Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes in “Item 1. Financial Statements” contained herein and in “Item 1A. Risk Factors” of our 2024 Form 10-K. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in the front of this report.
Overview
We operate in one reportable segment engaged in the acquisition, development, exploitation and production of oil and natural gas properties. Our management evaluates performance based on the reportable business segment as the economic environments are not different within the operation of our oil and natural gas properties. Our business activities are conducted through OLLC, our wholly owned subsidiary, and its wholly owned subsidiaries. Our assets have historically consisted primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (“Bairoil”), federal waters offshore Southern California (“Beta”), East Texas/North Louisiana and the Eagle Ford (non-op). Amplify’s current operations are focused at Oklahoma, Bairoil and Beta. Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs.
Industry Trends
We continue to monitor the impact of the actions of OPEC+ and other large producing nations, the Russia-Ukraine conflict, conflicts in the Middle East, the imposition of tariffs or other economic sanctions, global inventories of oil and natural gas and the uncertainty associated with recovering oil demand, inflation and future monetary policy and governmental policies aimed at transitioning towards lower carbon energy. In 2025, there has been continued volatility in oil, natural gas and NGL prices resulting from (i) trade tariff uncertainties driving concerns over an increase in inflation and (ii) OPEC+’s decision to increase production in May through September 2025, creating additional global supply and further downward pressure on oil prices. In October 2025, OPEC+ announced an additional production increase for November, which is expected to exacerbate these supply-side pressures on oil prices.
While U.S. inflation rates during 2025 have remained relatively stable, they continued to be slightly higher than historical averages. Such inflation, along with the effects of economic pressures from international military and trade conflicts, could, as a result, continue to raise the cost of borrowing, impact the demand for and price of oil and natural gas, increase the price of crucial supplies and raw materials and impact interest rates. In both September and October, the Federal Reserve reduced interest rates, and may lower rates further, though it remains uncertain at this time. Due to these factors, among others, we expect prices for some or all commodities to remain volatile. Thus, we cannot predict with reasonable certainty the extent to which these factors may impact our business, results of operations, financial condition and cash flows.
Recent Developments
East Texas Haynesville Monetization
On October 2, 2025, the Company entered into a purchase and sale agreement to sell its remaining interest in certain units with rights in the Cotton Valley and Haynesville basins in Harrison County, Texas, generating $5.5 million in net proceeds from the transactions. The sale closed on October 24, 2025 and has an effective date of October 1, 2025.
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EQV Purchase and Sale Agreement
On October 28, 2025, OLLC and Magnify Energy Services LLC, a Delaware limited liability company and indirect, wholly owned subsidiary of the Company (“Magnify” and together with OLLC, the “EQV Sellers”), entered into a purchase and sale agreement (the “EQV Purchase and Sale Agreement”) with EQV Alpha LLC, a Delaware limited liability company (“Alpha”), pursuant to which the EQV Sellers sold to Alpha certain assets of the EQV Sellers, which include, among other things, the EQV Sellers’ right, title and interest in and to certain specified oil and gas Properties and Equipment (each as defined in the EQV Purchase and Sale Agreement) within or related to certain designated lands in East Texas and Louisiana (the “EQV Asset Sale”) for a cash purchase price of $122.0 million, which remains subject to customary adjustments under the EQV Purchase and Sale Agreement. The EQV Asset Sale contemplated by the EQV Purchase and Sale Agreement is expected to close in December 2025 with an effective date of October 1, 2025.
