarily in Oklahoma and Kansas at December 31, 2023.
Under the SDWA, the EPA established the Underground Injection Control (“UIC”) program, which established the minimum program requirements for state and local programs regulating underground injection activities.
Subsurface Injections Underground injection operations performed by us are subject to the Safe Drinking Water Act (“SDWA”), as well as analogous state laws and regulations. Under the SDWA, the EPA established the Underground Injection Control (“UIC”) program, which established the minimum program requirements for state and local programs regulating underground injection activities.
Oil Natural Gas Total Gross Net Gross Net Gross Net Geographic Area Mid-Continent 1,146 653 325 203 1,471 856 Drilling Activity During the year ended December 31, 2022 there were eight operated wells drilled, with one third-party rig actively drilling on our operated acreage and two wells awaiting completion.
Oil Natural Gas Total Gross Net Gross Net Gross Net Geographic Area Mid-Continent 1,133 650 320 199 1,453 849 Drilling Activity During the year ended December 31, 2023 there were two operated wells drilled and four wells completed, with zero wells awaiting completion at year end 2023.
The Reservoir Engineering Manager serves as the primary technical professional providing oversight of our reserve estimate. CGA and the Reservoir Engineering Manager monitor well performance and make reserve estimate adjustments as necessary to ensure the most current information is reflected.
The Reservoir Engineering Manager serves as the primary technical professional providing oversight of our reserve estimate.
Additionally, we participated in one non-operated well drilled for the year ended December 31, 2022. During the year ended December 31, 2021, there were no operated wells drilled.
During the year ended December 31, 2022, there were eight operated wells drilled, with one third-party rig actively drilling on our operated acreage and two wells awaiting completion. Additionally, we participated in one non-operated well that was drilled during the year ended December 31, 2022, and was completed during year ended December 31, 2023.
A year later on December 30, 2022, the agencies announced a final rule which will take effect 60 days after publication in the Federal Register.
A year later on December 30, 2022, the agencies announced a final rule called the “Revised Definition of “Waters of the United States’” rule which was published in the Federal Register on January 8, 2023 and took effect on March 20, 2023. This “Revised Definition of “Waters of the United States’” rule was also challenged in federal court.
At December 31, 2021 there was no difference between the standardized measure and PV-10 due to an excess of tax basis in oil and natural gas properties over projected undiscounted future cash flows from our proved reserves. 10 Table of Contents (3) PV-10 is a non-GAAP financial measure.
(2) Standardized Measure differs from PV-10 as standardized measure includes the effect of future income taxes. 10 Table of Contents (3) PV-10 is a non-GAAP financial measure. Neither PV-10 nor Standardized Measure represents an estimate of fair market value of our oil and natural gas properties.
EPA has announced that it is targeting the end of 2023 to complete its reconsideration of the 2015 ozone standards and intends to reinstall the ozone panel of the Clean Air Scientific Advisory Committee to advise the Administration.
On August 21, 2023, the EPA announced a new review of the ozone National Ambient Air Quality Standards , and stated that it will incorporate the ongoing reconsideration into this review. EPA also announced that it will consider the advice and recommendation of the ozone review panel of the Clean Air Scientific Advisory Committee in its review.

… 49 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+4 added−18 removed169 unchanged
Biggest changeOn November 8, 2022, EPA issued a supplemental notice of proposed rulemaking that would impose standards for certain sources that were not addressed in the November 2021 proposal, revise the previously proposed emissions standards, and establish a “super emitter response program” allowing local regulatory agencies and EPA-certified third parties to issue notices to owners and operators of regulated facilities when they detect a so-called “super-emitting event.” EPA is expected to finalize the rulemaking in late 2023.
Biggest changeOn November 8, 2022, EPA issued a supplemental notice of proposed rulemaking that would impose standards for certain sources that were not addressed in the November 2021 proposal, revise the previously proposed emissions standards, and establish a “super emitter response program” allowing local regulatory agencies and EPA-certified third parties to issue notices to owners and operators of regulated facilities when they detect a so-called “super-emitting event.” Additionally, as discussed above in the description of our business, various regulatory bodies have announced or are considering new rules and regulations impacting our operations and our business, including the EPA’s final rule under the CAA to reduce methane emissions from the oil and natural gas industry, EPA and BLM methane emissions limitations, cap and trade programs launched by states and regions in which we operate, and, to the extent applicable, the Paris Agreement.
In addition, our drilling and producing operations may be curtailed, delayed or canceled as a result of various factors, including among others the following: • reductions in oil, natural gas and NGL prices; • delays imposed by or resulting from compliance with regulatory requirements including permitting; • unusual or unexpected geological formations and miscalculations; • shortages of or delays in obtaining equipment and qualified personnel; • shortages of or delays in obtaining water and sand for hydraulic fracturing operations; • equipment malfunctions, failures or accidents; • lack of available gathering or midstream facilities or delays in construction of gathering or midstream facilities; • lack of available capacity on interconnecting transmission pipelines; • lack of adequate electrical infrastructure and water disposal capacity; • unexpected operational events and drilling conditions; • pipe or cement failures and casing collapses; • pressures, fires, blowouts and explosions; • lost or damaged drilling and service tools; • loss of drilling fluid circulation; • uncontrollable flows of oil, natural gas, brine, water or drilling fluids; • natural disasters; • environmental hazards, such as oil spills and natural gas leaks, pipeline or 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; • high costs, shortages or delivery delays of equipment, labor or other services, or water used in hydraulic fracturing; • compliance with environmental and other governmental requirements; 26 Table of Contents • adverse weather conditions such as extreme cold, fires caused by extreme heat or lack of rain, and severe storms, tornadoes or hurricanes; • oil and natural gas property title problems; • market and midstream limitations for oil, natural gas and NGLs; • unexpected subsurface conditions; • lack of qualified labor; • lack of hydrocarbon content; and • low pressure, depletion from existing wells, parent / child effect, or other conditions that may reduce ultimate recovery of reserves.
In addition, our drilling and producing operations may be curtailed, delayed or canceled as a result of various factors, including among others the following: • reductions in oil, natural gas and NGL prices; • delays imposed by or resulting from compliance with regulatory requirements including permitting; • unusual or unexpected geological formations and miscalculations; • shortages of or delays in obtaining equipment and qualified personnel; • shortages of or delays in obtaining water and sand for hydraulic fracturing operations; • equipment malfunctions, failures or accidents; • lack of available gathering or midstream facilities or delays in construction of gathering or midstream facilities; • lack of available capacity on interconnecting transmission pipelines; • lack of adequate electrical infrastructure and water disposal capacity; • unexpected operational events and drilling conditions; • pipe or cement failures and casing collapses; • pressures, fires, blowouts and explosions; • lost or damaged drilling and service tools; • loss of drilling fluid circulation; • uncontrollable flows of oil, natural gas, brine, water or drilling fluids; • natural disasters; • environmental hazards, such as oil spills and natural gas leaks, pipeline or 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; • high costs, shortages or delivery delays of equipment, labor or other services, or water used in hydraulic fracturing; • compliance with environmental and other governmental requirements; • adverse weather conditions such as extreme cold, fires caused by extreme heat or lack of rain, and severe storms, tornadoes or hurricanes; 26 Table of Contents • oil and natural gas property title problems; • market and midstream limitations for oil, natural gas and NGLs; • unexpected subsurface conditions; • lack of qualified labor; • lack of hydrocarbon content; and • low pressure, depletion from existing wells, parent / child effect, or other conditions that may reduce ultimate recovery of reserves.
Risk Factors Summary The following is a summary of the material risk factors that could adversely affect our business, financial condition, and results of operations: • Risks Relating to the Oil and Natural Gas Industry and Our Business ◦ Oil, natural gas and NGL prices fluctuate widely due to a number of factors that are beyond our control ◦ Drilling for and producing oil and natural gas are high risk activities with many uncertainties ◦ Market conditions or operational impediments may hinder our access to oil, natural gas and NGL markets or delay production ◦ A financial downturn could negatively affect our business, results of operations, financial condition, cash flows and access to capital ◦ Future drilling activities face substantial uncertainties ◦ Certain of our undeveloped acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage or we renew the leases ◦ We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties and our ability to offset the natural decline in our oil, natural gas and NGL reserves ◦ Future commodity price declines may result in reductions of the asset carrying values of our oil and natural gas properties ◦ Significant inaccuracies in our reserve estimates or underlying assumptions could materially affect the quantities and present value of our reserves ◦ The loss of senior management or technical personnel or our inability to hire additional qualified personnel could adversely affect our operations ◦ We are subject to litigation and adverse outcomes in such litigation could have a material effect on our financial condition ◦ Changes affecting the availability of the London Inter-bank Offered Rate (“LIBOR”) may have consequences for us that cannot yet be reasonably predicted ◦ The present value of future net cash flows from our proved reserves are not the same as the current market value of our estimated oil, natural gas and NGL reserves ◦ We will not know conclusively prior to drilling whether oil or natural gas will be present in sufficient quantities to be economically producible ◦ Production of oil, natural gas and NGLs could be materially and adversely affected by natural disasters or severe weather ◦ Capital market volatility could adversely affect our ability to obtain capital, cause us to incur additional financing expense or affect the value of certain assets ◦ Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against them ◦ All of our operations are located in the Mid-Continent region, making us vulnerable to risks associated with operating in a limited number of major geographic areas ◦ Oil and natural gas wells are subject to operational hazards that can cause substantial losses for which we may not be adequately insured ◦ Shortages or increases in costs of equipment, services and qualified personnel could adversely affect our ability to execute our development plans ◦ Intense competition in the oil and natural gas industry may adversely affect our ability to succeed ◦ Seismic data may not accurately identify the presence of oil and natural gas, and the use of such technology requires greater predrilling expenditures ◦ Inflation may increase costs which can adversely impact cash flows and reserves value ◦ Disruptions or delays at our third-party service providers could adversely impact our operations ◦ Complex laws and regulations could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities ◦ Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, the FTC or other regulators, we could be subject to substantial penalties and fines 24 Table of Contents ◦ Our operations are subject to environmental and occupational safety and health laws and regulations that could adversely affect the cost, manner or feasibility of conducting operations ◦ Legislative or regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays and adversely affect our production ◦ Legislative or regulatory initiatives relating to seismic activity could limit our ability to produce oil and natural gas economically ◦ Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce ◦ Our failure to maintain an adequate system of internal control over financial reporting could adversely affect our ability to accurately report our results ◦ Our derivative activities could result in financial losses and are subject to new derivatives legislation and regulation, which could adversely affect our ability to hedge risks associated with our business ◦ Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations ◦ Repercussions from terrorist activities or armed conflict could harm our business ◦ Conservation measures and technological advances could reduce demand for oil and natural gas ◦ Events outside of our control, including an epidemic or outbreak of an infectious disease, such as COVID-19, may materially adversely affect our business • Risks Relating to our NOLs ◦ Our ability to use our NOLs may be limited, and our Tax Benefits Preservation Plan may not prevent an ownership change resulting in loss of the Company’s NOLs • Risks Relating to our Common Stock ◦ We have adopted a Tax Benefits Preservation Plan, which may discourage a corporate takeover ◦ Anti-takeover provisions in our charter documents may make it more difficult to acquire us, even though such acquisitions may be beneficial to our stockholders For a more complete discussion of the material risk factors relevant to us, see below. • Risks Relating to the Oil and Natural Gas Industry and Our Business Oil, natural gas and NGL prices fluctuate widely due to a number of factors that are beyond our control.
