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Risks Related to our Business
−Removed: The COVID-19 pandemic and the significant decline in commodity prices in the first half of 2020 has adversely affected our business, and the ultimate effect on our financial condition, results of operations, and cash distributions to unitholders will depend on future developments, which are highly uncertain and cannot be predicted.
+Added: The COVID-19 pandemic and the significant decline in commodity prices in 2020 has adversely affected our business, and the ultimate effect on our financial condition, results of operations, and cash distributions to unitholders will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets.
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production have helped to correct the supply and demand imbalance;
−Removed: however, these reductions are not expected to be enough in the near-term to offset the significant inventory build caused by demand destruction from the COVID-19 pandemic in the first half of 2020.
+Added: however, these reductions are not expected to be enough in the near-term to offset the significant inventory build caused by demand destruction from the COVID-19 pandemic in 2020.
Prices for oil were over $60 per barrel at the beginning of 2020 before declining significantly through March and further declining into April.
−Removed: While oil prices modestly recovered in June and July 2020, a reversal of recent improvements or a prolonged period at current prices may materially and adversely affect our financial condition, results of operations, and cash distributions to unitholders.
−Removed: The impact of the COVID-19 pandemic has negatively affected the oil and natural gas business environment, significantly reducing prices of oil, natural gas and NGLs.
+Added: While oil prices have modestly recovered, a reversal of recent improvements or a prolonged period at current prices may materially and adversely affect our financial condition, results of operations, and cash distributions to unitholders.
+Added: The impact of the COVID-19 pandemic has negatively affected the oil and natural gas business environment, primarily by causing a reduction in commercial activity and travel worldwide thereby lowering energy demand.
+Added: This, in turn, has resulted in significantly lower market prices for oil, natural gas, and natural gas liquids.
While we use derivative instruments to partially mitigate the impact of commodity price volatility, our revenues and operating results depend significantly upon the prevailing prices for oil and natural gas.
−Removed: The current price environment has caused some of our operators’ wells to become uneconomic, which has resulted, or may result in the future, in suspension of production from those wells or a significant reduction in or no royalty revenues from existing production.
−Removed: Some operators may also attempt to shut in producing wells and avoid lease termination or payment of shut-in royalties by claiming force majeure, if provided for in the applicable lease.
−Removed: Because these shut-ins have happened so recently, and no operator has, to our knowledge, claimed force majeure, we have not been able to quantify their impact on our future revenues.
+Added: The current price environment has caused many of our operators to reduce their drilling and completion activity on our acreage, and caused some of our operators to temporarily shut-in production from existing wells, both of which negatively impact our production volumes.
+Added: While we believe most of the shut-in production has been brought back on-line, drilling and completion activity remains depressed relative to pre-pandemic levels.
The current price environment also caused us to determine that certain depletable units consisting of mature oil producing properties were impaired.
−Removed: Therefore, we recognized impairment of oil and natural gas properties of $ 51.0 million for the six months ended June 30, 2020.
+Added: Therefore, we recognized impairment of oil and natural gas properties of $ 51.0 million for the nine months ended September 30, 2020.
Additionally, the borrowing base under the Credit Facility, which takes into consideration the estimated loan value of our oil and natural gas properties, was reduced from $ 650.0 million to $ 460.0 million, effective May 1, 2020.
Effective July 21, 2020, in connection with the closing of our two asset sales in the Permian Basin, the borrowing base was further reduced to $ 430.0 million.
+Added: Effective November 3, 2020, the most recent borrowing base redetermination reduced the borrowing base to $ 400.0 million.
In a prolonged period of low commodity prices, we may be required to impair additional properties and the borrowing base under our Credit Facility could be further reduced.
In light of the challenging business environment and uncertainty caused by the pandemic, the board of directors of our general partner (the "Board") also approved a reduction in the quarterly distribution for the first quarter of 2020 to increase the amount of retained free cash flow for debt reduction and balance sheet protection.
−Removed: The Board approved an increase in the quarterly distribution for the second quarter of 2020 but the distribution remains below 2019 levels.
+Added: The Board approved an increase in the quarterly distribution for the second quarter of 2020 and maintained that distribution for the third quarter of 2020 but the distribution remains below 2019 levels.
We enter into derivative instruments to partially mitigate the impact of commodity price volatility on our cash generated from operations.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.