What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-12 compared with 2026-05-13 · 105 added, 73 removed, 147 unchanged (55% of the section changed)

MANAGEMENT’S DISCUSSION A ND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding our results of operations for the three months ended March 31, 2026 and 2025 and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and with the consolidated financial statements, notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

The results presented in this Form 10-Q are not necessarily indicative of future operating results.

The following discussion is intended to assist in understanding our results of operations for the three and six months ended June 30, 2026 and 2025 and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report and with the consolidated financial statements, notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report for the fiscal year ended December 31, 2025.

The results presented in this Quarterly Report are not necessarily indicative of future operating results.

Statements in this discussion may be forward-looking.

As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report, and as supplemented by this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed.

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Recent Developments

2026 Term Loan Agreement

On June 30, 2026, we entered into a Third Amended and Restated Senior Secured Credit Agreement (the “2026 Term Loan Agreement”) which amended and restated in its entirety the Second Amended and Restated Senior Secured Credit Agreement (the “2024 Amended Term Loan Agreement”) dated as of December 26, 2024.

Pursuant to the 2026 Term Loan Agreement, the lenders agreed to provide us with (i) a term loan facility in the aggregate principal amount of $162.5 million, deemed funded on June 30, 2026 and (ii) on an uncommitted and absolutely discretionary basis, a delayed draw term loan facility in a maximum aggregate amount of up to $175.0 million, to be made available from and

including June 30, 2026 through and including the earliest to occur of (a) the date on which the delayed draw term loans have been fully drawn or (b) the date on which the discretionary delayed draw term loan commitments are terminated, subject to the satisfaction of certain conditions as outlined in the 2026 Term Loan Agreement.

The 2026 Term Loan Agreement matures on December 31, 2029 and bears interest at a rate per annum equal to a forward-looking term rate based on SOFR for a tenor of three months (with a credit spread adjustment of 0.15% per annum) (or another applicable reference rate, as determined pursuant to the terms of the 2026 Term Loan Agreement) plus an applicable margin of 6.50% (or, for ABR Loans, a base rate plus an applicable margin of 5.50%).

The applicable margin is fixed at 6.50% and replaces the leverage-based pricing grid contained in the 2024 Amended Term Loan Agreement, under which the applicable SOFR margin ranged from 7.75% to 8.50% depending on the Total Net Leverage Ratio.

We are required under the 2026 Term Loan Agreement to make scheduled amortization payments (i) commencing with the fiscal quarter ending June 30, 2027 through and including the fiscal quarter ending March 31, 2029, in an aggregate principal amount equal to 1.25% of the loans outstanding on June 30, 2026, (ii) for the fiscal quarter ending June 30, 2029, an aggregate principal amount equal to 7.50% of the loans outstanding on June 30, 2026, and (iii) for the fiscal quarter ending September 30, 2029, an aggregate principal amount equal to 10.00% of the loans outstanding on June 30, 2026.

The 2026 Term Loan Agreement also contains certain financial covenants (as defined in the 2026 Term Loan Agreement), including the maintenance of (i) a Total Net Leverage Ratio not to exceed 2.75x as of each fiscal quarter ending September 30, 2026 through and including December 31, 2026, and 2.50x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter, (ii) a Current Ratio not to fall below 1.00x, determined as of the last day of any fiscal quarter commencing with the fiscal quarter ending September 30, 2026, (iii) an Asset Coverage Ratio not to fall below 1.75x as of each fiscal quarter ending September 30, 2026 through and including December 31, 2026, 2.00x as of each fiscal quarter ending March 31, 2027 through and including December 31, 2027, and 2.50x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter, and (iv) Liquidity not to fall below the greater of (x) $10,000,000 and (y) the amount equal to the scheduled principal and interest payments for the immediately succeeding three-month period, determined as of the last day of any fiscal quarter.

We recorded an additional $0.4 million of deferred financing costs at June 30, 2026 in conjunction with entry into the 2026 Term Loan Agreement.