Risk Factors Summary The following is a summary of the material risk factors that could adversely affect our business, financial condition, and results of operations: Risks Relating to the Oil and Natural Gas Industry and Our Business ◦ Oil, natural gas and NGL prices fluctuate widely due to a number of factors that are beyond our control ◦ Drilling for and producing oil and natural gas are high risk activities with many uncertainties ◦ Market conditions or operational impediments may hinder our access to oil, natural gas and NGL markets or delay production ◦ A financial downturn could negatively affect our business, results of operations, financial condition, cash flows and access to capital ◦ Future drilling activities face substantial uncertainties ◦ Certain of our undeveloped acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage or we renew the leases ◦ We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties and our ability to offset the natural decline in our oil, natural gas and NGL reserves ◦ Future commodity price declines may result in reductions of the asset carrying values of our oil and natural gas properties ◦ Significant inaccuracies in our reserve estimates or underlying assumptions could materially affect the quantities and present value of our reserves ◦ The loss of senior management or technical personnel or our inability to hire additional qualified personnel could adversely affect our operations ◦ We are subject to litigation and adverse outcomes in such litigation could have a material effect on our financial condition ◦ Changes affecting the availability of the London Inter-bank Offered Rate (“LIBOR”) may have consequences for us that cannot yet be reasonably predicted ◦ The present value of future net cash flows from our proved reserves are not the same as the current market value of our estimated oil, natural gas and NGL reserves ◦ We will not know conclusively prior to drilling whether oil or natural gas will be present in sufficient quantities to be economically producible ◦ Production of oil, natural gas and NGLs could be materially and adversely affected by natural disasters or severe weather ◦ Our business could be affected by macroeconomic risks ◦ Capital market volatility could adversely affect our ability to obtain capital, cause us to incur additional financing expense or affect the value of certain assets ◦ Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against them ◦ All of our operations are located in the Mid-Continent region, making us vulnerable to risks associated with operating in a limited number of major geographic areas ◦ Oil and natural gas wells are subject to operational hazards that can cause substantial losses for which we may not be adequately insured ◦ Shortages or increases in costs of equipment, services and qualified personnel could adversely affect our ability to execute our development plans ◦ Intense competition in the oil and natural gas industry may adversely affect our ability to succeed ◦ Seismic data may not accurately identify the presence of oil and natural gas, and the use of such technology requires greater predrilling expenditures ◦ Inflation may increase costs which can adversely impact cash flows and reserves value ◦ Disruptions or delays at our third-party service providers could adversely impact our operations ◦ Complex laws and regulations could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities ◦ Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, the FTC or other regulators, we could be subject to substantial penalties and fines 24 Table of Contents ◦ Our operations are subject to environmental and occupational safety and health laws and regulations that could adversely affect the cost, manner or feasibility of conducting operations ◦ Legislative or regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays and adversely affect our production ◦ Legislative or regulatory initiatives relating to seismic activity could limit our ability to produce oil and natural gas economically ◦ Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce ◦ Our failure to maintain an adequate system of internal control over financial reporting could adversely affect our ability to accurately report our results ◦ Our derivative activities could result in financial losses and are subject to new derivatives legislation and regulation, which could adversely affect our ability to hedge risks associated with our business ◦ Cybersecurity incidents or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations ◦ Repercussions from terrorist activities or armed conflict could harm our business ◦ Conservation measures and technological advances could reduce demand for oil and natural gas ◦ Events outside of our control, including an epidemic or outbreak of an infectious disease, may materially adversely affect our business • Risks Relating to our NOLs ◦ Our ability to use our NOLs may be limited, and our Tax Benefits Preservation Plan may not prevent an ownership change resulting in loss of the Company’s NOLs • Risks Relating to our Common Stock ◦ We have adopted a Tax Benefits Preservation Plan, which may discourage a corporate takeover ◦ Anti-takeover provisions in our charter documents may make it more difficult to acquire us, even though such acquisitions may be beneficial to our stockholders For a more complete discussion of the material risk factors relevant to us, see below.
In some cases, financial markets produced downward pressure on stock prices and credit capacity for certain issuers without regard to those issuers’ underlying financial and/or operating strength. Volatility in the capital markets can significantly increase the cost of raising money in the debt and equity capital markets.
In some cases, financial markets produced downward pressure on stock prices and credit capacity for certain issuers without regard to those issuers’ underlying financial and/or operating strength. Volatility in the capital markets can significantly increase the cost of raising capital in the debt and equity capital markets.
We maintained effective internal control over financial reporting as of December 31, 2022, as further described in Part II “Item 9A—Controls and Procedures” and “Management’s Report on Internal Control over Financial Reporting.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We maintained effective internal control over financial reporting as of December 31, 2023, as further described in Part II “Item 9A—Controls and Procedures” and “Management’s Report on Internal Control over Financial Reporting.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
Additional impacts from cyber-attacks could include remediation costs, such as liability for stolen assets or information, repairs of system damage, and incentives to our business partners; increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and security technologies, training employees, and engaging third-party experts and consultants; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an attack; increased insurance premiums; and damage to the company’s competitiveness, stock price, and long-term shareholder value.
Additional impacts from cybersecurity incidents could include remediation costs, such as liability for stolen assets or information, repairs of system damage, and incentives to our business partners; increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and security technologies, training employees, and engaging third-party experts and consultants; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an attack; increased insurance premiums; and damage to the company’s competitiveness, stock price, and long-term shareholder value.
Actual or anticipated declines in domestic or foreign economic growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the U.S. or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from a variety of factors including COVID-19, could materially affect our business and financial condition and impact our ability to finance operations or acquisitions by worsening the actual or anticipated future drop in worldwide commodity demand, negatively impacting the price we receive for our oil and natural gas production.
Actual or anticipated declines in domestic or foreign economic growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the U.S. or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from a variety of factors could materially affect our business and financial condition and impact our ability to finance operations or acquisitions by worsening the actual or anticipated future drop in worldwide commodity demand, negatively impacting the price we receive for our oil and natural gas production.
Private parties, including the owners of properties upon which our wells are drilled or facilities where our petroleum hydrocarbons or wastes are taken for reclamation or disposal may also have the right to pursue legal actions to enforce compliance, to seek damages for contamination, for personal injury, natural resources damage or property damage.
Private parties, including the owners of properties upon which our wells are drilled or facilities where our petroleum hydrocarbons or wastes are taken for separation, storage, reclamation or disposal may also have the right to pursue legal actions to enforce compliance or to seek damages for contamination, personal injury, natural resources damage or property damage.
Changes in environmental laws and regulations occur frequently, and any changes that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management, or completion activities or waste handling, storage, transport, remediation or disposal, emission or discharge requirements could require significant expenditures by us to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition.
Changes in environmental and occupational health and safety laws and regulations occur frequently, and any changes that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management, or completion activities or waste handling, storage, transport, remediation, disposal, emission or discharge requirements could require significant expenditures by us to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition.
These provisions may also discourage, delay or prevent a third party from acquiring a large portion of our securities, or initiating a tender offer, even if our stockholders might receive a premium for their shares in the acquisition over the then current market price. 39 Table of Contents
These provisions may also discourage, delay or prevent a third party from acquiring a large portion of our securities, or initiating a tender offer, even if our stockholders might receive a premium for their shares in the acquisition over the then current market price. 40 Table of Contents
These anti-takeover provisions include: • lack of a provision for cumulative voting in the election of directors; • the ability of our Board to authorize the issuance of “blank check” preferred stock to increase the number of outstanding shares and thwart a takeover attempt; • advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • limitations on who may call a special meeting of stockholders.
These anti-takeover provisions include: • lack of a provision for cumulative voting in the election of directors; • the ability of our Board to authorize the issuance of “blank check” preferred stock to increase the number of outstanding shares and thwart a takeover attempt; 39 Table of Contents • advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • limitations on who may call a special meeting of stockholders.
The full cost ceiling is evaluated at the end of each quarter using the SEC prices, adjusted for the impact of derivatives accounted for as cash flow hedges, if any. The Company did not recognize any full cost ceiling impairment charges for the years ended December 31, 2022 or 2021.
The full cost ceiling is evaluated at the end of each quarter using the SEC prices, adjusted for the impact of derivatives accounted for as cash flow hedges, if any. The Company did not recognize any full cost ceiling impairment charges for the years ended December 31, 2023 or 2022.
If oil, natural gas and NGL prices decline further in the 28 Table of Contents near term, and without other mitigating circumstances, we may experience additional losses of future net revenues, including losses attributable to quantities that cannot be economically produced at lower prices, which would likely cause us to record additional write-downs of capitalized costs of oil and natural gas properties and non-cash charges against future earnings.
If oil, natural gas and NGL prices decline further in the near term, and without other mitigating circumstances, we may experience additional losses of future net revenues, including losses attributable to quantities that cannot be economically produced at lower prices, which would likely cause us to record additional write-downs of capitalized costs of oil and natural gas properties and non-cash charges against future earnings.
The global or national outbreak of an illness or other communicable disease, or any other public health crisis, such as COVID-19, may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) unavailability of contractors or subcontractors, (iii) interruption of supplies from third parties upon which we rely, (iv) recommendations of, or restrictions imposed by government and health authorities, including quarantines, to address an outbreak and (v) restrictions that we and our contractors, subcontractors and our customers impose, including facility shutdowns, to ensure the safety of employees.
The global or national outbreak of an illness or other communicable disease, or any other public health crisis may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) unavailability of contractors or subcontractors, (iii) interruption of supplies from third parties upon which we rely, (iv) recommendations of, or restrictions imposed by government and health authorities, including quarantines, to address an outbreak and (v) restrictions that we and our contractors, subcontractors and our customers impose, including facility shutdowns, to ensure the safety of employees.
The Board adopted the Tax Benefits Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our NOLs. We may utilize these NOLs in certain circumstances to offset future United States taxable income and reduce our United States federal income tax liability.
The Company's Board of Directors (the "Board") adopted the Tax Benefits Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our NOLs. We may utilize these NOLs in certain circumstances to offset future United States taxable income and reduce our United States federal income tax liability.
However, the U.S. District Court of Wyoming struck down this rule in June 2016, and after various appeals and a presidential executive order directing it to review rules related to the energy industry, the BLM published a final rule rescinding the 2015 rule in December 2017. From time to time, the U.S.
