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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-02-24 · 94 added, 96 removed, 343 unchanged (36% of the section changed)

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The following discussion should be read in conjunction with our financial statements and accompanying notes to financial statements appearing elsewhere in this report.

See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated herein by reference, for discussion and analysis of results of operations for the year ended December 31, 2020.

See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022 for discussion and analysis of results of operations for the year ended December 31, 2021.

Executive Overview

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Our financial and operating performance for the year ended December 31, 2023 included the following:

• Oil and natural gas sales of $1,985.8 million, a 104% increase compared to 2021

• Cash flows from operations of $928.4 million, a 134% increase compared to 2021

• Total production of 98,822 Boe per day, a 31% increase compared to 2022

• Cash flows from operations of $1.2 billion, a 27% increase compared to 2022

• Proved reserves of 339.7 MMBoe at year-end, a 3% increase compared to year-end 2022

• Grew and diversified the business through over $955 million in substantial bolt-on acquisitions that closed during 2022

• Grew our quarterly common stock dividend from $0.08 per share for the fourth quarter of 2021 to $0.30 per share for the fourth quarter of 2022

• Expanded our stockholder return program by repurchasing and retiring $54.5 million of common stock, $57.5 million in liquidation value of our Series A Preferred Stock (as defined below), and $25.8 million in face value of our Senior Notes

• Simplified our balance sheet by exercising our right to force a mandatory conversion of all remaining shares of our Series A Preferred Stock in November 2022

• Issued $500.0 million in aggregate principal amount of Convertible Notes (as defined below), and used the net proceeds to reduce borrowings under our Revolving Credit Facility, fund acquisitions, and for other general corporate purposes

• Grew and diversified the business through over $1.0 billion in substantial bolt-on acquisitions that closed during 2023

• Grew our quarterly common stock dividend by 33%, from $0.30 per share for the fourth quarter of 2022 to $0.40 per share for the fourth quarter of 2023

Source of Our Revenues

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Production expenses are daily costs incurred to bring oil and natural gas out of the ground and to the market, together with the daily costs incurred to maintain our producing properties.

Such costs also include field personnel compensation, salt water disposal, utilities, maintenance, repairs and servicing expenses related to our oil and natural gas properties.

Such costs also include

field personnel compensation, salt water disposal, utilities, maintenance, repairs and servicing expenses related to our oil and natural gas properties.

• Production taxes.

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We capitalize a portion of the interest paid on applicable borrowings into our unproved cost pool.

We include interest expense that is not capitalized into the full cost pool, the amortization of deferred financing costs and bond premiums (including origination and amendment fees), commitment fees and annual agency fees as interest expense.

We include interest expense that is not capitalized into the unproved cost pool, the amortization of deferred financing costs and bond premiums (including origination and amendment fees), commitment fees and annual agency fees as interest expense.

• Impairment expense.

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In addition to the factors that affect companies in our industry generally, the location of substantially all of our acreage and wells in the Williston, Permian and Appalachian Basins subjects our operating results to factors specific to these regions.

These factors include the potential adverse impact of weather on drilling, production and transportation activities, particularly during the winter and spring months, as well as infrastructure limitations, transportation capacity, regulatory matters and other factors that may specifically affect one or more of these regions.

These factors include the potential adverse impact of weather on drilling, production and transportation activities, particularly

during the winter and spring months, as well as infrastructure limitations, transportation capacity, regulatory matters and other factors that may specifically affect one or more of these regions.

The price at which our oil production is sold typically reflects a discount to the NYMEX benchmark price.

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In addition, individual components of the cost can vary depending on numerous factors such as the length of the horizontal lateral, the number of fracture stimulation stages, and the type and amount of proppant.

Since 2021, we have observed inflationary pressures on drilling and other operating costs due to various factors, such as higher commodity prices, labor shortages, supply chain disruptions and other factors.

During 2023, the weighted average gross authorization for expenditure (or AFE) cost for wells we elected to participate in was $9.5 million, compared to $8.0 million for the wells we elected to participate in during 2022.

Certain drilling and completion costs and costs of oilfield services, equipment, and materials decreased in 2020 as service providers reduced their costs in response to reduced demand arising from historically low crude oil prices.

However, inflationary pressures returned in 2021 and have continued to persist in conjunction with the significant increase in commodity prices since that time, labor shortages, and other factors.

