What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-11 · 170 added, 102 removed, 238 unchanged (53% of the section changed)

12 unchanged sentences

The Company divested its assets in Oklahoma, East Texas/North Louisiana and the Eagle Ford (non-op) during the year ended December 31, 2025.

As of March 31, 2026, the Company properties consist of its Bairoil and Beta oil and NGL producing properties.

As of June 30, 2026, the Company properties consist of its Bairoil and Beta oil and NGL producing properties.

The oil and NGL properties are located in mature oil reservoirs.

As of March 31, 2026, the Company is the operator of record for properties containing 100% of its total estimated proved reserves.

As of June 30, 2026, the Company is the operator of record for properties containing 100% of its total estimated proved reserves.

Industry Trends

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the Russia-Ukraine conflict;

conflicts or entanglements in the Middle East or South America;

conflicts or entanglements in the Middle East;

global inventories of oil and natural gas and the uncertainty associated with recovering oil demand;

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and governmental policies aimed at transitioning towards lower carbon energy.

The Russia-Ukraine conflict and conflicts or entanglements in the Middle East and South America continue to evolve, and the extent to which these events may impact our business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

The Russia-Ukraine conflict and conflicts or entanglements in the Middle East continue to evolve, and the extent to which these events may impact our business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

Divestiture Summary

6 unchanged sentences

Recent Developments

Beta Royalty Relief

On, April 30, 2026, the Bureau of Safety and Environmental Enforcement (“BSEE”) informed the Company that it had been approved for End-of-Life Royalty Relief for the Company’s interests in three Pacific Outer Continental Shelf blocks (P-300, P-0301, and P-0306), referred to as the Beta unit in the Beta Field located in federal waters approximately 11 miles offshore from the Port of Long Beach, California.

The royalty relief is effective beginning May 1, 2026 for the Beta leases.

On the Company’s two primary producing leases, the royalty rate was reduced from approximately 25% to 12.5%, and on the third lease, the royalty rate was reduced from 16.67% to 8.33%.

Royalty relief rates will be suspended in months in which the rolling 12-month weighted average NYMEX oil and Henry Hub gas price exceeds $79.65 per BOE, which represents a 25% premium to the average realized price recognized by the Company during the qualification period.

Royalty relief will end in the event that the rolling 12-month weighted average commodity prices exceed $79.65 per BOE, or if monthly production doubles the qualifying months’ average for 12 consecutive months.

Share Repurchase Program

On August 6, 2026, the Company's board of directors approved a share repurchase program authorizing the repurchase of up to $15.0 million of Common Stock.

Using recent prices, a fully executed program would represent approximately 10% of the Company's outstanding shares.

Under the share repurchase program, repurchases may begin after market open on August 11, 2026 and continue through and including December 31, 2026.

Repurchases under the share repurchase program may be made from time to time through open market repurchases or through privately negotiated transactions subject to market conditions, applicable legal requirements, and other relevant factors.

Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 under the Exchange Act.

The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares of its Common Stock under this authorization.

The Company is not obligated under the share repurchase program to acquire any particular amount of Common Stock, and the Company may terminate or suspend the share repurchase program at any time.

The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

Business Environment and Operational Focus

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Subsequent changes in these estimates may have a significant impact on our consolidated financial position, results of operations and cash flows.

Beta Royalty Relief

On April 30, 2026, the Bureau of Safety and Environmental Enforcement (“BSEE”) informed the Company that it had been approved for End-of-Life Royalty Relief for the Company’s interests in three Pacific Outer Continental Shelf blocks (P-300, P-0301, and P-0306), referred to as the Beta unit in the Beta Field located in federal waters approximately 11 miles offshore from the Port of Long Beach, California.

The royalty relief is effective beginning May 1, 2026 for the Beta leases.

On the Company’s two primary producing leases, the royalty rate was reduced from approximately 25% to 12.5%, and on the third lease, the royalty rate was reduced from 16.67% to 8.33%.

Royalty relief will end in the event that the rolling 12-month weighted average commodity price exceed $79.65 per BOE, or if monthly production doubles the qualifying months’ average for 12 consecutive months.