However, the U.S. District Court of Wyoming struck down this rule in June 2016, and after various appeals and a presidential executive order directing it to review rules related to the energy industry, the BLM published a final rule rescinding the 2015 rule in December 2017. 34 Table of Contents From time to time, the U.S.
The failure to obtain additional financing could result in a curtailment of our operations relating to development of prospects, which in turn could lead to a possible loss of properties and a decline in our oil, natural gas and NGL reserves. Future price declines may result in reductions of the asset carrying values of our oil and natural gas properties.
The failure to obtain additional financing could result in a curtailment of our operations relating to development of prospects, which in turn could lead to a possible loss of properties and a decline in our oil, natural gas and NGL reserves. 28 Table of Contents Future price declines may result in reductions of the asset carrying values of our oil and natural gas properties.
The effects of COVID-19 and other infectious diseases and concerns regarding their global spread could negatively impact the domestic and international demand for crude oil, natural gas and NGL, which could contribute to price volatility, impact the price we receive for crude oil, natural gas and NGL and materially and adversely affect the demand for and marketability of our production.
The effects of infectious diseases and concerns regarding their global spread could negatively impact the domestic and international demand for crude oil, natural gas and NGL, which could contribute to price volatility, impact the price we receive for crude oil, natural gas and NGL and materially and adversely affect the demand for and marketability of our production.
We make substantial capital expenditures in our business and operations for the acquisition, development and production of oil, natural gas and NGL reserves. Historically, we have financed capital expenditures primarily with cash generated by operations, credit facility borrowings and proceeds from asset sales.
We have historically utilized substantial capital expenditures in our business and operations for the acquisition, development and production of oil, natural gas and NGL reserves, and have financed capital expenditures primarily from cash generated by operations, credit facility borrowings and proceeds from asset sales.
We 38 Table of Contents may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our federal NOLs.
We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our federal NOLs.
For example, our outsourcing entities and other third-party service providers may experience difficulties, disruptions, delays, or failures in their ability to deliver services to us as a result of a variety of factors including COVID-19.
For example, our outsourcing entities and other third-party service providers may experience difficulties, disruptions, delays, or failures in their ability to deliver services to us as a result of a variety of factors.
Outside of our cash assets, we may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss in our ability to offset the natural decline in our oil, natural gas and NGL reserves, which would adversely affect our business, financial condition and results of operations.
Outside of our cash assets, if we need to obtain additional capital, we may be unable to obtain needed capital or financing on satisfactory terms, which would lead to a loss in our ability to offset the natural decline in our oil, natural gas and NGL reserves, which would adversely affect our business, financial condition and results of operations.
The impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows. Events outside of our control, including an epidemic or outbreak of an infectious disease, such as COVID-19, may materially adversely affect our business.
The impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows. Events outside of our control, including an epidemic or outbreak of an infectious disease, may materially adversely affect our business.
Additional rules and legislation pertaining to these and other matters may be considered or adopted from time to time. Our failure to comply with these or other 33 Table of Contents laws and regulations administered by these agencies could subject us to criminal and civil penalties, as described in Item 1.
Additional rules and legislation pertaining to these and other matters may be considered or adopted from time to time. Our failure to comply with these or other laws and regulations administered by these agencies could subject us to criminal and civil penalties, as described in Item 1.
In addition, the market price of natural gas is generally higher in the winter months than during other months of the year due to increased demand for natural gas for heating purposes during the winter season. For NGLs, prices exhibited similar volatility from January 2018 through December 2022.
In addition, the market price of natural gas is generally higher in the winter months than during other months of the year due to increased demand for natural gas for heating purposes during the winter season. For NGLs, prices exhibited similar volatility from January 2019 through December 2023.
As of December 31, 2022, we had U.S. federal NOLs of $1.6 billion, net of NOLs expected to expire unused due to the 2016 IRC Section 382 limitation, approximately half of which will expire between 2025 and 2037, if not limited by additional triggering events prior to such time.
As of December 31, 2023, we had U.S. federal NOLs of $1.6 billion, net of NOLs expected to expire unused due to the 2016 IRC Section 382 limitation, of which approximately $0.7 billion will expire between 2025 and 2037, if not limited by additional triggering events prior to such time.
Cumulative full cost ceiling impairment from the Emergence Date through December 31, 2022 totaled $947.1 million.
Cumulative full cost ceiling impairment from the Emergence Date through December 31, 2023 totaled $947.1 million.
Cyber-attacks or security breaches also could result in litigation and legal risks, including regulatory actions by state, federal, and non-US governmental authorities, as well as significant additional expense to implement further data protection measures.
Cybersecurity incidents or security breaches also could result in litigation and legal risks, including regulatory actions by state, federal, and non-US governmental authorities, as well as significant additional expense to implement further data protection measures.
In addition to the risks presented to our systems and networks, cyber-attacks affecting oil and natural gas distribution systems maintained by third parties, or the networks and infrastructure on which they rely, could delay or prevent delivery of our production to markets.
In addition to the risks presented to our systems and networks, cybersecurity incidents affecting oil and natural gas distribution systems maintained by third parties, or the networks and infrastructure on which they rely, could delay or prevent delivery of our production to markets.
At this time, the impact of such regulations is not clear. Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations.
At this time, the impact of such regulations is not clear. Cybersecurity incidents or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations.
For oil, from January 2018 through December 2022, the NYMEX West Texas Intermediate ("WTI") settled price fluctuated between a high of $123.64 per Bbl and a low of $(36.98) per Bbl.
For oil, from January 2019 through December 2023, the NYMEX West Texas Intermediate ("WTI") settled price fluctuated between a high of $123.64 per Bbl and a low of $(36.98) per Bbl.
Although prior cyber-attacks have not had a material adverse impact on our operations or financial performance, there can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effect. Any cyber-attack could have a material adverse effect on our reputation, competitive position, business, financial condition and results of operations.
Although prior cybersecurity incidents have not had a material adverse impact on our operations or financial performance, there can be no assurance that we will be successful in preventing cybersecurity incidents or successfully mitigating their effect. Any cybersecurity incident could have a material adverse effect on our reputation, competitive position, business, financial condition and results of operations.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.
We may incur substantial costs in order to maintain compliance with these laws and regulations.
We may incur substantial costs in order to maintain compliance with these laws and regulations and permits issued pursuant thereto.
As of December 31, 2022, we hold approximately 365,000 total net acres (including developed and undeveloped net acres), of which 27,011 net aces is undeveloped. Of our undeveloped acreage, less than 5% are subject to expiration at the end of their primary terms. For additional information on our developed and undeveloped acreage please see the section “Item 1.
As of December 31, 2023, we hold 364,201 total net acres (including developed and undeveloped net acres), of which 26,070 net aces is undeveloped. Of our undeveloped acreage, less than 5% are subject to expiration at the end of their primary terms. For additional information on our developed and undeveloped acreage please see the section “Item 1.
The potential impact from COVID-19, both now and in the future, is difficult to predict, and the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain. Risks Relating to our NOLs Our ability to use our NOLs may be limited.
The potential impact from infectious diseases is difficult to predict, and the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain. 38 Table of Contents Risks Relating to Our NOLs Our ability to use our NOLs may be limited.
The CFTC has similar authority under the Commodity Exchange Act and regulations it has promulgated thereunder with respect to certain segments of the physical and futures energy commodities market including oil and natural gas.
Under the EPAct 2005 and implementing regulations, the FERC prohibits market manipulation in connection with the purchase or sale of natural gas. The CFTC has similar authority under the Commodity Exchange Act and regulations it has promulgated thereunder with respect to certain segments of the physical and futures energy commodities market including oil and natural gas.
These and other potential regulations could increase our operating costs, reduce our liquidity, delay our operations, increase direct and third-party post production costs or otherwise alter the way we conduct our business, which could have a material adverse effect on our financial condition, results of operations and cash flows and which could reduce cash received by or available for distribution, including any amounts paid for transportation on downstream interstate pipelines.
These and other potential regulations could increase our operating costs, reduce our liquidity, delay our operations, increase direct and third-party post production costs or otherwise alter the way we conduct our business, which could have a material adverse effect on our financial condition, results of operations and cash flows and which could reduce cash received by or available for distribution, including any amounts paid for transportation on downstream interstate pipelines. 33 Table of Contents Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, the FTC or other regulators, we could be subject to substantial penalties and fines.
If the debt and equity capital markets are not accessible, we may be unable to implement our development plans or otherwise carry out our business strategy as expected.
However, a change in economic conditions or the need to access additional capital may be necessary in the future, and if the debt and capital markets are not accessible, we may be unable to implement our development plans or otherwise carry out our business strategy as expected.
On June 30, 2021, Congress issued a joint resolution pursuant to the Congressional Review Act disapproving the September 2020 rule, and on November 15, 2021, EPA issued a proposed rule to revise the Quad Oa regulations that, if finalized, would require methane emissions reductions and implementation of a fugitive emissions monitoring and repair program.
On June 30, 2021, Congress issued a joint resolution pursuant to the Congressional Review Act disapproving the September 2020 rule, and on November 15, 2021, EPA issued a proposed rule to revise the Quad Oa regulations.
For natural gas, from January 2018 through December 2022, the month-end NYMEX Henry Hub settled price fluctuated between a high of $24.74 per Mcf and a low of $1.38 per Mcf.
For natural gas, from January 2019 through December 2023, the NYMEX Henry Hub spot prices fluctuated between a high of $24.77 per Mcf and a low of $1.38 per Mcf.
We undertake ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards; however, because the techniques used to obtain unauthorized access change frequently and can be difficult to detect, anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us more vulnerable to cyber-attacks than other companies not similarly situated. 37 Table of Contents If our security measures are circumvented, proprietary information may be misappropriated, our operations may be disrupted, and our computers or those of our customers or other third parties may be damaged.
We undertake ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards; however, because the techniques used to obtain unauthorized access change frequently and can be difficult to detect, anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us vulnerable.
Legislation or regulatory initiatives intended to address seismic activity are restricting and could restrict our ability to dispose of saltwater produced alongside our hydrocarbons, which could limit our ability to produce oil and natural gas economically and have a material adverse effect on our business. 34 Table of Contents Large volumes of saltwater produced alongside our oil, natural gas and NGLs in connection with drilling and production operations are disposed of pursuant to permits issued by governmental authorities overseeing such disposal activities.
Legislation or regulatory initiatives intended to address seismic activity are restricting and could restrict our ability to dispose of saltwater produced alongside our hydrocarbons, which could limit our ability to produce oil and natural gas economically and have a material adverse effect on our business.
We have programs, processes and technologies in place to attempt to prevent, detect, contain, respond to and mitigate security-related threats and potential incidents, as well as internal accounting controls to prevent unauthorized or fraudulent payments by ensuring that transactions are executed only with management authorization.
A cybersecurity incident of this nature would be outside our control, but could have a material, adverse effect on our business, financial condition and results of operations. 37 Table of Contents We have programs, processes and technologies in place to attempt to prevent, detect, contain, respond to and mitigate security-related threats and potential incidents, as well as internal accounting controls to prevent unauthorized or fraudulent payments by ensuring that transactions are executed only with management authorization.
