What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-06 · 90 added, 163 removed, 205 unchanged (55% of the section changed)

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Our business activities are conducted through OLLC, our wholly owned subsidiary, and its wholly owned subsidiaries.

Our assets consist primarily of producing oil and natural gas properties and are located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas/North Louisiana and the Eagle Ford.

Our properties consist primarily of operated and non-operated working interests in producing and undeveloped leasehold acreage and working interests in identified producing wells.

Our assets consist 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).

Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs.

Industry Trends

Commodity prices have decreased in 2023 when compared to the same period of 2022, and as a result, we experienced a decline in revenues.

We continue to monitor the impact of the actions of the Organization of the Petroleum Exporting Countries and other large producing nations, the Russia-Ukraine conflict, conflicts in the Middle East, global inventories of oil and gas and the uncertainty associated with recovering oil demand, inflation and future monetary policy, and governmental policies aimed at transitioning towards lower carbon energy.

We expect prices for some or all of the commodities to remain volatile.

The COVID-19 pandemic, the Russia-Ukraine conflict and conflicts 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.

We continue to monitor the impact of the actions of the Organization of the Petroleum Exporting Countries and other large producing nations;

the Russia-Ukraine conflict;

conflicts in the Middle East;

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.

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

Certain Board of Director Appointments and Departures

On October 3, 2023, the board of directors (the “Board”) of the Company appointed Vidisha Prasad to the Board, effective immediately.

Prasad was also appointed to the audit committee of the Board.

In addition, Randal T.

Klein has informed the Board of his decision not to seek reelection as a director on the Board at the Company’s 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”).

Klein will continue to serve on the Board and the respective Board committees for the remainder of his term as a director until the 2024 Annual Meeting.

Klein’s decision not to stand for reelection was not due to any disagreements with the Company on any matter relating to the Company’s operations, policies, or practices.

Borrowing Base Redetermination

On October 19, 2023, we completed the fall 2023 borrowing base redetermination, which reaffirmed the borrowing base of $150.0 million with elected commitments of $135.0 million.

The next redetermination is expected to occur in the second quarter of 2024.

On May 2, 2024, OLLC completed its spring 2024 borrowing base redetermination, which reaffirmed the borrowing base of $150.0 million with elected commitments of $135.0 million.

The next redetermination is expected in the fourth quarter of 2024.

Business Environment and Operational Focus

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Results of Operations

The results of operations for the three and nine months ended September 30, 2023 and 2022 have been derived from our unaudited condensed consolidated financial statements.

The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties.

The results of operations for the three months ended March 31, 2024 and 2023 have been derived from our unaudited condensed consolidated financial statements.

The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties during 2023.

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,

($ In thousands except per unit amounts)

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Pipeline incident loss

Pipeline incident settlement

Interest expense, net

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Depletion, depreciation and amortization

For the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

We reported a net loss of $13.4 million and net income of $47.2 million for the three months ended September 30, 2023 and 2022, respectively.

Oil, natural gas and NGL revenues were $76.4 million and $112.8 million for the three months ended September 30, 2023 and 2022, respectively.

Average net production volumes were approximately 20.6 MBoe/d and 21.0 MBoe/d for the three months ended September 30, 2023 and 2022, respectively.

The average realized sales price was $40.28 per Boe and $58.31 per Boe for the three months ended September 30, 2023 and 2022, respectively.

The decrease in revenue and average realized sales price was primarily due to lower commodity prices.

Other revenues were $0.4 million and $13.5 million for the three months ended September 30, 2023 and 2022, respectively.

The change in other revenues was primarily related to the termination of LOPI insurance proceeds.

Lease operating expense was $37.1 million and $32.0 million for the three months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, lease operating expense was $19.54 and $16.56 for the three months ended September 30, 2023 and 2022, respectively.

The change in lease operating expense was primarily driven by higher costs associated with the restart of operations at Beta.

Gathering, processing and transportation expense was $5.0 million and $7.5 million for the three months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, gathering, processing and transportation expense was $2.63 and $3.87 for the three months ended September 30, 2023 and 2022, respectively.

The decrease in gathering, processing and transportation expense was primarily driven by the expiration of the minimum volume commitment (“MVC”) fee in East Texas/North Louisiana (November 2022) and Oklahoma (June 2023) and lower commodity prices.

