What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-12 compared with 2020-03-12 · 49 added, 57 removed, 205 unchanged (34% of the section changed)

1 unchanged sentence

We believe the location, size and concentration of our acreage position in one of North America’s leading unconventional oil-resource plays provide us with drilling and development opportunities that will result in significant long-term value.

Our primary focus is acquiring and participating in the development of non-operated working interests in oil wells in the Williston Basin.

Our primary focus is investing in non-operated minority working and mineral interests in oil and gas properties in the United States.

As a non‑operator, we are able to diversify our investment exposure by participating in a large number of gross wells, as well as entering into additional project areas by partnering with numerous experienced operating partners or pursuing value‑enhancing acquisitions.

In addition, because we can elect to participate on a well-by-well basis, we believe we have increased flexibility in the timing and amount of our capital expenditures because we are not burdened with various contractual arrangements with respect to minimum drilling obligations.

In addition, because we can generally elect to participate on a well‑by‑well basis, we believe we have increased flexibility in the timing and amount of our capital expenditures because we are not burdened with various contractual arrangements with respect to minimum drilling obligations.

Further, we are able to avoid exploratory and infrastructure costs incurred by many oil and gas producers.

We seek to create value through strategic acquisitions and partnering with operators who have experience in developing and producing oil in our core areas.

We seek to create value through strategic acquisitions and partnering with operators who have significant experience in developing and producing hydrocarbons in our core areas.

We have more than 40 experienced operating partners that provide technical insights and opportunities for acquisitions.

Historically, our core acquisition strategy has been to seek to acquire smaller lease positions at a significant discount to the contiguous acreage positions typically sought by larger producers and operators of oil wells.

Such acquisitions, including wellbore acquisitions, have been a significant driver of our historical net well additions and additions to production.

In addition, in 2018 and 2019 we have accelerated our growth through several larger acquisitions of non-operated asset packages, which are described in detail in Note 3 to our financial statements.

For 2019, this included the VEN Bakken Acquisition (defined in Note 3 to our financial statements) that closed on July 1, 2019, which we estimate contributed approximately 7,912 Boepd, or 18%, of our average daily production in the fourth quarter of 2019.

During 2019, we added a total of 1,386 gross (133.2 net) producing wells in the Williston Basin, including 90.1 net wells from the VEN Bakken acquisition.

At December 31, 2019, we owned working interests in 6,156 gross (458.7 net) producing wells, with substantially all the wells targeting the Bakken and Three Forks formations.

As of December 31, 2019, we leased approximately 182,854 net acres, all located in the Williston Basin, of which approximately 164,066 net acres were developed.

As of December 31, 2019, our proved reserves were 163.3 MMBoe (all of which are in the Williston Basin) as estimated by our third-party independent reserve engineers, Cawley, Gillespie & Associates, Inc.

As of December 31, 2019, 59% of our proved reserves were classified as proved developed and 81% of our proved reserves were oil.

The following table provides a summary of certain information regarding our assets:

Across these operators, no single operator represented more than 15% of our net producing wells as of December 31, 2020.

We had historically focused entirely in the Williston Basin of the United States, in North Dakota and Montana, where substantially all of our assets were located as of December 31, 2020.

We expanded our strategy in 2020, making our first small acquisitions in the Permian Basin.

In February 2021, we entered into an agreement to acquire producing natural gas properties in the Appalachian Basin from Reliance Marcellus, LLC (the “Reliance Acquisition”), which we anticipate will close in April 2021.

See Note 14 to our financial statements for further details regarding the pending Reliance Acquisition.

The following table provides a summary of certain information regarding our assets as of December 31, 2020, including reserves information as estimated by our third-party independent reserve engineers, Cawley, Gillespie & Associates, Inc.:

As of December 31, 2020

2 unchanged sentences

(MBoe) % Oil % Proved Developed

North Dakota 166,134 6,033 444.4 42,369 161,431 81 % 59 %

Montana and Other 16,720 123 14.3 1,572 1,876 84 100

Williston Basin 183,242 6,633 474.5 35,583 119,523 78 % 69 %

Permian Basin 285 7 0.6 155 3,109 82 54

Total 183,527 6,640 475.1 35,738 122,632 78 % 69 %

1 unchanged sentence

(1) Represents the average daily production over the three months ended December 31, 2020.

Tab le of Contents

Business Strategy

Key elements of our business strategies include:

• Diversify Our Risk Through Non-Operated Participation in a Large Number of Wells .

As a non-operator, we seek to diversify our investment and operational risk through participation in a large number of oil wells and with multiple operators.

As of December 31, 2019, we have participated in 6,156 gross (458.7 net) producing wells in the Williston Basin with an average working interest of 7.5% in each gross well, with more than 40 experienced operating partners.

We believe the best way to develop our acreage is to take a long-term approach and to participate in the development of our locations with potential for the highest rates of return.

• Diversify Our Risk Through Non-Operated Participation in a Large Number of Wells and Multiple Basins .

As a non-operator, we seek to diversify our investment and operational risk through participation in a large number of oil and gas wells and with multiple operators.

As of December 31, 2020, we have participated in 6,640 gross (475.1 net) producing wells with an average working interest of 7.2% in each gross well, with more than 40 experienced operating partners.

We believe the best way to develop our acreage is to take a long-term approach and to participate in the development of our locations with potential for the highest rates of return while preserving optionality to allocate capital to assets in our portfolio that offer the highest projected rates of return.

We also believe that we can further diversify our risk with acquisitions in other basins, which we began in 2020 in the Permian Basin and expect to continue in 2021, including via the pending Reliance Acquisition.

• Accelerate Growth by Pursuing Value-Enhancing Acquisitions.

We strive to be the natural consolidator and clearing house of non-operated working interest in the Williston Basin.

We strive to be the natural consolidator and clearing house of non-operated working interest in various leading oil and gas shale plays in the United States.

Our “ground game” acquisition strategy is to build a strong presence in our core basins and seek to acquire smaller additional lease positions at a significant discount to the contiguous acreage positions typically sought by larger producers and operators of oil and gas wells, focusing on near term drilling opportunities.

Such acquisitions have been a significant driver of our net well additions and additions to production.

We intend to continue these activities, while at the same time evaluating and pursuing larger non-operated asset packages that we believe can responsibly accelerate our growth strategy.

We intend to continue these activities, while at the same time evaluating and pursuing larger non-operated asset packages, such as the pending Reliance Acquisition, that we believe can responsibly accelerate our growth strategy.

• Build and Maintain a Strong Balance Sheet and Proactively Manage to Limit Downside.

9 unchanged sentences

While lower commodity prices may reduce our future net cash flow from operations, we expect to have sufficient liquidity to continue development of our oil and gas properties.

At December 31, 2019, the borrowing base on our revolving credit facility was $800.0 million and we had $580.0 million of borrowings outstanding thereunder, leaving $220.0 million of borrowing availability under the facility.

In addition, we undertake an active commodity hedging program that helps stabilize a volatile commodity pricing environment and protect cash flows in a potential downturn.

In addition, we undertake an active commodity hedging program that is designed to help stabilize the volatile commodity pricing environment and protect cash flows in a potential downturn.

We primarily engage in oil and natural gas exploration and production by participating on a proportionate basis alongside third-party interests in wells drilled and completed in spacing units that include our acreage.

4 unchanged sentences

Historically, we have participated pursuant to our working interest in a vast majority of the wells proposed to us.

However, declines in oil prices typically reduce both the number of well proposals we receive and the proportion of well proposals in which we elect to participate.

Our land and engineering team uses our extensive database to make these economic

Tab le of Contents

However, declines in oil prices typically reduce both the number of well proposals we receive and the proportion of well

proposals in which we elect to participate.

Our land and engineering team uses our extensive database to make these economic decisions.

Given our large acreage footprint and substantial number of well participations, we believe we can make accurate economic drilling decisions.

1 unchanged sentence

Instead, our operating partners generally market and sell oil and natural gas produced from wells in which we have an interest.

Our operating partners coordinate the transportation of our oil production from our wells to appropriate pipelines or rail transport facilities pursuant to arrangements that they negotiate and maintain with various parties purchasing the production.

Our operating partners coordinate the transportation of our oil and gas production from our wells to appropriate pipelines or rail transport facilities pursuant to arrangements that they negotiate and maintain with various parties purchasing the production.

We understand that our partners generally sell our production to a variety of purchasers at prevailing market prices under separately negotiated short-term contracts.

25 unchanged sentences

These constraints and the resulting shortages or high costs could delay or temporarily halt the operations of our operating partners and materially increase our operating and capital costs.