The oil and natural gas industry is capital intensive. Our future oil, natural gas and NGL reserves and production, and therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current estimated proved reserves and finding or acquiring additional economically recoverable reserves.
The oil and natural gas industry is capital intensive. Our future oil, natural gas and NGL reserves and production are naturally depleting resources, which in turn impacts our cash flow and income. Our ability to offset these declines may be highly dependent on our success in efficiently developing our undeveloped assets, and finding or acquiring additional economically recoverable reserves.
Refer to “—Environmental Regulations— Subsurface Injections” included in Item 1 of this report for additional discussion of the current and potential impacts of legislation or regulatory initiatives related to seismic activity on our operations.
Refer to “—Environmental Regulations— Subsurface Injections” included in Item 1 of this report for additional discussion of the current and potential impacts of legislation or regulatory initiatives related to seismic activity on our operations. 35 Table of Contents Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce.
Prices for oil, natural gas and NGLs can move quickly and fluctuate widely in response to a variety of factors that are beyond our control.
Our revenues, profitability and cash flow are highly dependent upon the prices we realize from the sale of oil, natural gas and NGLs. Historically, the markets for these commodities are very volatile. Prices for oil, natural gas and NGLs can move quickly and fluctuate widely in response to a variety of factors that are beyond our control.
The Tax Benefits Preservation Plan was approved at the 2021 annual meeting of stockholders on May 25, 2021.
The Tax Benefits Preservation Plan was approved at the 2021 annual meeting of stockholders on May 25, 2021. On June 14, 2023, our Board of Directors approved an amendment to the Tax Benefits Preservation Plan to extend the expiration time of the Tax Benefits Preservation Plan from July 1, 2023 to July 1, 2026.
The Tax Benefits Preservation Plan was approved at the 2021 annual meeting of stockholders on May 25, 2021. Each share of our common stock issued thereafter will also include one right.
The Company will submit this amendment to the Company’s stockholders for approval at our 2024 Annual Meeting. Each share of our common stock issued thereafter will also include one right.
Our failure to maintain an adequate system of internal control over financial reporting, could adversely affect our ability to accurately report our results. Management is responsible for establishing and maintaining adequate internal control over financial reporting.
See “Business—Environmental, Health, and Safety Regulations” in Item 1 of this report for information about climate change laws and regulations restricting emissions of GHGs that could impact our operations and business. Our failure to maintain an adequate system of internal control over financial reporting, could adversely affect our ability to accurately report our results.
In particular, cash flow from operations were $164.7 million and $110.3 million for the years ended December 31, 2022 and 2021, respectively. The capital markets that we have historically accessed have recently been and may continue to be constrained to such an extent that debt or equity capital raises are practically unfeasible.
In particular, cash flow from operations were $115.6 million and $164.7 million for the years ended December 31, 2023 and 2022, respectively. We are not actively trying to raise debt or equity capital at this time, with current projected activity for the year financed by cash flow from operations or cash held on the balance sheet.
Declines in oil, natural gas or NGL prices significantly affect our financial condition and results of operations. Our revenues, profitability and cash flow are highly dependent upon the prices we realize from the sale of oil, natural gas and NGLs. Historically, the markets for these commodities are very volatile.
Risks Relating to the Oil and Natural Gas Industry and Our Business Oil, natural gas and NGL prices fluctuate widely due to a number of factors that are beyond our control. Declines in oil, natural gas or NGL prices significantly affect our financial condition and results of operations.
Removed
Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, the FTC or other regulators, we could be subject to substantial penalties and fines. Under the EPAct 2005 and implementing regulations, the FERC prohibits market manipulation in connection with the purchase or sale of natural gas.
Added
Large volumes of saltwater produced alongside our oil, natural gas and NGLs in connection with drilling and production operations are disposed of pursuant to permits issued by governmental authorities overseeing such disposal activities.
Removed
Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce.
Added
If our security measures are circumvented, proprietary information may be misappropriated, our operations may be disrupted, and our computers or those of our customers or other third parties may be damaged.
Removed
It is possible that these rules will continue to require oil and gas operators to expend material sums. In addition, in November 2016, the BLM issued final rules to reduce methane emissions from venting, flaring, and leaks during oil and gas operations on public lands that are substantially similar to the EPA Quad Oa requirements.
Added
The Company will submit this amendment to the Company’s stockholders for approval at our 2024 Annual Meeting.
Removed
However, on December 8, 2017, the BLM published a final rule to temporarily suspend or delay certain requirements contained in the November 2016 final rule until January 17, 2019, including those requirements relating to venting, flaring and leakage from oil and gas production activities.
Added
The Tax Benefits Preservation Plan was approved at the 2021 annual meeting of stockholders on May 25, 2021. On June 14, 2023, our Board of Directors approved an amendment to the Tax Benefits Preservation Plan to extend the expiration time of the Tax Benefits Preservation Plan from July 1, 2023 to July 1, 2026.
Removed
Further, in September 2018, the BLM published a final rule to revise or rescind certain provisions of the 2016 rule.
Removed
On July 21, 2020, a Wyoming federal court vacated almost all of the 2016 rule, including all provisions relating to the loss of gas through venting, flaring, and leaks, and on July 15, 2020, a California federal court vacated the 2018 rule.
Removed
On November 28, 2022, BLM announced a new proposed rule regulating emissions of methane in connection with the production of oil and gas on federal and Tribal lands. If finalized, the proposed rule would require various technology upgrades, impose limits related to flaring, and require LDAR plans. The final rule is expected to be announced later this year.
Removed
While, as a result of these developments, future implementation of the EPA and BLM methane rules is uncertain, given the long-term trend towards increasing regulation, future federal GHG regulations of the oil and gas industry remain a possibility.
Removed
We have the necessary equipment (pollution control equipment and optical gas imaging equipment for LDAR inspections) and personnel trained to assist with inspection and reporting requirements to maintain compliance with these rules. 35 Table of Contents In addition, there are a number of state and regional efforts that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs.
Removed
On an international level, the United States was one of almost 200 nations that agreed in December 2015 to the Paris Agreement. However, the Paris Agreement did not impose any binding obligations on the United States. In June 2017, the United States announced it would withdraw from the Paris Agreement, which became effective November 4, 2020.
Removed
The United States has rejoined the Paris Agreement as of February 19, 2021.
Removed
The adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and our operations could require us to incur additional costs to monitor, report and potentially reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas that we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves.
Removed
Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.
Removed
Ultimately, this could make it more difficult to secure funding for development and production activities.
Removed
Notwithstanding potential risks related to climate change, the International Energy Agency estimates that global energy demand will continue to rise and will not peak until after 2040 and that oil and gas will continue to represent a substantial percentage of global energy use over that time.
Removed
Finally, to the extent increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on our assets and operations, and potentially subject us to greater regulation.
Removed
A cyber-attack of this nature would be outside our control, but could have a material, adverse effect on our business, financial condition and results of operations.
Removed
On July 1, 2020, our Board of Directors adopted a Tax Benefits Preservation Plan as amended on March 16, 2021 and declared a dividend distribution of one right for each outstanding share of our common stock to stockholders of record at the close of business on July 13, 2020.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+10 added−0 removed0 unchanged
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Since October 4, 2016, the Company’s common stock has been listed on the New York Stock Exchange (“NYSE”) under the symbol “SD.” On March 8, 2023, there were 326 record holders of the Company’s common stock, which does not reflect persons or entities that hold the common stock in nominee or “street” name through various brokerage firms and financial institutions.
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Since October 4, 2016, the Company’s common stock has been listed on the New York Stock Exchange (“NYSE”) under the symbol “SD.” 42 Table of Contents Holders On March 1, 2024, there were 313 record holders of the Company’s common stock, which does not reflect persons or entities that hold the common stock in nominee or “street” name through various brokerage firms and financial institutions.
Added
Dividends In May 2023, the Board approved a one-time cash dividend of $2.00 per share of the Company’s common stock, which was paid on June 7, 2023 to shareholders of record as of the close of business on May 24, 2023. The aggregate total payout was $73.8 million.
Added
Additionally, in May 2023, the Board announced plans for a regular quarterly dividend of $0.10 per share, subject to quarterly approval by the Board.
Added
In August 2023, the Board declared a cash dividend of $0.10 per share of the Company’s common stock, which was paid on August 28, 2023 to shareholders of record as of the close of business on August 14, 2023. The aggregate total payout was $3.7 million.
Added
On November 2, 2023, the Board declared a cash dividend of $0.10 per share of the Company’s common stock, which was paid on November 27, 2023 to shareholders of record as of the close of business on November 13, 2023. The aggregate total payout was $3.7 million.
Added
In addition to the quarterly dividend payments, the Company paid $0.3 million in cash dividends on vested stock awards during the year ended December 31, 2023. Dividend payments for the year ended December 31, 2023 total $81.5 million. See Note 19 for discussion on dividends declaredpaid in 2024.
Added
The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of our Board of Directors.
Added
Our Board of Directors' decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors deems relevant.
Added
Our ability to pay dividends will depend on our existing cash available and our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will continue to pay a dividend in any future period.
Added
Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the quarter ended December 31, 2023. In May 2023, the Board approved a stock buyback program authorizing the repurchase of up to $75 million of the Company's outstanding common stock in open market transactions with no expiration date.
Added
The maximum number of shares that may still be purchased under the buyback program as of March 1, 2024 is approximately 5.8 million.

Item 7. Management's Discussion & Analysis

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

59 edited+20 added−17 removed24 unchanged
Biggest changeSee "Note 3-Acquisitions, Divestitures and Disposal of Assets and Oil and Gas Properties." 47 Table of Contents Interest (income) expense, net for the years ended December 31, 2022 and 2021 consisted of the following (in thousands): Year Ended December 31, 2022 2021 Interest expense Interest expense on debt and letters of credit $ 37 $ 377 Interest expense on right of use assets 36 26 Write off of debt issuance costs — 174 Amortization of debt issuance costs, premium and discounts — 57 Capitalized interest — (252) Interest expense - other 143 25 Total 216 407 Less: interest income (2,026) (3) Total interest (income) expense, net $ (1,810) $ 404 Interest (income) expense, net during the year ended December 31, 2022 is primarily comprised of interest income received from cash deposits partially offset by interest paid on royalty obligations of $0.1 million, interest on vehicle leases and letters of credit.
Biggest change“Quantitative and Qualitative Disclosures about Market Risk” of this report for additional discussion of our commodity derivatives. 49 Table of Contents Interest (income) expense, net for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): Year Ended December 31, 2023 2022 Interest income (expense), net Interest income $ 10,656 $ 2,026 Interest expense Interest expense on letters of credit $ (37) $ (37) Interest expense on right of use assets (64) (36) Interest expense - other (3) (143) Total interest expense (104) (216) Total interest income (expense), net $ 10,552 $ 1,810 Interest (income) expense, net during the year ended December 31, 2023 is primarily comprised of interest income received from cash deposits.
