What changed in this filing

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Item 9A. Controls and Procedures

2021-04-26 compared with 2020-05-06 · 357 added, 326 removed, 743 unchanged (48% of the section changed)

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information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the chief executive officer and chief financial officer, does not expect that our Disclosure Controls will prevent

all error and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must

reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance

that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple

error or mistake.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all

potential future conditions.

Members of our management, including our chief executive officer and chief financial officer, have evaluated

the effectiveness of our disclosure controls and procedures, as defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of December 31, 2019 the

end of the period covered by this Report.

Based upon that evaluation, these officers concluded that our disclosure controls and procedures were effective as of December 31, 2019.

Our management, including the chief executive officer and chief financial officer, does not

expect that our Disclosure Controls will prevent all error and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no

evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be

faulty, and that breakdowns can occur because of simple error or mistake.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design

will succeed in achieving its stated goals under all potential future conditions.

Members of our management, including our chief

executive officer and chief financial officer, have evaluated the effectiveness of our disclosure controls and procedures, as defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of December 31, 2020 the end of the period covered by this Report.

Based upon that evaluation, these officers concluded that our disclosure controls and procedures were effective as of

December 31, 2020.

Managements Report on Internal Control Over Financial Reporting

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this assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2020.

This Annual Report does not include an attestation report of the Companys registered

public accounting firm regarding internal control over financial reporting.

Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to rules of the Securities and Exchange

Commission that permit the Company to provide only managements report in this Annual Report.

There have been no changes in our

internal controls over financial reporting during the fourth fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

This Annual Report does not include an attestation report of the Companys registered public accounting firm regarding internal control

over financial reporting.

Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only

managements report in this Annual Report.

There have been no changes in our internal controls over financial reporting during the

fourth fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

OTHER INFORMATION.

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24, 2020 (filed as Exhibit 3.2 of PrimeEnergy Resources Corporation Form 8-K on April 27, 2020 and incorporated herein by reference).

Composite copy of Non-Statutory Option Agreements (Incorporated by reference to Exhibit

10.18 of PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2004).

Composite copy of Non-Statutory Option Agreements (Incorporated by reference to Exhibit 10.18 of PrimeEnergy

Resources Corporation Form 10-K for the year ended December 31, 2004).

Third Amended and Restated Credit Agreement dated as of February

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December 31, 2016).

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT

AGREEMENT dated as of January 8, 2019, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole

Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.3 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2018).

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of January

8, 2019, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole Lead Arranger and Sole Book Runner

(Incorporated by reference to Exhibit 10.22.5.10.3 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2018).

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of July

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by reference to Exhibit 10.22.5.10.2 to PrimeEnergy Corporation Form 10-Q for the quarter ended June 30, 2018).

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 8, 2019, among PRIMEENERGY RESOURCES CORPORATION, as Borrower,

THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.3 to

PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2018).

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of January

(Incorporated by reference to Exhibit 10.22.5.10.3 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2018).

FOURTH AMENDMENT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of May

8, 2020 among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, BBVA USA (f/k/a COMPASS BANK), as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA USA, as Sole Lead Arranger and Sole

Book Runner (Incorporated by reference to 10.22.5.10.4 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended September 30, 2020).

FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of September

4, 2020, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, BBVA USA (f/k/a COMPASS BANK,) as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA USA, as Sole Lead Arranger and Sole

Book Runner (Incorporated by reference to 10.22.5.10.5 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended September 30, 2020).

SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of FEBRUARY

11, 2021, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE GUARANTORS PARTY HERETO, THE LENDERS PARTY, HERETO, BBVA USA, as Administrative Agent and BBVA USA, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.6

to PrimeEnergy Resources Corporation Form 8-K dated February 12, 2021).

Amended, Restated and Consolidated Guaranty dated as of February

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Administrative Agent for the Secured Parties (Incorporated by reference to Exhibit 10.22.5.12 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31,

Amended, Restated and Consolidated Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as

of May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.13 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

Amended, Restated and Consolidated Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as of

May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.13 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as of May

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Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

Summary Reserve Report dated January 28, 2019, of Ryder Scott Company, L.P.

Summary Reserve Report dated March 23, 2020, of Ryder Scott Company, L.P.

(filed herewith).

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to

be signed on its behalf by the undersigned, thereunto duly authorized, on the 6 th , day of May 2020.

be signed on its behalf by the undersigned, thereunto duly authorized, on the 23 rd , day of April 2021.

PrimeEnergy Resources Corporation

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Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below

by the following persons on behalf of the Registrant and in the capacities indicated and on the 6 th day of May, 2020.

by the following persons on behalf of the Registrant and in the capacities indicated and on the 23 rd day of April 2021.

/s/ Charles E.

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We have audited the accompanying consolidated balance sheets of PrimeEnergy Resources Corporation and Subsidiaries (the Company) as of

December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial

statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the

years then ended, in conformity with U.S.

generally accepted accounting principles.

December 31, 2020 and 2019, the related consolidated statements of operations, equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters

communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to

the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are

not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Depreciation, Depletion and Amortization and Impairment of Property and Equipment

Description of

At December 31, 2020, the carrying value of the Companys property and equipment was $191.1 million and depreciation, depletion and amortization (DD&A) expense was $27.3 million for the year then ended.

described in Note 1, the Company follows the successful efforts method of accounting for its oil and gas properties.

Under the successful efforts method, costs of acquiring undeveloped oil and gas leasehold acreage, including

lease bonuses, brokers fees and other related costs are capitalized.

Provisions for impairment of undeveloped oil and gas leases are based on periodic evaluations.

Annual lease rentals and exploration expenses, including geological and

geophysical expenses and exploratory dry hole costs, are charged against income as incurred.

Costs of drilling and equipping productive wells, including development dry holes and related production facilities, are capitalized.

All other property and

equipment are carried at cost.

Depreciation and depletion of oil and gas production equipment and properties are determined under the unit-of-production method based on

estimated proved developed recoverable oil and gas reserves.

Depreciation of all other equipment is determined under the straight-line method using various rates based on useful lives generally ranging from 5 to 10 years.

The cost of assets and

related accumulated depreciation is removed from the accounts when such assets are disposed of, and any related gains or losses are reflected in current earnings.

Interest costs related to financing major oil and gas projects in progress are capitalized until the projects are evaluated or until the

projects are substantially complete and ready for their intended use if the projects are evaluated and successful

The Company reviews long-lived assets, including oil and gas properties, for impairment whenever events or changes in circumstances indicate that the carrying

amounts may not be recovered.

If the carrying amounts are not expected to be recovered by undiscounted cash flows, the assets are impaired, and an impairment loss is recorded.

The amount of impairment is based on the estimated fair value of the

assets determined by discounting anticipated future net cash flows.

Proved oil and

gas reserves directly impact financial accounting estimates, including depreciation, depletion and amortization.

Proved reserves represent estimated quantities of natural gas, crude oil, condensate, and natural gas liquids that geological and

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

The process of estimating quantities of proved oil

and gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir.

The data for a given reservoir may also change substantially over time as a

result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions.

Consequently, material revisions

(upward or downward) to existing reserve estimates may occur from time to time.

Estimates of oil and gas reserves, as determined by independent petroleum engineers, are continually subject to revision based on price, production history and

other factors.

Depletion expense, which is computed based on the units of production method, could be significantly impacted by changes in such estimates.

Additionally, U.S.

generally accepted accounting principles require that if the expected

future undiscounted cash flows from an asset are less than its carrying cost, that asset must be written down to its fair market value.

As the fair market value of an oil and gas property will usually be significantly less than the total

undiscounted future net revenues expected from that asset, slight changes in the estimates used to determine future net revenues from an asset could lead to the necessity of recording a significant impairment of that asset.

Auditing the Companys DD&A and impairment calculations is complex because of

the use of independent petroleum engineers and the evaluation of managements determination of the inputs described above used by the engineers in estimating oil and gas reserves.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design of the Companys controls over its process to calculate DD&A and impairment,

including managements controls over the completeness and accuracy of the financial data utilized by the engineers in estimating oil and gas reserves.

Our audit procedures included, among others, evaluating the professional qualifications and objectivity of the Companys independent petroleum engineers

responsible for the preparation of the proved oil and gas reserve estimates for select properties.

In addition, we compared the Companys recent production with its reserve estimates for properties that have significant production or

significant reserve quantities and inquired of disproportionate ratios that did not align with our expectations.

We also tested the mathematical accuracy of the DD&A and impairment calculations, including comparing the oil and gas reserve

amounts used in the calculations to the Companys reserve reports.

Accounting for Asset Retirement Obligations

Description of

At December 31, 2020, the asset retirement obligation (ARO) balance totaled $13.7 million.

As further described in Note 5, the

Companys ARO primarily represents the estimated present value of the amount the Company will incur to plug, abandon, and remediate producing properties at the end of their productive lives, in accordance with applicable state laws.

determined its asset retirement obligation by calculating the present value of estimated cash flows related to the liability.

The asset retirement obligation is recorded as a liability at its estimated present value at its inception, with an

offsetting increase to producing properties.

Periodic accretion of discount of the estimated liability is recorded as an expense in the statement of operations.

The Companys liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of

these costs, the productive life of wells and a risk-adjusted interest rate.

Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation.

Revisions to the asset retirement obligation are

recorded with an offsetting change to producing properties, resulting in prospective changes to depreciation, depletion and amortization expense and accretion of discount.

Because of the subjectivity of assumptions and the relatively long life of

most of the Companys wells, the costs to ultimately retire the wells may vary significantly from previous estimates.

Auditing the Companys ARO is complex and highly judgmental because of the significant estimation by management in determining the obligation.

particular, the estimate was sensitive to significant subjective assumptions such as retirement cost estimates and the estimated timing of settlements, which are both affected by expectations about future market and economic

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design of the Companys internal controls over its ARO estimation process, including managements review of the significant assumptions that have a material effect on the

determination of the obligations.

To test the ARO for the Company, our audit procedures included, among others, assessing the significant assumptions and inputs used in the valuation, such as retirement cost estimates and timing of settlement

Additionally, we compared the ARO against historical results, reviewed the reasonableness of the discount rate utilized in the estimate, considered the reasonableness of the current and long-term portion of the obligation by comparing

the accretion expense trends, and considered the completeness of the properties included in the estimate by comparing to the Companys reserve reports.

GRASSI & CO., CPAs, P.C.

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York, New York

April 23, 2021

PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

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Accrued liabilities

Due to related parties

Current portion of long-term debt

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Derivative liability short-term

Due to Related Parties

Total Current Liabilities

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Asset Retirement Obligations

Derivative Liability Long-Term

Deferred Income Taxes

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Natural gas liquids sales

Realized (loss) on derivative instruments, net

Realized gain (loss) on derivative instruments, net

Field service income

Administrative overhead fees

Unrealized (loss) gain on derivative instruments

Unrealized (loss) on derivative instruments

Total Revenues

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Gain on Sale and Exchange of Assets

