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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2021-08-11 compared with 2021-02-10 · 42 added, 41 removed, 6 unchanged (93% of the section changed)

Quantitative and Qualitative Disclosures About Market Risk

primary sources of market risk for us include fluctuations in commodity prices and interest rates.

All of our financial instruments

are for purposes other than trading.

primary source of market risk for us includes fluctuations in commodity prices and interest rates.

All of our financial instruments are

for purposes other than trading.

At June 30, 2021, we had an outstanding loan balance of $800,000 under our credit agreement, which bears interest at a

rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) floating daily.

If the interest

rate on our bank debt increases or decreases by one percentage point our annual pretax income would change by $8,000, based on the outstanding

balance at June 30, 2021.

Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations.

primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized.

At December 31, 2020, our largest credit risk associated with any single purchaser was $235,604 or 65% of our total oil and gas

credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized.

June 30, 2021, our largest credit risk associated with any single purchaser was $495,512 or 74% of our total oil and gas receivables.

We have not experienced any significant credit losses.

At December 31, 2020, we had an outstanding loan balance of $1,100,000 under our credit agreement, which bears

interest at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) floating daily.

If the interest rate on our bank debt increases or decreases by one percentage point our annual pretax income would change by

$11,000 based on the outstanding balance at December 31, 2020.

Our most significant market risk is the pricing for crude oil and natural gas.

Our financial condition, results

of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural

Our most significant market risk is the pricing applicable to our crude oil and natural gas production.

Our financial

condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil

and natural gas.

Prices for oil and natural gas fluctuate widely.

We cannot predict future oil and natural gas prices with any certainty.

Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility

to continue in the future.

that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil

and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price

and availability of alternative fuels and overall political and economic conditions in oil producing countries.

prices dropped sharply in early March 2020, and then continued to decline reaching levels below zero dollars per barrel.

was a result of multiple factors affecting supply and demand in global oil and gas markets, including the announcement of price

reductions and production increases by OPEC members and other oil exporting nations and the ongoing COVID-19 pandemic.

natural gas prices are expected to continue to be volatile as a result of the changes in oil and natural gas production, inventories

and demand, as well as national and international economic performance.

Even though oil prices improved in June 2020, we cannot

predict when oil prices will stabilize.

in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing

and operating results.

Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved

Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit

facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional

capital for our acquisition, exploration and development activities.

In addition, a noncash write-down of our oil and gas properties

could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of

Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically.

Thus, we may experience

material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well

any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital

Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue

in the future.

that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas,

the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability

of alternative fuels and overall political and economic conditions in oil producing countries.

example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from

a low of $31.75 per bbl in October 2020 to a high of $70.03 per bbl in June 2021.

The Henry Hub Spot Market Price (“Henry Hub”)

posted price for natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $23.86 per MMBtu in February 2021.

On June 30, 2021, the WTI posted price for crude oil was $69.45 and the Henry Hub posted price for natural gas was $3.79.

of Operations above for the Company’s realized prices during the quarter.

in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating

Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves.

Any reduction

in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect

the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration

and development activities.

In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting

rules if prices declined significantly, even if it is only for a short period of time.

Lower prices may also reduce the amount of crude

oil and natural gas that can be produced economically.

Thus, we may experience material increases or decreases in reserve quantities

solely as a result of price changes and not as a result of drilling or well performance.

any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources.

Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other.

If the average oil price

had increased or decreased by ten dollars per barrel for the first nine months of fiscal 2021, pretax income or loss would have

changed by $376,810.

If the average gas price had increased or decreased by one dollar per mcf for the first nine months of fiscal

2021, pretax income or loss would have changed by $251,094.

If the average oil price had increased

or decreased by ten dollars per barrel for the quarter ended June 30, 2021, our pretax income would have changed by $154,380.

average gas price had increased or decreased by one dollar per mcf for the quarter ended June 30, 2021, our pretax income would have

increased or decreased by $90,063.

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 3. Quantitative and Qualitative Disclosures About Market Risk