If oil or natural gas prices decline from current levels, they could have a material adverse effect on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced.
If oil, natural gas and NGL prices decline from current levels, they could have a material adverse effect on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced.
See "Note 3 — Acquisitions, Divestitures and Disposal of Assets and Oil and Gas Properties" to the accompanying consolidated financial statements included in Item 8 of this report for additional information. Capital Expenditures.
See "Note 3 — Acquisitions and Divestitures of Assets and Oil and Gas Properties" to the accompanying consolidated financial statements included in Item 8 of this report for additional information. Capital Expenditures.
We have applied the Securities and Exchange Commission’s adopted FAST Act Modernization and Simplification of Regulation S-K, which limits the discussion to the two most recent calendar years. This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for years ended December 31, 2022 and 2021.
We have applied the Securities and Exchange Commission’s adopted FAST Act Modernization and Simplification of Regulation S-K, which limits the discussion to the two most recent calendar years. This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for years ended December 31, 2023 and 2022.
We did not record a full cost ceiling limitation impairment for the years ended December 31, 2022 or 2021. Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month SEC prices as adjusted for price differentials and other contractual arrangements.
We did not record a full cost ceiling limitation impairment for the years ended December 31, 2023 or 2022. Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month SEC prices as adjusted for price differentials and other contractual arrangements.
For a discussion of recently adopted accounting standards and recent accounting standards not yet adopted, see “Note 1—Summary of Significant Accounting Policies” to the Company’s accompanying consolidated financial statements in Item 8 of this report. 53 Table of Contents
For a discussion of recently adopted accounting standards and recent accounting standards not yet adopted, see “Note 1—Summary of Significant Accounting Policies” to the Company’s accompanying consolidated financial statements in Item 8 of this report. 55 Table of Contents
Inherent in the present value calculation are the timing of settlement and changes in the legal, regulatory, environmental and political environments, which are subject to change. Changes in timing or to the original estimate of cash flows will result in changes to the carrying amount of the liability. Income Taxes.
Inherent in the present value calculation are the timing of settlement and changes in the legal, regulatory, environmental and political environments, which are subject to change. Changes in timing or to the original estimate of cash flows will result in changes to the carrying amount of the liability.
Cash Flows from Financing Activities Our financing activities used $1.6 million of cash for the year ended December 31, 2022, consisted primarily of $1.2 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise, and finance lease payments of $0.5 million offset by $0.1 million of proceeds from the exercise of stock options.
Our financing activities used $1.6 million of cash for the year ended December 31, 2022, consisting primarily of $1.2 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise, and finance lease payments of $0.5 million offset by $0.1 million of proceeds from the exercise of stock options.
The Company employs a present value technique to estimate the fair value of an asset retirement obligation, which reflects certain assumptions and requires significant judgment, including an inflation rate, its credit-adjusted, risk-free interest rate, the estimated settlement date of the liability and the estimated current cost to settle the liability based on third-party quotes and current actual costs.
The Company employs a present value technique to estimate the fair value of an asset retirement obligation, which reflects certain assumptions and requires significant judgment, including an inflation rate, its credit-adjusted risk-free interest rate, the estimated settlement date of the liability and the estimated current cost to settle the liability based on current actual costs.
We will continue to monitor forward-looking commodity prices, results, costs and other factors that could influence returns on investments, which will continue to shape our disciplined development decisions in 2023 and beyond.
We will continue to monitor forward-looking commodity prices, results, costs and other factors that could influence returns on investments, which will continue to shape our disciplined development decisions in 2024 and beyond.
For the comparison of the years ended December 31, 2021 and 2020, see “Management's Discussion and Analysis of Consolidated Results of Operations” in Part II, Item 7 of our 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 10, 2022.
For the comparison of the years ended December 31, 2022 and 2021, see “Management's Discussion and Analysis of Consolidated Results of Operations” in Part II, Item 7 of our 2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 15, 2023.
As of December 31, 2022, we had future contractual payment commitments under various agreements, which are summarized below. The short-term leases and operating lease are not recorded in the accompanying consolidated balance sheets.
As of December 31, 2023, we had future contractual commitments under various agreements, which are summarized below. The short-term leases and operating lease are not recorded in the accompanying consolidated balance sheets.
Net exercises of stock awards allows the holder of a stock award to tender back to us a number of shares at fair value upon the vesting of such stock award, that equals the employee payroll tax obligation due.
Net exercises of stock awards allows the holder of a stock award to tender back to us a number of shares at fair value upon the vesting of such stock award, t hat equals the employee payroll tax obligation due.
However, a full cost ceiling limitation impairment may still be realized in the first quarter of 2023 and in subsequent quarters based on the outcome of numerous other factors such as additional declines in the actual trailing twelve-month SEC prices, production, lower commodity prices, changes in estimated future development costs and operating expenses, and other revisions to our proved reserves.
However, a full cost ceiling limitation impairment may still be realized in the future based on the outcome of numerous other factors such as additional declines in the actual trailing twelve-month SEC prices, production, lower commodity prices, changes in estimated future development costs and operating expenses, and other revisions to our proved reserves.
To provide information on the general trend in pricing, the average annual NYMEX prices for oil and natural gas for recent years are presented in the table below: Year Ended December 31, 2022 2021 NYMEX WTI Oil (per Bbl) $ 94.90 $ 68.18 NYMEX Henry Hub Natural gas (per Mcf) $ 6.68 $ 4.04 In order to reduce our exposure to price fluctuations, from time to time we enter into commodity derivative contracts for a portion of our anticipated future oil, natural gas, and NGL production as discussed in Item 7A.
To provide information on the general trend in pricing, the average annual NYMEX prices for oil and natural gas for recent years are presented in the table below: Year Ended December 31, 2023 2022 NYMEX WTI Oil (per Bbl) $ 77.58 $ 94.90 NYMEX Henry Hub Natural gas (per Mcf) $ 2.63 $ 6.68 In order to reduce our exposure to price fluctuations, from time to time we enter into commodity derivative contracts for a portion of our anticipated future oil, natural gas, and NGL production as discussed in Item 7A.
Applying these estimated first quarter prices, and holding all other inputs constant to those used in the 46 Table of Contents calculation of our December 31, 2022 ceiling test, no full cost ceiling limitation impairment is indicated for the first quarter of 2023.
Applying these estimated first quarter prices, and holding all other inputs constant to those used in the calculation of our December 31, 2023 ceiling test, no full cost ceiling limitation impairment is indicated for the first quarter of 2024.
For example, during the period from January 2018 through December 2022, the NYMEX WTI settled price for oil fluctuated between a high of $123.64 per Bbl and a low of $(36.98) per Bbl, and the month-end NYMEX Henry Hub settled price for gas fluctuated between a high of $24.74 per Mcf and a low of $1.38 per Mcf.
For example, during the period from January 2019 through December 2023, the NYMEX WTI settled price for oil fluctuated between a high of $123.64 per Bbl and a low of $(36.98) per Bbl, and the NYMEX Henry Hub spot prices for gas fluctuated between a high of $24.77 per Mcf and a low of $1.38 per Mcf.
We did not repurchase any common stock under the Program during the year ended 2022. 50 Table of Contents Contractual Obligations and Off-Balance Sheet Arrangements At December 31, 2022, our contractual obligations included asset retirement obligations and short and long-term leases.
The Company did not repurchase any common stock under the existing or prior Program during the years ended December 31, 2023 and 2022. 52 Table of Contents Contractual Obligations and Off-Balance Sheet Arrangements At December 31, 2023, our contractual obligations included asset retirement obligations and short and long-term leases.
The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at December 31, 2022 were $93.67 per barrel of oil and $6.36 per MMBtu of natural gas, before price differential adjustments.
The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at December 31, 2023 were $78.22 per barrel of oil and $2.64 per MMBtu of natural gas, before price differential adjustments.
The following table summarizes derivative activity for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 (Gain) loss on derivative contracts $ (5,975) $ 2,251 Cash paid (received) on settlements $ (1,525) $ 2,230 Our derivative contracts are not designated as accounting hedges and, as a result, changes in the fair value of our commodity derivative contracts are recorded quarterly as a component of operating expenses.
The following table summarizes derivative activity for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 (Gain) loss on derivative contracts $ (1,447) $ (5,975) Realized settlement gains (losses) on derivative contracts $ 5,876 $ 1,525 Our derivative contracts are not designated as accounting hedges and, as a result, changes in the fair value of our commodity derivative contracts are recorded quarterly as a component of operating expenses.
Estimates of proved reserves are based on the quantities of oil, natural gas and NGLs that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions.
Approximately 95.2% of the Company’s reserves were estimated by independent petroleum engineers as of December 31, 2023. Estimates of proved reserves are based on the quantities of oil, natural gas and NGLs that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions.
If capitalized costs exceed the ceiling limitation, the excess must be charged to expense. Once incurred, a write-down cannot be reversed at a later date. The Company did not record any impairment for the years ended December 31, 2022 or 2021.
See above discussion on the uncertainty of proved reserves estimates. If capitalized costs exceed the ceiling limitation, the excess must be charged to expense. Once incurred, a write-down cannot be reversed at a later date. The Company did not record any impairment for the years ended December 31, 2023 or 2022. Asset Retirement Obligations.
Production volumes for the year ended December 31, 2022 decreased slightly due to the natural declines of our producing wells, which were partially offset from the production from our well reactivations and new well activity for the year.
Production volumes for the year ended December 31, 2023 decreased slightly due to the natural declines of our producing wells, which were partially offset from the production from our new wells and increased ownership interest from our July 2023 acquisition.
Conversely, during periods of declining market prices of oil, natural gas and NGL, our commodity derivative contracts may partially offset declining revenues and cash flow to the extent strike prices for our contracts are above market prices at the time of settlement.
Conversely, during periods of declining market prices of oil, natural gas and NGL, our commodity derivative contracts may partially offset declining revenues and cash flow to the extent strike prices for our contracts are above market prices at the time of settlement. 46 Table of Contents Oil, Natural Gas and NGL Production and Pricing The table below presents production and pricing information for the years ended December 31, 2023 and 2022.
Working Capital and Sources and Uses of Cash Our principal sources of liquidity for 2022 included cash flow from operations and cash on hand. Our working capital increased to $241.6 million at December 31, 2022, compared to $97.7 million at December 31, 2021.
Working Capital and Sources and Uses of Cash Our principal sources of liquidity for 2024 include cash flow from operations and cash on hand. Our working capital decreased to $228.5 million at December 31, 2023, compared to $241.6 million at December 31, 2022.
The Company’s critical accounting policies and additional information on significant estimates are discussed below. See “Note 1—Summary of Significant Accounting Policies” to the Company’s accompanying consolidated financial statements in Item 8 of this report for additional discussion of significant accounting policies. Proved Reserves. Approximately 95.0% of the Company’s reserves were estimated by independent petroleum engineers as of December 31, 2022.