Results of Operations

The results of operations for the three months ended March 31, 2026 and 2025 have been derived from our unaudited condensed consolidated financial statements.

The results of operations for the three and six months ended June 30, 2026 and 2025 have been derived from our unaudited condensed consolidated financial statements.

Factors Affecting the Comparability of the Historical Financial Results

● The sale of our non-operated Eagle Ford assets in July 2025 for $23.0 million, excluding $1.9 million of final post-closing adjustments, resulting in a final adjusted purchase price of $21.1 million.

● The sale of all of our assets located in East Texas/North Louisiana in December 2025 for $122.0 million, subject to estimated post-closing adjustments.

● The sale of all of our assets located in Oklahoma in December 2025 for $92.5 million, subject to estimated post-closing adjustments.

● Other sales of interest in certain units with rights in the Cotton Valley and Haynesville basins during 2025 for $13.6 million.

● The sale of all of our assets located in East Texas/North Louisiana in December 2025 for $122.0 million, excluding $3.2 million of final post-closing adjustments.

● The sale of all of our assets located in Oklahoma in December 2025 for $92.5 million, excluding $0.5 million of final post-closing adjustments.

● Other sales of interests in certain units with rights in the Cotton Valley and Haynesville basins during 2025 for $13.6 million.

As a result of the factors listed above, the historical results of operations and period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results.

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For the Three Months Ended

For the Six Months Ended

($ In thousands except per unit amounts)

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Depreciation, depletion and amortization

Impairment expense

General and administrative expense

Loss (gain) on commodity derivative instruments

Pipeline incident loss

(Gain) loss on sale of properties

Gain on sale of properties

Interest expense, net

3 unchanged sentences

Oil and natural gas revenues:

Oil sales (1)

NGL sales (2)

Natural gas sales (2)

1 unchanged sentence

Production volumes:

Oil (MBbls) (1)

NGLs (MBbls) (2)

Natural gas (MMcf) (2)

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Depletion, depreciation and amortization

The average realized sales price for the three months ended March 31, 2026, was negatively impacted by post-divestiture accrual estimate adjustments related to the Company’s East Texas and Oklahoma assets sales completed during the fourth quarter of 2025.

For the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

We reported a net loss of $38.1 million compared to a net loss of $5.9 million for the three months ended March 31, 2026 and 2025, respectively.

Oil, natural gas and NGL revenues were $37.3 million and $70.3 million for the three months ended March 31, 2026 and 2025, respectively.

Average net production volumes were approximately 6.4 MBoe/d and 17.9 MBoe/d for the three months ended March 31, 2026 and 2025, respectively.

The average realized sales prices were $64.26 per Boe and $43.76 per Boe for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $33.0 million in oil, natural gas and NGL revenue was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

Oil revenues for our Beta and Bairoil assets were $37.4 million and $39.9 million for the three months ended March 31, 2026 and 2025, respectively.

The change in oil revenue at Beta and Bairoil was primarily due to lower realized oil commodity prices.

Other revenues were $0.2 million and $1.7 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $1.5 million in other revenue was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

For the three months ended March 31, 2026, other revenues primarily consisted of $0.1 million for pipeline transportation income.

For the three months ended March 31, 2025, other revenues consisted of service revenues of $0.9 million with respect to our wholly owned subsidiary, Magnify Energy Services, and iodine sales of $0.7 million.

Lease operating expenses were $22.2 million and $37.4 million for the three months ended March 31, 2026 and 2025, respectively.

On a per Boe basis, lease operating expenses were $38.20 and $23.28 for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $15.2 million in lease operating expense was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

Lease operating expenses for Beta and Bairoil were $22.0 million and $27.0 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease in lease operating expenses at Beta and Bairoil was primarily driven by lower CO 2 costs and electricity at Bairoil and lower base costs at Beta.

Gathering, processing and transportation expenses were $0.8 million and $4.3 million for the three months ended March 31, 2026 and 2025, respectively.

On a per Boe basis, gathering, processing and transportation expenses were $1.31 and $2.67 for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $3.5 million in gathering, processing and transportation expenses was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

Gathering, processing and transportation expenses for Beta were $0.7 million and $0.6 million for the three months ended March 31, 2026 and 2025, respectively.

