What changed in this filing

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Item 2. Properties

2021-03-08 compared with 2020-03-02 · 5 added, 114 removed, 8 unchanged (94% of the section changed)

Please read “Item 1.

— Business ” of this Form 10-K for the location and general character of the properties used in our refining, retail, and logistics segments.

— Business” of this Form 10-K for the location and general character of the properties used in our refining, logistics, and retail segments.

Our corporate headquarters are located at 825 Town & Country Lane, Suite 1500, Houston, Texas 77024.

5 unchanged sentences

The geology of the Piceance Basin is characterized as highly consistent and predictable over large areas, which generally equates to reliable timing and cost expectations during drilling and completion activities, as well as minimal well-to-well variance in production and reserves when completed with the same methodology.

Laramie Energy considers the Mesaverde formation within Garfield, Mesa, and Rio Blanco Counties, Colorado, to be a single field.

Laramie Energy and its predecessor company have drilled over 300 natural gas wells with over a 99% success rate in the Piceance Basin.

We also own certain immaterial minority working interests in wells located in Colorado.

Please read Note 24—Supplemental Oil and Gas Disclosures (Unaudited) to our consolidated financial statements under Item 8 of this Form 10-K for additional information.

For a table presenting the estimated natural gas and crude oil reserves we own indirectly through Laramie Energy , please read “ Item 1.

— Business — Other Operations ” of this Form 10-K.

The natural gas and crude oil reserves we own directly are not material.

Internal Controls Over Reserve Estimates, Technical Qualifications, and Technologies Used

Our policies regarding internal controls require our reserve estimates to be prepared in compliance with the SEC definitions and guidance by an independent third-party reserve engineering firm.

These reserve estimates are reviewed and approved by our reserves committee, which ensures that our reserves estimates and related disclosures are prepared in compliance with SEC definitions and guidance, taking into consideration recent developments, including the impact of changes in commodity price and drilling and transportation costs, drilling and completion technological innovations, the evaluation of historical conversion rates for previous proved undeveloped reserves, and deviations from previously sanctioned development plans for such reserves.

Our reserves committee is comprised of the following members:

our Chief Executive Officer, our Chief Financial Officer, our Chief Administrative Officer, our Chief Accounting Officer, our Associate General Counsel and Secretary, our Assistant Controller, and a strategy and financial planning director with a background in the oil and gas industry.

The reserves committee also consults with representatives from our independent reserve engineering firm.

In addition, with respect to the reserves that we own indirectly through Laramie Energy , our Chief Administrative Officer, our Chief Financial Officer, and our strategy and financial planning director participate in Laramie Energy ’s board of managers meetings (which generally occur at least quarterly) as our appointees to Laramie Energy ’s board of managers under the Laramie Energy limited liability company agreement.

Together with the other members of our reserves committee, our Chief Executive Officer and our Chief Financial Officer review Laramie Energy ’s development plan and related capital expenditures and meet regularly with Laramie Energy ’s management in connection with our review of the development and classification of such reserves to ensure that such reserves are prepared in compliance with SEC definitions and guidance.

Under the Laramie Energy limited liability company agreement, Laramie Energy is required to provide to us certain reports and other information on a monthly, quarterly, and annual basis, including monthly and quarterly reports with respect to drilling and completion activities and a comparison of budgeted amounts for such month or quarter to the actual results of operations for such month or quarter (with a written explanation of any material variances).

This information allows our reserves committee to monitor Laramie Energy ’s development activities and to evaluate any deviations from Laramie Energy ’s development plan to ensure compliance with SEC definitions and guidance.

The reserves committee also utilizes the information received from Laramie Energy to provide feedback to Laramie Energy (through Laramie Energy ’s board of managers, if necessary) with respect to such development activities.

The enhanced scrutiny and evaluation of Laramie Energy ’s development plan by our reserves committee, supported by access to information required by Laramie Energy ’s organizational documents and our ability to provide feedback to Laramie Energy at the highest organizational level, ensure that our reserves estimates and related disclosures are prepared in compliance with SEC definitions and guidance.