The Company’s critical accounting policies and additional information on significant estimates are discussed below. See “Note 1—Summary of Significant Accounting Policies” to the Company’s accompanying consolidated financial statements in Item 8 of this report for additional discussion of significant accounting policies. 53 Table of Contents Proved Reserves.
See “Consolidated Results of Operations” for further analysis of the changes in revenues and operating expenses. 49 Table of Contents Cash Flows from Investing Activities During the year ended December 31, 2022, cash flows used in investing activities primarily reflects capital expenditures of $44.1 million related to drilling, capital workovers, well reactivations, and inventory purchases and $1.4 million related to an acquisition of proved reserves.
See “Consolidated Results of Operations” for further analysis of the changes in revenues and operating expenses. 51 Table of Contents Cash Flows from Investing Activities During the year ended December 31, 2023, cash flows used in investing activities primarily reflects capital expenditures of $26.4 million made for drilling and completions, capital workovers, and well reactivations and $11.2 million related to an acquisition of proved reserves, which increased ownership interests in properties operated by the Company.
Our financing activities used $22.0 million in of cash for the year ended December 31, 2021, consisting primarily of repayments of borrowings under the 2020 Credit Facility of $20.0 million, finance lease payments of $1.0 million and cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise of $0.9 million.
Cash Flows from Financing Activities Our financing activities used $82.9 million of cash for the year ended December 31, 2023, consisting primarily of $81.5 million in cash dividends, $0.9 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise, and finance lease payments of $0.6 million offset by $0.1 million of proceeds from the exercise of stock options.
Other income (expense), net Other income (expense), net for the years ended December 31, 2022 and 2021 is reflected in the table below (in thousands): Year Ended December 31, 2022 2021 Other income (expense), net Other income, net $ 378 $ 3,055 Total other income $ 378 $ 3,055 The Other income (expense), net line item for the year ended December 31, 2022 is primarily comprised of gains on the sale of fleet vehicles and the removal of previously accrued liabilities due to a change in estimate.
Other income (expense), net The Other income (expense), net line item was not significant for the year ended December 31, 2023. For the year ended December 31, 2022, Other income (expense), net of $0.4 million is primarily comprised of gains on the sale of fleet vehicles and the removal of previously accrued liabilities due to a change in estimate.
Based on the SEC prices over the twelve months ended March 1, 2023, we anticipate the SEC prices utilized in the March 31, 2023 full cost ceiling test may be $90.97 per barrel of oil and $5.96 per MMBtu of natural gas, (the "estimated first quarter prices").
Based on the SEC prices over the eleven months ended February 1, 2024 and NYMEX strip pricing for March 2024 as of March 1, 2024, we anticipate the SEC prices utilized in the March 31, 2024 full cost ceiling test may be $77.48 per barrel of oil and $2.44 per MMBtu of natural gas, (the "estimated first quarter prices").
Year Ended December 31, 2022 2021 Change % Change Production data (in thousands) Oil (MBbls) 949 957 (8) (1) % NGL (MBbls) 1,997 2,267 (270) (12) % Natural gas (MMcf) 21,101 21,417 (316) (1) % Total volumes (MBoe) 6,463 6,793 (330) (5) % Average daily total volumes (MBoe/d) 17.7 18.6 (0.9) (5) % Average prices—as reported (1) Oil (per Bbl) $ 92.21 $ 65.10 $ 27.11 42 % NGL (per Bbl) $ 31.88 $ 22.42 $ 9.46 42 % Natural gas (per Mcf) $ 4.88 $ 2.60 $ 2.28 88 % Total (per Boe) $ 39.34 $ 24.86 $ 14.48 58 % Average prices—including impact of derivative contract settlements Oil (per Bbl) $ 92.21 $ 65.10 $ 27.11 42 % NGL (per Bbl) $ 31.72 $ 22.28 $ 9.44 42 % Natural gas (per Mcf) $ 4.97 $ 2.51 $ 2.46 98 % Total (per Boe) $ 39.58 $ 24.53 $ 15.05 61 % ___________________ (1) Prices represent actual average prices for the periods presented and do not include the impact of derivative transactions.
Year Ended December 31, 2023 2022 Change Production data (in thousands) Oil (MBbls) 1,047 949 98 Natural gas (MMcf) 20,403 21,101 (698) NGL (MBbls) 1,705 1,997 (292) Total volumes (MBoe) 6,152 6,463 (311) Average daily total volumes (MBoe/d) 16.9 17.7 (0.8) Average prices—as reported (1) Oil (per Bbl) $ 74.69 $ 92.21 $ (17.52) Natural gas (per Mcf) $ 1.71 $ 4.88 $ (3.17) NGL (per Bbl) $ 20.83 $ 31.88 $ (11.05) Total (per Boe) $ 24.16 $ 39.34 $ (15.18) Average prices—including impact of derivative contract settlements Oil (per Bbl) $ 74.69 $ 92.21 $ (17.52) Natural gas (per Mcf) $ 2.00 $ 4.97 $ (2.97) NGL (per Bbl) $ 20.83 $ 31.72 $ (10.89) Total (per Boe) $ 25.11 $ 39.58 $ (14.47) ___________________ (1) Prices represent actual average prices for the periods presented and do not include the impact of derivative transactions.
We anticipate being able to utilize these deferred tax assets based on the generation of future income. A change in the estimate of future income could cause the valuation allowance to be adjusted in subsequent periods. New Accounting Pronouncements.
A change in the estimate of future income could cause the valuation allowance to be adjusted in subsequent periods. New Accounting Pronouncements.
Cash flows for the years ended December 31, 2022, and 2021 are presented in the following table and discussed below (in thousands): Year Ended December 31, 2022 2021 Cash flows provided by operating activities $ 164,696 $ 110,260 Cash flows provided by (used in) investing activities (45,117) 22,973 Cash flows (used in) financing activities (1,635) (21,975) Net increase in cash, cash equivalents and restricted cash $ 117,944 $ 111,258 Cash Flows from Operating Activities The $54.4 million increase in operating cash flows for the year ended December 31, 2022 compared to 2021, is primarily due to increased revenues which is the result of improved commodity prices as discussed above, offset by a slight decrease in production.
Cash flows for the years ended December 31, 2023, and 2022 are presented in the following table and discussed below (in thousands): Year Ended December 31, 2023 2022 Cash flows provided by operating activities $ 115,578 $ 164,696 Cash flows used in investing activities (36,164) (45,117) Cash flows used in financing activities (82,938) (1,635) Net (decrease) increase in cash, cash equivalents and restricted cash $ (3,524) $ 117,944 Cash Flows from Operating Activities The $49.1 million decrease in operating cash flows for the year ended December 31, 2023 compared to 2022, is primarily due to a decrease in revenues from lower commodity prices.
Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (In thousands) Asset retirement obligations (1) $ 63,709 $ 16,074 $ — $ 127 $ 47,508 Operating lease 167 167 — — — Short-term leases 2,076 2,076 — — — Finance lease 1,059 459 600 — — Total $ 67,011 $ 18,776 $ 600 $ 127 $ 47,508 ____________________ (1) Asset retirement obligations are based on estimates and assumptions that affect the reported amounts as of December 31, 2022.
Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (In thousands) Asset retirement obligations (1) $ 64,404 $ 9,851 $ — $ — $ 54,553 Operating lease 167 167 — — — Short-term leases 1,773 1,773 — — — Finance lease 1,311 616 695 — — Total $ 67,655 $ 12,407 $ 695 $ — $ 54,553 ____________________ (1) Asset retirement obligations are based on estimates and assumptions that affect the reported amounts as of December 31, 2023.
In prior years, we determined that the deferred tax assets did not meet the more likely than not threshold of being utilized and thus recorded a valuation allowance. As of December 31, 2022, we have partially released our valuation allowance on our deferred tax assets by $64.5 million.
As such, the successor Company had significant deferred tax assets to consume upon emergence. In prior years, we determined that the deferred tax assets did not meet the more likely than not threshold of being utilized and thus recorded a valuation allowance.
Operational Activities For the year ended December 31, 2022, there were eight operated wells drilled and six wells completed. There was no drilling activity on our operated acreage during the year ended December 31, 2021.
For the year ended December 31, 2022 there were eight operated wells drilled, six wells completed, and 50 wells reactivated.
Cash outflows were partially offset by $0.4 million of proceeds from the sale of assets.
Cash outflows were partially offset by $1.5 million of proceeds from the sale of equipment related to our oil and gas assets.
Operating Expenses Operating expenses for the years ended December 31, 2022 and 2021 consisted of the following (in thousands): Year Ended December 31, 2022 2021 Change % Change Lease operating expenses $ 41,286 $ 35,999 $ 5,287 14.7 % Production, ad valorem, and other taxes 15,880 9,918 5,962 60.1 % Depreciation and depletion—oil and natural gas 11,542 9,372 2,170 23.2 % Depreciation and amortization—other 6,342 6,073 269 4.4 % Total operating expenses $ 75,050 $ 61,362 $ 13,688 22.3 % Lease operating expenses ($/Boe) $ 6.39 $ 5.30 $ 1.09 20.6 % Production, ad valorem, and other taxes ($/Boe) $ 2.46 $ 1.46 $ 1.00 68.6 % Depreciation and amortization—oil and natural gas ($/Boe) $ 1.79 $ 1.38 $ 0.41 29.7 % Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 6.2 % 5.9 % 0.4 % 5.5 % The increase in lease operating expenses was primarily due to inflationary pressures, a higher number of producing wells and higher workover expenses due to our well reactivation program during the year ended December 31, 2022.
Operating Expenses Operating expenses for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): Year Ended December 31, 2023 2022 Change Lease operating expenses $ 41,862 $ 41,286 $ 576 Production, ad valorem, and other taxes 10,870 15,880 (5,010) Depreciation and depletion—oil and natural gas 15,657 11,542 4,115 Depreciation and amortization—other 6,518 6,342 176 Total operating expenses $ 74,907 $ 75,050 $ (143) Lease operating expenses ($/Boe) $ 6.80 $ 6.39 $ 0.41 Production, ad valorem, and other taxes ($/Boe) $ 1.77 $ 2.46 $ (0.69) Depreciation and amortization—oil and natural gas ($/Boe) $ 2.54 $ 1.79 $ 0.75 Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 7.3 % 6.2 % 1.1 % The increase in lease operating expenses was primarily due to inflationary pressures and higher production costs associated with more producing wells from our prior well reactivations and development program as well as increased ownership interest from our July 2023 acquisition during the year ended December 31, 2023.
Any such ceiling test impairments in 2023 could be material to our net earnings. Full cost pool impairments have no impact to our cash flow or liquidity.
Any such ceiling test impairments in 2024 could be material to our net earnings.
Production, ad valorem, and other taxes increased primarily due to the increase in production taxes as a result of increased revenues. The increase in depreciation and depletion for oil and natural gas properties was primarily the result of increased capital expenditures from higher drilling and completion activity which increased our depletion rate. Full cost pool impairment.