Additionally, supply chain disruptions stemming from the COVID-19 pandemic have led to shortages of certain materials and equipment and resulting increases in material and labor costs.

Our capital spending budget for 2023 includes an estimate for the impact of cost inflation and, despite inflationary pressures, we expect to continue generating significant amounts of free cash flow at current commodity price levels.

Market Conditions

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(1) Based on average NYMEX closing prices.

For 2022, the average NYMEX pricing was $94.38 per barrel of oil, or 39% higher than in 2021.

For 2023, the average NYMEX pricing was $77.61 per barrel of oil, or 18% lower than in 2022.

Our average realized oil price before reflecting settled oil derivatives was $74.78 per barrel of oil in 2023.

Our average realized oil price after reflecting settled oil derivatives was $69.60 per barrel of oil in 2022, or 32% higher than in 2021, due to the higher average NYMEX price and a lower oil price differential, partially offset by a larger loss on settled oil derivatives in 2022 compared to 2021.

For 2022, the average NYMEX pricing for natural gas was $6.56 per Mcf, or 71% higher than in 2021.

Our average realized oil price after reflecting settled oil derivatives was $73.88 per barrel of oil in 2023, or 5% higher than in 2022, due to a significantly smaller loss on settled oil derivatives in 2023 compared to 2022, partially offset by the lower average NYMEX price and a higher oil price differential.

For 2023, the average NYMEX pricing for natural gas was $2.66 per Mcf, or 59% lower than in 2022.

Our average realized natural gas price before reflecting settled natural gas derivatives was $2.98 per Mcf in 2023.

Our average realized natural gas price after reflecting settled natural gas derivatives was $5.83 per Mcf in 2022, or 60% higher than in 2021, due to the higher average NYMEX price, partially offset by lower realizations and a larger loss on settled natural gas derivatives in 2022 compared to 2021.

Our average realized natural gas price after reflecting settled natural gas derivatives was $3.90 per Mcf in 2023, or 33% lower than in 2022, due to the lower average NYMEX price, partially offset by a gain on settled natural gas derivatives in 2023 compared to a loss in 2022.

We have entered into derivatives contracts to hedge commodity price risk on a portion of our future expected oil and natural gas production.

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Production volumes and average sales prices are derived from accrued accounting data for the relevant period indicated.

Years Ended December 31,

Year Ended December 31,

Net Production:

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Gain (Loss) on Settled Commodity Derivatives 57,919 (455,450)

Gain (Loss) on Unsettled Commodity Derivatives 40,187 (312,370)

Gain on Unsettled Commodity Derivatives 201,331 40,187

Other Revenue 9,230 —

Total Revenues 2,166,259 1,570,535

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Oil (per Bbl) $ 74.78 $ 91.65

Effect of Gain (Loss) on Settled Oil Derivatives on Average Price (per Bbl) (22.05) (10.17)

Effect of Loss on Settled Oil Derivatives on Average Price (per Bbl) (0.90) (21.48)

Oil Net of Settled Oil Derivatives (per Bbl) 73.88 70.17

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Depletion, Depreciation, Amortization and Accretion 486,024 251,272

Other Expenses 4,448 —

Costs and Expenses (per Boe):

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Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes.

In 2022, our oil, natural gas and NGL sales, excluding the effect of settled commodity derivatives, increased 104% from 2021, driven by a 40% increase in production volumes and a 45% increase in realized prices, excluding the effect of settled commodity derivatives.

The higher average realized price in 2022 as compared to 2021 was driven by higher average NYMEX oil and natural gas prices, and a lower average oil price differential, partially offset by lower average natural gas realizations in 2022 as compared to 2021.

In 2023, our oil, natural gas and NGL sales, excluding the effect of settled commodity derivatives, decreased 4% from 2022, driven by a 27% decrease in realized prices, excluding the effect of settled commodity derivatives, partially offset by a 31% increase in production volumes.

The lower average realized price in 2023 as compared to 2022 was driven by lower average NYMEX oil and natural gas prices and slightly higher average oil price differential in 2023 as compared to 2022.

Oil price differential during 2023 averaged $2.83 per barrel, as compared to $2.73 per barrel in 2022.

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We enter into commodity derivative instruments to manage the price risk attributable to future oil and natural gas production.

Our gain (loss) on commodity derivatives, net was a loss of $415.3 million in 2022, compared to a loss of $478.2 million in 2021.