Joint Exploration and Development Agreement

On May 27, 2026, we entered into a joint exploration and development agreement (“JEDA”) with an energy investment firm, pursuant to which the investment firm will earn assigned working interests in certain wells and leasehold acreage in Monument Draw by funding its proportionate share of well costs, subject to a carried interest.

Under the JEDA, we serve as operator and the investment firm as a non-operating working interest owner.

The JEDA contemplates a primary tranche of four identified wells, in which both us and the investment firm have committed to participate, and following completion of that tranche, we may propose one or more subsequent tranches, each subject to the investment firm’s election to participate.

Pursuant to the JEDA, we were required to spud an initial well prior to August 1, 2026, however, both parties agreed and the spud date of the initial well was delayed until mid-August 2026.

Well costs and revenues for the initial tranche are allocated 50% to us and 50% to the investment firm on an 8/8ths cost basis, with post-completion net revenue interest and operating cost allocations of approximately 55% to us and 45% to the investment firm, subject to adjustment for the investment firm’s earned working interest share.

We bear a carried interest equal to 10% of our participating interest with respect to well costs chargeable to wells in the primary tranche and any subsequent tranche, such that the investment firm funds a portion of costs attributable to our retained interest in exchange for the assignment of working interest.

The investment firm’s allocated percentage of certain net revenue interest (up to an additional 2.5%) varies based on the trading price of 2027 WTI crude oil (as measured by the applicable futures index) on the last trading day of 2026, with a threshold of $70.00 per barrel determining whether a 25% or 45% allocated percentage applies.

As of June 30, 2026, we had incurred approximately $0.5 million of well costs under the JEDA, of which 50% will be billed to the investment firm in accordance with the cost-sharing provisions of the JEDA.

At the Market Sales Offering

On May 5, 2026, we entered into a sales agreement with Roth Capital Partners, LLC (the “Agent”) (the “Sales Agreement”) pursuant to which we may issue and sell, from time to time, up to $150.0 million of shares of our common stock, through or to the Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions (the “ATM Agreement”).

For the period May 6, 2026 to May 8, 2026, we sold and issued 550,013 shares of our common stock under the ATM Agreement for net proceeds of $1.6 million.

On May 5, 2026, we entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”) pursuant to which we may issue and sell, from time to time, up to $150.0 million of shares of our common stock, through or to the Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions (the “ATM Program”).

For the period May 6, 2026 through June 30, 2026, we sold and issued 17,396,701 shares under the ATM Program for net proceeds of $30.3 million, after deducting sales commissions and other offering costs.

As of June 30, 2026, we had $118.9 million of aggregate gross sales remaining under the Sales Agreement.

Subsequent to June 30, 2026 through July 29, 2026 when sales under the ATM Program were suspended, we sold an additional 14,895,784 shares under the ATM Program for net proceeds of $25.6 million, after deducting sales commissions and other offering costs.

Preferred Stock Conversion

On March 30, 2026, we issued 1,800,000 shares of our common stock to Luminus Energy Partners Master Fund, Ltd.

(“Luminus”) upon the conversion of 7,803 shares of our Series A-2 Redeemable Convertible Preferred Stock (the

“Series A-2 Preferred Stock”).

(“Luminus”) upon the conversion of 7,803 shares of our Series A-2 Redeemable Convertible Preferred Stock (the “Series A-2 Preferred Stock”).

The conversion was calculated in accordance with the terms of the Series A-2 Preferred Stock, including adjustments provided in respect of any Unpaid Dividend Accrual (as defined in the Company’s Certificate of Incorporation, as amended) and using a conversion price of $6.21 per share.

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We used $45.6 million of the net proceeds from closing to repay amounts outstanding under the 2024 Amended Term Loan Agreement on February 24, 2026 - $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026.

Pursuant to the Third Amendment, on February 24, 2026, $12.9 million of Reinvestment Proceeds were held in a reinvestment account to be used to acquire additional contiguous non-operated oil and natural gas properties consisting of proved developed reserves in Ward and Winkler Counties, Texas, to fund permitted capital expenditures in the Monument Draw area and/or to fund the drilling and completion of two Monument Draw wells within 180 days after receipt.

two Monument Draw wells within 180 days after receipt.