The increase in depreciation and depletion for oil and natural gas properties was primarily the result of capital expenditures for 2023 and a decrease in proved reserves at December 31, 2023, primarily as a result of lower SEC prices (as defined below), which increased our depletion rate. Full cost pool impairment.
See “Note 13 — Income Taxes” to the accompanying consolidated financial statements for additional discussion of income tax related matters. 51 Table of Contents Critical Accounting Estimates The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
During the year ended December 31, 2023, plugging and abandonment costs incurred were $0.9 million. Critical Accounting Estimates The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Year Ended December 31, 2022 2021 Change % Change Revenues Oil $ 87,528 $ 62,297 $ 25,231 41 % NGL 63,663 50,836 12,827 25 % Natural gas 103,067 55,749 47,318 85 % Total revenues $ 254,258 $ 168,882 $ 85,376 51 % 45 Table of Contents Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the years ended December 31, 2022 and 2021 are shown in the table below (in thousands): 2021 oil, natural gas and NGL revenues $ 168,882 Change due to production volumes in 2022 (12,982) Change due to average prices in 2022 98,358 2022 oil, natural gas and NGL revenues $ 254,258 Oil, natural gas and NGL revenues increased primarily due to improvements in realized commodity prices.
Year Ended December 31, 2023 2022 Change Revenues Oil $ 78,174 $ 87,528 $ (9,354) Natural gas 34,941 103,067 (68,126) NGL 35,526 63,663 (28,137) Total revenues $ 148,641 $ 254,258 $ (105,617) Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the years ended December 31, 2023 and 2022 are shown in the table below (in thousands): 2022 oil, natural gas and NGL revenues $ 254,258 Change due to production volumes in 2023 (7,514) Change due to average prices in 2023 (98,103) 2023 oil, natural gas and NGL revenues $ 148,641 47 Table of Contents Oil, natural gas and NGL revenues decreased primarily due to lower commodity prices.
Depreciation and depletion of Oil and Natural Gas Properties. In accordance with full cost accounting rules, capitalized costs are amortized using the unit-of-production method. Under this method, depreciation and depletion is computed at the end of each quarter by multiplying total production for the quarter by a depletion rate.
See Proved Reserves discussion in Part I, Item 1 of this Form 10-K for additional detail. Depreciation and Depletion of Oil and Natural Gas Properties. In accordance with full cost accounting rules, capitalized costs are amortized using the unit-of-production method.
The depletion rate is determined by dividing the total unamortized cost base plus future development costs by net equivalent proved reserves at the beginning of the quarter. Impairment of Oil and Natural Gas Properties. In accordance with full cost accounting rules, capitalized costs are subject to a limitation.
Under this method, depreciation and depletion is computed at the end of each quarter by multiplying total production for the quarter by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base plus future development costs by net equivalent proved reserves at the beginning of the quarter.
These projects include (1) a continuation of our well reactivation program, (2) artificial lift conversions to more efficient and cost effective systems and (3) focused drilling in high-graded areas.
These projects include (1) artificial lift conversions to more efficient and cost effective systems, (2) high-graded re-fracturing and recompletion and (3) limited opportunistic leasing in proven areas around or adjacent to our area of operations that could further bolster future development.
Our capital expenditures for the years ended December 31, 2022 and 2021, are summarized below (in thousands): Year Ended December 31, 2022 2021 Capital Expenditures Drilling and completions $ 38,077 $ 1,087 Capital workovers 10,322 8,958 Leasehold and geophysical 809 905 Capital expenditures, excluding acquisitions (on an accrual basis) 49,208 10,950 Acquisitions 1,431 3,545 Current year total capital expenditures, including acquisitions 50,639 14,495 Change in capital accruals (5,123) 633 Total cash paid for capital expenditures $ 45,516 $ 15,128 Capital expenditures, excluding acquisitions, for development activities increased for the year ended December 31, 2022 compared to 2021, which is in line with the planned drilling, completion, capital workover and well reactivation program.
Our capital expenditures for the years ended December 31, 2023 and 2022, are summarized below (in thousands): Year Ended December 31, 2023 2022 Capital Expenditures Drilling and completions $ 18,132 $ 38,077 Capital workovers 4,346 10,322 Leasehold and geophysical (46) 809 Capital expenditures, excluding acquisitions (on an accrual basis) 22,432 49,208 Acquisitions 11,232 1,431 Capital expenditures, including acquisitions 33,664 50,639 Changes in accounts payable and accrued expenses 5,232 (5,123) Inventory material transfers to oil and natural gas properties $ (1,289) $ — Total cash paid for capital expenditures, including acquisitions $ 37,607 $ 45,516 Capital expenditures, excluding acquisitions, for development activities decreased for the year ended December 31, 2023 compared to 2022, primarily due to the conclusion of our drilling program in the second quarter of 2023.
Dunlap also joined the Audit Committee. • As part of our well reactivation program, we returned 50 wells to production for the year ended December 31, 2022. 43 Table of Contents Outlook We will continue to focus on growing the cash value and generation capability of our asset base in a safe, responsible and efficient manner, while exercising prudent capital allocations to projects we believe provide high rates of returns in the current commodity price environment.
Our dividend payment in May was $73.8 million and the $0.10 dividend payments made in August 2023 and November 2023 totaled $7.4 million. • In May 2023, the Board approved a stock buyback program authorizing the repurchase of up to $75 million of the Company’s outstanding common stock in open market transactions. 45 Table of Contents Outlook We will continue to focus on growing the value and cash generation capability of our asset base in a safe, responsible and efficient manner, while exercising prudent capital allocations to projects we believe provide high rates of returns in the current commodity price environment.
For the next twelve months, we expect to have ample liquidity with cash on hand and cash from operations. As of March 8, 2023 , the Company had no outstanding term or revolving debt obligations. Our commodity derivative contracts are subject to credit risk of our counterparties being financially able to settle the transaction.
We expect our cash on hand and cash from operations to be adequate to meet our short and long-term liquidity needs. As of March 1, 2024 , the Company had no outstanding term or revolving debt obligations.
Additionally, we had significant U.S. federal net operating losses remaining after the attribute reduction caused by the restructuring transactions. As such, the successor Company had significant deferred tax assets to consume upon emergence.
Upon emergence from bankruptcy and the application of fresh start accounting in 2016, our tax basis in oil and gas properties and property, plant, and equipment exceeded the book carrying value of our assets. Additionally, we had significant U.S. federal net operating losses remaining after the attribute reduction caused by the restructuring transactions.
Other Operating Expenses Other operating expenses for the years ended December 31, 2022 and 2021 consisted of the following (in thousands): Year Ended December 31, 2022 2021 Change % Change General and administrative $ 9,449 $ 9,675 (226) (2.3) % Restructuring expenses 382 792 (410) (51.8) % Employee termination benefits — 49 (49) (100.0) % (Gain) loss on derivative contracts (5,975) 2,251 (8,226) (365.4) % (Gain) loss on sale of assets — (18,952) 18,952 (100.0) % Other operating expense (income) (99) (382) 283 (74.1) % Total other operating expenses $ 3,757 $ (6,567) $ 10,324 (157.2) % General and administrative expenses decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to continued efforts of cost control initiatives.
Full cost pool impairments have no impact to our cash flow or liquidity. 48 Table of Contents Other Operating Expenses Other operating expenses for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): Year Ended December 31, 2023 2022 Change General and administrative $ 10,735 $ 9,449 $ 1,286 Restructuring expenses 406 382 24 Employee termination benefits 19 — 19 (Gain) loss on derivative contracts (1,447) (5,975) 4,528 Other operating expense (income) (157) (99) (58) Total other operating expenses $ 9,556 $ 3,757 $ 5,799 General and administrative expenses increased for the year ended December 31, 2023 primarily due to higher technology, service and personnel costs.
For the years ended December 31, 2022 and 2021, the Company revised its proved reserves from prior years’ reports by approximately 8.1 MMBoe and 43.3 MMBoe, respectively, due to increases in SEC prices used to value reserves at the end of the applicable period, production performance indicating more (or less) reserves in place, larger (or smaller) reservoir size than initially estimated or additional proved reserve bookings within the original field boundaries among other factors.
In the future, estimates of proved reserves could also be influenced by production performance indicating more (or less) reserves in place, larger (or smaller) reservoir size than initially estimated or additional proved reserve bookings within the original field boundaries among other factors.
Year Ended December 31, 2022 2021 Production (MBoe) % of Total Production Production (MBoe) % of Total Production Mid-Continent 6,463 100.0 % 6,726 99.0 % North Park Basin — — % 67 1.0 % Total 6,463 100.0 % 6,793 100.0 % Revenues Consolidated revenues for the years ended December 31, 2022 and 2021 are presented in the table below (in thousands).
Revenues Consolidated revenues for the years ended December 31, 2023 and 2022 are presented in the table below (in thousands).
Overview We are an independent oil and natural gas company with a principal focus on acquisition, development and production activities in the U.S. Mid-Continent. Prior to February 5, 2021, we held assets in the North Park Basin, which have been sold in their entirety.
Overview We are an independent oil and natural gas company with a principal focus on acquisition, development and production activities in the U.S. Mid-Continent region ("Mid-Con"). Operational Activities For the year ended December 31, 2023, there were two operated wells drilled and four wells completed.
During the year ended December 31, 2021, cash flows provided by investing activities primarily reflects $38.2 million of net cash proceeds primarily from the sale of the NPB assets partially offset by capital expenditures of $11.6 million and the acquisition of overriding royalty interests for $3.6 million.
During the year ended December 31, 2022, cash flows used in investing activities primarily reflects capital expenditures of $44.1 million related to drilling and completions, capital workovers, well reactivations, and inventory purchases and $1.4 million related to an acquisition of proved reserves. Cash outflows were partially offset by $0.4 million of proceeds from the sale of assets.
For the year ended December 31, 2021, Other income (expense), net is primarily comprised of the removal of $2.4 million of an allowance for doubtful accounts as a result of the $2.4 million being collected in October 2021. 48 Table of Contents Liquidity and Capital Resources At December 31, 2022, our cash and cash equivalents, including restricted cash, was $257.5 million.
As the partial valuation allowance release as of December 31, 2023 was lower than the partial valuation allowance release as of December 31, 2022 of $64.5 million, we recognized $14.0 million of deferred federal and state income tax expense for the year ended December 31, 2023. 50 Table of Contents Liquidity and Capital Resources At December 31, 2023, our cash and cash equivalents, including restricted cash, was $253.9 million.
Mid-Continent total production for the years ended December 31, 2022 and 2021 was composed of the following: Year Ended December 31, 2022 2021 Oil 14.7 % 13.2 % NGL 30.9 % 33.7 % Natural gas 54.4 % 53.1 % Total 100.0 % 100.0 % Highlighted Events • Consistent with our 2022 capital development program, we drilled eight wells and completed six wells during the year ended December 31, 2022. • On October 5, 2022 the Company’s Board of Directors appointed Ms.