Our gain (loss) on commodity derivatives, net was a gain of $259.3 million in 2023, compared to a loss of $415.3 million in 2022.

Gain (loss) on commodity derivatives, net is comprised of (i) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (ii) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

For 2022, we realized a loss on settled commodity derivatives of $455.4 million, compared to a $165.8 million loss in 2021.

The percentage of oil production hedged under our derivative contracts was 68% and 73% in 2022 and 2021, respectively.

The weighted average oil price on our settled commodity derivative contracts in 2022 and 2021 was $62.52 and $55.56, respectively.

For 2023, we realized a gain on settled commodity derivatives of $57.9 million, compared to a $455.4 million loss in 2022.

The increased gain on settled derivatives was primarily due to a significant decrease in the average NYMEX oil price in 2023 compared to 2022.

The average NYMEX oil price for 2023 was $77.61 per barrel, compared to $94.38 per barrel for 2022.

During 2023, our derivative settlements included 8.1 million barrels of oil subject to swaps at an average settlement price of $75.19 per barrel, and we had an additional 6.3 million barrels of oil hedged subject to collars.

During 2022, our settled commodity derivatives included 10.9 million barrels of oil at an average settlement price of $62.52 per barrel.

Our average realized price (including all commodity derivative cash settlements) in 2023 was $54.22 per Boe compared to $55.53 per Boe in 2022.

The gain (loss) on settled commodity derivatives decreased our average realized price per Boe by $16.52 in 2022, and decreased our average realized price per Boe by $8.45 in 2021.

Unsettled commodity derivative gains and losses was a gain of $40.2 million in 2022 compared to a loss of $312.4 million in 2021.

Our derivatives are not designated for hedge accounting and are accounted for using the mark-to-market accounting method whereby gains and losses from changes in the fair value of derivative instruments are recognized immediately into earnings.

The gain (loss) on settled commodity derivatives increased our average realized price per Boe by $1.61 in 2023 and decreased our average realized price per Boe by $16.52 in 2022.

The percentage of oil production hedged under our derivative contracts was 65% and 68% in 2023 and 2022, respectively.

Unsettled commodity derivative gains and losses was a gain of $201.3 million in 2023 compared to a gain of $40.2 million in 2022.

immediately into earnings.

Mark-to-market accounting treatment creates volatility in our revenues as gains and losses from unsettled derivatives are included in total revenues and are not included in accumulated other comprehensive income in the accompanying balance sheets.

As commodity prices increase or decrease, such changes will have an opposite effect on the

mark-to-market value of our commodity derivatives.

As commodity prices increase or decrease, such changes will have an opposite effect on the mark-to-market value of our commodity derivatives.

Any gains on our unsettled commodity derivatives are expected to be offset by lower wellhead revenues in the future, while any losses are expected to be offset by higher future wellhead revenues based on the value at the settlement date.

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Production expenses were $347.0 million in 2023 compared to $260.7 million in 2022.

On a per unit basis, production expenses increased 9%, from $8.70 per Boe in 2021 to $9.46 per Boe in 2022, due to higher processing costs due in part to elevated NGL pricing, which drives increased payments under percentage of proceeds contracts.

Additionally, higher service and maintenance costs have contributed to an increase in production expense.

On a per unit basis, production expenses increased 2%, from $9.46 per Boe in 2022 to $9.62 per Boe in 2023, due to higher service and maintenance costs and higher workover expenses, which was partially offset by lower processing costs associated with a change in our production mix.

On an absolute dollar basis, the 33% increase in our production expenses in 2023 compared to 2022 was primarily due to a 31% increase in production volumes and a 2% increase in per unit costs.

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Production taxes were $160.1 million in 2023 compared to $158.2 million in 2022.

The increase is due to higher production and higher realized prices, which significantly increased our oil and natural gas sales in 2022 as compared to 2021.

The increase is due to higher production and a higher oil cut percentage, offset by the significantly lower realized prices and the change in our geographical production mix.

As a percentage of oil and natural gas sales, our production taxes were 8.4% and 8.0% in 2023 and 2022, respectively.

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General and administrative expenses were $46.8 million for 2023 compared to $47.2 million for 2022.

The increase in 2022 compared to 2021 was primarily due to an $8.4 million increase in acquisition costs, a $5.4 million increase in compensation costs and a $1.5 million increase in professional fees.