Should such funds have not been spent within the 180-day period, the Reinvestment Proceeds shall be used to prepay borrowings outstanding under the 2024 Amended Term Loan Agreement.

At March 31, 2026, $7.9 million of Reinvestment Proceeds remained and was recorded as restricted cash.

At June 30, 2026, $5.2 million of Reinvestment Proceeds remained and was recorded as restricted cash.

Term Loan Credit Facility

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We may retain the remaining net cash proceeds received from the West Quito Divestiture, subject to certain reinvestment requirements, set forth in the Third Amendment.

additional $0.6 million of deferred financing costs at March 31, 2026 in conjunction with entry into the Third Amendment.

We recorded a loss on extinguishment of debt in the amount of $0.9 million to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment and deferred an additional $0.6 million of deferred financing costs at March 31, 2026 in conjunction with entry into the Third Amendment.

Capital Resources and Liquidity

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Sufficient levels of available cash are required to fund capital expenditures necessary to offset inherent declines in our production and proven reserves.

We generated a net loss of $56.5 million for the three months ended March 31, 2026 and had negative working capital of $9.1 million as of March 31, 2026.

As of March 31, 2026, we had $46.4 million of cash and cash equivalents, no additional borrowing capacity under the 2024 Amended Term Loan Agreement (as defined in Note 5, “ Debt ” to the unaudited condensed consolidated financial statements) and a total of $22.5 million in debt repayments due through March 2027 under our 2024 Amended Term Loan Agreement .

As of March 31, 2026, $30.0 million remained available for issuance on or before August 31, 2026 under a support letter from our investors.

We generated a net loss of $41.0 million for the six months ended June 30, 2026 and had working capital of $58.4 million as of June 30, 2026.

As of June 30, 2026, we had $83.1 million of cash and cash equivalents, $162.5 million of borrowings outstanding and secured access to up to $175.0 million of additional discretionary delayed draw capacity to fund future growth, available on an uncommitted basis under the 2026 Term Loan Agreement and no required debt repayments due until June 30, 2027 under our 2026 Term Loan Agreement .

We closed on the sale of our West Quito Assets on February 24, 2026 for net proceeds of $60.1 million, of which $45.6 million was used to repay a portion of outstanding borrowings under our 2024 Amended Term Loan Agreement including $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026.

Pursuant to the Third Amendment, remaining proceeds from the sale after related expenses (the “Reinvestment Proceeds”) are to be used to acquire additional contiguous non-operated oil and natural gas properties consisting of proved developed reserves in Ward and Winkler Counties, Texas, to fund permitted capital expenditures in the Monument Draw area and/or to fund the drilling and completion of two Monument Draw wells within 180 days after receipt.

Should such funds have not been spent within the 180-day period, the Reinvestment Proceeds shall be used to prepay borrowings outstanding under the 2024 Amended Term Loan Agreement.

At March 31, 2026, $7.9 million of Reinvestment Proceeds remained and was recorded as restricted cash.

Pursuant to the Third Amendment and continuing requirements under the 2026 Term Loan Agreement, remaining proceeds from the sale after related expenses (the “Reinvestment Proceeds”) are to be used to acquire additional contiguous non-operated oil and natural gas properties consisting of proved developed reserves in Ward and Winkler Counties, Texas, to fund permitted capital expenditures in the Monument Draw area and/or to fund the drilling and completion of two Monument Draw wells within 180 days after receipt.

Should such funds have not been spent within the 180-day period, the Reinvestment Proceeds shall be used to prepay borrowings outstanding under the 2026 Term Loan Agreement.

At June 30, 2026, $5.2 million of Reinvestment Proceeds remained and such were recorded as restricted cash.

On March 3, 2026, we entered into a definitive agreement to sell in a private placement to an institutional investor, 1,800,000 shares of our common stock and 927,273 prefunded warrants for the purchase of common stock at $5.50 per share for total proceeds of $15.0 million.

The offering closed on March 4, 2026, on satisfaction of customary closing conditions.

We intend to use the net proceeds received from the offering for working capital and general corporate purposes.