Taxes other than income were $4.9 million and $9.2 million for the three months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, taxes other than income were $2.60 and $4.73 for the three months ended September 30, 2023 and 2022, respectively.

The decrease was primarily related to a reduction in production taxes due to lower commodity prices.

DD&A expense was $7.5 million and $6.3 million for the three months ended September 30, 2023 and 2022, respectively.

The change in DD&A expense was primarily driven by three months of production at Beta.

General and administrative expenses were $8.3 million and $7.0 million for the three months ended September 30, 2023 and 2022, respectively.

The change in general and administrative expense was primarily related to (i) an increase of $0.5 million in stock compensation expense, (ii) an increase of $0.3 million in salaries and other payroll benefits, and (iii) an increase of $0.3 million in professional services.

Net loss on commodity derivative instruments of $23.3 million were recognized for the three months ended September 30, 2023, consisting of a $3.9 million of cash settlements paid on expired positions, an increase of $20.1 million in the fair value of open positions and $0.7 million of cash settlements received on terminated derivative instruments.

Net gain on commodity derivative instruments of $3.3 million was recognized for the three months ended September 30, 2022, consisting of a $44.1 million increase in the fair value of open positions and $40.8 million of cash settlements paid on expired positions.

Pipeline incident loss was $0.5 million and $2.6 million for the three months ended September 30, 2023 and 2022, 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.

Litigation settlement was not recorded for the three months ended September 30, 2023 and 2022.

Interest expense, net was $4.5 million and $4.0 million for the three months ended September 30, 2023 and 2022, respectively.

The change in interest expense was primarily due to higher interest rates and the amortization and write-off of deferred issuance costs partially offset by lower debt outstanding during the period.

Average outstanding borrowings under our Revolving Credit Facility were $121.8 million and $214.9 million for the three months ended September 30, 2023 and 2022, respectively.

Current income tax (expense) benefit was ($1.4) million for the three months ended September 30, 2023.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No current income tax expense was recorded for the three months ended September 30, 2022.

Deferred income tax benefit (expense) was $4.7 million for the three months ended September 30, 2023.

Starting in the first quarter of 2023, we achieved three years of cumulative income which allowed the release of the valuation allowance.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No deferred income tax benefit was recorded for the three months ended September 30, 2022.

For the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

We reported net income of $349.2 million and $27.8 million for the nine months ended September 30, 2023 and 2022, respectively.

Oil, natural gas and NGL revenues were $210.1 million and $319.6 million for the nine months ended September 30, 2023 and 2022, respectively.

Average net production volumes were approximately 20.4 MBoe/d and 20.6 MBoe/d for the nine months ended September 30, 2023 and 2022, respectively.

The average realized sales price was $37.72 per Boe and $56.76 per Boe for the nine months ended September 30, 2023 and 2022, respectively.

The decrease in revenue and average realized sales price was primarily due to lower commodity prices.

Other revenues were $18.5 million and $39.9 million for the nine months ended September 30, 2023 and 2022, respectively.

The change in other revenues was primarily related to LOPI insurance proceeds of $17.9 million for the nine months ended September 30.

2023 compared to $39.6 million of LOPI proceeds for the nine months ended September 30, 2022.

Lease operating expense was $104.9 million and $98.3 million for the nine months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, lease operating expenses were $18.84 and $17.45 for the nine months ending September 30, 2023 and 2022, respectively.

The change in lease operating expense was primarily related to higher costs associated with the restart of operations at Beta.

Gathering, processing and transportation expense was $15.7 million and $22.8 million for the nine months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, gathering, processing and transportation expenses were $2.83 and $4.05 for the nine months ending September 30, 2023 and 2022, respectively.

The decrease in gathering, processing and transportation expense was primarily driven by the expiration of the MVC fee in East Texas/North Louisiana (November 2022) and in Oklahoma (June 2023) and lower commodity prices.

Taxes other than income were $15.4 million and $25.3 million for the nine months ended September 30, 2023 and 2022, respectively.

On a per Boe basis, taxes other than income were $2.77 and $4.50 for the nine months ended September 30, 2023 and 2022, respectively.

The decrease was primarily related to a reduction in production taxes due to lower commodity prices.

In addition, we received a $0.4 million from a one-time positive severance tax adjustment related to our non-operated Eagle Ford operations.

DD&A expense was $20.4 million and $17.8 million for the nine months ended September 30, 2023 and 2022, respectively.