The decrease in 2023 compared to 2022 was primarily due to a $5.3 million decrease in acquisition costs, partially offset by a $2.5 million increase in professional fees and a $1.2 million increase in compensation costs.

Depletion, Depreciation, Amortization and Accretion

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The aggregate increase in DD&A expense for 2023 compared to 2022 was driven by a 31% increase in production levels and a 48% increase in the depletion rate per Boe.

Depletion expense, the largest component of DD&A, was $9.01 per Boe in 2022 compared to $7.07 per Boe in 2021.

The increase in depletion rate per Boe for 2023 as compared to 2022 was primarily due to a significant increase to our depletable base, due to the closing of several larger acquisitions in 2022 and 2023 (see Note 3 to our financial statements).

The following table summarizes DD&A expense per Boe for 2023 and 2022:

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Total DD&A expense $ 13.47 $ 9.12 $ 4.35 48 %

Impairment of Oil and Natural Gas Properties

We did not record any impairment of our proved oil and gas properties in 2022 or 2021.

Depending on future commodity price levels, the trailing twelve-month average price used in the ceiling calculation may decline, which could cause additional future write downs of our oil and natural gas properties.

In addition to commodity prices, our production rates, levels of proved reserves, future development costs, transfers of unevaluated properties and other factors will determine our actual ceiling test calculation and impairment analysis in future periods.

Interest Expense

Interest expense, net of capitalized interest, was $135.7 million in 2023 compared to $80.3 million in 2022.

The increase in interest expense for 2022 as compared to 2021 was primarily due to higher levels of debt and higher weighted-average interest rates associated with our Revolving Credit Facility in 2022 compared to 2021.

Gain (Loss) on the Extinguishment of Debt

As a result of refinancing transactions during 2022 (see Note 4 to our financial statements), we recorded a gain on the extinguishment of debt of $0.8 million for the year ended December 31, 2022, based on the differences between the reacquisition costs of retiring the applicable debt and the net carrying values thereof.

During 2021, we recorded a loss on extinguishment of debt of $13.1 million as a result of refinancing transactions, based on the differences between the reacquisition costs of retiring the applicable debt and the net carrying values thereof.

The increase in interest expense for 2023 as compared to 2022 was primarily due to higher levels of debt and higher weighted-average interest rates on debt outstanding during 2023 compared to 2022.

Contingent Consideration Gain (Loss)

We have incurred contingent consideration liabilities in connection with certain acquisitions of oil and gas properties.

During the years ended December 31, 2022 and 2021, we recorded a contingent consideration gain of $1.9 million compared to a loss of $0.3 million, respectively, due to the change in the fair value of these liabilities.

As of December 31, 2022, there were $10.1 million of remaining outstanding contingent consideration liabilities.

Income Tax Expense (Benefit)

We recognized income tax expense (benefit) of $3.1 million and $0.2 million in 2022 and 2021, respectively.

In 2022 and 2021, we recorded income tax expense as a result of state income tax requirements related to our Permian and Appalachian Basin properties.

We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

Release of any portion of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

It is reasonably possible that sufficient positive evidence will exist within the next 12 months to release our current valuation allowance position, which would be indicative of our ability to utilize deferred tax assets in the future.

The exact timing and amount of the valuation allowance release are subject to change based on the evaluation of all evidence and actual results, including, but not limited to, the level of profitability that we are forecasted to achieve in future periods.

For further discussion of our valuation allowance, see Note 10 to our financial statements.

During the years ended December 31, 2023 and 2022, we recorded a contingent consideration gain of $10.1 million compared to a gain of $1.9 million, respectively, due to the change in the fair value of these liabilities.

As of December 31, 2023, there were no remaining outstanding contingent consideration liabilities.

Income Tax Expense

During 2023, we recorded income tax expense of $77.8 million related to federal and state income taxes as a result of the release of the majority of our valuation allowance during the period.

During 2022, we recorded income tax expense of $3.1 million related to state income taxes as the Company maintained a full valuation allowance for its deferred tax assets.

The effective tax rate for 2023 was 7.8% compared to an effective tax rate of 0.4% for 2022.

The difference was due primarily to the release of our full valuation allowance and recording of deferred tax liabilities in 2023.