Revolution Purchase and Sale Agreement
On November 4, 2025, Amplify Oklahoma Operating LLC, a Delaware limited liability company and indirect, wholly owned subsidiary of the Company (“Amplify Oklahoma”), Magnify (together with Amplify Oklahoma, the “Revolution Sellers”) and OLLC, for certain limited purposes, entered into a purchase and sale agreement (the “Revolution Purchase and Sale Agreement”) with Revolution Resources III, LLC, a Delaware limited liability company (“Revolution”), pursuant to which the Revolution Sellers sold to Revolution certain assets of the Revolution Sellers, which include, among other things, the Revolution Sellers’ right, title and interest in and to certain specified oil and gas Properties and Equipment (each as defined in the Revolution Purchase and Sale Agreement) within or related to certain designated lands in Oklahoma (the “Revolution Asset Sale”) for a cash purchase price of $92.5 million, which remains subject to customary adjustments under the Revolution Purchase and Sale Agreement. The Revolution Asset Sale contemplated by the Revolution Purchase and Sale Agreement is expected to close in December 2025 with an effective date of October 1, 2025.
Business Environment and Operational Focus
We use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including: (i) production volumes; (ii) realized prices on the sale of our production; (iii) cash settlements on our commodity derivatives; (iv) lease operating expense; (v) gathering, processing and transportation; (vi) general and administrative expense; and (vii) Adjusted EBITDA (as defined below).
Sources of Revenues
Our revenues are derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from natural gas during processing. Production revenues are derived entirely from the continental United States. Natural gas, NGL and oil prices are inherently volatile and are influenced by many factors outside our control. In order to reduce the impact of fluctuations in natural gas and oil prices on revenues, we intend to periodically enter into derivative contracts that fix the future prices received. At the end of each period, the fair value of these commodity derivative instruments is estimated and because hedge accounting is not elected, the changes in the fair value of unsettled commodity derivative instruments are recognized in earnings at the end of each accounting period.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates, including a discussion regarding the estimation uncertainty and the impact that our critical accounting estimates have had, or are reasonably likely to have, on our financial condition or results of operations, are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K. Significant estimates include, but are not limited to, oil and natural gas reserves, fair value estimates, revenue recognition and contingencies and insurance accounting. These estimates, in our opinion, are subjective in nature, require the use of professional judgment and involve complex analysis.
When used in the preparation of our consolidated financial statements, such estimates are based on our current knowledge and understanding of the underlying facts and circumstances and may be revised as a result of actions we take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our consolidated financial position, results of operations and cash flows.
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Results of Operations
The results of operations for the three and nine months ended September 30, 2025 and 2024 have been derived from our unaudited condensed consolidated financial statements.
The following table summarizes certain of the results of operations for the periods indicated.
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
($ In thousands except per unit amounts)
Oil and natural gas sales
$
64,242
$
68,135
$
201,357
$
215,803
Other revenues
2,154
1,723
5,450
9,857
Lease operating expense
35,613
33,255
111,652
107,850
Gathering, processing and transportation
5,237
4,290
14,246
13,959
Taxes other than income
3,654
5,997
12,337
15,539
Depreciation, depletion and amortization
9,004
8,102
27,263
24,168
Impairment expense
34,002
—
42,450
—
General and administrative expense
11,764
8,251
33,776
26,409
Loss (gain) on commodity derivative instruments
(6,922)
(25,047)
(14,767)
(7,258)
Pipeline incident loss
54
247
645
1,454
(Gain) loss on sale of properties
(1,740)
—
(9,536)
—
Interest expense, net
3,860
3,756
10,973
10,915
Income tax (expense) benefit - current
116
(412)
(380)
(2,364)
Income tax (expense) benefit - deferred
9,228
(5,650)
9,346
(3,082)
Net income (loss)
(20,966)
22,652
(20,443)
20,375
Oil and natural gas revenues:
Oil sales
$
45,543
$
54,353
$
145,230
$
169,563
NGL sales
5,401
6,096
17,206
20,187
Natural gas sales
13,298
7,686
38,921
26,053
Total oil and natural gas revenues
$
64,242
$
68,135
$
201,357
$
215,803
Production volumes:
Oil (MBbls)
750
758
2,315
2,300
NGLs (MBbls)
286
301
834
979
Natural gas (MMcf)
4,648
4,165
12,055
12,953
Total (MBoe)
1,811
1,752
5,158
5,438
Average net production (MBoe/d)
19.7
19.0
18.9
19.8
Average realized sales price (excluding commodity derivatives):
Oil (per Bbl)
$
60.72
$
71.74
$
62.73
$
73.73
NGL (per Bbl)
18.86
20.29
20.63
20.62
Natural gas (per Mcf)
2.86
1.85
3.23
2.01
Total (per Boe)
$
35.47
$
38.88
$
39.03
$
39.69
Average unit costs per Boe:
Lease operating expense
$
19.67
$
18.98
$
21.65
$
19.83
Gathering, processing and transportation
2.89
2.45
2.76
2.57
Taxes other than income
2.02
3.42
2.39
2.86
General and administrative expense
6.50
4.71
6.55
4.86
Depletion, depreciation and amortization
4.97
4.62
5.29
4.44
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For the Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
We reported a net loss of $21.0 million compared to net income of $22.7 million for the three months ended September 30, 2025 and 2024, respectively.
Oil, natural gas and NGL revenues were $64.2 million and $68.1 million for the three months ended September 30, 2025 and 2024, respectively. Average net production volumes were approximately 19.7 MBoe/d and 19.0 MBoe/d for the three months ended September 30, 2025 and 2024, respectively. The average realized sales prices were $35.47 per Boe and $38.88 per Boe for the three months ended September 30, 2025 and 2024, respectively. The change in realized sales price was due to lower realized sales prices for oil, partially offset by higher realized sales prices for natural gas.
Other revenues were $2.2 million and $1.7 million for the three months ended September 30, 2025 and 2024, respectively. The increase was primarily related to an increase of $0.3 million in rental income with respect to Magnify and interest income earned on our sinking fund escrow accounts.
Lease operating expenses were $35.6 million and $33.3 million for the three months ended September 30, 2025 and 2024, respectively. On a per Boe basis, lease operating expenses were $19.67 and $18.98 for the three months ended September 30, 2025 and 2024, respectively. The change in lease operating expense was primarily due to increased workover activity at Beta and Bairoil, partially offset by a decrease in costs associated with the divestiture of our non-operated Eagle Ford assets.
Gathering, processing and transportation expenses were $5.2 million and $4.3 million for the three months ended September 30, 2025 and 2024, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.89 and $2.45 for the three months ended September 30, 2025 and 2024, respectively. The change in gathering, processing and transportation expenses was primarily due to higher gas volumes during the quarter.
Taxes other than income were $3.7 million and $6.0 million for the three months ended September 30, 2025 and 2024, respectively. On a per Boe basis, taxes other than income were $2.02 and $3.42 for the three months ended September 30, 2025 and 2024, respectively. The reduction in taxes other than income was primarily related to a decrease in both emission charges and production taxes.
DD&A expenses were $9.0 million and $8.1 million for the three months ended September 30, 2025 and 2024, respectively. The change in DD&A expenses was primarily driven by increased production, partially offset by the divestiture of our non-operated Eagle Ford assets.
Impairment expense was $34.0 million for the three months ended September 30, 2025. The Company recognized an impairment charge due to the carrying value of the assets exceeding the fair market value of the assets. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information. No impairment expense was recorded for the three months ended September 30, 2024.
General and administrative expenses were $11.8 million and $8.3 million for the three months ended September 30, 2025 and 2024, respectively. The change in general and administrative expenses was primarily related to (i) an increase of $0.8 million in acquisition and divestiture costs incurred during the second quarter, (ii) an increase of $0.8 million in stock compensation expense and (iii) an increase in severance expense of $1.5 million.
Net loss (gain) on commodity derivative instruments of ($6.9) million was recognized for the three months ended September 30, 2025, consisting of a $2.1 million increase in the fair value of open positions and $4.8 million of cash settlements received on expired positions. Net gain on commodity derivative instruments of $25.0 million was recognized for the three months ended September 30, 2024, consisting of a $18.7 million increase in the fair value of open positions, $5.6 million of cash settlements received on expired positions and $0.8 million of cash settlements received on terminated derivative instruments.