For the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

We reported a net loss of $9.4 million compared to net income of $352.8 million for the three months ended March 31, 2024 and 2023, respectively.

Oil, natural gas and NGL revenues were $75.3 million and $66.3 million for the three months ended March 31, 2024 and 2023, respectively.

Average net production volumes were approximately 20.2 MBoe/d and 19.4 MBoe/d for the three months ended March 31, 2024 and 2023, respectively.

The change in production volumes was primarily driven by Beta returning to production in April 2023.

For the first quarter of 2023 Beta was offline.

The average realized sales prices were $40.89 per Boe and $37.99 per Boe for the three months ended March 31, 2024 and 2023, respectively.

The increase in oil, natural gas and NGL revenues and average realized sales price was primarily due to Beta returning to production in April 2023.

Other revenues were $1.0 million and $13.6 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease in other revenues was primarily related to our receipt of LOPI insurance proceeds of $13.5 million for the three months ended March 31, 2023.

We have not received LOPI insurance proceeds since payments under the LOPI policy terminated on March 31, 2023.

Lease operating expenses were $38.3 million and $33.0 million for the three months ended March 31, 2024 and 2023, respectively.

On a per Boe basis, lease operating expenses were $20.78 and $18.89 for the three months ended March 31, 2024 and 2023, respectively.

The change in lease operating expense was primarily related to operating costs associated with Beta returning to production.

During the first quarter of 2023, Beta was offline.

Gathering, processing and transportation expenses were $4.8 million and $5.6 million for the three months ended March 31, 2024 and 2023, respectively.

On a per Boe basis, gathering, processing and transportation expenses were $2.59 and $3.21 for the three months ended March 31, 2024 and 2023, respectively.

The change in gathering processing and transportation expense was primarily due to lower gas volumes and the expiration of minimum volume commitments for our Oklahoma properties.

Taxes other than income were $4.9 million and $5.3 million for the three months ended March 31, 2024 and 2023, respectively.

On a per Boe basis, taxes other than income were $2.67 and $3.03 for the three months ended March 31, 2024 and 2023, respectively.

The decrease was primarily related to a reduction in production taxes due to lower natural gas commodity prices.

DD&A expenses were $8.2 million and $5.8 million for the three months ended March 31, 2024 and 2023, respectively.

The increase in DD&A expense was primarily driven by production at Beta.

General and administrative expenses were $24.5 million and $23.4 million for the nine months ended September 30, 2023 and 2022, respectively.

The change in general and administrative expenses was primarily related to (i) an increase of $1.2 million in salaries and other payroll benefits and (ii) an increase of $1.3 million in stock compensation expense, partially offset by a decrease of $1.1 million in professional services.

Net loss on commodity derivative instruments of $4.4 million were recognized for the nine months ended September 30, 2023, consisting of less than $0.1 million increase in the fair value of open positions, $0.7 million of cash settlement received on terminated derivative instruments partially offset by $5.1 million of cash settlements paid on expired positions.

Net loss on commodity derivative instruments of $108.7 million was recognized for the nine months ended September 30, 2022, consisting of a $11.6 million increase in the fair value of open positions and $120.3 million of cash settlements paid on expired positions.

Pipeline incident loss was $15.7 million and $8.3 million for the nine months ended September 30, 2023 and 2022, respectively.

During the first quarter of 2023, Beta was offline.

General and administrative expenses were $9.8 million and $8.5 million for the three months ended March 31, 2024 and 2023, respectively.

The change in general and administrative expenses was primarily related to (i) an increase of $0.6 million in stock compensation expense, (ii) an increase of $0.3 million in severance payments, (iii) and an increase of $0.4 million in office lease expense related to the early termination of our Oklahoma office lease.

Net loss on commodity derivative instruments of $16.6 million were recognized for the three months ended March 31, 2024, consisting of $20.8 million decrease in the fair value of open positions, partially offset by $4.3 million of cash settlements received on expired positions.

Net gain on commodity derivative instruments of $15.2 million was recognized for the three months ended March 31, 2023, consisting of a $17.9 million increase in the fair value of open positions, partially offset by $2.7 million of cash settlements paid on expired positions.

Pipeline incident loss was $0.7 million and $8.3 million for the three months ended March 31, 2024 and 2023, respectively.

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

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Financial Statements” of this quarterly report for additional information.

Litigation settlement was $84.9 million for the nine months ended September 30, 2023, related to the settlement with the shipping companies related to the containerships’ anchor strikes of the Company’s pipeline.