Liquidity and Capital Resources

Our main sources of liquidity and capital resources as of the date of this report have been internally generated cash flow from operations, proceeds from equity and debt financings, credit facility borrowings and cash settlements of commodity derivative instruments.

Our primary uses of capital have been for the acquisition and development of our oil and natural gas properties and cash settlements of commodity derivative instruments.

Our primary uses of capital have been for the acquisition, development and operation of our oil and natural gas properties, cash settlements of commodity derivative instruments and for stockholder returns.

We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

During 2022, we repurchased and retired (i) 575,000 shares of our 6.500% Series A Perpetual Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”) for total consideration of $81.2 million, (ii) 1,909,097 shares of our common stock for total consideration of $54.5 million and (iii) $25.8 million aggregate principal amount of our Senior Notes for total consideration of $24.9 million, plus accrued interest.

In October 2022, we issued $500.0 million in aggregate principal amount of the Convertible Notes, the proceeds of which were used to reduce borrowings under our Revolving Credit Facility, fund acquisitions, and for other general corporate purposes.

We completed over $955.3 million in substantial bolt-on acquisitions that closed during 2022 (see Note 3 to our financial statements).

In addition, in January 2023 we completed an additional $320.0 million acquisition (the “MPDC Acquisition”) that was originally signed and announced during October 2022 (see Note 14 to our financial statements).

As of December 31, 2022, we had outstanding debt consisting of $319.0 million of borrowings under our Revolving Credit Facility, $724.2 million aggregate principal amount of our Senior Notes, and $500.0 million aggregate principal amount of our Convertible Notes.

In May 2023, we issued $500.0 million in aggregate principal amount of Senior Notes due 2031, the proceeds of which were used primarily to refinance existing indebtedness, and for general corporate purposes.

In May 2023, we closed an underwritten public offering of 7,647,500 shares of our common stock at a price of $29.40 per share, after deducting underwriting discounts.

This offering resulted in net proceeds of approximately $224.7 million, after deducting underwriting discounts and commissions, which were used primarily to finance the cash consideration for the acquisition of Delaware Basin assets from Forge Energy II Delaware, LLC.

In October 2023, we closed an underwritten public offering of 7,475,000 shares of our common stock at a price of $38.88 per share, after deducting underwriting discounts.

This offering resulted in net proceeds of approximately $290.6 million, after deducting underwriting discounts and commissions, which were primarily used for the repayment of existing indebtedness, and for general corporate purposes.

During 2023, we repurchased and retired (i) 287,751 shares of our common stock for total consideration of $8.0 million and (ii) $19.1 million aggregate principal amount of our Senior Notes due 2028 for total consideration of $18.4 million, plus accrued and unpaid interest.

We completed over $1.0 billion in substantial bolt-on acquisitions that closed during 2023 (see Note 3 to our financial statements).

We financed these acquisitions with a combination of debt and equity financings, credit facility borrowings, and internally generated cash flow from operations.

As of December 31, 2023, we had outstanding debt consisting of $161.0 million of borrowings under our Revolving Credit Facility, $705.1 million aggregate principal amount of our Senior Notes due 2028, $500.0 million aggregate principal amount of our Convertible Notes, and $500.0 million aggregate principal amount of our Senior Notes due 2031.

We had total liquidity of $1,097.2 million as of December 31, 2023, consisting of $1,089.0 million of committed borrowing availability under the Revolving Credit Facility and $8.2 million of cash on hand.

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As a result, our operating cash flows are more sensitive to fluctuations in oil prices than they are to fluctuations in natural gas and NGL prices.

We seek to maintain a robust hedging program to mitigate volatility in commodity prices with respect to a portion of our expected production.

We seek to maintain

a robust hedging program to mitigate volatility in commodity prices with respect to a portion of our expected production.

For the years ended 2023 and 2022, we hedged approximately 65% and 68% of our crude oil production, respectively.

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Quantitative and Qualitative Disclosures about Market Risk” below.

With our cash on hand, cash flow from operations, and borrowing capacity under our Revolving Credit Facility, we believe that we will have sufficient cash flow and liquidity to fund our budgeted capital expenditures and operating expenses for at least the next twelve months.

However, we may seek additional access to capital and liquidity.

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Our working capital balance fluctuates as a result of changes in commodity pricing and production volumes, collection of receivables, expenditures related to our development and production operations and the impact of our outstanding derivative instruments.

