What changed in this filing

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Item 2. Properties

2021-02-23 compared with 2020-02-20 · 37 added, 29 removed, 140 unchanged (32% of the section changed)

6 unchanged sentences

At December 31, 2020, we had approximately 1.653 billion tons of coal reserves.

These reserves are owned or held by the complexes they are most closely associated with or Alliance Resource Properties.

Alliance Resource Properties has lease agreements with some of the complexes for certain reserves it owns or holds.

All of the estimates of reserves which are presented in this Annual Report on Form 10-K are of proven and probable reserves (as defined below) and closely adhere to the standards described in United States Geological Survey ("USGS") Circular 831 and USGS Bulletin 1450-B.

15 unchanged sentences

River View (KY)

Gibson (North) (IN)

Sebree - Onton (KY)

4 unchanged sentences

(1) Our mining operations, both active and inactive, contain underground mines

(2) A = Active, C = Closed/Idled, R = Reserves only

(2) A = Active, C = Closed, I = Idled, R = Reserves only

Our reserve estimates are prepared from geological data assembled and analyzed by our staff of geologists and engineers.

3 unchanged sentences

Reserve estimates will change from time to time to reflect mining activities, additional analysis, new engineering and geological data, acquisition or divestment of reserve holdings, modification of mining plans or mining methods, and other

We have historically obtained an outside audit of our reserve estimates and calculation methods every five years with the most recent audit being performed by Weir International Mining Consultants in July 2015.

Weir is expected to perform this audit again during 2021 in advance of the SEC's new property disclosure requirements for mining companies.

Reserves represent that part of a mineral deposit that can be economically and legally extracted or produced, and reflect estimated losses involved in producing a saleable product.

7 unchanged sentences

Our remaining non-reserve coal deposits include the following:

Dotiki—16.2 million tons, Elk Creek—7.8 million tons, Gibson (South)—1.7 million tons, Hamilton—33.7 million tons, Mettiki—1.0 million tons, Penn Ridge––15.8 million tons, Riverview—3.2 million tons, Sebree - Onton—4.6 million tons, Sebree—7.0 million tons, Tunnel Ridge—16.5 million tons and Warrior—4.5 million tons.

Dotiki—16.2 million tons, Elk Creek—7.8 million tons, Gibson South—1.7 million tons, Gibson North—21.4 million tons, Hamilton—33.7 million tons, Mettiki—1.0 million tons, Penn Ridge––15.9 million tons, Riverview—2.1 million tons, Sebree - Onton—4.6 million tons, Sebree—7.0 million tons, Tunnel Ridge—16.2 million tons and Warrior—4.2 million tons.

We lease most of our reserves and generally have the right to maintain leases in force until the exhaustion of mineable and merchantable coal located within the leased premises or a larger coal reserve area.

11 unchanged sentences

CSX, NS, truck, barge

Gibson (South)

CSX, NS, truck, barge

14 unchanged sentences

Our net acres standardized to 1/8th royalty equates to approximately 55,500 net royalty acres, including approximately 3,988 net royalty acres owned through our equity interest in AllDale III.

The following table presents our estimated net proved oil & gas reserves, including our share of reserves owned through our equity interest in AllDale III, as of December 31, 2019 based on the reserve reports prepared by NSAI.

The reserve report, which is filed as an exhibit to this annual report, has been prepared in accordance with the rules and regulations of the SEC.

The following table presents our estimated net proved oil & gas reserves, including our share of reserves owned through our equity interest in AllDale III, as of December 31, 2020 based on the reserve report prepared by our internal engineering team.

The reserve report has been prepared in accordance with the rules and regulations of the SEC.

All of our proved reserves included in the reserve report are located in the continental United States.

As of December 31, 2020

Natural Gas Liquids

2 unchanged sentences

Total estimated proved reserves (1)

(1) As of December 31, 2019, proved reserves of approximately 1,208 MBOE were attributable to noncontrolling interests.

(1) Proved reserves of approximately 972 MBOE were attributable to noncontrolling interests as of December 31, 2020.

(2) Natural gas reserve volumes are converted to BOE based on a 6:1 ratio:

1 unchanged sentence

Estimates of reserves as of December 31, 2020 were prepared using product prices equal to the unweighted arithmetic average of the first-day-of-the-month market price for each month in the period from January through December 2020.

The average realized product prices weighted by production over the remaining lives of the properties are $52.32 per barrel of oil, $1.83 per Mcf of natural gas and $21.95 per barrel of NGL.

The average realized product prices weighted by production over the remaining lives of the properties are $36.95/Bbl for oil, $0.88/Mcf of natural gas and $7.99 per barrel of NGL.

These prices are adjusted for energy content, associated average differential and transportation deducts by producing area to arrive at the net realized prices by product.

For 2020, NGL prices averaged approximately 26% of the posted oil prices during the course of the year with an additional $2.30/Bbl deducted for transportation costs.

The following table summarizes our changes in proved undeveloped reserves (in MBOE):

Beginning balance, December 31, 2018

Acquisitions of proved undeveloped reserves

Beginning balance, January 1, 2020

Transfers of PUDs to estimated proved developed

2 unchanged sentences

Ending balance, December 31, 2020

New PUD reserves totaling 4,669 MBOE were added during the year ended December 31, 2019, resulting from acquisitions.

Approximately 3,594 MBOE were acquired through the AllDale Acquisition, primarily in the Permian, Bakken, and Anadarko Basins.

An additional 1,075 MBOE of PUD reserves in the Permian was added through the Wing acquisition.

During the year ended December 31, 2020, we converted 115 MBOE of PUD reserves to proved developed reserves as applicable wells began production.

We had reductions of 2,465 MBOE to our PUD reserves, primarily as a result of updated operator information.

Extensions and discoveries contributed 2,238 MBOE resulting in a net increase of 1,221 MBOE despite a reduction of 1,017 MBOE due to expired permits.

Revisions of previous estimates of 317 MBOE is a result of type curve changes.

As a mineral interest owner we have no transparency into or control over our operators' investments and operational progress to convert PUDs to proved developed producing reserves.

6 unchanged sentences

The reserves actually recovered and the timing of production of the reserves may vary significantly from the original estimates.

Our 2019 year end proved reserves were prepared by NSAI, an independent third-party petroleum engineering firm that does not own an interest in any of our properties and is not employed by us on a contingent basis.

The technical persons responsible for preparing our proved reserve estimates meet the requirements with regards to qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.

Under SEC rules, proved reserves are those quantities of oil & gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible–from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations–prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

11 unchanged sentences

The analogy method was used where there were inadequate historical performance data to establish a definitive trend and where the use of production performance data as a basis for the reserve estimates was considered to be inappropriate.

To estimate economically recoverable proved reserves and related future net cash flows, NSAI considered many factors and assumptions, including the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates.

To establish reasonable certainty with respect to our estimated proved reserves, the technologies and economic data used in the estimation of our proved reserves included production and well test data, downhole completion information, geologic data, electrical logs, radioactivity logs, core analyses, available seismic data and historical well cost and operating expense data.

We utilize contract petroleum engineers who worked closely with our third-party reserve engineers to ensure the integrity, accuracy, and timeliness of the data used to calculate our estimated proved reserves.

Our contract engineers met with our third-party reserve engineers periodically during the period covered by the above referenced reserve report to discuss the assumptions and methods used in the reserve estimation process.

Our contract engineers provided historical information to the third-party reserve engineers for our properties, such as oil & gas production, well test data, and realized commodity prices.

Our contract engineers also provided ownership interest information with respect to our properties.

internal petroleum engineer has over 25 years of engineering and operations experience in the oil & gas sector and is primarily responsible for overseeing the petroleum reserves preparation.

To estimate economically recoverable proved reserves and related future net cash flows, our engineering team considered many factors and assumptions, including the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates.

Our 2020 year-end proved reserves were prepared by our internal engineering team.

Our engineering team works to ensure the integrity, accuracy, and timeliness of the data used to calculate our estimated proved reserves.

Approximately 95% of our total 2020 year end proved reserve estimates were audited by NSAI.

Our engineering team met with NSAI periodically during the period covered by the above referenced reserve report to discuss the assumptions and methods used in the reserve estimation process.

Our engineering team provided historical information to NSAI for our properties, such as oil & gas production, well test data, and realized commodity prices.

Our engineering team also provided ownership interest information with respect to our properties.

Our internal petroleum engineer, primarily responsible for overseeing the petroleum reserves preparation, has over 20 years of engineering and operations experience in the oil & gas sector and a Bachelor of Science in Petroleum Engineering.

The preparation of our proved reserve estimates are completed in accordance with our internal control procedures.

1 unchanged sentence

● review and verification of historical data, which is based on actual production as reported by our operators;

● internally prepared reserve estimates compared to reserves prepared by third parties;

● review of all our reported proved reserves semi-annually including the review of all significant reserve changes and proved undeveloped reserves additions by our internal petroleum engineer, or those under his direct supervision including our contract engineers;

● review of changes in reserves semi-annually and in comparison to third-party reports by both the Chief Accounting Officer and Chief Financial Officer;

● verification of property ownership by our land department;

● review of all our reported proved reserves semi-annually including the review of all significant reserve changes and proved undeveloped reserves additions by our internal petroleum engineer;

● internally prepared reserve estimates compared to reserves audit by NSAI;

● review of changes in reserves semi-annually by our internal petroleum engineer and by senior management;

● no employee ' s compensation is tied to the amount of reserves booked.

NSAI, an independent third-party petroleum engineering firm, does not own an interest in any of our properties and is not employed on a contingent basis.

When compared on a well-by-well basis, some of our estimates are greater and some are less than the NSAI estimates.

NSAI is satisfied with our methods and procedures used to prepare the December 31, 2020 reserve estimates and future revenue, and noted nothing of an unusual nature that would cause NSAI to take exception with the estimates, in the aggregate, prepared by us.

NSAI's audit report with the respect to our proved reserve estimates as of December 31, 2020 is included as an exhibit to this Annual Report on Form 10-K.

NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No.

Within NSAI, the technical persons primarily responsible for auditing the estimates meet or exceed the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers;

both are proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.

Acreage Concentration

Our mineral interests are primarily located in three basins, which are also our areas of focus for future operator development.

Our mineral interests, which include both proved reserves discussed above and unproved reserves, are primarily located in three basins, which are also our areas of focus for future operator development.

These include the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) Basins.

Below is a chart reflecting our gross, net and net royalty acreage in each of our primary basins as of December 31, 2019.

Below is a chart reflecting our gross, net mineral and net royalty acreage associated with our mineral interests in each of our primary basins as of December 31, 2020.

Developed Acreage

24 unchanged sentences

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-K

Item 2. Properties