Litigation settlement was $84.9 million for the three months ended March 31, 2023, related to the settlement with the shipping companies and the containerships whose anchors struck the Company’s pipeline.

See additional information discussed in Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No litigation settlement was recorded for the nine months ended September 30, 2022.

Interest expense, net was $13.9 million and $9.5 million for the nine months ended September 30, 2023 and 2022, respectively.

The change in interest expense was primarily driven by (i) higher interest rates, (ii) amortization and write-off of deferred issuance cost, and (iii) the change in interest rate swaps.

Average outstanding borrowings under our Revolving Credit Facility were $145.8 million and $220.7 million for the nine months ended September 30, 2023 and 2022, respectively.

Current income tax (expense) benefit was ($7.1) million for the nine months ended September 30, 2023.

No litigation settlement was recorded for the three months ended March 31, 2024.

Interest expense, net was $3.5 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively.

The change in interest expense was primarily driven by lower outstanding borrowings, slightly lower interest rates and amortization of deferred issuance costs.

In addition, in the first quarter of 2023, the Company wrote off $0.2 million in deferred issuance costs.

Average outstanding borrowings under our Revolving Credit Facility were $115.2 million and $192.4 million for the three months ended March 31, 2024 and 2023, respectively.

Current income tax expenses were $1.4 million and $12.5 million for the three months ended March 31, 2024 and 2023, respectively.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No current income tax expense was recorded for the nine months ended September 30, 2022.

Deferred income tax benefit (expense) was $264.1 million for the nine months ended September 30, 2023.

Starting in the first quarter of 2023, we achieved three years of cumulative income which allowed the release of the valuation allowance.

Deferred income tax benefits were $4.7 million and $259.5 million for the three months ended March 31, 2024 and 2023, respectively.

Starting in the first quarter of 2023, we achieved three years of cumulative income which resulted in the release of the valuation allowance.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No deferred income tax benefit was recorded for the nine months ended September 30, 2022.

Adjusted EBITDA

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For the Three Months Ended

For the Nine Months Ended

September 30,

(In thousands)

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Pipeline incident loss

Pipeline incident settlement

Litigation settlement

Share-based compensation expense

Loss on settlement of AROs

Exploration costs

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Bad debt expense

LOPI - timing difference

Adjusted EBITDA

1 unchanged sentence

For the Three Months Ended

For the Nine Months Ended

September 30,

(In thousands)

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Pipeline incident loss

Pipeline incident settlement

Litigation settlement

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Exploration costs

Gain (loss) on interest rate swaps

Cash settlements paid (received) on interest rate swaps

Cash settlements paid (received) on terminated derivatives

Plugging and abandonment cost

Acquisition and divestiture related expenses

LOPI - timing difference

Adjusted EBITDA

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As we pursue reserve and production growth, 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 New 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 2023 development activities.

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 2024 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 2023, we expect our primary funding sources to be from internally generated cash flow, borrowings under our New Credit Facility, and equity and debt capital markets.

Impact of the Southern California Pipeline Incident.

For the remainder of 2024, we expect our primary funding sources to be from internally generated cash flow but retain the flexibility to utilize borrowings under our Revolving Credit Facility and/or to access the debt and equity capital markets.

Impact of the Beta Pipeline Incident.

There are remaining uncertainties surrounding the full impact that the Incident will have on our financial condition and cash flow generation going forward.

We have incurred and will continue to incur certain costs as a result of the Incident.

We carry customary insurance policies, which have covered a material portion of the aggregate costs, including LOPI insurance, to offset loss of revenue resulting from suspended operations in Southern California.

LOPI coverage specific to the Incident expired on March 31, 2023.

However, in addition to the settlement amount disclosed elsewhere in this Quarterly Report on Form 10-Q that we received from the vessels that struck and damaged the Pipeline and their respective owners and operators, we carry customary insurance policies, which have covered a material portion of aggregate costs, including loss of production income insurance to offset loss of revenue resulting from suspended operations.

The loss of production income insurance related to the Incident expired on March 31, 2023.

We restarted operations at Beta in April 2023.

We can provide no assurance that our coverage will adequately protect us against liability from all potential consequences, damages and losses related to the Incident.

In connection with the settlement between the Company and the vessels that struck and damaged the pipeline and their respective owners and operators, the Company received a net payment of approximately $85.0 million.