On May 5, 2026, we established our ATM Program, pursuant to which we may issue and sell, from time to time, up to $150.0 million of shares of our common stock, through or to our Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions.

For the period May 6, 2026 through June 30, 2026, we sold 17,396,701 shares under the ATM Program for net proceeds of $30.3 million, after deducting sales commissions and other offering costs.

We intend to use the net proceeds received from the private placement and ATM Program offerings for working capital and general corporate purposes.

We continue to execute on a plan to reduce operating and capital costs to improve cash flow.

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We have been exploring, and continue to explore, strategic transactions to address these concerns, while also looking at opportunities to significantly reduce expenses in the near term.

However, there can be no assurance that, absent additional capital,

reducing costs or other material favorable developments, the Company will not experience liquidity and covenant compliance issues in the future.

However, there can be no assurance that, absent additional capital, reducing costs or other material favorable developments, the Company will not experience liquidity and covenant compliance issues in the future.

On May 30, 2025, we received written notice (the “Notice”) on behalf of the NYSE American indicating that we are no longer in compliance with NYSE American’s continued listing standards.

Specifically, the letter stated that we are not in compliance with the continued listing standards set forth in Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”).

Section 1003(a)(i) requires a listed company to have stockholders’ equity of $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years.

Section 1003(a)(i) requires a listed company to have stockholders’ deficit of $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years.

Section 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.

Our noncompliance resulted from our reporting stockholders’ equity of $(1.8) million as of March 31, 2025, and losses from continuing operations and/or net losses in three of our four most recent fiscal years ended December 31, 2024.

We reported stockholders’ equity of $157.1 million at March 31, 2026 resulting from the reclassification of our preferred stock from temporary to permanent equity and additional losses from continuing operations.

Our noncompliance resulted from our reporting stockholders’ deficit of $1.8 million as of March 31, 2025, and losses from continuing operations and/or net losses in three of our four most recent fiscal years ended December 31, 2024.

The Notice further provided that we must submit a plan of compliance (the “Plan”) by June 30, 2025 addressing how we intend to regain compliance with the continued listing standards by November 30, 2026.

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The unavailability or high cost of drilling rigs and/or frac crews, pressure pumping equipment, tubulars and other supplies, and of qualified personnel can materially and adversely affect our operations and profitability.

Lastly, actual or anticipated declines in domestic or foreign economic activity or growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the United States or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from international conflicts, efforts to contain pandemics or other factors, could materially affect our business and financial condition and impact our ability to finance operations by worsening the actual or anticipated future drop in worldwide oil demand, negatively impacting the price received for oil and natural gas production or adversely impacting our ability to comply with covenants in our 2024 Amended Term Loan Agreement.

Negative economic conditions could also adversely affect the collectability of our trade receivables or performance by our vendors and suppliers or cause our commodity hedging arrangements to be ineffective if our counterparties are unable to perform their obligations.

All of the foregoing may adversely affect our business, financial condition, results of operations, cash flows and, potentially, compliance with the covenants contained in our Amended Term Loan Agreement.

Debt Obligations.

Under our 2024 Amended Term Loan, we are required to make scheduled quarterly amortization payments in an aggregate principal amount equal to 2.50% of the aggregate principal amount of the loans outstanding commencing with the fiscal quarter ending June 30, 2025.

We must make a total of $22.5 million in debt repayments through March 2027 under our 2024 Amended Term Loan Agreement.

Changes in the level and timing of our production, drilling and completion costs, the cost and availability of transportation for our production and other factors varying from our expectations can affect our ability to comply with the covenants under our 2024 Amended Term Loan Agreement.

Under our 2026 Term Loan Agreement, we are required to make scheduled quarterly amortization payments (i) commencing with the fiscal quarter ending June 30, 2027 through and including the fiscal quarter ending March 31, 2029, in an aggregate principal amount equal to 1.25% of the loans outstanding on June 30, 2026, (ii) for the fiscal quarter ending June 30, 2029, an aggregate principal amount equal to 7.50% of the loans outstanding on June 30, 2026, and (iii) for the fiscal quarter ending September 30, 2029, an aggregate principal amount equal to 10.00% of the loans outstanding on June 30, 2026.