Income from Operations

(Loss) Income from Operations

Other Income and Expenses

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Interest income

Income Before Provision for Income Taxes

Provision for Income Taxes

Net Income Attributable to Non-Controlling

Net Income Attributable to PrimeEnergy

Basic Income Per Common Share

Diluted Income Per Common Share

(Loss) Income Before (Benefit from) Provision for Income Taxes

(Benefit from) Provision for Income Taxes

Net (Loss) Income

Net (Loss) Income Attributable to Non-Controlling

Net (Loss) Income Attributable to PrimeEnergy

Basic (Loss) Income Per Common Share

Diluted (Loss) Income Per Common Share

The accompanying Notes are an integral part of these Consolidated Financial Statements

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CONSOLIDATED STATEMENT OF EQUITY

(Thousands of dollars)

(Thousands of dollars, except share amounts)

Stockholders

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Purchase 40,941 shares of common stock

Retirement of 1,026,397 shares of common stock

Purchase of non-controlling interest

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Purchase 4,801 shares of common stock

Net income (loss)

Purchase of non-controlling interest

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Cash Flows from Operating Activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net (Loss) Income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion on discounted liabilities

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Proceeds from sale of properties and equipment

Net Cash Used in by Investing Activities

Net Cash (Used in) provided by Investing Activities

Cash Flows from Financing Activities:

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Interest paid during the year

Non-Cash Disclosures:

Purchase of non-controlling interest

Distribution of non-controlling interest in liquidated partnerships

The accompanying Notes are an integral part of these Consolidated Financial Statements

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acquisition and production of oil and natural gas properties.

PrimeEnergy Resources Corporation and its subsidiaries are herein referred to as the Company. The Company owns leasehold, mineral and royalty interests in producing and non-producing oil and gas properties across the United States, primarily in Oklahoma, Texas and West Virginia.

The Company operates approximately 1,400 active wells and owns

non-operating interests and royalties in approximately 800 additional wells.

Additionally, the Company provides well-servicing support operations, site-preparation and construction services for oil and gas

drilling and reworking operations, both in connection with the Companys activities and providing contract services for third parties.

The Company is publicly traded on the NASDAQ under the symbol PNRG. PERC owns Eastern Oil Well

Service Company (EOWSC) and EOWS Midland Company (EMID) which perform oil and gas field servicing.

PERC also owns Prime Operating Company (POC), which serves as operator for most of the producing oil and gas

properties owned by the Company and affiliated entities.

PrimeEnergy Management Corporation (PEMC), a wholly-owned subsidiary, acts as the managing general partner, providing administration, accounting and tax preparation services for 3

limited partnerships and 2 trusts (collectively, the Partnerships).

The markets for the Companys products are highly competitive, as oil and gas are commodity products and prices depend upon numerous factors beyond the control of

the Company, such as economic, political and regulatory developments and competition from alternative energy sources.

Coronavirus on Business:

On March 11, 2020, the World Health Organization declared the outbreak of the Coronavirus (COVID-19), which continues to spread throughout the U.S.

The Company operates approximately 760 active wells and owns non-operating

interests and royalties in approximately 800 additional wells.

Additionally, the Company provides well-servicing support operations, site-preparation and construction services for oil and gas drilling and reworking operations, both in connection

with the Companys activities and providing contract services for third parties.

The Company is publicly traded on the NASDAQ under the symbol PNRG. PERC owns Eastern Oil Well Service Company (EOWSC) and EOWS Midland

Company (EMID) which perform oil and gas field servicing.

PERC also owns Prime Operating Company (POC), which serves as operator for most of the producing oil and gas properties owned by the Company and affiliated entities.

PrimeEnergy Management Corporation (PEMC), a wholly-owned subsidiary, acts as the managing general partner, providing administration, accounting and tax preparation services for 1 limited partnership and 1 trust (collectively, the

Partnerships).

The markets for the Companys products are highly competitive, as oil and gas are commodity products and prices depend upon numerous factors beyond the control of the Company, such as economic, political and

regulatory developments and competition from alternative energy sources.

Effects of Coronavirus on Business:

On March 11, 2020, the World Health Organization declared the outbreak of the Coronavirus

(COVID-19), which continues to spread throughout the U.S.

and the world, a pandemic.

The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions.

The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic

Similar to many businesses in the energy sector, our business has been impacted by the recent COVID-19 outbreak and associated restrictions that have been implemented.

The Company temporarily implemented

social distancing requirements and work from home accommodations where appropriate.

The oversupply in the oil markets and related price

volatility, depending on its duration may have an adverse impact on cash flows from operations and the valuation of capitalized costs related to oil and gas producing activities.

The Company temporarily

implemented social distancing requirements and work from home accommodations where appropriate.

The oversupply in the oil markets and

related price volatility, depending on its duration may have an adverse impact on cash flows from operations and the valuation of capitalized costs related to oil and gas producing activities.

The full extent to which

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the full consolidation method for those partnerships which are controlled by the Company.

The Companys reserve estimates are based on the ownership percentage of Partnership reserve reports.

DD&A expense and evaluation of impairment may

differ from the Partnership as the Companys cost basis for the Partnership interests acquired may be different than the cost basis at the Partnership level for properties acquired by the Partnership.

All significant intercompany balances and

transactions are eliminated in preparing the consolidated financial statements.

The Companys reserve estimates are based on the full consolidation method.

DD&A expense and evaluation of impairment may differ from the Partnership

as the Companys cost basis for the Partnership interests acquired may be different than the cost basis at the Partnership level for properties acquired by the Partnership.

All significant intercompany balances and transactions are eliminated

in preparing the consolidated financial statements.

Reclassifications:

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During this period, there were

no material subsequent items requiring disclosure other than as stated in footnotes 2 and 4 to these financial statements.

no material subsequent items requiring disclosure other than as stated in footnote 4 to these financial statements.

The preparation of financial statements in conformity with U.S.

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Actual results could differ from those estimates.

Estimates of oil and gas reserves, as determined by

independent petroleum engineers, are continually subject to revision based on price, production history and other factors.