Proceeds from the settlement have been used to reduce debt outstanding under the Company’s Revolving Credit Facility and to enhance liquidity.

Capital Markets.

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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 losses.

Valuation Allowance.

Net deferred tax assets relate to net operating loss carryforwards, interest expense carryforwards, tax credits, and other temporary differences expected to produce tax deductions in future periods.

The realization of these assets depends on recognition of sufficient future taxable income in specific federal and state tax jurisdictions in which those temporary differences are deductible.

In assessing the need for a valuation allowance on our deferred tax assets, we consider whether it is more likely than not that some portion of or all our deferred tax assets will not be realized.

On December 31, 2022, our valuation allowance was $284.9 million, which offset all net deferred tax assets as of such date.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

The assessment considers all available information including historical and forecasted taxable income and operating history.

The three months ended March 31, 2023 marked the first time that we had achieved three years of cumulative income.

Furthermore, management determined that our ability to maintain long-term profitability despite near-term changes in commodity prices and capital and operating costs demonstrated that there is sufficient positive evidence to conclude that it is more likely than not that all net deferred tax asset is realizable.

As a result of our assessment, during the quarter ended September 30, 2023, we released substantially all of our valuation allowance previously recorded.

The result of the valuation allowance release during the nine months ended September 30, 2023 was a tax benefit of $278.8 million.

Capital Expenditures.

Our total capital expenditures were approximately $26.6 million for the nine months ended September 30, 2023, which were primarily related to capital workovers and facilities upgrades located in Oklahoma and California and non-operated drilling and completion activities in the Eagle Ford.

Total capital expenditures were approximately $19.1 million for the three months ended March 31, 2024, which were primarily related to the development program at Beta, capital workovers and facilities upgrade projects at Beta and in Oklahoma and non-operated drilling and completion activities in the Eagle Ford.

Working Capital.

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We expect that our future working capital requirements will be impacted by these same factors.

As of September 30, 2023, we had a working capital deficit (excluding commodity derivatives) of $17.0 million primarily due to accrued liabilities of $55.4 million, revenues payable of $21.2 million, and accounts payable of $18.7 million partially offset by accounts receivable of $47.9 million, prepaid expenses of $24.0 million and cash on hand of $6.4 million.

As of March 31, 2024, we had a working capital deficit (excluding commodity derivatives) of $21.4 million primarily due to accrued liabilities of $36.8 million, revenues payable of $20.8 million, and accounts payable of $21.7 million partially offset by accounts receivable of $36.5 million, prepaid expenses of $18.4 million and cash on hand of $3.0 million.

Debt Agreement

Revolving Credit Facility.

On November 2, 2018, OLLC, as borrower, entered into the Revolving Credit Facility (as amended and supplemented to date).

KeyBank National Association serves as the administrative agent.

On July 31, 2023, OLLC and Acquisitionco entered into the New Credit Facility.

The New Credit Facility is a replacement in full of the prior Revolving Credit Facility.

The aggregate principal amount of loans outstanding under the New Credit Facility as of September 30, 2023, was $120.0 million.

As of September 30, 2023, we had approximately $15.0 million of available borrowings under our New Credit Facility.

As of September 30, 2023, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with the New Credit Facility.

Subsequent Event .

On October 19, 2023, we completed the fall 2023 borrowing base redetermination, which reaffirmed the borrowing base of $150.0 million with elected commitments of $135.0 million.

The next redetermination is expected to occur in the second quarter of 2024.

For additional information regarding our Revolving Credit Facility and New Credit Facility, see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

On July 31, 2023, OLLC and Acquisitionco entered into the Revolving Credit Facility.

The Revolving Credit Facility is a replacement in full of the Prior Revolving Credit Facility.

The aggregate principal amount of loans outstanding under the Revolving Credit Facility as of March 31, 2024, was $115.0 million.

As of March 31, 2024, we had approximately $20.0 million of available borrowings under our Revolving Credit Facility.

The Company is required to maintain a minimum current ratio of 1.00 to 1.00, which is measured on the last day of each quarter.

On March 31, 2024, the Company’s current ratio was 0.98 to 1.00.

On May 2, 2024, the Company received a letter agreement from its lenders waiving any default or event of default as a result of such noncompliance related to the minimum current ratio requirement for the quarter ended March 31, 2024.

As a result, the Company was in compliance with all financial covenants as of March 31, 2024.

