Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item
3. Quantitative and Qualitative Disclosures About Market Risk
The
primary source of market risk for us includes fluctuations in commodity prices. All of our financial instruments are for purposes other
than trading.
Credit
Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary
credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At
September 30, 2022, our largest credit risk associated with any single purchaser was $677,030 or 57% of our total oil and gas receivables.
We have not experienced any significant credit losses.
Energy
Price Risk . 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. 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.
For
example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from
a low of $61.55 per bbl in December 2021 to a high of $119.68 per bbl in March 2022. The Henry Hub Spot Market Price (“Henry Hub”)
posted price for natural gas has ranged from a low of $3.32 per MMBtu in December 2021 to a high of $9.85 per MMBtu in August 2022. On
September 30, 2022, the WTI posted price for crude oil was $75.47 and the Henry Hub posted price for natural gas was $6.40. See Results
of Operations above for the Company’s realized prices during the three and six months.
Similarly,
any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources.
If the average oil price had increased or decreased by ten dollars per barrel for the first six months of fiscal 2023, our pretax income
would have increased or decreased by $287,440. If the average gas price had increased or decreased by one dollar per mcf for the first
six months of fiscal 2023, our pretax income would have increased or decreased by $248,313.
Information
about market risks for the six months ended September 30, 2022, does not differ materially from that discussed under Item 7A of the registrant’s
2022 Annual Report on Form 10-K.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.