Taxes other than income were $2.3 million and $4.4 million for the three months ended March 31, 2026 and 2025, respectively.

On a per Boe basis, taxes other than income were $4.03 and $2.73 for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $2.0 million in taxes other than income was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

Taxes other than income at Beta and Bairoil were $2.3 million and $3.0 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease in taxes other than income was primarily driven by lower production taxes and lower NOx credits purchased.

Depreciation, depletion & amortization (“DD&A”) expenses were $5.7 million and $8.5 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease of $2.8 million in DD&A expense was primarily driven by the divestiture of our East Texas, Oklahoma and our non-operated Eagle Ford assets in 2025.

DD&A expenses for Beta and Bairoil were $5.6 million and $4.0 million for the three months ended March 31, 2026 and 2025, respectively.

General and administrative expenses were $8.9 million and $10.8 million for the three months ended March 31, 2026 and 2025, respectively.

NGLs produced in Bairoil are treated as condensate and reflected within the commodity line for oil.

The average realized sales price for the three and six months ended June 30, 2026, was impacted by post-divestiture true-up adjustments related to the Company’s East Texas and Oklahoma assets sales completed during the fourth quarter of 2025.

The Company did not have any revenue or new production activity related to natural gas and NGLs for the divested assets for the three and six months ended June 30, 2026 and therefore the revenue or production for the period are not indicative of ongoing commodity sales from retained assets.

For the Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

We reported net income of $17.3 million compared to net income of $6.4 million for the three months ended June 30, 2026 and 2025, respectively.

Oil, natural gas and NGL revenues were $52.6 million and $66.8 million for the three months ended June 30, 2026 and 2025, respectively.

Average net production volumes were approximately 6.8 MBoe/d and 19.1 MBoe/d for the three months ended June 30, 2026 and 2025, respectively.

The average realized sales prices were $85.14 per Boe and $38.38 per Boe for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $14.2 million in oil, natural gas and NGL revenue was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Oil revenues for our Beta and Bairoil assets were $52.5 million and $37.9 million for the three months ended June 30, 2026 and 2025, respectively.

The change in oil revenue at Beta and Bairoil was primarily due to higher realized oil commodity prices and higher volumes.

Other revenues were $0.1 million and $1.6 million for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $1.5 million in other revenue was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

For the three months ended June 30, 2026, other revenues primarily consisted of other income for pipeline transportation income.

For the three months ended June 30, 2025, other revenues consisted of $1.1 million for service revenues with respect to our wholly owned subsidiary, Magnify Energy Services (“Magnify”), and $0.5 million for iodine sales.

Lease operating expenses were $22.7 million and $38.6 million for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $16.0 million in lease operating expenses was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Lease operating expenses for Beta and Bairoil were $22.7 million and $27.4 million for the three months ended June 30, 2026 and 2025, respectively.

At Beta, the decrease in lease operating expenses was due to lower base lease operating costs, partially offset by higher workovers.

At Bairoil, the decrease in lease operating expenses was primarily driven by lower CO 2 and electricity costs.

Gathering, processing and transportation expenses were $0.7 million and $4.7 million for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $4.0 million in gathering, processing and transportation expenses was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Gathering, processing and transportation expenses for Beta were $0.7 million and $0.9 million for the three months ended June 30, 2026 and 2025, respectively.

Taxes other than income were $3.0 million and $4.3 million for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $1.3 million in taxes other than income was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Taxes other than income at Beta and Bairoil were $3.0 million and $2.6 million for the three months ended June 30, 2026 and 2025, respectively.

The increase in taxes other than income was primarily related to production taxes, which were driven by higher commodity prices, partially offset by lower NOx credits purchased.

Depreciation, depletion & amortization (“DD&A”) expenses were $4.9 million and $9.8 million for the three months ended June 30, 2026 and 2025, respectively.

The decrease of $4.8 million in DD&A expense was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

DD&A expenses for Beta and Bairoil were $4.9 million and $4.4 million for the three months ended June 30, 2026 and 2025, respectively.

Impairment expense .

No impairment expense was recorded for the three months ended June 30, 2026.

The Company recorded impairment expense of $8.4 million for the three months ended June 30, 2025.