Pipeline incident loss was less than $0.1 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
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(Gain) loss on sale of properties was ($1.7) million for the three months ended September 30, 2025. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements under “Item 1. Financial Statements” of this quarterly report for additional information. There was no (gain) loss on sale of properties for the three months ended September 30, 2024.
Interest expense, net was $3.9 million for the three months ended September 30, 2025 and $3.8 million for the three months ended September 30, 2024.
Average outstanding borrowings under our Revolving Credit Facility were $124.9 million and $122.5 million for the three months ended September 30, 2025 and 2024, respectively.
Current income tax benefit (expense) was $0.1 million and ($0.4) million for the three months ended September 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Deferred income tax benefit (expense) was $9.2 million and ($5.7) million for the three months ended September 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
For the Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
We reported a net loss of $20.4 million compared to a net income of $20.4 million for the nine months ended September 30, 2025 and 2024, respectively.
Oil, natural gas and NGL revenues were $201.4 million and $215.8 million for the nine months ended September 30, 2025 and 2024, respectively. Average net production volumes were approximately 18.9 MBoe/d and 19.8 MBoe/d for the nine months ended September 30, 2025 and 2024, respectively. The average realized sales prices were $39.03 per Boe and $39.69 per Boe for the nine months ended September 30, 2025 and 2024, respectively. The change in realized sales price was due to lower realized sales prices for oil, partially offset by higher realized sales prices for natural gas.
Other revenues were $5.5 million and $9.9 million for the nine months ended September 30, 2025 and 2024, respectively. The change was primarily related to the revenue suspense release of $4.8 million for the nine months ended September 30, 2024.
Lease operating expenses were $111.7 million and $107.9 million for the nine months ended September 30, 2025 and 2024, respectively. On a per Boe basis, lease operating expenses were $21.65 and $19.83 for the nine months ended September 30, 2025 and 2024, respectively. The change in lease operating expense was primarily due to increased workover activity at Beta and an increase in electricity cost at Bairoil, partially offset by the decrease in cost associated with the divestiture of our non-operated Eagle Ford assets.
Gathering, processing and transportation expenses were $14.2 million and $14.0 million for the nine months ended September 30, 2025 and 2024, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.76 and $2.57 for the nine months ended September 30, 2025 and 2024, respectively. The change in gathering, processing and transportation expense was primarily due to lower gas volumes.
Taxes other than income were $12.3 million and $15.5 million for the nine months ended September 30, 2025 and 2024, respectively. On a per Boe basis, taxes other than income were $2.39 and $2.86 for the nine months ended September 30, 2025 and 2024. The change in taxes other than income was primarily related to a reduction in production taxes due to lower volumes and a decrease in emission charges.
DD&A expenses were $27.3 million and $24.2 million for the nine months ended September 30, 2025 and 2024, respectively. The change was primarily due to an increase in our depletion rate of $4.4 million, partially offset by a decrease of $1.2 million due to lower volumes of production.
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Impairment expense was $42.5 million for the nine months ended September 30, 2025. The Company recognized an impairment charge due to the carrying value of the assets exceeding the fair market value of the assets. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information. No impairment expense was recorded for the nine months ended September 30, 2024.
General and administrative expenses were $33.8 million and $26.4 million for the nine months ended September 30, 2025 and 2024, respectively. The change in general and administrative expenses was primarily related to (i) an increase of $4.7 million in acquisition and divestiture costs, (ii) an increase of $1.4 million in stock compensation expense and (iii) an increase in severance expense of $1.2 million.
Net loss (gain) on commodity derivative instruments of ($14.8) million was recognized for the nine months ended September 30, 2025, consisting of a $4.6 million increase in the fair value of open positions and $10.1 million of cash settlements received on expired positions. A net gain on commodity derivative instruments of $7.3 million was recognized for the nine months ended September 30, 2024, consisting of a $13.6 million of cash settlements received on expired positions and $0.8 million of cash settlements received on terminated derivative instruments, partially offset by a decrease of $7.1 million in the fair value of open positions.
Pipeline incident loss was $0.6 million and $1.5 million for the nine months ended September 30, 2025 and 2024, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
(Gain) loss on sale of properties was ($9.5) million for the nine months ended September 30, 2025. This primarily related to the sale of certain units with rights in the Cotton Valley and Haynesville basins in Harrison County, Texas. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements under “Item 1. Financial Statements” of this quarterly report for additional information. There was no (gain) loss on sale of properties for the nine months ended September 30, 2024.
Interest expense, net was $11.0 million and $10.9 million for the nine months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025, we recognized a write-off of deferred financing cost of $0.2 million in connection with the decrease in our borrowing base.
Average outstanding borrowings under our Revolving Credit Facility were $127.5 million and $119.8 million for the nine months ended September 30, 2025 and 2024, respectively.
Current income tax benefit (expense) was ($0.4) million and ($2.4) million for the nine months ended September 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Deferred income tax benefit (expense) was $9.3 million and ($3.1) million for the nine months ended September 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Non-GAAP Financial Measures
We include in this report the non-GAAP financial measure of Adjusted Net Income (Loss) and Adjusted EBITDA and provide our reconciliation of net income (loss) to Adjusted Net Income (Loss), Adjusted EBITDA to net income (loss), and net cash flows from operating activities, our most directly comparable financial measures calculated and presented in accordance with GAAP.
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Adjusted Net Income (Loss)
We define Adjusted Net Income (Loss) as net income (loss) adjusted for unrealized loss (gain) on commodity derivative instruments, acquisition and divestiture-related expenses, impairment expense, unusual and infrequent items, and the income tax expense or benefit of these adjustments using our federal statutory tax rate. This measure is not meant to disassociate these items from management’s performance but rather is intended to provide helpful information to investors interested in comparing our performance between periods. Adjusted Net Income (Loss) is not considered to be an alternative to net income (loss) reported in accordance with GAAP.
The following tables present our reconciliation of the Company’s net income (loss) to Adjusted Net Income (Loss), our most directly comparable GAAP financial measures, for each of the periods indicated.
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Net (loss) income
$
(20,966)
$
22,652
$
(20,443)
$
20,375
Unrealized loss (gain) on commodity derivative instruments
(2,077)
(18,672)
(4,638)
7,100
Acquisition and divestiture-related expenses
951
186
4,926
209
Impairment expense
34,002
—
42,450
—
Non-recurring costs:
Income tax expense (benefit) - deferred
(9,228)
5,650
(9,346)
3,082
(Gain) loss on sale of properties
(1,740)
—
(9,536)
—
Tax effect of adjustments (1)
(6,975)
(39)
(7,946)
(44)
Adjusted net income (loss)
$
(6,033)
$
9,777
$
(4,533)
$
30,722
(1) The federal statutory rates were utilized for all periods presented.
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. We define Adjusted EBITDA as net income (loss):
Plus:
● Interest expense;
● Income tax expense;
● DD&A;
● Impairment of goodwill and long-lived assets (including oil and natural gas properties);
● Accretion of AROs;
● Loss on commodity derivative instruments;
● Cash settlements received on expired commodity derivative instruments;
● Amortization of gain associated with terminated commodity derivatives;
● Losses on sale of assets;
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● Share-based compensation expenses;
● Exploration costs;
● Acquisition and divestiture related expenses;
● Reorganization items, net;
● Severance payments; and
● Other non-routine items that we deem appropriate.