Depletion expense, which is computed based on the units of production method, could be significantly impacted by changes in

such estimates.

Estimates of oil and gas reserves, as determined by independent petroleum engineers, are

continually subject to revision based on price, production history and other factors.

Depletion expense, which is computed based on the units of production method, could be significantly impacted by changes in such estimates.

Additionally, U.S.

generally accepted accounting principles require that if the expected future undiscounted cash flows from an asset are less than its carrying cost, that asset must be written down to its fair market value.

fair market value of an oil and gas property will usually be significantly less than the total undiscounted future net revenues expected from that asset, slight changes in the estimates used to determine future net revenues from an asset could lead

to the necessity of recording a significant impairment of that asset.

As the fair market value of an oil and gas

property will usually be significantly less than the total undiscounted future net revenues expected from that asset, slight changes in the estimates used to determine future net revenues from an asset could lead to the necessity of recording a

significant impairment of that asset.

Property and Equipment:

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liabilities in financial statements that are already required by U.S.

generally accepted

accounting principles to be measured at fair value.

The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date (exit price).

The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or

owes the liability.

The Company utilizes market data or assumptions that market participants who are independent, knowledgeable and

willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market corroborated or generally

unobservable.

generally accepted accounting principles to be measured at fair value.

The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement date (exit price).

The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market

participant that holds the asset or owes the liability.

The Company utilizes market data or assumptions that market participants who are

independent, knowledgeable and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market

corroborated or generally unobservable.

The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company is able to classify fair value balances based on the observability of those

The Company is able to classify fair value balances based on the

observability of those inputs.

The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value.

The hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in

active markets.

The hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for

identical instruments in active markets.

Level 2 inputs consist of quoted prices for similar instruments.

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the statement of operations.

Recently Issued Accounting Standards:

On January 1, 2018, PrimeEnergy adopted ASU 2014-09, Revenue from Contracts with Customers

(ASC 606), using the modified retrospective method.

The Company elected to evaluate all contracts at the date of initial application.

While there was no impact to the opening balance of retained earnings as a result of the adoption,

certain items previously netted in revenue are now recognized as lease operating expense in the Companys statement of consolidated operations.

The amounts are immaterial to the financial statements, and prior comparative periods have not been

restated and continue to be reported under the accounting standards in effect for those periods.

Adoption of the new standard does not have a material impact on the Companys net earnings.

The Company applies the provisions of ASC 606 for revenue recognition to contracts with customers.

Sales of crude oil, natural gas, and

natural gas liquids (NGLs) are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts.

Performance obligations primarily comprise delivery of oil, gas, or NGLs at a

delivery point, as negotiated within each contract.

Each barrel of oil, million Btu (MMBtu) of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is

Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer.

The Company considers a variety of facts and circumstances in assessing the point of control transfer, including

but not limited to:

whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Companys right to payment, and transfer of legal title.

In each case, the term between delivery and when

payments are due is not significant.

Revenue is recognized based on the transfer of control or our customers ability to

benefit from our services and products in an amount that reflects the consideration we expect to receive in exchange for those services and products.

The vast majority of our service and product contracts are short-term in nature.

In recognizing

revenue for our services and products, we determine the transaction price of purchase orders or contracts with our customers, which may consist of fixed and variable consideration.

We also assess our customers ability and intention to pay,

which is based on a variety of factors, including our historical payment experience with and the financial condition of our customers.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment

within 20 to 60 days.

Other judgments involved in recognizing revenue include an assessment of progress towards completion of performance obligations for certain long-term contracts, which involve estimating total costs to determine our progress

towards contract completion and calculating the corresponding amount of revenue to recognize.

PrimeEnergy records trade accounts

receivable for its unconditional rights to consideration arising under sales contracts with customers.

The carrying value of such receivables, net of the allowance for doubtful accounts, represents estimated net realizable value.

routinely assesses the collectability of all material trade and other receivables.

The Company accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any

reserve may be reasonably estimated.

PrimeEnergy has concluded that the disaggregation of revenue by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Practical Expedients and Exemptions

PrimeEnergy does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or

less or contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

PrimeEnergy will

utilize the practical expedient to expense incremental costs of obtaining a contract if the expected amortization period is one year or less.

Costs to obtain a contract with expected amortization periods of greater than one year will be recorded as

an asset and will be recognized in accordance with ASC 340, Other Assets and Deferred Costs. Currently, the Company does not have contract assets related to incremental costs to obtain a contract.

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases

(Topic 842), requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous GAAP.

The guidance is effective for fiscal years beginning after December 15, 2018.

January 2018, the FASB issued ASU 2018-01, which permits an entity an optional election to not evaluate under ASU 2016-02 those existing or expired land easements

that were not previously accounted for as leases prior to the adoption of ASU 2016-02.

In July 2018, the FASB issued ASU 2018-11, which adds a transition option

permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements.

Under this transition option, comparative reporting would not be

required, and the provisions of the standard would be applied prospectively to leases in effect at the date of adoption.

The Company intends to elect both transitional practical expedients.

As allowed under the standard, the Company also applied

practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs.

The Company also elected to exclude short-term

leases (those with terms of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components as a single lease component for all asset classes.

The Company has adopted this guidance as of January 1, 2019.

In the normal course of business, the Company enters into various lease

agreements for office space and equipment related to its exploration and development activities that are currently accounted for as operating leases.

The Companys adoption and

implementation of this ASU did not significantly impact its balance sheet.

The impact to the Companys consolidated statement of operations and consolidated statement of cash flows is not

On January 1, 2019, the company adopted ASU 2018-07 Improvements to

Nonemployee Share-Based Payment Accounting, to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment

transactions for acquiring goods and services from nonemployees.

As a result, the same guidance that provides for employee share-based payments, including most of the requirements related to classification and measurement, applies to nonemployee

share-based payment arrangements.

ASU 2018-07 was effective for financial statements issued for annual periods beginning after December 15, 2018 and interim periods within those annual periods.

The Companys adoption did not have a material effect on its consolidated financial statements.

New Pronouncements Issued But Not Yet

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework:

the Disclosure Requirements for Fair Value Measurement, which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures.

ASU 2018-13 is

effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods.

Early adoption is permitted.

The company plans to adopt this ASU and its related disclosures during

the first quarter of 2020 and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued

ASU 2018-15, Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This pronouncement clarifies the requirements for capitalizing

implementation costs in cloud computing arrangements and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This pronouncement is

effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued.

Company plans to adopt this ASU on its consolidated financial statements during the first quarter of 2020 and does not expect it to have a material impact.

In December 2019, The FASB issued Accounting Standards Update (ASU) 2019-12 Income Taxes (Topic740)

Simplifying the Accounting for Income Taxes as part of its initiative to reduce complexity in the accounting standards.

The amendments in ASU 2019-12 remove certain exceptions related to the incremental

approach for intraperiod tax allocations, the general methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

also clarifies and simplifies other aspects of accounting for income taxes.

For public business entries, the amendment in this update are effective for fiscal years and interim periods with those fiscal years, beginning after December 15, 2020.

New Pronouncements Issued But Not Yet Adopted:

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which clarifies or

improves disclosure requirements for various topics to align with Securities and Exchange Commission (SEC) regulations.

This update is effective for the Company beginning in the first quarter of 2021 and will be applied retrospectively.

and implementation of this ASU will not have a material impact on the Companys financial statements.

In March 2020, the FASB issued ASU 2020-04,

Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate

(LIBOR) or by another reference rate expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, which clarified the scope and application of the original guidance.

The guidance was effective

beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

The Company is evaluating whether to apply any of these expedients and, if elected, will adopt these standards when LIBOR is discontinued.

Acquisitions and Dispositions

Historically, the Company has repurchased the non-controlling interests of the partners and trust unit

holders in certain of the Partnerships, which consist primarily of oil and gas interests.

Historically, the Company has repurchased the non-controlling interests of the partners and trust unit holders in certain of the Partnerships,

which consist primarily of oil and gas interests.

The Company purchased such non-controlling interests in an amount totaling $22,000 in 2020 and $499,000 in 2019.

During 2018 the Company acquired 1,640 gross (464 net) acres, along with 16.6% to 33.4% working interest ownership in 51 oil and gas wells and

one commercial salt water disposal well operated by the Company, all located in Reagan County, Texas, for $6,080,000.

During 2019 and

2018 the Company sold or farmed out interests in certain non-core undeveloped and developed oil and natural gas properties through a number of individually negotiated transactions in exchange for cash and a

royalty or working interest in Oklahoma, Kansas, Colorado, Texas and Wyoming.

Proceeds under these agreements were approximately $4.3 and $3.1 million, respectively.

Such purchases resulted in the non-cash acquisition of non-controlling equity

interests of $36,000 and $111,000 respectively.

In 2020 the Company liquidated three partnerships for total cash payments of $720,000 resulting in the non-cash distribution of non-controlling interest of $1,550 million.

During 2020 the Company acquired 232 net acres, along with 15% to 16.6% working interest ownership in 53 oil and gas wells and one commercial

salt water disposal well operated by the Company, all located in Reagan County, Texas, for $343,000.

In addition, we acquired 9.36 net acre in Upton County, Texas at a cost of $5,100.

During 2020 and 2019 the Company sold or farmed out interests in certain non-core undeveloped and

developed oil and natural gas properties through a number of individually negotiated transactions in exchange for cash and a royalty or working interest in Oklahoma, Texas, New Mexico, Wyoming and West Virginia.

Proceeds under these agreements were

approximately $10.9 million and $4.3 million, respectively.

Additional Balance Sheet Information

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Partner advances

Prepaid drilling deposits

Accrued liabilities at December 31, 2020 and 2019 consisted of the following:

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Long-Term Debt

Effective July 30, 2010 the Company entered into a Second Amended and Restated Credit Agreement between Compass Bank as agent and a

syndicated group of lenders (Credit Agreement).

The Credit Agreement had a revolving line of credit and letter of credit facility of up to $250 million with a final maturity date of July 30, 2017.

The credit facility was

secured by substantially all of the Companys oil and gas properties.

The credit facility was subject to a borrowing base determined by the lenders taking into consideration the estimated value of PERCs oil and gas properties in

accordance with the lenders customary practices for oil and gas loans

On February 15, 2017, the Company and its lenders

entered into a Third Amended and Restated Credit Agreement (the 2017 Credit Agreement) with a maturity date of February 15, 2021.

The Second Amended and Restated Credit Agreement and subsequent amendments were amended and restated

by the 2017 Credit Agreement.

Pursuant to the terms and conditions of the 2017 Credit Agreement, the Company has a revolving

line of credit and letter of credit facility of up to $300 million subject to a borrowing base that is determined semi-annually by the lenders based upon the Companys financial

statements and the estimated value of the Companys oil and gas properties, in accordance with the Lenders customary practices for oil and gas loans.

The credit facility is secured by substantially all of the Companys oil and gas

The 2017 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio, total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and

exploration costs) ratio and interest coverage ratio, as defined, and restrictions are placed on the payment of dividends, the amount of treasury stock the Company may purchase, commodity hedge agreements, and loans and investments in its

consolidated subsidiaries and limited partnerships.

On December 22, 2017, the Company and its lenders entered into a First Amendment

to the Third Amended and Restated Credit Agreement.

The credit agreement includes the addition of a new lender and retains all other aspects of the original credit agreement.

As of the effective date of this amendment the Companys borrowing

base was increased to $85 million.

On July 17, 2018, the Company and its lenders entered into a Second Amendment to the Third

Amended and Restated Credit Agreement.

The credit agreement includes modifications for the borrowing base utilization margins and rates by type of borrowing, revises minimum quantifications for individual borrowings, reduces the overall percentage

required for commodity hedge agreements, modifies the requirements placed on the companies ability to purchase equity interests and retains all other aspects of the original credit agreement.

As of the effective date of this amendment the

Companys borrowing base was increased to $90 million.

On January 8, 2019, the Company and its lenders entered into a

Third Amendment to the Third Amended and Restated Credit Agreement.

February 15, 2017, the Company and its lenders entered into a Third Amended and Restated Credit Agreement (the 2017 Credit Agreement) with a maturity date of February 15, 2021.

The Second Amended and Restated Credit Agreement

and subsequent amendments were amended and restated by the 2017 Credit Agreement.

Pursuant to the terms and conditions of the 2017 Credit Agreement, the Company has a revolving line of credit and letter of credit facility of up to $300 million

subject to a borrowing base that is determined semi-annually by the lenders based upon the Companys financial statements and the estimated value of the Companys oil and gas properties, in accordance with the Lenders customary

practices for oil and gas loans.

The credit facility is secured by substantially all of the Companys oil and gas properties.

The 2017 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio,

total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and exploration costs) ratio and interest coverage ratio, as defined, and restrictions are placed on the payment of dividends, the amount

of treasury stock the Company may purchase, commodity hedge agreements, and loans and investments in its consolidated subsidiaries and limited partnerships.

On December 22, 2017, the Company and its lenders entered into a First Amendment to the 2017 Credit Agreement.

The credit agreement

includes the addition of a new lender and retains all other aspects of the original credit agreement.

As of the effective date of this amendment the Companys borrowing base was increased to $85 million.

On July 17, 2018, the Company and its lenders entered into a Second Amendment to the

2017 Credit Agreement.

commodity hedge agreements, modifies the requirements placed on the Companys ability to purchase equity interests and retains all other aspects of the original credit agreement.

As of the effective date of this amendment the Companys

borrowing base was increased to $90 million.

On January 8, 2019, the Company and its lenders entered into a Third Amendment to

the 2017 Credit Agreement.

The credit agreement includes additions for a Beneficial Ownership Certification on the effective date of the amendment.

The agreement includes further clarifications for potential

Libor loan market rate issues, swap agreement modifications and retains all other aspects of the original credit agreement.

The agreement includes further clarifications for potential LIBOR loan market rate issues, swap

agreement modifications and retains all other aspects of the original credit agreement.

As of the effective date of this amendment the Companys borrowing base was increased to $100 million.

June 26, 2019 the Companys lenders adjusted the borrowing base to $ 90 million.

On December 18, 2019 as part of the scheduled redetermination of the borrowing base, lenders approved the borrowing base to stand at

$72 million until the next redetermination.

At December 31, 2019, the Company had a total of $53.5 million of borrowings

outstanding under its revolving credit facility at a weighted-average interest rate of 4.85 % and $18.5 million available for future borrowings.

The combined weighted average interest rate paid on outstanding bank borrowings subject to

base rate and LIBO interest was 5.34% for the twelve months ended December 31, 2019 as compared to 5.33% for twelve months ended December 31 2018.

The Companys borrowings under this credit facility approximates fair value because the

interest rates are variable and reflective of market rates.

Pursuant to borrowing base redeterminations on

June 26, 2019 and December 18, 2019, the borrowing base was set at $90 million and $72 million, respectively.

May 8, 2020, the Company and its lenders entered into a Fourth Amendment to the 2017 Credit Agreement which added loans under the Paycheck Protection Program to the Permitted loans, as defined in the agreement.

On September 4, 2020, the Company and its lenders entered into a Fifth Amendment to the 2017 Credit Agreement.

As of the effective date

of this amendment the Companys borrowing base was decreased to $50 million.

The amendment included an automatic reduction of $666,666.67 to the borrowing base on October 1, 2020, November 1, 2020, and December 1, 2020.

amendment also revised the applicable borrowing base utilization percentages for Eurodollar and ABR loans with a range of 2.5% to 3.5% and 1.5% to 2.5%, respectively.

The agreement also adjusted percentages of title and mortgage guarantees supported

by the oil and gas properties presented to the administrative agent at each borrowing redetermination as supported by the required reserve report.

On December 31, 2020, the Company had a total of $37 million of borrowings outstanding under its revolving credit facility at a

weighted-average interest rate of 4.00% and $11 million was available for future borrowings.

The combined weighted average interest rate paid on outstanding bank borrowings subject to base rate and LIBO interest was 3.95% for the year ended

December 31, 2020 as compared to 5.34% for year ended December 31, 2019.

On February 11, 2021, the Company and its lenders

entered into a Sixth Amendment to the 2017 Credit Agreement.

Under this amendment the Companys borrowing base is $40 million.

Borrowings under the 2017 Credit Agreement will bear interest at a base rate plus an applicable margin ranging

from 2.00% to 3.00% or at the Companys option, at LIBOR plus an applicable margin ranging from 3.00% to 4.00%.

The 2017 Credit Agreement will mature on February 11, 2023.

The Companys borrowings under this credit facility

approximates fair value because the interest rates are variable and reflective of market rates.

Paycheck Protection Program Loans

During May 2020, Prime Operating Company and Eastern Oil Well Services Corporation, subsidiaries of the Company received loan proceeds in the

amount of $1.28 million and $0.47 million, respectively, under the Paycheck Protection Program (the PPP) of the CARES Act, which was enacted March 27, 2020.

The PPP Loans are evidenced by a promissory note in favor of the

Lender, which bears interest at the rate of 1.00% per annum.

No payments of principal or interest are due under the note until the date on which the amount of loan forgiveness (if any) under the CARES Act, which can be up to 10 months after the end

of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the Deferral Period).

The note may be prepaid at any time prior to maturity with no prepayment penalties.

Funds from the PPP Loans may be used

only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred prior to February 15, 2020 (the Qualifying

Under the terms of the PPP Loans, certain amounts thereunder may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act.

The Company utilized the PPP Loan proceeds exclusively for

Qualifying Expenses during the 24-week coverage period and will submit its application for forgiveness in accordance with the terms of the CARES Act and related guidance.

In the event the PPP Loan or any

portion thereof is forgiven, the amount forgiven is applied to the outstanding principal.

To the extent, if any, that any or all of the

PPP loans are not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the Maturity Date), the Company is obligated to make monthly

payments of principal and interest to the Lender with respect to any unforgiven portion of the Note, in such equal amounts required to fully amortize the principal amount outstanding on such Note as of the last day of the applicable Deferral Period

by the applicable Maturity Date.

The Company accounts for these loans on the balance sheet as financial liabilities reported within the following lines:

Current portion of long-term debt in the amount of $487 thousand and included as part of

the long-term bank debt in the amount of $1.267 million.

Equipment Loans:

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Effective with the

payment due of January 26, 2018 the required monthly payments (principal and

interest) on this loan changed to $7,986 with a continuing effective rate of 3.50% and a final maturity of June 26, 2020.

payment due of January 26, 2018 the required monthly payments (principal and interest) on this loan changed to $7,986 with a continuing effective rate of 3.50% and a final maturity of June 26, 2020.

On May 23, 2019, the Company made its final payment towards both the second and third loans.

4 unchanged sentences

assets and liabilities are initially recorded at commencement date based on the present value of lease payments over the lease term.

A new finance lease for office equipment is included in property and equipment, other current liabilities and other

long-term liabilities this quarter.

As most of the Companys lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the

present value of lease payments.

A finance lease for office equipment is included in property and equipment, other current liabilities and other

long-term liabilities.

of lease payments.

The weighted average discount rate used was 5.5%.

Certain leases may contain variable costs above the minimum required payments and are not included in the right-of-use assets or liabilities.

Certain leases may contain variable costs above the minimum required payments and are not included in the

right-of-use assets or liabilities.

Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease.

The exercise of those options is at the Companys sole

discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The exercise of those

options is at the Companys sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required.

Leases with an initial term of 12 months or less are not recorded on the balance

Operating lease costs for the twelve months ended December 31, 2020 were $574 thousand.

Cash payments included in the operating

lease cost for twelve months ended December 31, 2019 were $447 thousand.

Cash payments included in the

operating lease cost for twelve months ended December 31, 2020 were $616 thousand.

The weighted-average remaining operating lease terms is 2.5 months.

The amortization and interest expense for financing lease amounted to $5,000 and the cash payment

for the lease was $5,100 and the lease term remaining was for 16 months.

The payment schedule for the Companys operating and

financing lease obligations as of December 31, 2019 is as follows:

The amortization and interest expense for financing lease amounted to $7,165 and the

cash payment for the lease was $7,655 and the lease term remaining was for 4 months.

The payment schedule for the Companys

operating and financing lease obligations as of December 31, 2020 is as follows:

(Thousands of dollars)

13 unchanged sentences

Liabilities settled

Liabilities divested

Accretion expense

23 unchanged sentences

According to their terms, the options have no expiration date.

The components of the provision (benefit) for income taxes for the years ended December 31, 2019 and 2018 are as follows:

The components of the

provision (benefit) for income taxes for the years ended December 31, 2020 and 2019 are as follows:

Year Ended December 31,

1 unchanged sentence

Total current

Year Ended December 31,

(Thousands of dollars)

Total deferred

6 unchanged sentences

Derivative Contracts

Disallowed Interest Carryforwards

Alternative minimum tax credits

State Net operating loss carry-forwards

Percentage depletion carry-forwards

General Business Credits

Total deferred tax assets

2 unchanged sentences

Depletion and depreciation

Derivative Contracts

Total deferred tax liabilities

Net deferred tax liabilities

The total provision for income taxes for the years ended December 31, 2019 and 2018 varies from the

federal statutory tax rate as a result of the following:

The total provision for income taxes for the years ended December 31, 2020 and 2019

varies from the federal statutory tax rate as a result of the following:

Year Ended December 31,

1 unchanged sentence

Expected tax expense

Revaluation of deferred tax attributes

Executive Compensation

3 unchanged sentences

Total income tax provision (benefit)

Deferred income taxes reflect the impact of temporary differences between the amount of

assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

On December 22,

2017, the U.S.

enacted into legislation the Tax Cuts and Jobs Act (2017 Tax Act).

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities

recognized for financial reporting purposes and such amounts recognized for tax purposes.

On December 22, 2017, the U.S.

into legislation the Tax Cuts and Jobs Act (2017 Tax Act).

Under the 2017 Tax Act, the company may use alternative minimum tax (AMT) credits to fully offset any regular tax liability.

In addition, a portion of the minimum tax

credit which exceeds the regular tax liability is refundable in future years.

The refundable portion is 50% of any excess credit in the years 2019 through 2020 and 100% in 2021.

The Company expects to receive a refund of $1.720 million in 2020

based on refundable credits claimed on the 2019 return, and additional $1.720 million refunds of previously paid taxes on its tax returns for the years 2020 and 2021.

The Company is entitled to marginal well production credits under Internal Revenue Code section 45I.

The Marginal Well Credit is phased out

when oil and gas prices exceed certain levels.

In addition, a portion of the AMT credit which exceeds the

regular tax liability is refundable in future years.

The refundable portion was 50% of any excess credit in the years 2019 through 2020 and 100% in 2021.

The Company expected to receive a refund of $1.720 million in 2020 based on refundable

credits claimed on the 2019 return, and additional $1.720 million refunds of previously paid taxes on its tax returns for the years 2020 and 2021.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic

Security Act (CARES Act).

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, AMT credit refunds,

modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

Under the CARES Act the refundable portion of AMT credits was increased to 100% therefore the Company

received a full refund of such credits in 2020.

The Company is entitled to percentage depletion on certain of its wells, which is

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The Companys oil and gas activities are entirely in the United States.

The Company sells its oil and natural gas and

liquids production to a number of direct purchasers under direct contracts or through other operators under joint operating agreements.

Listed below are the purchasers of the Companys production which represented more than 10% of the

Companys sales in the year 2019.

The Company sells its oil and natural gas and liquids production to a number of direct

purchasers under direct contracts or through other operators under joint operating agreements.

Listed below are the purchasers of the Companys production which represented more than 10% of the Companys sales in the year 2020.

Apache Corporation

40 unchanged sentences

These estimates are verified using comparable NYMEX futures contracts or are compared to multiple quotes obtained from counterparties for reasonableness.

The significant unobservable inputs for Level 3 derivative contracts include basis differentials and volatility factors.

(decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively.

The Company does not have access to the specific assumptions used in its counterparties valuation models.

Consequently, additional

disclosures regarding significant Level 3 unobservable inputs were not provided.

The following table sets forth a reconciliation of changes in the fair value of financial

assets and liabilities classified as Level 3 in the fair value hierarchy for the year ended December 2019.

The significant unobservable inputs for Level 3 derivative contracts include basis

differentials and volatility factors.

An increasee (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively.

The Company does not have access to the specific assumptions used in its

counterparties valuation models.

Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in

the fair value hierarchy for the year ended December 2020.

(Thousands of dollars)

Net Assets December 31, 2018

Net Liabilities December 31, 2019

Total realized and unrealized (gains) losses:

45 unchanged sentences

Natural gas commodity contracts

Unrealized gain (loss) on derivative instruments, net

Unrealized gain on derivative

instruments, net

Crude oil commodity contracts

Unrealized (loss) gain on derivative instruments, net

Unrealized gain (loss) on

derivative instruments, net

Natural gas liquids contracts

Unrealized (loss) gain on derivative instruments, net

Unrealized (loss) on

derivative instruments, net

Natural gas commodity contracts

Realized gain (loss) on derivative instruments, net

Realized (loss) gain on

derivative instruments, net

Crude oil commodity contracts

Realized (loss) on derivative instruments, net

Natural gas liquids contracts

Realized gain (loss) on derivative instruments, net

Realized gain (loss) on

derivative instruments, net

Related Party Transactions

2 unchanged sentences

The Company purchased such interests in an amount totaling $742,000 during 2020 and $499,000 during 2019.

Treasury stock purchases in any reported period may include shares from a related party, which may include members of the Companys Board

of Directors.

In 2018, the Company purchased 10,000 shares from related parties.

There were no treasury stock purchases made during 2019 from related parties.

Payables owed to related parties primarily represent receipts collected by the Company as agent for the joint venture partners, which may

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The Plan provides for matching contributions, of which $341,000 and $412,000 were made in 2020 and 2019, respectively.

Earnings per Share

Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares

outstanding during the period.

Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of

common shares outstanding during the period.

Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock in gain periods.

The following reconciles amounts reported in the

financial statements:

The following reconciles amounts

reported in the financial statements:

Year Ended December 31,

Effect of dilutive securities:

Shareholders Equity

The Company has in place a stock repurchase program whereby it may purchase outstanding shares of its common stock from time-to-time, in open market transactions or negotiated sales.

The Company uses the cost method to account for its treasury share purchases.

Effective December 21, 2018,

pursuant to a vote of the shareholders amending the Articles of Incorporation, the authorized shares of common stock were reduced from 4,000,000 to 2,810,000 shares.

The amendment was filed with the Secretary of State in Delaware.

The cost of the

cancelled shares was determined by use of the first-in, first out valuation method.

The cost of reacquired shares was $28,775,000.

The cost was allocated between the par value ($0.10) of the shares cancelled;

the excess of cost over the par value to paid in capital based upon the average per share amount of paid in capital ($1.43) for all shares from the original issuance;

and the excess was charged to retained earnings.

The effect of the 767,000 outstanding stock options is antidilutive for the year ended December 31,

2020, due to net loss for this period.

PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

113 unchanged sentences

Future income tax expenses give effect to permanent differences and tax credits and allowances relating to the proved oil and gas reserves.

Future net cash flows are discounted at a rate of 10% annually (pursuant to applicable

guidance) to derive the standardized measure of discounted future net cash flows.

This calculation does not necessarily represent an estimate of fair market value or the present value of such cash flows since future prices and costs can vary

substantially from year-end and the use of a 10% discount figure is arbitrary.

Future net cash flows are discounted at a rate of 10% annually (pursuant to applicable guidance) to derive the standardized measure of

discounted future net cash flows.

This calculation does not necessarily represent an estimate of fair market value or the present value of such cash flows since future prices and costs can vary substantially from

year-end and the use of a 10% discount figure is arbitrary.

Changes in Reserves

12 unchanged sentences

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 9A. Controls and Procedures