The Company recognized an impairment expense to reduce the net book value of our non-operated Eagle Ford assets to fair value less costs to sell.

See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report for additional information.

General and administrative expenses were $7.0 million and $11.2 million for the three months ended June 30, 2026 and 2025, respectively.

The change in general and administrative expenses was primarily related to (i) a decrease of $2.2 million in acquisition and divestiture costs;

(ii) a decrease of $0.5 million for salaries and other payroll benefits, (iii) a decrease of $0.1 million in legal expense, partially offset by (i) an increase of $0.3 million in severance expense, (ii) an increase of $0.6 million due to the elimination of COPAS overhead charges and (iii) an increase of $0.2 million in stock compensation expense.

In addition, general and administrative expenses for the three months ended March 31, 2026 included a credit of $0.5 million for the management fees received for the transition services related to the divestiture of our East Texas and Oklahoma assets.

Acquisition and divestiture related expenses included the following for the periods indicated below (in thousands):

For the Three Months Ended

Cost incurred related to the contemplated merger with Juniper Capital

Cost incurred related to the East Texas and Oklahoma divestitures

Other acquisition and divestitures expenses

Net loss (gain) on commodity derivative instruments of $45.8 million was recognized for the three months ended March 31, 2026, consisting of a $43.4 million decrease in the fair value of open positions and $2.6 million of cash settlements paid on expired positions, partially offset by $0.2 million of cash settlement received on terminated derivative instruments.

Net loss on commodity derivative instruments of $14.3 million was recognized for the three months ended March 31, 2025, consisting of a $14.8 million decrease in the fair value of open positions, partially offset by $0.5 million of cash settlements received on expired positions.

Pipeline incident loss was less than $0.1 million and $0.4 million for the three months ended March 31, 2026 and 2025, respectively.

The costs reflect certain expenses not expected to be recovered under an insurance policy.

(ii) a decrease of $1.4 million for salaries and other payroll benefits, (iii) a decrease of $0.7 million in stock compensation expense, and (iv) a decrease of $0.4 million in legal expense, partially offset by (i) an increase of $0.5 million in bad debt expense and (ii) an increase of $0.7 million due to the elimination of COPAS overhead charges.

Net loss (gain) on commodity derivative instruments of ($9.0) million was recognized for the three months ended June 30, 2026, consisting of a $22.6 million increase in the fair value of open positions partially offset by $13.6 million of cash settlements paid on expired positions.

Net gain on commodity derivative instruments of $22.2 million was recognized for the three months ended June 30, 2025, consisting of a $17.4 million increase in the fair value of open positions and $4.8 million of cash settlements received on expired positions.

Gain on sale of properties was $1.6 million and $1.5 million for the three months ended June 30, 2026 and 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.

Interest expense, net was $0.9 million for the three months ended June 30, 2026 and $3.6 million for the three months ended June 30, 2025.

The change was primarily related to the Company paying off all outstanding debt as of December 31, 2025.

In 2026, the Company will continue to have interest expense associated with its surety bonds.

Current income tax benefit (expense).

The Company had no current income tax benefit (expense) for the three months ended June 30, 2026 compared to ($0.5) million for the three months ended June 30, 2025.

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 ($5.9) million and ($1.4) million for the three months ended June 30, 2026 and 2025, 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 Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

We reported a net loss of $20.8 million compared to net income of $0.5 million for the six months ended June 30, 2026 and 2025, respectively.

Oil, natural gas and NGL revenues were $89.8 million and $137.1 million for the six months ended June 30, 2026 and 2025, respectively.

Average net production volumes were approximately 6.6 MBoe/d and 18.5 MBoe/d for the six months ended June 30, 2026 and 2025, respectively.

The average realized sales prices were $75.03 per Boe and $40.96 per Boe for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $47.3 million in oil, natural gas and NGL revenue was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Oil revenues for our Beta and Bairoil assets were $89.9 million and $77.8 million for the six months ended June 30, 2026 and 2025, respectively.

The change in oil revenue at Beta and Bairoil was primarily due to higher realized oil commodity prices, partially offset by lower volumes.