The Company expects to maintain a current ratio of 1.0 to 1.0 in future quarters.

For additional information regarding our Revolving Credit Facility, see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

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Sinking Fund Payments .

We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for our offshore Southern California production facilities.

As of September 30, 2023, our future commitment under this agreement was $2.0 million for the remainder of 2023, and $15.8 million per year for years 2024 through 2033.

We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for the Beta production facilities.

As of March 31, 2024, our future commitment under this agreement was $6.8 million for the remainder of 2024 and $9.0 million per year until the escrow account is fully funded.

See Note 14 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 nine months ended September 30, 2023 and 2022 have been derived from our Unaudited Condensed Consolidated Financial Statements.

The cash flows for the three months ended March 31, 2024 and 2023 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,

For the Three Months Ended

(In thousands)

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

Net cash provided by operating activities was $113.2 million and $49.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Production volumes were approximately 20.4 MBoe/d and 20.6 MBoe/d for the nine months ended September 30, 2023 and 2022, respectively.

The average realized sales price was $37.72 per Boe and $56.76 per Boe for the nine months ended September 30, 2023 and 2022, respectively.

The change in average realized sales price was primarily due to lower commodity prices.

For the nine months ended September 30, 2023, we received $84.9 million in connection with the settlement between the Company and the vessels that struck and damaged the pipeline and their respective owners and operators.

Net cash provided by operating activities for the nine months ended September 30, 2023 included $5.1 million of cash paid on expired commodity derivative instruments and $0.7 million of cash received on terminated derivatives compared to $120.3 million of cash paid on expired commodity derivatives for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, we had net losses on commodity derivative instruments of $4.4 million compared to net losses of $108.7 million for the nine months ended September 30, 2022.

Net cash provided by operating activities was $7.7 million and $90.3 million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2023, we received $84.9 million in connection with the settlement between the Company and the vessels that struck and damaged the pipeline and their respective owners and operators.

Production volumes were approximately 20.2 MBoe/d and 19.4 MBoe/d for the three months ended March 31, 2024 and 2023, respectively.

The change in production volumes was primarily driven by Beta returning to production in April 2023.

For the first quarter of 2023 Beta was offline.

The average realized sales price was $40.89 per Boe and $37.99 per Boe for the three months ended March 31, 2024 and 2023, respectively.

The change in average realized sales price was primarily due to higher oil commodity prices and Beta coming back online.

Net cash provided by operating activities for the three months ended March 31, 2024 included $4.3 million of cash received on expired commodity derivative instruments compared to $2.7 million of cash paid on expired commodity derivatives for the three months ended March 31, 2023.

For the three months ended March 31, 2024, we had net losses on commodity derivative instruments of $16.6 million compared to a net gain of $15.2 million for the three months ended March 31, 2023.

Investing Activities.

Net cash used in investing activities for the nine months ended September 30, 2023 was $30.0 million, of which $23.1 million was used for additions to oil and natural gas properties.

Net cash provided by investing activities for the nine months ended September 30, 2022 was $31.6 million, of which $26.2 million was used for additions to oil and natural gas properties.

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our offshore Southern California properties.

Additions to restricted investments were $6.4 million and $5.4 million during the nine months ended September 30, 2023 and 2022, respectively.

Net cash used in investing activities for the three months ended March 31, 2024 was $23.7 million, of which $19.1 million was used for additions to oil and natural gas properties.

In addition, we had a decrease of $1.5 million in our capital expenditures payable account.

Net cash provided by investing activities for the three months ended March 31, 2023 was $10.4 million, of which $8.2 million was used for additions to oil and natural gas properties.

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 and $2.1 million during the three months ended March 31, 2024 and 2023, respectively.

Financing Activities .

We had net repayments of $70.0 million and $25.0 million for the nine months ended September 30, 2023 and 2022, respectively, related to our Revolving Credit Facility.

For the nine months ended September 30, 2023, we paid $4.7 million in deferred financing costs under the New Credit Facility.

We had repayments of $25.0 million, offset by $25.0 million in borrowings for the three months ended March 31, 2024 related to our Revolving Credit Facility compared to net repayments of $65.0 million for the three months ended March 31, 2023.

Off–Balance Sheet Arrangements

As of September 30, 2023, we had no off–balance sheet arrangements.

As of March 31, 2024, we had no off–balance sheet arrangements.

Recently Issued Accounting Pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis