What changed in this filing

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Item 2. Properties

2021-04-26 compared with 2020-05-06 · 120 added, 126 removed, 119 unchanged (67% of the section changed)

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leased premises in Houston, Texas.

We maintain district offices in Midland, Texas, Oklahoma City, Oklahoma and Charleston, West Virginia,

and have field offices in Carrizo Springs and Midland, Texas, Elmore City, Oklahoma and Arnoldsburg, West Virginia.

Substantially all of

our oil and gas properties are subject to a mortgage given to collateralize indebtedness or are subject to being mortgaged upon request by our lenders for additional collateral.

The information set forth below concerning our properties, activities, and oil and gas reserves include our interests in affiliated entities.

The following table sets forth the exploratory and development drilling experience with respect to wells in which we participated during

the three years ended December 31, 2019.

We maintain district offices in Midland, Texas and Oklahoma City, Oklahoma and have field offices in

Carrizo Springs and Midland, Texas, and Elmore City, Oklahoma.

Substantially all of our oil and gas properties are subject to a mortgage

given to collateralize indebtedness or are subject to being mortgaged upon request by our lenders for additional collateral.

information set forth below concerning our properties, activities, and oil and gas reserves include our interests in affiliated entities.

The following table sets forth the exploratory and development drilling experience with respect to wells in which we participated during the

three years ended December 31, 2020.

In 2020, we participated in seven new horizontal wells, however, only one well was completed in 2020, and the remaining six wells are to be completed in 2021.

Oil and Gas Production

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Some wells produce both oil and gas.

The following table shows our net production of oil, NGL and natural gas for each of the

three years ended December 31, 2019.

Net production is net after royalty interests of others are deducted and is determined by multiplying the gross production volume of properties in which we have an interest by percentage of the

leasehold, mineral or royalty interest owned by us.

following table shows our net production of oil, NGL and natural gas for each of the three years ended December 31, 2020.

Net production is net after royalty interests of others are deducted and is determined by multiplying the

gross production volume of properties in which we have an interest by percentage of the leasehold, mineral or royalty interest owned by us.

Oil (barrels)

NGL (barrels)

The following table sets forth our average sales prices together with our average production costs per unit of

production for the three years ended December 31, 2019.

The following table sets forth our average sales prices together with our average production

costs per unit of production for the three years ended December 31, 2020.

Average sales price per barrel of oil

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Total Net Undeveloped Acreage Expiration

In the event that production is not established, or we take no action to extend or renew the terms of our leases, our net undeveloped acreage

that will expire over the next three years, as of December 31, 2019, is zero acres for the year ending December 31, 2020, zero in 2021, and zero acres in 2022.

As of December 31, 2020, we have no acreage subject to expiration during the years ending 2021 through 2023.

Our interests in proved

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technical persons primarily responsible for overseeing the preparation of the reserve estimates can be found in Exhibit 99.1, the Ryder Scott Company, L.P.

Registrants Reserves Estimates.

In matters related to the preparation of our reserve estimates, our district managers report to the Engineering Data manager, who maintains oversight and

compliance responsibility for the internal reserve estimate process and provides oversight for the annual preparation of reserve estimates of 100% of our year-end reserves by our independent third-party

engineers, Ryder Scott Company, L.P.

The members of our district and central groups consist of degreed engineers and geologists with between approximately twenty and thirty-five years of industry experience, and between eight and twenty-five years

of experience managing our reserves.

Our Engineering Data manager, the technical person primarily responsible for overseeing the preparation of reserves estimates, has over twenty-five years of experience, holds a Bachelor degree in Geology and an

MBA in finance and is a member of the Society of Petroleum Engineers and American Association of Petroleum Geologist.

See Part II, Item 8 Financial Statements and Supplementary Data, for additional discussions regarding proved

reserves and their related cash flows.

Report on Registrants Reserves Estimates.

In matters related to the preparation of our

reserve estimates, our district managers report to the Engineering Data manager, who maintains oversight and compliance responsibility for the internal reserve estimate process and provides oversight for the annual preparation of reserve estimates

of 100% of our year-end reserves by our independent third-party engineers, Ryder Scott Company, L.P.

The members of our district and central groups consist of degreed engineers and geologists with between

approximately twenty and thirty-five years of industry experience, and between eight and twenty-five years of experience managing our reserves.

Our Engineering Data manager, the technical person primarily responsible for overseeing the preparation

of reserves estimates, has over thirty years of experience, holds a Bachelor degree in Geology and an MBA in finance and is a member of the Society of Petroleum Engineers and American Association of Petroleum Geologist.

See Part II, Item 8

Financial Statements and Supplementary Data, for additional discussions regarding proved reserves and their related cash flows.

All of our reserves are located within the continental United States.

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one barrel of natural gas liquids equals one barrel of oil.

At December 31, 2017 our reserve report included 779 MBoe of proved undeveloped reserves attributable to 22 horizontal wells that were all

completed in 2018, therefore, 100% of these reserves were converted to proved developed in the 2018 year-end reserves report.

In 2018, the Company drilled and completed seventeen horizontal wells in West Texas and eleven horizontal wells in Oklahoma.

In addition, the

Company added reserves through overriding royalty interest in 16 wells, primarily in Oklahoma and Texas.

In 2018, the Company drilled and completed 17 horizontal wells in West Texas and 11 horizontal wells in Oklahoma.

In addition, the Company

added reserves through overriding royalty interest in 16 wells, primarily in Oklahoma and Texas.

At year-end 2018, thirteen of the seventeen wells completed in 2018 were designated as Shut-In:

eight in our West Texas horizontal development program, which were brought on production in February, 2019, and five in our Oklahoma Scoop-Stack development program, which were brought on production in

eight located in our West Texas horizontal development program that were brought on production in February, 2019, and five in our Oklahoma Scoop-Stack development program, which were brought on production

in March, 2019.

At December 31, 2018, our reserve report included 43 MBoe of proved undeveloped reserves attributable to eight

horizontal wells that had been drilled but had not yet been completed:

three of these were completed in 2019, converting 24 Mboe of undeveloped reserves to proved developed, and five remained uncompleted as of December 31, 2019, which account

for 18 Mboe of the 43 Mboe.

The Company has 9% ownership in one of these five wells and less than 1% in four wells.

In 2019, in West

Texas, in addition to the eight wells classified as Shut-in at year-end 2018 that were brought on production in February, we participated in the drilling and completion

of three wells on our Kashmir tract:

horizontal wells that had been drilled but not yet been completed:

three of these were completed in 2019, converting 24 Mboe of undeveloped reserves to proved developed, and four remained uncompleted as of December 31, 2020, which account for

18 Mboe of the 43 Mboe.

The Company has 9% ownership in one of these four wells and less than 1% in three wells.

In 2019, in West Texas,

in addition to the eight wells classified as Shut-in at year-end 2018 that were brought on production in February, we participated in the drilling and completion of

three wells on our Kashmir tract:

two wells with an average 49% interest, and a third well for 5.3% interest.

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production in May of 2019.

In our Oklahoma, Scoop-Stack play, in 2019, we participated in the drilling and completion of six wells on our

WM Wallace tract for 7.67% interest, and nine wells, included on Slash, Osborn, and Leon tracts, with an average 1.34% interest.

In 2020, in West Texas we participated in the drilling of seven wells:

one for 8.6% which was brought into

production in July of 2020, and six wells with an average 47.5% interest that were shut-in and are planned for completion in mid-2021 with production to start early in

the third quarter of 2021.

The Company invested approximately $4.5 million in these seven wells in 2020.

Also in 2020, reserves were added in West Texas through the addition of 11 horizontal wells completed in Midland County, Texas, in which we

receive 0.56% to 1% over-riding royalty interest.

In our Oklahoma, Scoop-Stack play, in 2019, we participated in the drilling and

completion of six wells on our WM Wallace tract for 7.67% interest, and nine wells, included on Slash, Osborn, and Leon tracts, with an average 1.34% interest.

In addition, three wells drilled in Oklahoma in 2018, designated as proved undeveloped at

year-end 2018, were completed in 2019 converting 24 Mboe of reserves to proved developed.

Oklahoma, six wells designated as Shut-in on December 31, 2018, were brought into production in 2019:

five located on our Ruthie tract, and one on our

In the Gulf Coast region, we added production through the recompletion of three vertical wells in Polk County, Texas:

one operated by the Company in which we have 72.5% interest, and two operated by Unit Petroleum in which the Company

owns 2.81% working interest and 3.77 net revenue interest.