At December 31, 2022, we had a working capital deficit of $24.5 million, compared to a deficit of $112.2 million at December 31, 2021.

Current assets increased by $105.2 million and current liabilities increased by $17.4 million at December 31, 2022, compared to December 31, 2021.

The $105.2 million increase in current assets in 2022 as compared to 2021 was driven by a $77.8 million increase in accounts receivable, primarily due to higher production levels and higher commodity prices, and a $32.8 million increase in derivative instruments due to the change in fair value as a result of commodity price changes.

These increases were partially offset by a $7.0 million decrease in our cash and cash equivalents balance.

The $17.4 million increase in current liabilities in 2022 as compared to 2021 was driven by a $79.3 million increase in accounts payable and accrued expenses, primarily as a result of increased development activity, a $10.1 million increase in contingent consideration liabilities related to our acquisition activities (see Note 3 to our financial statements), and a $3.8 million increase in accrued interest.

These increases were partially offset by a $75.9 million decrease in our derivative instruments as a result of commodity price changes.

At December 31, 2023, we had a working capital surplus of $123.6 million, compared to a deficit of $24.5 million at December 31, 2022.

Current assets increased by $188.9 million and current liabilities increased by $40.8 million at December 31, 2023 as compared to December 31, 2022.

The $188.9 million increase in current assets in 2023 as compared to 2022 was driven by a $99.2 million increase in accounts receivable, primarily due to higher production levels, and a $40.4 million increase in derivative instruments due to the change in fair value as a result of commodity price changes.

The $40.8 million increase in current liabilities in 2023 as compared to 2022 was driven by a $90.3 million increase in accounts payable and accrued liabilities, primarily as a result of increased development activity, and a $1.9 million increase in accrued interest.

These increases were partially offset by a $41.6 million decrease in our derivative instruments as a result of commodity price changes and a $10.1 million decrease in contingent consideration liabilities related to our acquisition activities (see Note 3 to our financial statements).

Cash flows from operations are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and by changes in working capital.

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Net cash provided by operating activities in 2023 was $1,183.3 million, compared to $928.4 million in 2022.

This increase was driven by a 40% year-over-year increase in production levels and a 35% increase in realized prices (including the effect of settled derivatives).

This increase was driven by a 31% year-over-year increase in production levels and a 5% increase in our realized oil price after the

effect of settled derivatives, which was partially offset by an increase in production expenses.

Net cash provided by operating activities is also affected by working capital changes or the timing of cash receipts and disbursements.

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We had cash flows used in investing activities of $1,862.3 million and $1,402.8 million during the years ended December 31, 2023 and 2022, respectively, primarily as a result of our capital expenditures for drilling, development and acquisition costs.

The year-over-year increase in cash used in investing activities in 2022 was attributable to our 2022 acquisitions.

In addition, cash flows used in investing activities included a $43.0 million acquisition deposit for our MPDC Acquisition that was pending at year-end 2022.

During 2022 and 2021, we added 56.8 and 35.8 net wells to production, respectively, in each case excluding already producing wells from acquisitions.

The year-over-year increase in cash used in investing activities in 2023 was mainly attributable to our 2023 acquisitions.

In addition, cash flows used in investing activities included a $17.1 million acquisition deposit for an acquisition that was pending at year-end 2023.

During 2023 and 2022, we added 76.6 and 56.8 net wells to production, respectively, excluding already producing wells from acquisitions.

Our cash flows used in investing activities reflects actual cash spending, which can lag several months from when the related costs were incurred.

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Net cash provided by financing activities was $684.7 million and $467.4 million for the years ended December 31, 2023 and 2022, respectively.

The cash provided by financing activities in 2022 was primarily related to $264.0 million of net advances under our Revolving Credit Facility and issuance of Convertible Notes of $483.0 million, which was partially offset by $81.2 million in repurchases of Series A Preferred Stock, $54.5 million in repurchases of common stock, $24.9 million in repurchases of our Senior Notes, and $36.1 million of capped call purchases related to the issuance of our Convertible Notes.

Additionally, we paid common and preferred stock dividends of $51.6 million and $21.7 million, respectively, and spent $7.4 million in fees in connection with debt financing transactions in 2022.