We must make a total of $2.0 million in debt repayments through June 2027 under our 2026 Term Loan Agreement.

As a consequence, we endeavor to anticipate potential covenant compliance issues and work with our lenders to address any such issues ahead of time.

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In the event we are not successful in obtaining covenant modifications, if needed, there is no assurance that we will be successful in implementing alternatives that allow us to maintain compliance with our covenants or that we will be successful in obtaining alternative financing that provides us with the liquidity that we need to operate our business.

Even if successful, alternative sources of financing could prove more expensive than borrowings under our 2024 Amended Term Loan Agreement.

Even if successful, alternative sources of financing could prove more expensive than borrowings under our 2026 Term Loan Agreement.

Net increase in cash and cash equivalents is summarized as follows (in thousands):

Three Months Ended

Six Months Ended

Cash flows provided by operating activities

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Operating Activities .

Net cash flows provided by operating activities for the three months ended March 31, 2026 and 2025, were $2.1 million and $12.7 million, respectively.

Items impacting the decrease in operating cash flows were primarily driven by changes in working capital for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Net cash flows provided by operating activities for the six months ended June 30, 2026 and 2025, were $10.8 million and $22.9 million, respectively.

Items impacting the decrease in operating cash flows were

driven by changes in working capital primarily related to unrealized losses (gains) on derivative contracts for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Investing Activities.

Net cash flows provided by investing activities for the three months ended March 31, 2026 were approximately $56.4 million primarily from proceeds received from sales of oil and natural gas assets compared to net cash flows used in investing activities for the three months ended March 31, 2025 of $20.1 million primarily for drilling and completion activities.

During the three months ended March 31, 2026, we spent $3.6 million on oil and natural gas capital expenditures, of which $2.6 million related to drilling and completion costs and $0.8 million related to the development of our treating equipment and gathering support infrastructure.

During the three months ended March 31, 2025, we spent $19.8 million on oil and natural gas capital expenditures, of which $17.4 million related to drilling and completion costs and $2.1 million related to the development of our treating equipment and gathering support infrastructure.

In the first three months of 2025, we ran one operated rig in the Delaware Basin, drilled and cased four gross (4.0 net) operated wells, and did not complete and put online any operated wells.

Net cash flows provided by investing activities for the six months ended June 30, 2026 were approximately $52.2 million primarily from proceeds received from sales of oil and natural gas assets compared to net cash flows used in investing activities for the six months ended June 30, 2025 of $53.5 million primarily for drilling and completion activities.

During the six months ended June 30, 2026, we spent $7.8 million on oil and natural gas capital expenditures, of which $4.0 million related to drilling and completion costs and $3.2 million related to the development of our treating equipment and gathering support infrastructure.

During the six months ended June 30, 2025, we spent $53.1 million on oil and natural gas capital expenditures, of which $47.2 million related to drilling and completion costs and $5.0 million related to the development of our treating equipment and gathering support infrastructure.

In the first six months of 2025, we ran one operated rig in the Delaware Basin, drilled and cased six gross (5.5 net) operated wells, and completed and put online four gross (4.0 net) operated wells.

Financing Activities.

Net cash flows used in financing activities for the three months ended March 31, 2026 were $32.3 million compared to net cash flows provided by financing activities for the three months ended March 31, 2025 of $61.2 million.

During the three months ended March 31, 2026, we repaid $45.6 million under our 2024 Amended Term Loan Agreement and issued $14.0 million in common stock.

During the three months ended March 31, 2025, we received net proceeds of $61.3 million from the incurrence of the Incremental Term Loans on January 9, 2025.

Net cash flows used in financing activities for the six months ended June 30, 2026 were $2.7 million compared to net cash flows provided by financing activities for the six months ended June 30, 2025 of $55.4 million.

During the six months ended June 30, 2026, we repaid $45.6 million under our 2024 Amended Term Loan Agreement and issued $43.9 million in common stock, net of issuance costs.

During the six months ended June 30, 2025, we received net proceeds of $61.1 million from the incurrence of the Incremental Term Loans on January 9, 2025.