Less:
● Interest income;
● Income tax benefit;
● Gain on commodity derivative instruments;
● Cash settlements paid on expired commodity derivative instruments;
● Gains on sale of assets and other, net; and
● Other non-routine items that we deem appropriate.
We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.
In addition, we use Adjusted EBITDA as an additional measure to evaluate actual cash flow available to develop existing reserves or acquire additional oil and natural gas properties.
The following tables present our reconciliation of the Company’s net income (loss) to Adjusted EBITDA and cash flows from operating activities to Adjusted EBITDA, our most directly comparable GAAP financial measures, for each of the periods indicated.
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Reconciliation of Net Income (Loss) to Adjusted EBITDA
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Net income (loss)
$
(20,966)
$
22,652
$
(20,443)
$
20,375
Interest expense, net
3,860
3,756
10,973
10,915
Income tax expense (benefit) - current
(116)
412
380
2,364
Income tax expense (benefit) - deferred
(9,228)
5,650
(9,346)
3,082
Impairment expense
34,002
—
42,450
—
DD&A
9,004
8,102
27,263
24,168
Accretion of AROs
2,219
2,125
6,612
6,282
Loss (gain) on commodity derivative instruments
(6,922)
(25,047)
(14,767)
(7,258)
Cash settlements (paid) received on expired commodity derivative instruments
4,845
5,582
10,129
13,565
(Gain) loss on sale of properties
(1,740)
—
(9,536)
—
Share-based compensation expense
2,656
1,815
6,536
5,113
Acquisition and divestiture related expenses
951
186
4,926
209
Severance payments
1,464
—
1,464
—
Amortization of gain associated with terminated commodity derivatives
159
—
477
—
Pipeline incident loss
54
247
645
1,454
Loss on settlement of AROs
33
38
70
136
Exploration costs
(1)
—
15
51
Bad debt expense
34
26
87
52
Other
—
—
800
686
Adjusted EBITDA (1)
$
20,308
$
25,544
$
58,735
$
81,194
(1) Adjusted EBITDA includes a revenue suspense release of $0.4 million and $8.4 million for the nine months ended September 30, 2025 and 2024, respectively.
Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Net cash provided by operating activities
$
13,448
$
15,737
$
62,638
$
38,838
Changes in working capital
1,046
5,937
(15,162)
27,502
Interest expense, net
3,860
3,756
10,973
10,915
(Gain) loss on sale of property
(550)
—
(8,346)
—
Acquisition and divestiture related expenses
951
186
4,926
209
Pipeline incident loss
54
247
645
1,454
Severance payments
1,464
—
1,464
—
Plugging and abandonment cost
482
372
1,044
886
Amortization and write-off of deferred financing fees
(489)
(310)
(1,119)
(918)
Cash settlements paid (received) on terminated derivatives
—
(793)
—
(793)
Amortization of gain associated with terminated commodity derivatives
159
—
477
—
Income tax expense (benefit) - current
(116)
412
380
2,364
Exploration costs
(1)
—
15
51
Other
—
—
800
686
Adjusted EBITDA (1)
$
20,308
$
25,544
$
58,735
$
81,194
(1) Adjusted EBITDA includes a revenue suspense release of $0.4 million and $8.4 million for the nine months ended September 30, 2025 and 2024, respectively.
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Liquidity and Capital Resources
Overview. Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness obligations, to refinance our indebtedness or to meet our collateral requirements will depend on our ability to generate cash in the future. Our primary sources of liquidity and capital resources are cash flows generated by operating activities, borrowings under our Revolving Credit Facility, equity and debt capital markets and potential proceeds from sales of assets. We plan to monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our Revolving Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2025 development activities. However, future cash flows are subject to a number of variables, including the level of our oil and natural gas production and the prices we receive for our oil and natural gas production, and significant additional capital expenditures will be required to more fully develop our properties. We cannot assure you that operations and other needed capital will be available on acceptable terms, or at all. For the remainder of 2025, we anticipate funding our 2025 capital program from internally generated cash flow but retain the flexibility to utilize borrowings under our Revolving Credit Facility, to access the debt and equity capital markets and continue to evaluate opportunities to optimize our portfolio to reduce debt and accelerate Beta development. We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under our Revolving Credit Facility will be sufficient to support working capital, capital expenditures and other cash requirements for at least the next 12 months and, based on our current expectations, for the foreseeable future thereafter.