As we do not operate our interests in our natural gas and crude oil assets, we do not have an internal reserve engineering staff and do not prepare any internal reserve estimates.

William Monteleone, our Chief Financial Officer and the chair of our reserves committee, reviews the independence and professional qualifications of the third-party engineering firms we engage with the other members of our reserves committee.

He also supervises the submission of technical and financial data to third-party engineering firms and reviews the prepared reports with the other members of our reserves committee.

Monteleone has more than eleven years of experience in senior financial positions in the oil and gas industry.

The reserves estimates shown herein have been independently evaluated by Netherland, Sewell & Associates, Inc.

(“NSAI”), a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies.

NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No.

Within NSAI, the technical persons primarily responsible for preparing the estimates set forth in the NSAI reserves report incorporated herein are Mr.

Johnson and Mr.

Johnson, a Licensed Professional Engineer in the State of Texas (No.

124738), has been practicing consulting petroleum engineering at NSAI since 2007 and has over two years of prior industry experience.

He graduated from Texas Tech University in 2005 with a Bachelor of Science Degree in Petroleum Engineering.

Hattner, a Licensed Professional Geoscientist in the State of Texas, Geophysics (License No.

559), has been practicing consulting petroleum geoscience at NSAI since 1991 and has over 11 years of prior industry experience.

He graduated from University of Miami, Florida, in 1976 with a Bachelor of Science Degree in Geology;

from Florida State University in 1980 with a Master of Science Degree in Geological Oceanography;

and from Saint Mary’s College of California in 1989 with a Master of Business Administration Degree.

Both technical principals meet or exceed the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers;

both are proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.

The professional qualifications of the individuals at NSAI who were responsible for overseeing the preparation of our reserve estimates as of December 31, 2019 have been filed as part of Exhibit

99.1 to this Annual Report on Form 10-K.

A variety of methodologies were used to determine our proved reserves estimates.

The principal methodologies employed are decline curve analysis, analog type curve analysis, log analysis, and analogy.

Substantially all of our proved reserves estimates are determined based on a combination of these methods.

Production Volumes, Unit Prices and Costs

All of Laramie Energy ’s properties are located in Garfield, Mesa, and Rio Blanco Counties, Colorado.

Substantially all of Laramie Energy ’s total estimated proved reserves are located in the same geological formation, the Mesaverde formation, which Laramie Energy considers to be a single field.

The following table sets forth certain information regarding volumes of production sold, average prices received, and production costs associated with our share of Laramie Energy ’s production and sales of natural gas and crude oil for the years ended December 31, 2019 , 2018 , and 2017 .

Year Ended December 31,

Production volumes

Natural Gas (MMcf)

Total (MMcfe)

Net average daily production

Natural Gas (Mcf)

Average sales price

Oil (Per Bbl)

NGLs (Per Bbl)

Natural Gas (per Mcf)

Hedge gain (loss) (per Mcfe)

Production costs (per Mcfe) (1)

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(1) Production costs (per Mcfe) exclude ad valorem and severance taxes.

The table above excludes immaterial production volumes related to our other non-operated natural gas and oil interests.

Please read Note 24—Supplemental Oil and Gas Disclosures (Unaudited) to our consolidated financial statements under Item 8 of this Form 10-K for further information on our proved reserves related to our other non-operated natural gas and oil interests.

Proved Undeveloped Reserves

The following table provides information regarding changes in our share of Laramie Energy ’s proved undeveloped reserves for the year ended December 31, 2019 .

Proved undeveloped reserves at December 31, 2018

Revisions of previous estimates

Extensions and discoveries

Conversion to proved developed reserves

Proved undeveloped reserves at December 31, 2019

At December 31, 2019, we held no proved undeveloped reserves directly or indirectly through our non-controlling equity ownership in Laramie Energy .