The cash provided by financing activities in 2021 was primarily related to $763.5 million of net proceeds for our offering of Unsecured Senior Notes due 2028 and $438.1 million of net proceeds from our offerings of common stock, which was partially offset by the retirement of our 8.500% senior secured second lien notes due 2023 of $295.9 million, retirement of our 6% senior unsecured promissory note due 2022 of $130.0 million, and net repayments under our Revolving Credit Facility

of $477.0 million.

The cash provided by financing activities in 2023 was primarily related to the issuance of the Senior Notes due 2031 of $492.8 million and the issuance of common stock of $514.7 million, which was partially offset by $8.0 million in repurchases of common stock, $18.4 million in repurchases of our Senior Notes due 2028, and $158.0 million of net repayments on our Revolving Credit Facility.

Additionally, we paid common stock dividends of $123.9 million and spent $11.9 million in fees in connection with debt financing transactions in 2023.

The cash provided by financing activities in 2022 was primarily related to $264.0 million of net advances under our Revolving Credit Facility and issuance of Convertible Notes of $483.0 million, which was partially offset by $81.2 million in repurchases of our 6.500 % Series A Perpetual Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), $54.5 million in repurchases of common stock, $24.9 million in repurchases of our Senior Notes due 2028, and $36.1 million of capped call purchases related to the issuance of our Convertible Notes.

Additionally, we paid common and preferred stock dividends of $51.6 million and $21.7 million, respectively, and spent $7.4 million in fees in connection with debt financing transactions in 2022.

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See Note 4 to our financial statements for further details regarding the Revolving Credit Facility.

As of December 31, 2022, we had outstanding $724.2 million aggregate principal amount of our 8.125% senior notes due 2028 (the “Senior Notes”).

See Note 4 to our financial statements for further details regarding the Senior Notes.

Convertible Notes

Senior Notes due 2028

As of December 31, 2023, we had outstanding $705.1 million aggregate principal amount of our 8.125% senior notes due 2028.

See Note 4 to our financial statements for further details regarding the Senior Notes due 2028.

Convertible Notes due 2029

As of December 31, 2023, we had outstanding $500.0 million aggregate principal amount of our Convertible Notes.

See Note 4 to our financial statements for further details regarding the Convertible Notes.

Senior Notes due 2031

As of December 31, 2023, we had outstanding $500.0 million aggregate principal amount of our 8.750% senior notes due 2031.

See Note 4 to our financial statements for further details regarding the Senior Notes due 2031.

Series A Preferred Stock

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For 2024, we are budgeting approximately $825 to $900 million in total planned capital expenditures, including development expenditures and our smaller day-to-day acquisition activity, which we refer to as our “ground game” acquisition activity.

As of December 31, 2022, we had incurred $163.1 million in capital expenditures that were included in accounts payable, and we estimate that we were committed to an additional approximately $468.4 million in development capital expenditures not yet incurred for wells we had elected to participate in.

As of December 31, 2023, we had incurred $236 million in capital expenditures that were included in accounts payable and accrued liabilities, and we estimate that we were committed to an additional approximately $393 million in development capital expenditures not yet incurred for wells we had elected to participate in.

We expect to fund planned capital expenditures with cash generated from operations and, if required, borrowings under our Revolving Credit Facility.

The foregoing excludes larger acquisitions, which are typically not included in our annual capital expenditure budget.

For example, our MPDC Acquisition was pending as of December 31, 2022, and subsequently closed in January 2023 (see Note 14 to our financial statements).

See also “Capital Requirements” below.

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During the year ended December 31, 2023 the Company repurchased 287,751 shares of its common stock under the stock repurchase program at a total cost of $8.0 million.

During the year ended December 31, 2022, the Company also repurchased and retired $25.8 million in aggregate principal amount of the Senior Notes in open market transactions for a total of $24.9 million in cash, plus accrued interest.

During the year ended December 31, 2023, the Company also repurchased and retired $19.1 million in aggregate principal amount of the Senior Notes due 2028 in open market transactions for a total of $18.4 million in cash, plus accrued interest.

The Company may in the future engage in similar transactions.

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We may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive.

We will carefully monitor and may adjust our projected capital expenditures in response to success or lack of success in drilling activities, changes in prices, availability of financing and joint venture opportunities, drilling and acquisition costs, industry conditions, the timing of regulatory approvals, the availability of rigs, fluctuations in service costs, contractual obligations, internally generated cash flow and other factors both within and outside our control.

fluctuations in service costs, contractual obligations, internally generated cash flow and other factors both within and outside our control.