Off-Balance Sheet Arrangements

At June 30, 2026, there are no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, results of operations or liquidity.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles

generally accepted in the United States.

Preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

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Three Months Ended

Six Months Ended

In thousands (except per unit and per Boe amounts)

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Other income (expenses):

Net (loss) gain on derivative contracts

Net gain (loss) on derivative contracts

Interest expense and other

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Operating Revenues.

Oil, natural gas and NGLs revenues were $39.1 million and $47.4 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease in revenues is primarily attributable to a decrease in average realized prices for oil, natural gas and NGLs.

We realized negative natural gas pricing for the quarter ended March 31, 2026 whereby costs and differentials exceeded the sales price for natural gas and resulted in us as seller paying the purchaser to take the natural gas.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $9.73 per Boe for three months ended March 31, 2026 when compared with the same period in 2025.

Production averaged 12,578 Boe per day for the three months ended March 31, 2026 compared to 11,900 Boe per day for the three months ended March 31, 2025 due to more consistent and reliable processing during the first quarter of 2026 compared to the first quarter of 2025.

West Quito area production averaged approximately 1,045 Boe per day of the Company’s total production for the quarter ended March 31, 2026 compared to 1,751 Boe per day for the quarter ended March 31, 2025.

We completed the West Quito Divestiture on February 24, 2026.

Oil, natural gas and NGLs revenues were $48.0 million and $42.6 million for the three months ended June 30, 2026 and 2025, respectively.

The increase in revenues is primarily attributable to an increase in average realized prices for oil, natural gas and NGLs partially offset by lower production volumes for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

We realized negative natural gas pricing for the three months ended June 30, 2026 whereby costs and differentials exceeded the sales price for natural gas and resulted in us as seller paying the purchaser to take the natural gas.

Average realized prices (excluding the effects of hedging arrangements) increased approximately $6.48 per Boe for three months ended June 30, 2026 when compared with the same period in 2025.

Production averaged 12,407 Boe per day for the three months ended June 30, 2026 compared to 12,989 Boe per day for the three months ended June 30, 2025.

Oil, natural gas and NGLs revenues were $87.0 million and $90.0 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease in revenues is primarily attributable to a decrease in our average realized prices partially offset by slightly higher production volumes in the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $1.45 per Boe for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025.

Production averaged 12,497 Boe per day for the six months ended June 30, 2026 compared to 12,448 Boe per day for the six months ended June 30, 2025.

The amount we realize for our production depends predominantly upon commodity prices, which are affected by changes in market demand and supply, as impacted by overall economic activity, weather, transportation take-away capacity constraints, inventory storage levels, quality of production, basis differentials and other factors.

Lease Operating Expenses.

Lease operating expenses were $10.1 million and $10.4 million for the three months ended March 31, 2026 and 2025, respectively.

On a per unit basis, lease operating expenses were $8.92 per Boe and $9.67 per Boe for the three months ended March 31, 2026 and 2025, respectively.

The decrease in lease operating expenses per Boe for the three months ended March 31, 2026 compared to the same period of 2025 is primarily a result of increased average daily production volumes.

Lease operating expenses were $9.2 million and $10.7 million for the three months ended June 30, 2026 and 2025, respectively, and $19.3 million and $21.0 million for the six months ended June 30, 2026 and 2025, respectively.

On a per unit basis, lease operating expenses were $8.14 per Boe and $9.03 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $8.52 per Boe and $9.33 per Boe for the six months ended June 30, 2026 and 2025, respectively.

The decrease in lease operating expenses on a per unit basis for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 is primarily a result of lower maintenance, power, and chemical costs.

Workover and Other Expenses .

Workover and other expenses were $1.0 million and $1.4 million for the three months ended March 31, 2026 and 2025, respectively.

On a per unit basis, workover and other expenses were $0.90 per Boe and $1.34 per Boe for the three months ended March 31, 2026 and 2025, respectively.

The decrease in workover and other expenses for the three months ended March 31, 2026 compared to the same period in 2025 is the result of less workover activity during the first quarter of 2026.

Workover and other expenses were $0.6 million and $2.3 million for the three months ended June 30, 2026 and 2025, respectively, and $1.6 million and $3.7 million for the six months ended June 30, 2026 and 2025, respectively.

On a per unit basis, workover and other expenses were $0.55 per Boe and $1.95 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $0.73 per Boe and $1.66 per Boe for the six months ended June 30, 2026 and 2025, respectively.

The decrease in workover and other expenses for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 is the result of less workover activity during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025.

Taxes Other than Income.

Taxes other than income were $2.3 million and $2.8 million for the three months ended March 31, 2026 and 2025, respectively.

Taxes other than income were $3.0 million and $2.5 million for the three months ended June 30, 2026 and 2025, respectively, and $5.3 million for both the six months ended June 30, 2026 and 2025.

Severance taxes are based on realized prices and volumes at the wellhead, while ad valorem taxes are tied to the annual valuation of our properties.

As revenues or volumes from oil and natural gas sales increase or decrease, severance taxes on these sales also increase or decrease.

On a per unit basis, taxes other than income were $2.05 per Boe and $2.61 per Boe for the three months ended March 31, 2026 and 2025, respectively.

On a per unit basis, taxes other than income were $2.64 per Boe and $2.13 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $2.35 per Boe and $2.36 per Boe for the six months ended June 30, 2026 and 2025, respectively.

Gathering and Other Expenses.

Gathering and other expenses were $11.3 million and $12.0 million for the three months ended March 31, 2026 and 2025, respectively.

Gathering and other expenses were $12.3 million and $11.0 million for the three months ended June 30, 2026 and 2025, respectively, and $23.5 million and $23.0 million for the six months ended June 30, 2026 and 2025, respectively.

Gathering and other expenses include gathering fees paid to third parties on our oil and natural gas production and operating expenses of our gathering support infrastructure.

Our gathering and other expenses are primarily driven by the amount and location of natural gas production, the concentration of H 2 S in our sour gas produced, and the amounts paid to treat our sour gas volumes.

On a per unit basis, gathering and other expenses were $9.94 per Boe and $11.20 per Boe for the three months ended March 31, 2026 and 2025, respectively.

The decrease in gathering and other expenses per Boe for the three months ended March 31, 2026 compared to the same period of 2025 is primarily related to realized savings from capital project returns and more reliable throughput resulting from entry into a long-term processing agreement with a publicly traded large-cap midstream provider in January 2026.

On a per unit basis, gathering and other expenses were $10.87 per Boe and $9.27 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $10.40 per Boe and $10.19 per Boe for the six months ended June 30, 2026 and 2025, respectively.

The increase in gathering and other expenses per Boe for the three and six months ended June 30, 2026 compared to the three and six months ended June 30,

2025 is primarily related to greater throughput volumes resulting from entry into a long-term processing agreement with a publicly traded large-cap midstream provider in January 2026.

General and Administrative Expense.

General and administrative expense was $4.3 million and $4.4 million for the three months ended March 31, 2026 and 2025, respectively.

On a per unit basis, general and administrative expenses were $3.76 per Boe and $4.08 per Boe for the three months ended March 31, 2026 and 2025, respectively.

The decrease in general and administrative expense per Boe for the three months ended March 31, 2026 compared with the same prior year periods is primarily due to increased average daily production.

General and administrative expense, excluding stock-based compensation, was $3.6 million and $2.6 million for the three months ended June 30, 2026 and 2025, respectively, and $7.9 million and $6.9 million for the six months ended June 30, 2026 and 2025, respectively.

On a per unit basis, general and administrative expenses were $3.23 per Boe and $2.17 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $3.50 per Boe and $3.08 per Boe for the six months ended June 30, 2025 and 2024, respectively.

The increase in general and administrative expense for the three and six months ended June 30, 2026 compared with the same prior year periods is primarily due to higher professional fees including legal costs.

We incurred $0.4 million of stock-based compensation expense during the three and six months ended June 30, 2026 related to the vesting of a restricted stock unit grant to specific executives upon the occurrence of a defined event.

Comparatively, we incurred less than $0.1 million of stock-based compensation expense for the six months ended June 30, 2025.

Depletion, Depreciation, and Amortization Expense.