At December 31, 2019, the Company had 3,607 Mboe of undeveloped reserves

attributable to 22 wells operated by others that are anticipated to be drilled and completed primarily in 2020:

ten of these are located in our West Texas horizontal development program and account for 3,526 Mboe of the total, and 12 wells are

located in our Oklahoma Scoop-Stack horizontal program and account for 81 Mboe of the total.

Nine of the ten wells in West Texas are located on our 1,300 acre Kashmir tract in Upton County, operated by Apache Corporation and, as of April 15,

2020, six of these have been drilled and are awaiting completion, which is expected to occur in the fourth quarter of 2020.

Our average 47.76% share of the cost of these six horizontal wells will be approximately $21 million.

Drilling of the

remaining three wells will likely occur in 2021.

In the first quarter of 2020, we have also participated with 7.7% interest in the drilling of a well in Upton County, Texas by Pioneer Natural Resources that is expected to be completed in the fourth

quarter of 2020.

The Companys net cost in this horizontal well will be approximately $580,400.

Additional drilling and future development plans will be established based on an expectation of available cash flows from operations and

availability of funds under our revolving credit facility.

We employ technologies to establish proved reserves that have been

demonstrated to provide consistent results capable of repetition.

The technologies and economic data being used in the estimation of our proved reserves include, but are not limited to, electrical logs, radioactivity logs, geologic maps, production

data, and well test data.

Also in Oklahoma, six wells designated as Shut-in on December 31, 2018,

were brought into production in 2019:

five located on our Ruthie tract, and one on our Braum tract.

In 2019, in our Gulf Coast region, we

added production through the recompletion of three vertical wells in Polk County, Texas:

one operated by the Company in which we have 72.5% interest, and two operated by Unit Petroleum in which the Company owns 2.81% working interest and 3.77 net

revenue interest.

In 2020, the Company successfully recompleted one additional operated well in the Segno field with a 72.5% interest.

December 31, 2020, the Company had 3,221 Mboe of proved undeveloped reserves attributable to 13 wells operated by others, three of which are new wells, spud in 2020 but not drilled until the first quarter of 2021 and 10 of which were drilled as

The three new horizontals along with six uncompleted wells are located in Upton County, Texas and are in the process of being completed and we expect them to be placed on production by the end of

the second quarter of 2021.

Apache Corporation is the operator of these wells.

These nine PUD wells account for 3,127 Mboe of the total undeveloped reserves.

The nine wells mentioned above are located on our 1,300 acre Kashmir tract in Upton County,

operated by Apache Corporation.

Our average 47.5% share of the total cost of these nine horizontal wells will be approximately $26 million.

The four remaining PUD wells, drilled but not completed, are located in Grady County, Oklahoma and

account for 95 Mboe of the total undeveloped reserves.

Additional drilling and future development plans will be

established based on an expectation of available cash flows from operations and availability of funds under our revolving credit facility.

We employ technologies to establish proved reserves that have been demonstrated to provide

consistent results capable of repetition.

The technologies and economic data being used in the estimation of our proved reserves include, but are not limited to, electrical logs, radioactivity logs, geologic maps, production data, and well test

The estimated reserves of wells with sufficient production history are estimated using appropriate decline curves.

Estimated reserves of producing wells with limited production history and for undeveloped locations are

estimated using performance data from analogous wells in the area.

Estimated reserves of producing wells with limited production history and for undeveloped locations are estimated using

performance data from analogous wells in the area.

These wells are considered analogous based on production performance from the same formation and with similar completion techniques.

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oil and natural gas reserves after income tax, discounted at 10%.

Proved developed oil and gas reserves are reserves that can be expected to be

recovered from existing wells with existing equipment and operating methods.

Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a

relatively major expenditure is required for recompletion.

Proved developed oil and gas reserves are reserves that can

be expected to be recovered from existing wells with existing equipment and operating methods.

Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing

wells where a relatively major expenditure is required for recompletion.

Our reserves include amounts attributable to non-controlling interests in the Partnerships.

These interests represent less than 10% of our reserves.

These interests represent less than 10% of

our reserves.

In accordance with U.S.

generally accepted accounting principles, product prices are determined using the twelve-month average oil and

gas index prices, calculated as the unweighted arithmetic average for the first day of the month price for each month, adjusted for oilfield or gas gathering hub and wellhead price differentials (e.g.

grade, transportation, gravity, sulfur, and

basic sediment and water) as appropriate.

generally accepted accounting principles, product prices are determined using the twelve-month

average oil and gas index prices, calculated as the unweighted arithmetic average for the first day of the month price for each month, adjusted for oilfield or gas gathering hub and wellhead price differentials (e.g.

grade, transportation, gravity,

sulfur, and basic sediment and water) as appropriate.

Also, in accordance with SEC specifications and U.S.

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District Information

following table represents certain reserve and well information as of December 31, 2019.

The following table represents certain reserve and well information as of December 31, 2020.

Proved Reserves as of December 31, 2020 (MBoe)

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transport trucks, saltwater disposal facilities, various land excavating equipment and trucks we own and that are operated by our field employees.

Appalachian Region

Our Appalachian activities are concentrated primarily in West Virginia.

This region is managed from our office in Charleston, West Virginia.

Our assets in this region include a large acreage position and a high concentration of wells.

At December 31, 2019, we had interest in 481 wells (451 net), of which 438 wells are operated.

Multiple producing intervals here include the Big Lime,

Injun, Blue Monday, Weir, Berea, Gordon and Devonian Shale formations at depths primarily ranging from 1,600 to 5,600 feet.

Average net daily production in 2019 was 240 Boe.

While natural gas production volumes from Appalachian reservoirs are

relatively low on a per-well basis compared to other areas of the United States, the productive life of Appalachian reserves is relatively long.

At December 31, 2019, we had 296 MBoe of proved developed

reserves (substantially all natural gas) in the Appalachian region, constituting 2.1% of our total proved reserves.

We maintain an acreage position of approximately 35,790 gross (35,350 net) acres in this region, primarily in Calhoun, Clay, and

Roane counties.

We operate a small field service group in this region utilizing one swab rig, one paraffin truck, one saltwater hauling truck and limited excavating equipment to primarily service our own operated wells and locations.

March 31, 2020, the Appalachian region has no wells in the process of being drilled, no waterfloods in the process of being installed and no other related activities of material importance.

Gulf Coast Region

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We had 239 producing wells (124 net) in the Gulf Coast region as of December 31, 2020, of which 158 wells are operated by us.

Average net daily production in 2019 was 348

Average net daily production in our Gulf Coast

Region in 2020 was 297 Boe.

At December 31, 2020, we had 517 MBoe of proved reserves in the Gulf Coast region, which represented 5% of our total proved reserves.

We maintain an acreage position of over 12,700 gross (5,120 net) acres in this region, primarily in

Dimmit and Polk counties.

We operate a field service group in this region from a field office in Carrizo Springs, Texas utilizing four workover rigs, nineteen water transport trucks, two saltwater disposal wells and several trucks and excavating

Services including well service support, site preparation and construction services for drilling and workover operations are provided to third-party operators as well as utilized in our own operated wells and locations.

March 31, 2020, the Gulf Coast region has no operated wells in the process of being drilled, no waterfloods in the process of being installed and no other related activities of material importance.

We maintain an acreage position of over 12,700 gross (5,120 net) acres in this

region, primarily in Dimmit and Polk counties.

We operate a field service group in this region from a field office in Carrizo Springs, Texas utilizing four workover rigs, nineteen water transport trucks, two saltwater disposal wells and several

trucks and excavating equipment.

As of March 31, 2021, the Gulf Coast region has no operated wells in the process of being drilled, no waterfloods in the process of being installed and no other related activities of material importance.

Mid-Continent Region

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Avant, Skinner, Sycamore, Bromide, McLish, Hunton, Mississippian, Oswego, Red Fork, and Chester formations at depths ranging from 1,100 to 10,500 feet.

Average net daily production in 2019 was 840 Boe.

At December 31, 2019, we had 2,094 MBoe of

proved reserves in the Mid-Continent area, or 14.7% of our total proved reserves.

We maintain an acreage position of approximately 55,880 gross (10,690 net) acres in this region, primarily in Canadian,

Kingfisher, Grant, Major, and Garvin counties.

Average net daily production in our Mid-Continent Region

in 2020 was 788 Boe.

At December 31, 2020, we had 1670 MBoe of proved reserves in the Mid-Continent area, or 16% of our total proved reserves.

We maintain an acreage position of approximately 56,000 gross

(10,355 net) acres in this region, primarily in Canadian, Kingfisher, Grant, Major, and Garvin counties.