The decrease in our share of Laramie Energy’s proved undeveloped reserves for the year ended December 31, 2019 was due to the following:

During the year ended December 31, 2019 , Laramie Energy expended approximately $63.6 million in connection with the development of its proved undeveloped reserves.

Our share of Laramie Energy’s proved undeveloped reserves converted to proved developed reserves during 2019 was 48,456 MMcfe.

This activity represented 46% of the prior year-end proved undeveloped reserves.

The total number of proved undeveloped locations converted to proved developed reserves during 2019 was consistent with Laramie Energy’s original development plan.

Revisions of previous estimates of (57,212) MMcfe were primarily driven by changes to Laramie Energy's development plan due to unfavorable market conditions.

As of December 31, 2019, Laramie Energy has ceased all drilling activities due to the continued decline in natural gas prices.

In recognition of the potential impact of recent commodity price volatility and Par’s position as an equity interest owner without control of Laramie Energy’s operations, Par primarily bases its determination of Laramie Energy’s proved undeveloped reserves at year end 2019 on a two-year drilling and three-year completion time horizon compared to the five-year time horizon permitted under SEC requirements.

Productive Wells and Acreage

The table below shows, as of December 31, 2019 , our share of Laramie Energy ’s gross and net wells and developed acres.

Developed acreage consists of acres spaced or assignable to productive wells.

Productive Wells

Developed Acres

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Some of the wells classified as “gas” wells also produce condensate.

A “gross well” or “gross acre” is a well or acre in which a working interest is held.

The number of gross wells or acres is the total number of wells or acres in which a working interest is owned.

A “net well” or “net acre” is deemed to exist when the sum of fractional ownership interests in gross wells or acres equals one.

The number of net wells or net acres is the sum of the fractional working interests owned in gross wells or gross acres expressed as whole numbers and fractions thereof.

Net wells and net developed acres are reflected as if we owned our interest directly.

Undeveloped Acreage

At December 31, 2019 , our share of undeveloped acreage held through our ownership in Laramie Energy was as follows:

Undeveloped Acres (1) (2)

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Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and gas, regardless of whether such acreage contains proved reserves.

There are no material near-term lease expirations for which the carrying value at December 31, 2019 has not already been impaired in consideration of these expirations or capital budgeted to convert acreage to held by production.

Net undeveloped acres are reflected as if we owned our interest directly.

Drilling Activity

As of December 31, 2019, Laramie Energy has ceased all drilling activities due to unfavorable market conditions.

The table below shows the number of development wells completed by Laramie Energy during the periods indicated.

Laramie Energy drilled no exploratory productive or dry wells during 2019 , 2018 , or 2017 .

Year ended December 31,

A “gross well” is a well in which a working interest is held.

The number of gross wells is the total number of wells in which a working interest is owned.

A “net well” is deemed to exist when the sum of fractional ownership interests in gross wells equals one.

The number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.

Delivery Commitments

Laramie Energy has entered into certain gathering, processing, and transportation contracts with third parties that require Laramie Energy to deliver fixed, determinable quantities of production over specified periods of time.

Under these agreements, Laramie Energy is required to make deficiency payments for any shortfalls associated with minimum volume commitments.

Laramie Energy expects to fulfill delivery commitments under gathering, processing, and transportation agreements from proved developed and undeveloped reserves.

The table below shows Laramie Energy ’s minimum volume commitments under gathering, processing, and transportation contracts as of December 31, 2019 (in MMcfe).

Total delivery commitments

As of December 31, 2019, Laramie Energy ceased all drilling activities due to unfavorable market conditions.

Our equity investment in Laramie Energy and the reserves we own indirectly through Laramie Energy are not material to our consolidated financial statements as of December 31, 2020.

Laramie Energy’s oil and gas producing activities are not material to our business operations or financial position.

We also own certain immaterial minority interests in wells located in Colorado.

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 2. Properties