Depletion for oil and natural gas properties is calculated using the unit of production method, which depletes the capitalized costs of evaluated properties plus future development costs based on the ratio of production for the current period to total reserve volumes of evaluated properties as of the beginning of the period.

Depletion expense was $12.1 million and $12.7 million for the three months ended March 31, 2026 and 2025, respectively.

On a per unit basis, depletion expense was $10.68 per Boe and $11.83 per Boe for the three months ended

March 31, 2026 and 2025, respectively.

Depletion expense was $12.0 million and $13.6 million for the three months ended June 30, 2026 and 2025, respectively, and $24.1 million and $26.2 million for the six months ended June 30, 2026 and 2025, respectively.

On a per unit basis, depletion expense was $10.62 per Boe and $11.47 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $10.64 per Boe and $11.64 per Boe for the six months ended June 30, 2026 and 2025, respectively.

The decrease in our depletion rate per Boe is primarily due to a period over period decrease in net oil and natural gas properties resulting from the sale of our West Quito Assets combined with the associated period over period decrease in proved reserves.

Net (loss) gain on derivative contracts.

Net gain (loss) on derivative contracts.

We enter into derivative commodity instruments to hedge our exposure to price fluctuations on our anticipated oil, natural gas and NGLs production.

Consistent with prior years, we have elected not to designate any positions as cash flow hedges for accounting purposes, and accordingly, we recorded the net change in the mark-to-market value of these derivative contracts in the unaudited condensed consolidated statements of operations.

For the three months ended March 31, 2026, we recorded a net derivative loss of $48.0 million ($47.0 million net unrealized loss on unsettled contracts and a $1.0 million net realized loss on settled contracts).

For the three months ended March 31, 2025, we recorded a net derivative gain of $9.3 million ($11.8 million net gain on unsettled contracts and a $2.5 million net realized loss on settled contracts).

At March 31, 2026, we had a $9.4 million derivative asset ($7.4 million current) and a $35.2 million derivative liability ($24.6 million current).

For the three months ended June 30, 2026, we recorded a net derivative gain of $13.1 million ($20.9 million net unrealized gain on unsettled contracts offset by a $7.8 million net realized loss on settled contracts).

For the three months ended June 30, 2025, we recorded a net derivative gain of $11.5 million ($7.2 million net unrealized gain on unsettled contracts and $4.3 million net realized gain on settled contracts).

For the six months ended June 30, 2026, we recorded a net derivative loss of $34.9 million ($26.1 million net unrealized loss on unsettled contracts and $8.8 million net realized loss on settled contracts).

For the six months ended June 30, 2025, we recorded a net derivative gain of $20.9 million ($19.1 million net unrealized gain on unsettled contracts and $1.8 million net realized gain on settled contracts).

At June 30, 2026, we had a $8.0 million derivative asset ($4.2 million current) and a $12.9 million derivative liability ($6.7 million current).

Interest Expense and Other.

Interest expense and other totaled $5.5 million and $6.7 million for the three months ended March 31, 2026 and 2025, respectively.

Our weighted average interest rate was approximately 11.57% and 12.21% for the three months ended March 31, 2026 and 2025, respectively .

For the second quarter of 2026, our interest rate will be approximately 11.60% on outstanding borrowings .

Interest expense and other totaled $4.3 million and $6.6 million for the three months ended June 30, 2026 and 2025, respectively and $9.8 million and $13.3 million for the six months ended June 30, 2026 and 2025, respectively.

Our weighted average interest rate was approximately 11.59% and 11.58% for the three and six months ended June 30, 2026, respectively .

Comparatively, our weighted average interest rate was approximately 12.20% for the three and six months ended June 30, 2025 .

For the third quarter of 2026, our interest rate will be approximately 10.38% on outstanding borrowings.

Loss on extinguishment of debt.

We recorded a loss on extinguishment of debt in the amount of $0.9 million for the quarter ended March 31, 2026 to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment.

We recorded a loss on extinguishment of debt in the amount of $0.9 million for the six months ended June 30, 2026 to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment under our 2024 Amended Term Loan Agreement.

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