We operate a field service group in this region from a field office in Elmore City, utilizing one workover rig and one saltwater hauling truck.

Our Mid-Continent

region is actively participating with third-party operators in the horizontal development of lands that include Company owned interest in several counties in the Stack and Scoop plays of Oklahoma where drilling is primarily targeting reservoirs of

the Mississippian, and Woodford formations.

As of March 31, 2020, in the Mid-Continent region, the Company was is participating in the drilling and/or completion of four wells, with overriding royalty

only in eight additional wells, all included as Proved Undeveloped in the 2019 year-end reserve report.

Our Mid-Continent region is actively participating with third-party operators in the horizontal development of lands that include Company owned interest in several counties in the Stack and Scoop plays of

Oklahoma where drilling is primarily targeting reservoirs of the Mississippian, and Woodford formations.

As of March 31, 2021, in the Mid-Continent region, the Company was participating in the completion

of four wells included as Proved Undeveloped in the 2020 year-end reserve report.

West Texas Region

Our West Texas activities are concentrated in the Permian Basin in Texas and New Mexico.

The Spraberry field was

discovered in 1949, encompasses eight counties in West Texas and the Company believes it is the

largest oil field in the United States.

The Spraberry field was discovered in 1949,

encompasses eight counties in West Texas and the Company believes it is the largest oil field in the United States.

The field is approximately 150 miles long and 75 miles wide at its widest point.

The oil produced is West Texas Intermediate Sweet, and the gas produced is

casing-head gas with an average energy content of 1,400 Btu.

The oil produced is West Texas Intermediate Sweet,

and the gas produced is casing-head gas with an average energy content of 1,400 Btu.

The oil and gas are produced primarily from five intervals;

the Upper and Lower Spraberry, the Wolfcamp, the Strawn, and the Atoka, at depths ranging from 6,700 feet to 11,300 feet.

the Upper and Lower Spraberry, the Wolfcamp, the Strawn, and the Atoka, at depths ranging from 6,700

feet to 11,300 feet.

region is managed from our office in Midland, Texas.

As of December 31, 2020, we had 556 wells (263 net) in the West Texas area, of which 325 wells are operated by us.

Principal producing intervals are in the Spraberry, Wolfcamp, and San Andres

formations at depths ranging from 4,200 to 12,500 feet.

Average net daily production in 2019 was 3,703 Boe.

At December 31, 2019, we had 11,108 MBoe of proved reserves in the West Texas area, or 78% of our total proved reserves.

We maintain an

acreage position of approximately 19,910 gross (12,560 net) acres in the Permian Basin in West Texas, primarily in Reagan, Upton, Martin and Midland counties and believe this acreage has significant resource potential for horizontal drilling in the

Spraberry, Jo Mill, and Wolfcamp intervals.

We operate a field service group in this region utilizing nine workover rigs, four hot oiler trucks, one kill truck and two roustabout trucks.

Services including well service support, site preparation and

construction services for drilling and workover operations are provided to third-party operators as well as utilized in our own operated wells and locations.

At December 31, 2019, the Company had committed to participate in the drilling of ten

Proved Undeveloped horizontal drilling locations.

Seven of the nine wells were drilled by April 15, 2020, but are not expected to be completed and producing until the fourth quarter of 2020.

Principal producing

intervals are in the Spraberry, Wolfcamp, and San Andres formations at depths ranging from 4,200 to 12,500 feet.

Average net daily production in Our West Texas Region in 2020 was 3,178 Boe.

At December 31, 2020, we had 8,242 MBoe of proved

reserves in the West Texas area, or 79% of our total proved reserves.

We maintain an acreage position of approximately 19,679 gross (12,461 net) acres in the Permian Basin in West Texas, primarily in Reagan, Upton, Martin and Midland counties and

believe this acreage has significant resource potential for horizontal drilling in the Spraberry, Jo Mill, and Wolfcamp intervals.

We operate a field service group in this region utilizing nine workover rigs, four hot oiler trucks, one kill truck

and two roustabout trucks.

At December 31, 2020, the Company was committed to participate with Apache Corporation in the drilling of three Proved Undeveloped

horizontal locations in Upton County, Texas and the completion of these along with six other wells drilled in 2020 on the same tract.

The three new horizontals have been drilled and cased as of April 1, 2021.

Completion operations for all nine

are scheduled for June 2021.

LEGAL PROCEEDINGS.

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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 2. Properties