The charts below show production and percent revenues by product for the years ended December 31, 2023 and 2022: 44 Table of Contents Total production for the years ended December 31, 2023 and 2022 was composed of the following: Year Ended December 31, 2023 2022 Oil 17.0 % 14.7 % Natural gas 55.3 % 54.4 % NGL 27.7 % 30.9 % Total 100.0 % 100.0 % The increase in oil production was primarily driven by the newly drilled wells as part of our capital development program.
We will endeavor to keep our capital spending within or very close to our projected cash flows from operations subject to changing industry conditions or events. Cash Flows Our cash flows from operations are substantially dependent on current and future prices for oil and natural gas, which historically have been, and may continue to be, volatile.
Total special and regular dividends for the year ended December 31, 2023 were $81.5 million. See Note 13 for further discussion of the Company’s dividends. Cash Flows Our cash flows from operations are substantially dependent on current and future prices for oil, natural gas and NGL, which historically have been, and may continue to be, volatile.
Share Repurchase Program On August 16, 2021, our Board approved the initiation of a share repurchase program authorizing us to purchase up to an aggregate of $25.0 million of our common stock beginning as early as August 16, 2021.
See discussion in above paragraph for additional information on net exercises of stock awards. Share Repurchase Program In May 2023, the Board approved a share repurchase program (the “Program”) authorizing the Company to repurchase up to an aggregate of $75.0 million of the Company’s outstanding common stock with the Company’s cash on hand.
We anticipate being able to utilize these deferred tax assets based on the generation of future income. A change in the estimate of future income could cause the valuation allowance to be adjusted in subsequent periods.
Our partial valuation release of $64.5 million as of December 31, 2022 was partially offset by $14.0 million due to changes in expected future income, resulting in net deferred tax assets of $50.6 million as of December 31, 2023. We anticipate being able to utilize these deferred tax assets based on the generation of future income.
Removed
However, we brought wells that were previously not producing on to production as part of our well reactivation program during the year ended December 31, 2021.
Added
The decrease in total MBoe was primarily driven by a reduction of NGL production, as one of our purchasers elected to retain more ethane in the natural gas stream, which had more favorable market pricing at the time of sales, as well as natural decline of its producing assets.
Removed
The chart below shows production by product for the years ended December 31, 2022 and 2021: (1) For the year ended December 31, 2021, North Park Basin had 67 MBoe in oil production. 42 Table of Contents Total production for the Company in 2022 was composed of approximately 14.7% oil, 54.4% natural gas and 30.9% NGLs compared to 14.1% oil, 52.5% natural gas and 33.4% NGLs in 2021.
Added
These factors were partially offset by production added during the third quarter from an acquisition that closed on July 11, 2023, which increased our ownership interest in twenty-six wells we operate.
Removed
Nancy Dunlap to serve as a member of the Board. Ms.
Added
Highlighted Events • In January 2024, the Board approved a one-time cash dividend of $1.50 per share of the Company's common stock, which was paid on February 20, 2024 to shareholders of record as of the close of business on February 5, 2024. The aggregate total payout was approximately $55.6 million.
Removed
Acquisitions and Divestitures of Properties 2021 Acquisitions and Divestitures On April 22, 2021, we announced the acquisition of all the overriding royalty interest assets of SandRidge Mississippian Trust I (the “Trust”). The gross purchase price was $4.9 million (net $3.6 million, given our 26.9% ownership of the Trust).
Added
Additionally, in January 2024, the Board announced that it plans to increase its on-going quarterly dividend to $0.11 per share starting with the next quarterly payout, estimated to be first paid in March 2024, continuing every quarter thereafter until noticed, subject to quarterly approval by the Board. • On July 11, 2023, the Company closed an acquisition that increased its ownership interest in twenty-six producing wells operated by the Company within the Northwest Stack play for $10.6 million, after customary post-closing adjustments, with an effective date of April 1, 2023.
Removed
On February 5, 2021, we sold all of our oil and natural gas properties and related assets of the North Park Basin ("NPB") in Colorado for a purchase price of $47 million in cash.
Added
The Company used its cash on hand to fund the acquisition. • In May 2023, the Board approved a one-time cash dividend of $2.00 per share of the Company’s common stock, which was paid on June 7, 2023 to shareholders of record as of the close of business on May 24, 2023.
Removed
Net proceeds were $39.7 million in cash as a result of customary effective to close date adjustments and a $0.8 million post-close adjustment made during the second half of the year.
Added
Additionally, in May 2023, the Board announced a regular quarterly dividend of $0.10 per share of the Company’s common stock, subject to quarterly approval by the Board.
Removed
The sale resulted in an $18.9 million gain after the post-close adjustment. 44 Table of Contents Oil, Natural Gas and NGL Production and Pricing The table below presents production and pricing information for the years ended December 31, 2022 and 2021.
Added
While commodity price futures are not yet at preferred levels to resume drilling or further well reactivations at this time, we retain the development option over a reasonable tenor, since our assets are 99% held by production.
Removed
The table below presents production by area of operation for the years ended December 31, 2022 and 2021.
Added
Production, ad valorem, and other taxes decreased primarily due to lower commodity prices and related revenues.
Removed
See Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of this report for additional discussion of our commodity derivatives. Gain on sale of assets for the year ended December 31, 2021 relates to the sale of our NPB assets in Colorado in February 2021.
Added
However, production, ad valorem, and other taxes increased as a percentage of oil, natural gas and NGL revenue primarily due to higher oil and gas property valuation assessments by local jurisdictions who use historical commodity price averages that included prior periods that were higher than current commodity prices, when determining ad valorem tax assessments.
Removed
Interest expense incurred during the year ended December 31, 2021 is primarily comprised of interest and fees paid on the 2020 Credit Facility. The 2020 Credit Facility has been fully repaid and terminated as of September 2, 2021. As a result of the termination of the 2020 Credit Facility, $0.2 million of deferred financing costs were expensed to Interest expense.
Added
Interest (income) expense, net during the year ended December 31, 2022 is primarily comprised of interest income received from cash deposits partially offset by interest paid on royalty obligations of $0.1 million, interest on vehicle leases and letters of credit.
Removed
We monitor the credit ratings of our derivative counterparties and consider our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts. However, any future failures by one or more counterparties could negatively impact our cash flow from operations.

… 16 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+0 added−1 removed1 unchanged
Biggest changeThese commodity derivative contracts consisted of the following: Notional Units Weighted Average Fixed Price per Unit Natural Gas Price Swaps: January 2023 - March 2023 1,044,000 MMBtu $ 8.39 Because we have not designated any of our derivative contracts as hedges for accounting purposes, changes in fair values of our derivative contracts are recognized as gains and losses in current period earnings.
Biggest changeBecause we historically have not designated any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts were recognized as gains and losses in current period earnings. As a result, and when applicable, current period earnings could have been significantly affected by changes in the fair value of our commodity derivative contracts.
Our most significant market risk relates to the prices we receive for oil, natural gas and NGLs.
Our most significant market risk relates to the prices we receive for our oil, natural gas and NGLs.
Historically, derivative contracts have been with multiple counterparties to minimize exposure to any individual counterparty, and in addition our counterparties have been large financial institutions. We do not require collateral or other security from counterparties to support derivative instruments.
Our derivative contracts have historically been with multiple counterparties to minimize exposure to any individual counterparty, and in addition our counterparties have been large financial institutions. We did not require collateral or other security from counterparties to support derivative instruments.
Credit Risk. We are exposed to credit risk related to counterparties to our derivative financial contracts. All of our derivative transactions have been carried out in the over-the-counter market. The use of derivative transactions in over-the-counter markets involves the risk that the counterparties may be unable to meet the financial terms of the transactions.
Credit Risk. As applicable, we were exposed to credit risk related to counterparties to our derivative financial contracts. All of our derivative transactions have been carried out in the over-the-counter market. The use of derivative transactions in over-the-counter markets involves the risk that the counterparties may be unable to meet the financial terms of the transactions.
As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the commodity derivative contracts. Therefore, we are not required to post additional collateral under our commodity derivative contracts.
As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk was limited to the net amounts due from the counterparties under the commodity derivative contracts. Therefore, we were not required to post additional collateral under our commodity derivative contracts.
We are also exposed to credit risk related to the collection of receivables from our joint interest partners for their proportionate share of expenditures made on projects we operate. Historically, our credit losses on joint interest receivables have been immaterial. 54 Table of Contents
We are also exposed to credit risk related to the collection of receivables from our joint interest partners for their proportionate share of expenditures on wells and properties we operate. Historically, our credit losses on joint interest receivables have been immaterial. 56 Table of Contents
We have master netting agreements with our derivative contract counterparties, which allow us to net our derivative assets and liabilities by commodity type with the same counterparty.
We historically had master netting agreements with our derivative contract counterparties, which allowed us to net our derivative assets and liabilities by commodity type with the same counterparty.
The counterparties for all of our derivative transactions have an “investment grade” credit rating. We monitor the credit ratings of our derivative counterparties and consider our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts.
The counterparties for all of our derivative transactions have had an “investment grade” credit rating. We have historically monitored the credit ratings of our derivative counterparties and considered our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts.
Due to the historical price volatility of these commodities, from time to time, depending upon our view of opportunities under the then-prevailing market conditions, we enter into commodity pricing derivative contracts for a portion of our anticipated production volumes for the purpose of reducing the variability of oil, natural gas and NGLs we receive.
Due to the historical price volatility of these commodities, from time to time, depending upon our view of opportunities under the then-prevailing current market conditions, we have historically entered into commodity derivative contracts for a portion of our anticipated production volumes for the purpose of reducing the impact of the variability of oil, natural gas and NGL prices.
The following table summarizes derivative activity for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 (Gain) loss on derivative contracts $ (5,975) $ 2,251 Cash paid (received) on settlements $ (1,525) $ 2,230 See “Note 6—Derivatives” to the accompanying consolidated financial statements in Item 8 of this report for additional information regarding our commodity derivatives.
The following table summarizes derivative activity for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 (Gain) loss on derivative contracts $ (1,447) $ (5,975) Realized settlement gains (losses) on derivative contracts $ 5,876 $ 1,525 See “Note 6—Derivatives” to the accompanying consolidated financial statements in Item 8 of this report for additional information regarding our commodity derivatives.
As a result, our current period earnings may be significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value are principally measured based on a comparison of future prices to the contract price at the period-end.
Changes in fair value were principally measured based on a comparison of future prices to the contract price at the end of the period.
We may use a variety of commodity-based derivative contracts, including fixed price swaps, basis swaps and collars.
We have used, and may use, a variety of commodity-based derivative contracts, including fixed price swaps, basis swaps and collars. At December 31, 2023, we had no open commodity derivative contracts or obligations to enter into commodity derivative contracts.
Removed
At December 31, 2022, the Company's open derivative contracts consisted of natural gas commodity derivative contracts under which we will receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume.

Other SD 10-K year-over-year comparisons