Termination of Contemplated Merger with Juniper Capital . In connection with the Contemplated Mergers, on April 25, 2025, pursuant to Section 8.1(a) of the Merger Agreement, the Company and the Acquired Companies entered into the Termination Agreement to terminate the Merger Agreement, effective immediately. In accordance with the terms of the Termination Agreement, the Company made a cash payment to the Acquired Companies in lieu of any termination fee which might have otherwise been payable pursuant to the Merger Agreement in the amount of $800,000 as payment for certain of the Acquired Companies’ expenses. The Company incurred professional fees and expenses of approximately $3.5 million in connection with the Contemplated Mergers and the Termination. For additional information regarding the Termination, see Notes 4 and 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Capital Markets. We do not currently anticipate any near-term capital markets activity, but we will continue to evaluate the availability of public debt and equity for funding capital needs.
Hedging. Commodity hedging has been and remains an important part of our strategy to reduce cash flow volatility. Our hedging activities are intended to support oil, NGL and natural gas prices at targeted levels and to manage our exposure to commodity price fluctuations. We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 50% - 75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time. We may, however, from time to time, hedge more or less than this approximate amount. Additionally, we may take advantage of opportunities to modify our commodity derivative portfolio to change the percentage of our hedged production volumes when circumstances suggest that it is prudent to do so. Market conditions may also impact our ability to enter into future commodity derivative contracts.
We evaluate counterparty risks related to our commodity derivative contracts and trade credit. Should any of these financial counterparties not perform, we may not realize the benefit of some of our hedges under lower commodity prices. We sell our oil and natural gas to a variety of purchasers. Non-performance by a customer could also result in a loss.
Capital Expenditures. Our total capital expenditures were approximately $66.1 million for the nine months ended September 30, 2025, which were primarily related to the development program at Beta and non-operated drilling and completion activities in East Texas and the Eagle Ford.
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Working Capital. Working capital is the amount by which current assets exceed current liabilities. Our working capital requirements are primarily driven by changes in accounts receivable and accounts payable, as well as the classification of our debt outstanding. These changes are impacted by changes in the prices of commodities that we buy and sell. In general, our working capital requirements increase in periods of rising commodity prices and decrease in periods of declining commodity prices. However, our working capital needs do not necessarily change at the same rate as commodity prices because both accounts receivable and accounts payable are impacted by the same commodity prices. In addition, the timing of payments received by our customers or paid to our suppliers can also cause fluctuations in working capital because we settle with most of our larger customers on a monthly basis and often near the end of the month. We expect that our future working capital requirements will be impacted by these same factors. From time-to-time, our working capital will reflect a deficit, while at other times it will reflect a surplus. This fluctuation is not unusual.
As of September 30, 2025, we had a working capital deficit (excluding commodity derivatives) of $9.6 million primarily due to accrued liabilities of $29.7 million, revenues payable of $10.1 million, and accounts payable of $29.2 million, partially offset by accounts receivable of $33.2 million and prepaid expenses of $26.2 million. As of September 30, 2025, although we had a working capital deficit, we had $12.0 million of available borrowings as of such date under our Revolving Credit Facility which provided additional liquidity. As such, we have met all debt covenant ratio requirements as of September 30, 2025.
Debt Agreement
Revolving Credit Facility. On July 31, 2023, OLLC and Acquisitionco entered into the Revolving Credit Facility. As of September 30, 2025, the borrowing base under the facility was $135.0 million with elected commitments of $135.0 million. The aggregate principal amount of loans outstanding under the Revolving Credit Facility as of September 30, 2025, was $123.0 million.
As of September 30, 2025, we had approximately $12.0 million of available borrowings under our Revolving Credit Facility.
As of September 30, 2025, we were in compliance with all the financial covenants (current ratio and total leverage ratio) and non-financial covenants associated with the Revolving Credit Facility.
For additional information regarding our Revolving Credit Facility, see Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Material Cash Requirements
Contractual Commitments. We have contractual commitments under our debt agreements, including interest payments and principal payments. See Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
Lease Obligations . We have operating leases for office and warehouse spaces, office equipment, compressors and surface rentals related to our business obligations. See Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
Sinking Fund Payments . We have a funding requirement to fund two trust accounts to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for the Beta production facilities. As of September 30, 2025, our future commitments under these agreements were $2.3 million for the remainder of 2025 and $9.0 million per year until the escrow accounts are fully funded. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
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Cash Flows from Operating, Investing and Financing Activities
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated. The cash flows for the nine months ended September 30, 2025 and 2024 have been derived from our Unaudited Condensed Consolidated Financial Statements. For information regarding the individual components of our cash flow amounts, see our Unaudited Condensed Consolidated Statements of Cash Flows included under “Item 1. Financial Statements” of this quarterly report.
For the Nine Months Ended
September 30,
2025
2024
(In thousands)
Net cash provided by operating activities
$
62,638
$
38,838
Net cash used in investing activities
(56,557)
(62,655)
Net cash used in financing activities
(6,081)
3,071
Operating Activities. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities was $62.6 million and $38.8 million for the nine months ended September 30, 2025 and 2024, respectively.
Production volumes were approximately 18.9 MBoe/d and 19.8 MBoe/d for the nine months ended September 30, 2025 and 2024, respectively. The average realized sales price was $39.03 per Boe and $39.69 per Boe for the nine months ended September 30, 2025 and 2024, respectively. The change in realized sales price was due to lower realized sales prices for oil, partially offset by higher realized sales prices for natural gas.
Net cash provided by operating activities for the nine months ended September 30, 2025 included $10.1 million of cash received on expired commodity derivative instruments compared to $13.6 million of cash received on expired commodity derivatives for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, we had a net gain on commodity derivative instruments of $14.8 million compared to a net gain on commodity derivative instruments of $7.3 million for the nine months ended September 30, 2024.
The Company recognized an impairment charge of $42.5 million for the nine months ended September 30, 2025, due to marketing its assets and reassessing the fair market value less costs to sell.
Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2025 was $56.6 million, of which $65.2 million (on an accrual basis) was used for additions to oil and natural gas properties and $0.9 million for additions to other property and equipment. In addition, we had changes in our accounts payable and accrued expenses of $5.5 million for the nine months ended September 30, 2025. Net cash used in investing activities for the nine months ended September 30, 2024 was $62.7 million, of which $54.1 million was used for additions to oil and natural gas properties and $1.0 million for additions to other property and equipment.
During 2025, we purchased and sold certain rights, title and interest in assets in East Texas to a third party, whereby we received net proceeds of $7.8 million. In addition, we divested all of our non-operated working interests in the Eagle Ford for a contract price of $23.0 million. See additional information discussed in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.
Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our Beta properties. Additions to restricted investments were $7.7 million and $7.5 million for the nine months ended September 30, 2025 and 2024, respectively.
Financing Activities . We had net repayments of $4.0 million for the nine months ended September 30, 2025 related to our Revolving Credit Facility compared to net borrowings of $5.0 million for the nine months ended September 30, 2024. Shares withheld for taxes were $2.0 million and $1.9 million for the nine months ended September 30, 2025 and 2024, respectively.
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Off–Balance Sheet Arrangements
As of September 30, 2025, we had no off–balance sheet arrangements.
Recently Issued Accounting Pronouncements
For a discussion of recent accounting pronouncements that will affect us, see Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
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