Such seasonal anomalies can also pose challenges for meeting well drilling objectives and may increase competition for equipment,

Tab le of Contents

supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay or temporarily halt our operating partners’ operations.

seasonal anomalies can also pose challenges for meeting well drilling objectives and may increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay or temporarily halt our operating partners’ operations.

Principal Agreements Affecting Our Ordinary Business

6 unchanged sentences

Other locations within the drilling unit created for a well may also be drilled at any time with no time limit as long as the lease is held by production.

Given the current pace of drilling in the Bakken play at this time, we do not believe lease expiration issues will materially affect our North Dakota position.

Given the current pace of drilling in the areas of our operations, we do not believe lease expiration issues will materially affect our acreage position.

Governmental Regulation and Environmental Matters

4 unchanged sentences

Such states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, the sourcing and disposal of water used in the process of drilling, completion and abandonment, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of such wells.

Moreover, the current administration has indicated that it expects to impose additional federal regulations limiting access to and production from federal lands.

The effect of these regulations is to limit the amount of oil and natural gas that we can produce from our wells and to limit the number of wells or the locations at which we can drill.

16 unchanged sentences

Effective January 1, 1995, the FERC implemented regulations establishing an indexing system (based on inflation) for transportation rates for oil pipelines that allows a pipeline to increase its rates annually up to a prescribed ceiling, without making a cost of service filing.

Every five years, the FERC reviews the appropriateness of the index level in relation to changes in industry costs.

Every five years, the FERC reviews the appropriateness of the index

level in relation to changes in industry costs.

On December 17, 2015, the FERC established a new price index for the five-year period which commenced on July 1, 2016.

Tab le of Contents

Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions.

28 unchanged sentences

Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on our company, as well as the oil and natural gas industry in general.

Tab le of Contents

The Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”) and comparable state statutes impose strict, joint and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of “hazardous substances” found at such sites.

11 unchanged sentences

CAA regulations include New Source Performance Standards (“NSPS”) for the oil and natural gas source category to address emissions of sulfur dioxide and volatile organic compounds (“VOCs”) and a separate set of emission standards to address hazardous air pollutants frequently associated with oil and natural gas production and processing activities.

On September 18, 2015, the EPA proposed to further amend the NSPS for the oil and natural gas source category to set standards for methane and VOC emissions from new and modified oil and gas production sources and natural gas-processing and transmission sources.

These regulations were finalized and published in the Federal Register on June 3, 2016.

Although these regulations are still in effect, they are being reconsidered by the Trump Administration EPA.

Although we cannot predict the cost to comply with these new requirements at this point, or to what extent they may or may not be changed upon review, compliance with these new rules could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact our business.

These new regulations and proposals and any other new regulations requiring the installation of more sophisticated pollution control equipment could have a material adverse impact on our business, results of operations and financial condition.

In recent years, there has been considerable uncertainty surrounding regulation of methane emissions, as the EPA previously published final regulations under the Clean Air Act establishing new performance standards for methane in 2016, but since that time the EPA has undertaken several measures, including issuing rules in 2020, to delay implementation of the methane standards.

Various states and industry and environmental groups are separately challenging both the original 2016 standards and the EPA’s 2020 final rule.

Notwithstanding the current court challenges, the EPA under the current administration may reconsider the 2020 final rule, which could result in more stringent methane emission rulemaking.

Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as greenhouse gas cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, there exists the United Nations-sponsored Paris Agreement, which is a non-binding agreement for nations to limit their greenhouse gas emissions through individually-determined reduction goals every five years after 2020.

While the United States withdrew from the Paris Agreement effective November 4, 2020, President Biden recommitted the United States to the Paris Agreement on January 20, 2021.

These regulations and proposals and any other new regulations requiring the installation of more sophisticated pollution control equipment could have a material adverse impact on our business, results of operations and financial condition.

The Federal Water Pollution Control Act of 1972, or the Clean Water Act (the “CWA”), imposes restrictions and controls on the discharge of produced waters and other pollutants into waters of the United States (“WOTUS”).

8 unchanged sentences

Some states also maintain groundwater protection programs that require permits for discharges or operations that may impact groundwater conditions.

Although the federal CWA is currently interpreted not to regulate discharges to groundwater, on February 21, 2019, the United States Supreme Court accepted jurisdiction to review the case County of Maui v.

federal CWA is currently interpreted not to regulate discharges to groundwater, on February 21, 2019, the United States Supreme Court accepted jurisdiction to review the case County of Maui v.

Hawaii Wildlife Fund , No.

1 unchanged sentence

Costs may be associated with the treatment of wastewater and/or developing and implementing storm water pollution prevention plans.

The CWA and comparable state statutes provide for civil, criminal and administrative

Tab le of Contents

penalties for unauthorized discharges of oil and other pollutants and impose liability on parties responsible for those discharges, for the costs of cleaning up any environmental damage caused by the release and for natural resource damages resulting from the release.

The CWA and comparable state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of oil and other pollutants and impose liability on parties responsible for those discharges, for the costs of cleaning up any environmental damage caused by the release and for natural resource damages resulting from the release.

The underground injection of oil and natural gas wastes are regulated by the Underground Injection Control program authorized by the Safe Drinking Water Act.

20 unchanged sentences

Recent scientific research and political debate has focused in part on carbon dioxide and methane incidental to oil and natural gas exploration and production.

In the United States, legislative and regulatory initiatives are underway to limit greenhouse gas (“GHG”) emissions.

In the United States, no comprehensive federal climate change legislation has been implemented to date but the current administration has indicated willingness to pursue new climate change legislation, executive actions or other regulatory initiatives to limit greenhouse gas (“GHG”) emissions.

Further, legislative and regulatory initiatives are already underway to that purpose.

Congress has considered legislation that would control GHG emissions through a “cap and trade” program and several states have already implemented programs to reduce GHG emissions.

1 unchanged sentence

As a result, a source may still have to control GHG emissions if it is an otherwise regulated source.

On February 23, 2014, Colorado became the first state in the nation to adopt rules to control methane emissions from oil and gas facilities.

On June 3, 2016, EPA issued three final rules that were intended to curb emissions of methane, VOCs and toxic air pollutants such as benzene from new, reconstructed and modified oil and gas sources.

These new regulations include leak detection and repair provisions, and may require controls to reduce methane emissions from certain oil and gas facilities.

In 2014, Colorado was the first state in the nation to adopt rules to control methane emissions from oil and gas facilities.

In 2016, the EPA issued three final rules that were intended to curb emissions of methane, VOCs and toxic air pollutants such as benzene from new, reconstructed and modified oil and gas sources.

These regulations include leak detection

and repair provisions, and may require controls to reduce methane emissions from certain oil and gas facilities.

To the extent that these regulations remain in place and to the extent that our third party operating partners are required to further control methane emissions, such controls could impact our business.

Tab le of Contents

In addition, our third party operating partners are required to report their greenhouse gas emissions under CAA rules.

Because regulation of GHG emissions is relatively new, further regulatory, legislative and judicial developments are likely to occur.

Because regulation of GHG emissions continues to evolve, further regulatory, legislative and judicial developments are likely to occur.

Such developments may affect how these GHG initiatives will impact us.

Moreover, while the U.S.

Supreme Court held in its June 2011 decision American Electric Power Co.

Supreme Court held in its 2011 decision American Electric Power Co.

Connecticut that, with respect to claims concerning GHG emissions, the federal common law of nuisance was displaced by the CAA, the Court left open the question of whether tort claims against sources of GHG emissions alleging property damage may proceed under state common law.

7 unchanged sentences

Although operators may take steps to mitigate physical risks from storms, no assurance can be given that future storms will not have a material adverse effect on our business.

Human Capital Resources

As of December 31, 2020, we had 25 full time employees.

We may hire additional technical or administrative personnel as appropriate.

We also use the services of independent consultants and contractors to perform various professional services.

We may hire additional personnel as appropriate.

We also may use the services of independent consultants and contractors to perform various professional services.

Office Locations

7 unchanged sentences

As of May 9, 2018, the rights of our stockholders began to be governed by Delaware General Corporation Law and our Delaware certificate of incorporation and bylaws.

On August 23, 2018, our stockholders, upon recommendation of the Board of Directors, approved an amendment to the Certificate of Incorporation to increase the number of authorized shares of common stock to 675,000,000.

On August 24, 2018, we restated our Certificate of Incorporation to integrate all prior amendments.

Available Information – Reports to Security Holders

3 unchanged sentences

We have also posted to our website our Audit Committee Charter, Compensation Committee Charter, Nominating Committee Charter and our Code of Business Conduct and Ethics, in addition to all pertinent company contact information.

Tab le of Contents

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 1. Business