Other revenues were $0.3 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $3.0 million in other revenue was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

For the six months ended June 30, 2026, other revenues primarily consisted of pipeline transportation income.

For the six months ended June 30, 2025, other revenues primarily consisted of service revenues of $2.0 million for Magnify and iodine sales of $1.2 million.

Lease operating expenses were $44.8 million and $76.0 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $31.2 million in lease operating expenses was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Lease operating expenses for Beta and Bairoil were $44.6 million and $54.5 million for the six months ended June 30, 2026 and 2025, respectively.

At Beta, the decrease in lease operating expenses was due to lower base lease operating costs, partially offset by higher workovers.

At Bairoil, the decrease in lease operating expenses was primarily driven by lower CO 2 and electricity costs.

Gathering, processing and transportation expenses were $1.4 million and $9.0 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $7.6 million in gathering, processing and transportation expenses was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Gathering, processing and transportation expenses for Beta were $1.4 million and $1.5 million for the six months ended June 30, 2026 and 2025, respectively.

Taxes other than income were $5.4 million and $8.7 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $3.3 million in taxes other than income was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

Taxes other than income at Beta and Bairoil were $5.4 million and $5.5 million for the six months ended June 30, 2026 and 2025, respectively.

DD&A expenses were $10.6 million and $18.3 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease of $7.7 million in DD&A expense was primarily driven by the divestiture of our East Texas, Oklahoma and non-operated Eagle Ford assets in 2025.

DD&A expenses for Beta and Bairoil were $10.6 million and $8.4 million for the six months ended June 30, 2026 and 2025, respectively.

Impairment expense.

No impairment expense was recorded for the six months ended June 30, 2026.

The Company recorded impairment expense of $8.4 million for the six months ended June 30, 2025.

The Company recognized an impairment expense to reduce the net book value of our non-operated Eagle Ford assets to fair value less costs to sell.

See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report for additional information.

Gain on sale of properties was $0.2 million and $6.3 million for the three months ended March 31, 2026 and 2025.

General and administrative expenses were $15.9 million and $22.0 million for the six months ended June 30, 2026 and 2025, respectively.

The change in general and administrative expenses was primarily related to (i) a decrease of $3.8 million in acquisition and divestiture costs, (ii) a decrease of $1.9 million for salaries and other payroll benefits, (iii) a decrease of $0.6 million in stock compensation expense, (iv) a decrease of $0.5 million in legal expense partially offset by (i) an increase of $0.3 million in severance expense, (ii) an increase of $1.3 million due to the elimination of COPAS overhead charges and (iii) an increase of $0.5 million in bad debt expense.

Net loss (gain) on commodity derivative instruments of $36.8 million was recognized for the six months ended June 30, 2026, consisting of a $20.8 million decrease in the fair value of open positions and $16.2 million of cash settlements paid on expired positions partially offset by $0.2 million of cash settlement received on terminated derivative instruments.

A net gain on commodity derivative instruments of $7.8 million was recognized for the six months ended June 30, 2025, consisting of a $2.6 million increase in the fair value of open positions and $5.3 million of cash settlements received on expired positions.

Gain on sale of properties was $1.7 million and $7.8 million for the six months ended June 30, 2026 and 2025, respectively.

The gain in 2025 primarily related to the sale of certain units with rights in the Haynesville basin 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.

Interest expense, net was $1.0 million for the three months ended March 31, 2026 and $3.5 million for the three months ended March 31, 2025.

Interest expense, net was $1.9 million and $7.1 million for the six months ended June 30, 2026 and 2025, respectively.

The change was primarily related to the Company paying off all outstanding debt as of December 31, 2025.

In 2026, the Company will continue to have interest expense associated with its surety bonds.

Current income tax benefit (expense) was $0.0 million and was less than ($0.1) million for the three months ended March 31, 2026 and 2025, respectively.

Current income tax benefit (expense).

The Company had no current income tax benefit (expense) for the six months ended June 30, 2026 compared to ($0.5) million for the six months ended June 30, 2025.

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 $11.6 million and $1.5 million for the three months ended March 31, 2026 and 2025, respectively.

Deferred income tax benefit (expense) was $5.7 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively.

See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

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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.

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) and 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.

Adjusted Net Income (Loss)

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For the Three Months Ended

For the Six Months Ended

(In thousands)

2 unchanged sentences

Acquisition and divestiture-related expenses

Impairment expense

Non-recurring costs:

(Gain) loss on sale of properties

Gain on sale of properties

Income tax effect of unrealized derivative instruments (1)

Tax effect of adjustments (1)

34 unchanged sentences

For the Three Months Ended

For the Six Months Ended

(In thousands)

3 unchanged sentences

Income tax expense (benefit) - deferred

Impairment expense

Accretion of AROs

1 unchanged sentence

Cash settlements (paid) received on expired commodity derivative instruments

(Gain) loss on sale of properties

Gain on sale of properties

Share-based compensation expense

Acquisition and divestiture related expenses

Severance payments

Amortization of gain associated with terminated commodity derivatives

Pipeline incident loss

Bad debt expense

Loss on settlement of AROs

Amortization of gain (loss) associated with terminated commodity derivatives

Pipeline incident loss

Acquisition and divestiture related expenses

Exploration costs

Severance payments

Adjusted EBITDA

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

(In thousands)

2 unchanged sentences

Interest expense, net

(Gain) loss on sale of property

Acquisition and divestiture related expenses

Gain on sale of property

Pipeline incident loss

Severance payments

Plugging and abandonment cost

Amortization and write-off of deferred financing fees

Cash settlements paid (received) on terminated derivatives

Amortization of gain associated with terminated commodity derivatives

Income tax expense (benefit) - current

Acquisition and divestiture related expenses

Exploration costs

Income tax expense (benefit) - current

Cash settlements paid (received) on terminated derivatives

Severance payments

Adjusted EBITDA

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We sell our oil to a small number of purchasers.

Our marketing deducts have recently increased due to a reduction in refining capacity in California.

As a result, we are exploring multiple options aimed at increasing our available markets and creating new customer relationships.

Non-performance by a customer could also result in a loss.

Capital Expenditures.

Our total capital expenditures were approximately $21.0 million for the three months ended March 31, 2026, which were primarily related to the development program at Beta.

Our total capital expenditures were approximately $41.7 million for the six months ended June 30, 2026, which were primarily related to the development program at Beta.

Working Capital.

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This fluctuation is not unusual.

As of March 31, 2026, we had working capital (excluding commodity derivatives) of $34.6 million primarily from cash on hand of $41.5 million, accounts receivable of $19.9 million and prepaid expenses of $23.9 million partially offset by accrued liabilities of $20.7 million, revenues payable of $7.5 million, and accounts payable of $22.5 million.

As of June 30, 2026, we had working capital (excluding commodity derivatives) of $18.2 million primarily from cash on hand of $21.2 million, accounts receivable of $19.5 million and prepaid expenses and other current assets of $25.0 million partially offset by accrued liabilities of $20.4 million, revenues payable of $5.0 million, and accounts payable of $22.1 million.

Debt Agreement

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On December 31, 2025, we amended the Revolving Credit Facility with Citizens Bank, as administrative agent.

As of March 31, 2026, the borrowing base under the facility was $25.0 million with elected commitments of $15.0 million.

At March 31, 2026, the Company had no loans outstanding under the Revolving Credit Facility.

As of March 31, 2026, we had approximately $15.0 million of available borrowings under our Revolving Credit Facility.

As of March 31, 2026, 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.

As of June 30, 2026, the borrowing base under the facility was $25.0 million with elected commitments of $15.0 million.

At June 30, 2026, the Company had no loans outstanding under the Revolving Credit Facility.

As of June 30, 2026, we had approximately $15.0 million of available borrowings under our Revolving Credit Facility.

As of June 30, 2026, 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.

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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 .

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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 March 31, 2026, our future commitments under these agreements were $6.8 million for the remainder of 2026 and $9.0 million per year until the escrow accounts are fully funded.

As of June 30, 2026, our future commitments under these agreements were $4.5 million for the remainder of 2026 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.

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The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated.

The cash flows for the three months ended March 31, 2026 and 2025 have been derived from our Unaudited Condensed Consolidated Financial Statements.