For additional information on the impact of changing prices and market conditions on our financial position, see “Item 7A.

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Our future success in growing proved reserves and production may be dependent on our ability to access outside sources of capital.

If internally generated cash flow and borrowing capacity is not available under our Revolving Credit Facility, we may issue additional equity or debt to fund capital expenditures, make acquisitions, extend maturities or to repay debt.

If internally generated cash flow and borrowing capacity under our Revolving Credit Facility are not available or sufficient, we may issue additional equity or debt to fund capital expenditures, make acquisitions, extend maturities or to repay debt.

Satisfaction of Our Cash Obligations for the Next Twelve Months

With our revolving credit agreement and our cash flows from operations, we believe we will have sufficient capital to meet our drilling commitments, expected general and administrative expenses and other cash needs for the next twelve months and, based on current expectations, for the foreseeable future.

With our Revolving Credit Facility and our cash flows from operations, we believe we will have sufficient capital to meet our drilling commitments, expected general and administrative expenses and other cash needs for the next twelve months and, based on current expectations, for the foreseeable future.

Nonetheless, any strategic acquisition of assets or increase in drilling activity may lead us to seek additional capital.

We may also choose to seek additional capital rather than utilize our credit facility or other debt instruments to fund accelerated or continued drilling at the discretion of management and depending on prevailing market conditions.

We may also choose to seek additional capital rather than utilize our Revolving Credit Facility or other debt instruments to fund accelerated or continued drilling at the discretion of management and depending on prevailing market conditions.

We will evaluate any potential opportunities for acquisitions as they arise.

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Material changes in prices can impact the value of oil and natural gas companies and their ability to raise capital, borrow money and retain personnel.

Higher prices for oil and natural gas have resulted in increases in the costs of materials, services and personnel, and we are budgeting for a 5-10% increase in drilling and completion and other associated costs in 2023 compared to 2022.

Based on current conditions and expectations, we are not budgeting for any significant change in per well drilling and completion and other associated costs in 2024 compared to 2023.

Critical Accounting Estimates

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The preparation of financial statements under GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Our estimates of our proved oil and

natural gas reserves, future development costs, estimates relating to certain oil and natural gas revenues and expenses, and fair value of derivative instruments are the most critical to our financial statements.

Our estimates of our proved oil and natural gas reserves, future development costs, estimates relating to certain oil and natural gas revenues and expenses, and fair value of derivative instruments are the most critical to our financial statements.

Oil and Natural Gas Reserves

The determination of depreciation, depletion and amortization expense as well as impairments that are recognized on our oil and natural gas properties are highly dependent on the estimates of the proved oil and natural gas reserves attributable to our properties.

Our estimate of proved reserves is based on the quantities of oil and natural gas which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in the future years from known reservoirs under existing economic and operating conditions.

Our estimate of proved reserves is based on the quantities of oil and natural gas which geological and

engineering data demonstrate, with reasonable certainty, to be recoverable in the future years from known reservoirs under existing economic and operating conditions.

The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment.

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The risk that we will be required to write down the carrying value of our oil and natural gas properties increases when oil and natural gas prices are depressed, even if the low prices are temporary.

In addition, capitalized ceiling impairment charges may occur if we experience poor drilling results or if estimations of our proved reserves are substantially reduced.

In addition, capitalized ceiling impairment charges may occur if we experience poor drilling results or if

estimations of our proved reserves are substantially reduced.

A capitalized ceiling impairment is a reduction in earnings that does not impact cash flows, but does impact operating income and stockholders’ equity.

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At December 31, 2023, we performed an impairment review using prices that reflect an average of 2023’s monthly prices as prescribed pursuant to the SEC’s guidelines.

We did not record any full cost impairment expense for the years ended December 31, 2022 or 2021, respectively.

For the year ended 2020, we recorded a $1,066.7 million full cost impairment expense.

If a low price environment reoccurs, we might be required to further write down the value of our oil and gas properties.

We did not record any full cost impairment expense for the years ended December 31, 2023 or 2022.

If a low price environment reoccurs, we might be required to write down the value of our oil and gas properties.

In addition, capitalized ceiling impairment charges may occur if estimates of proved reserves are substantially reduced or estimates of future development costs increase significantly.

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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.

What changed 10-K

Item 7. Management’s Discussion and Analysis