The cash flows for the six months ended June 30, 2026 and 2025 have been derived from our Unaudited Condensed Consolidated Financial Statements.

As a result of the divestiture activity in 2025, the period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results.

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Financial Statements” of this quarterly report.

For the Three Months Ended

For the Six Months Ended

(In thousands)

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Net cash used in investing activities

Net cash used in financing activities

Net cash (used in) provided by financing activities

Operating Activities.

Key drivers of net operating cash flows are commodity prices, production volumes and operating costs.

Net cash provided by operating activities was $4.5 million and $25.5 million for the three months ended March 31, 2026 and 2025, respectively.

Production volumes were approximately 6.4 MBoe/d and 17.9 MBoe/d for the three months ended March 31, 2026 and 2025, respectively.

The average realized sales price was $64.26 per Boe and $43.76 per Boe for the three months ended March 31, 2026 and 2025, respectively.

Net cash provided by operating activities for the three months ended March 31, 2026 included $2.6 million of cash paid on expired commodity derivative instruments compared to $0.5 million of cash received on expired commodity derivatives for the three months ended March 31, 2025.

For the three months ended March 31, 2026, we had a net loss on commodity derivative instruments of $45.8 million compared to a net loss on commodity derivative instruments of $14.3 million for the three months ended March 31, 2025.

Net cash provided by operating activities was $7.3 million and $49.2 million for the six months ended June 30, 2026 and 2025, respectively.

Production volumes were approximately 6.6 MBoe/d and 18.5 MBoe/d for the six months ended June 30, 2026 and 2025, respectively.

The average realized sales price was $75.03 per Boe and $40.96 per Boe for the six months ended June 30, 2026 and 2025, respectively.

Net cash provided by operating activities for the six months ended June 30, 2026 included $16.2 million of cash paid on expired commodity derivative instruments compared to $5.3 million of cash received on expired commodity derivatives for the six months ended June 30, 2025.

For the six months ended June 30, 2026, we had a net loss on commodity derivative instruments of $36.8 million compared to a net gain on commodity derivative instruments of $7.8 million for the six months ended June 30, 2025.

Investing Activities.

Net cash used in investing activities for the three months ended March 31, 2026 was $21.6 million, of which $19.0 million was used for additions to oil and natural gas properties.

Net cash used in investing activities for the three months ended March 31, 2025 was $21.5 million.

Additions to oil and natural gas properties were $24.9 million for the three months ended March 31, 2025 and $0.3 million for additions to other property and equipment for the three months ended March 31, 2025.

In January 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 $6.3 million.

Net cash used in investing activities for the six months ended June 30, 2026 was $44.6 million, of which $42.2 million was used for additions to oil and natural gas properties.

Net cash used in investing activities for the six months ended June 30, 2025 was $50.2 million.

Additions to oil and natural gas properties were $52.2 million for the six months ended June 30, 2025 and $0.6 million for additions to other property and equipment for the six months ended June 30, 2025.

During 2026, the Company generated investing cash flows from the final post-closing adjustments related to its divested assets:

$3.2 million of proceeds related to the East Texas divestiture and $0.5 million payment for the final post-closing adjustment for Oklahoma.

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.

See additional information discussed in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

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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 $2.5 million for the three months ended March 31, 2026 and 2025, respectively.

Additions to restricted investments were $5.0 million and $5.1 million for the six months ended June 30, 2026 and 2025, respectively.

Financing Activities .

Shares withheld for taxes were $2.1 million and $2.0 million for the three months ended March 31, 2026 and 2025, respectively.

The Company had no debt outstanding for the three months ended March 31, 2026.

For the three months ended March 31, 2025 we had net repayments of $2.0 million related to our Revolving Credit Facility.

Shares withheld for taxes were $2.1 million and $2.0 million for the six months ended June 30, 2026 and 2025, respectively.

The Company had no debt outstanding for the six months ended June 30, 2026.

For the six months ended June 30, 2025 we had net borrowings of $3.0 million related to our Revolving Credit Facility.

Off–Balance Sheet Arrangements

As of March 31, 2026, we had no off–balance sheet arrangements.

As of June 30, 2026, we had no off–balance sheet arrangements.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis