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Item 9A. Controls and Procedures

2022-04-21 compared with 2021-04-26 · 399 added, 625 removed, 475 unchanged (68% of the section changed)

CONTROLS AND PROCEDURES.

As of the end of the period covered by this Annual Report on Form 10-K, our principal executive officer

and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures (Disclosure Controls).

As of the end of the period covered by this Annual Report on Form 10-K,

our principal executive officer and principal financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”).

Disclosure Controls, as defined in Rule 13a-15(e)

of the Securities Exchange Act of 1934, as amended (the Exchange Act), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this

Annual Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.

Disclosure Controls are also designed with the objective of ensuring that such

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

of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure Controls are also designed with the objective of ensuring that such 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, 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.

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

as of December 31, 2021 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, 2021.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance that assets are

safeguarded against loss from unauthorized use or disposition, transactions are executed in accordance with appropriate management authorization and accounting records are reliable for the preparation of financial statements in accordance with U.S.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)

and 15d-15(f)

under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are executed in accordance with appropriate management authorization and accounting records are reliable for the preparation of financial statements in accordance with U.S.

generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent

or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or

procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of

December 31, 2020.

Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission.

Managements assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over

financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.

Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

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, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Based on this assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2021.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s 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, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information relating to the Companys Directors, nominees for Directors and executive officers will be included in the Companys

definitive proxy statement relating the Companys Annual Meeting of Stockholders to be held in June, 2021, and which is incorporated herein by reference.

Information relating to the Company’s Directors, nominees for Directors and executive officers will be included in the Company’s definitive proxy statement relating the Company’s Annual Meeting of Stockholders to be held in June, 2022, and which is incorporated herein by reference.

EXECUTIVE COMPENSATION.

Information relating to executive compensation will be included in the Companys definitive proxy statement relating to the Companys

Annual Meeting of Stockholders to be held in June, 2021, and which is incorporated herein by reference.

Information relating to executive compensation will be included in the Company’s definitive proxy statement relating to the Company’s Annual Meeting of Stockholders to be held in June, 2022, and which is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information relating to security ownership of certain beneficial owners and management will be included in the

Companys definitive proxy statement relating to the Companys Annual Meeting of Stockholders to be held in June, 2021, and which is incorporated herein by reference.

Information relating to security ownership of certain beneficial owners and management will be included in the Company’s definitive proxy statement relating to the Company’s Annual Meeting of Stockholders to be held in June, 2022, and which is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Information relating to certain transactions by Directors and executive officers of the Company will be included in the Companys

definitive proxy statement relating to the Companys Annual Meeting of Stockholders to be held in June, 2021, and which is incorporated herein by reference.

Information relating to certain transactions by Directors and executive officers of the Company will be included in the Company’s definitive proxy statement relating to the Company’s Annual Meeting of Stockholders to be held in June, 2022, and which is incorporated herein by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information relating to principal accountant fees and services will be included in the Companys definitive proxy statement relating to

the Companys Annual Meeting of Stockholders to be held in June, 2021, and which is incorporated herein by reference.

Information relating to principal accountant fees and services will be included in the Company’s definitive proxy statement relating to the Company’s Annual Meeting of Stockholders to be held in June, 2022, and which is incorporated herein by reference.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of this Report:

Financial statements (Index to Consolidated Financial Statements at page

F-1 of this Report)

Financial Statement Schedules (Index to Consolidated Financial Statements Supplementary Information at

page F-1 of this Report)

Certificate of Incorporation of PrimeEnergy Resources Corporation, as amended and restated of December

21, 2018, (filed as Exhibit 3.1 of PrimeEnergy Resources Corporation Form 8-K on December 27, 2018, and incorporated herein by reference).

Bylaws of PrimeEnergy Resources Corporation as amended and restated as of April

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).

Third Amended and Restated Credit Agreement dated as of February

15, 2017 among PrimeEnergy Resources Corporation, as Borrower, Compass Bank, as Administrative Agent and Lender, Wells Fargo, National Association, as Document Agent, the Lenders Party Hereto (Compass Bank, Wells Fargo, National Association, Citibank, N.A.)

and BBVA Compass Bank, as Letter of Credit Issuer and Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.22.5.10 to PrimeEnergy Resources Corporation Form 10-K for the year ended

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).

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

17, 2018 among PRIMEENERGY 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 10.22.5.10.2 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

(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

15, 2017, among PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C.

in favor of Compass Bank, as Administrative Agent for

the Lenders (Incorporated by reference to Exhibit 10.22.5.11 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

Amended, Restated and Consolidated Pledge and Security Agreement dated as of February

15, 2017, among PrimeEnergy Resources Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C.

and Compass Bank, as

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).

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

5, 2017 (Incorporated by reference to Exhibit 10.22.5.14 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

Amended, Restated and Consolidated Mortgage of Oil and Gas Property, Security Agreement, Assignment of Production and Financing Statement Dated

as of May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.15 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

PrimeEnergy Resources Corporation Code of Business Conduct and Ethics, as amended December

16, 2011 (Incorporated by reference to Exhibit 14 of PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2011).

Financial statements (Index to Consolidated Financial Statements at page F-1

of this Report)

Financial Statement Schedules (Index to Consolidated Financial Statements – Supplementary Information at page F-1

of this Report)

Certificate of Incorporation of PrimeEnergy Resources Corporation, as amended and restated of December 21, 2018, (filed as Exhibit 3.1 of PrimeEnergy Resources Corporation Form 8-K on December 27, 2018, and incorporated herein by reference).

Bylaws of PrimeEnergy Resources Corporation as amended and restated as of April 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).

Third Amended and Restated Credit Agreement dated as of February 15, 2017 among PrimeEnergy Resources Corporation, as Borrower, Compass Bank, as Administrative Agent and Lender, Wells Fargo, National Association, as Document Agent, the Lenders Party Hereto (Compass Bank, Wells Fargo, National Association, Citibank, N.A.) and BBVA Compass Bank, as Letter of Credit Issuer and Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.22.5.10 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 22, 2017 among PRIMEENERGY 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 10.22.5.10.1 to PrimeEnergy Corporation Form 10-K for the year ended December 31, 2017).

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 17, 2018 among PRIMEENERGY 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 10.22.5.10.2 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 December 27, 2018, 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).

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 10.22.5.4 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 10.22.5.5 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 16, 2021).

SEVENTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 20, 2021 among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO, CITIBANK, N.A., as Administrative Agent, and CITIBANK, N.A., as Sole Lead Arranger and Sole Book Runner (filed herewith).

Amended, Restated and Consolidated Guaranty dated as of February 15, 2017, among PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C.

in favor of Compass Bank, as Administrative Agent for the Lenders (Incorporated by reference to Exhibit 10.22.5.11 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

Amended, Restated and Consolidated Pledge and Security Agreement dated as of February 15, 2017, among PrimeEnergy Resources Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C.

and Compass Bank, as 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, 2016).

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).

THIS FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “ Amendment ”) is made and entered into as of December 20, 2021, by PRIMEENERGY RESOURCES CORPORATION , a Delaware corporation, formerly known as PrimeEnergy Corporation (“ Prime ”) and PRIMEENERGY MANAGEMENT CORPORATION , a New York corporation (“ PEMC, ” and Prime and PEMC herein, individually and collectively, “ Grantor ”), and CITIBANK, N.A.

, as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “ Beneficiary ”).

Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as of May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.14 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

FIRST AMENDMENT TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “ Amendment ”) is made and entered into as of December 20, 2021, by PRIMEENERGY RESOURCES CORPORATION , a Delaware corporation, formerly known as PrimeEnergy Corporation (“ Prime ”) and PRIMEENERGY MANAGEMENT CORPORATION , a New York corporation (“ PEMC, ” and Prime and PEMC herein, individually and collectively, “ Grantor ”), and CITIBANK, N.A.

, as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “ Beneficiary ”)

THIS SECOND AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED MORTGAGE OF OIL AND GAS PROPERTY, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “ Amendment ”) is made and entered into as of December 20, 2021, between PRIMEENERGY RESOURCES CORPORATION , a Delaware corporation, formerly known as PrimeEnergy Corporation (“ Prime ”) and PRIMEENERGY MANAGEMENT CORPORATION , a New York corporation (“ PEMC, ” and Prime and PEMC herein, individually and collectively, “ Mortgagor ”), and CITIBANK, N.A.

, as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “ Mortgagee ”).

PrimeEnergy Resources Corporation Code of Business Conduct and Ethics, as amended December 16, 2011 (Incorporated by reference to Exhibit 14 of PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2011).

Subsidiaries (filed herewith).

1 unchanged sentence

(filed herewith).

Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

(filed herewith).

Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

(filed herewith).

Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).

Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).

Certification of Chief Executive Officer pursuant to 18 U.S.C.

4 unchanged sentences

(filed herewith).

XBRL (eXtensible Business Reporting Language) Instance Document (filed herewith)

XBRL Taxonomy Extension Schema Document (filed herewith)

XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

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 23 rd , day of April 2021.

Inline XBRL (eXtensible Business Reporting Language) Instance Document (filed herewith)

Inline XBRL Taxonomy Extension Schema Document (filed herewith)

Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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 21st day of April, 2022.

PrimeEnergy Resources Corporation

1 unchanged sentence

Chairman, Chief Executive Officer and President

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 23 rd day of April 2021.

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 12st, day of April 2022

/s/ Charles E.

9 unchanged sentences

Financial Statements

Consolidated Balance Sheet As of December

31, 2020 and 2019

Consolidated Statement of Operations

For the years ended December 31, 2020 and 2019

Consolidated Statement of Equity

For the years ended December 31, 2020 and 2019

Consolidated Statement of Cash Flows

For the years ended December 31, 2020 and 2019

Consolidated Balance Sheet – As of December 31, 2021 and 2020

Consolidated Statement of Operations – For the years ended December 31, 2021 and 2020

Consolidated Statement of Equity – For the years ended December 31, 2021 and 2020

Consolidated Statement of Cash Flows – For the years ended December 31, 2021 and 2020

Notes to Consolidated Financial Statements

Supplementary Information:

Capitalized Costs Relating to Oil and Gas Producing Activities, years ended December 31,

2020 and 2019

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development

Activities, years ended December 31, 2020 and 2019

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil

and Gas Reserves, years ended December 31, 2020 and 2019

Standardized Measure of Discounted Future Net Cash Flows and

Changes Therein Relating to Proved Oil and Gas Reserves, years ended December 31, 2020 and 2019

Capitalized Costs Relating to Oil and Gas Producing Activities, years ended December 31, 2021 and 2020

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities, years ended December 31, 2021 and 2020

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves, years ended December 31, 2021 and 2020

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves, years ended December 31, 2021 and 2020

Reserve Quantity Information, years ended December 31, 2021 and 2020

Results of Operations from Oil and Gas Producing Activities, years ended December 31,

2020 and 2019

Results of Operations from Oil and Gas Producing Activities, years ended December 31, 2021 and 2020

Notes to Supplementary Information

2 unchanged sentences

To the Board of Directors and Stockholders of

Resources Corporation and Subsidiaries:

PrimeEnergy Resources Corporation and Subsidiaries:

Opinion on the Financial Statements

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

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.

We have audited the accompanying consolidated balance sheets of PrimeEnergy Resources Corporation and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, 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, 2021 and 2020, 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

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Companys financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in

accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for

the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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.

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

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At December 31, 2021, the carrying value of the Company’s property and equipment was $184.7 million, and depreciation, depletion and amortization (DD&A) expense was $26.3 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.

As 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.

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 of 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.

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.

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.

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 Company’s DD&A and impairment calculations is complex because of the use of independent petroleum engineers and the evaluation of management’s 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.

We obtained an understanding and evaluated the design of the Company’s controls over its process to calculate DD&A and impairment, including management’s 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 Company’s independent petroleum engineers responsible for the preparation of the proved oil and gas reserve estimates for select properties.

In addition, we compared the Company’s 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 Company’s reserve reports.

Accounting for Asset Retirement Obligations

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At December 31, 2021, the asset retirement obligation (ARO) balance totaled $14.3 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.

As further described in Note 1, the Company’s 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.

The Company 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.

The Company’s 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.

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 Company’s wells, the costs to ultimately retire the wells may vary significantly from previous estimates.

Auditing the Company’s 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

In 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 conditions.

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

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

We obtained an understanding and evaluated the design of the Company’s internal controls over its ARO estimation process, including management’s review of the significant assumptions that have a material effect on the determination of the obligations.

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 Company’s reserve reports.

GRASSI & CO., CPAs, P.C.

We have served as the Company’s auditor since 1989.

York, New York

New York, New York

April 21, 2022

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Prepaid obligations

Derivative asset short-term

Other current assets

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Asset Retirement Obligations

Derivative Liability Long-Term

Deferred Income Taxes

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Commitments and Contingencies

Common stock, $.10 par value;

Common stock, $.

10 par value;

2021 and 2020:

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1,994,177 shares .

Paid-in capital

Retained earnings

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817,923 shares;

811,022 shares

Total Stockholders’ Equity – PrimeEnergy

Non-controlling interest

Non-controlling

Total Liabilities and Equity

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Gain on Sale and Exchange of Assets

(Loss) Income from Operations

Income (Loss) from Operations

Other Income and Expenses

Interest expense

Interest income

(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

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

Provision (Benefit from) Income Taxes

Net Income (Loss)

Net Income (Loss) Attributable to Non-Controlling

Net Income (Loss) Attributable to PrimeEnergy

Basic Income (Loss) Per Common Share

Diluted Income (Loss) Per Common Share

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

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Purchase 4,801 shares of common stock

Purchase of non-controlling interest

Distributions to non-controlling interest

Purchase of non-controlling

Distributions to non-controlling

Balance at December 31, 2020

Purchase 2,100 shares of common stock

Purchase of non-controlling interest

Distributions to non-controlling interest

Purchase of non-controlling

Distributions to non-controlling

Balance at December 31, 2021

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Cash Flows from Operating Activities:

Net (Loss) Income

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

Net Income (Loss)

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

Depreciation, depletion, amortization and accretion on discounted liabilities

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Unrealized loss (gain) on derivative instruments

PPP Loan forgiveness

Provision for deferred income taxes

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Purchase of stock for treasury

Purchase of non-controlling interests

Purchase of non-controlling

Increase in long-term bank debt and other long-term obligations

Repayment of long-term bank debt and other long-term obligations

Distribution to non-controlling interest

Net Cash (used in) provided by Financing Activities

Cash and Cash Equivalents Period Decrease

Distribution to non-controlling

Net Cash (used in) Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Year

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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

Purchase of non-controlling

Distribution of non-controlling

interest in liquidated partnerships

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

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Nature of Operations:

PrimeEnergy Resources Corporation (PERC), a Delaware corporation, was organized in March 1973 and is engaged in the development,

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, and Texas.

PrimeEnergy Resources Corporation (“PERC”), a Delaware corporation, was organized in March 1973 and is engaged in the development, 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, and Texas.

The Company operates approximately 710 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.

interests and royalties in approximately 822

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 Company’s 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.

The markets for the Company’s 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

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 full extent to which

COVID-19 will impact the Companys results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the

virus and the actions to contain or treat its impact.

pandemic resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil, throughout the world, and created significant volatility, uncertainty and turmoil in the oil and gas industry.

The decrease in demand for oil combined with pressures on the global supply-demand balance for oil and related products, resulted in oil prices declining significantly beginning in late February 2020.

Since mid-2020,

oil prices improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19

variants, which have continued to inhibit a full global demand recovery.

In addition, worldwide oil inventories are, from a historical perspective, very low and supply increases from OPEC, Russia and other oil producing nations are not expected to be sufficient to meet forecasted oil demand growth in 2022 and 2023, with many OPEC countries not able to produce at their OPEC agreed upon quota levels due to their lack of capital investments over the past few years in developing incremental oil supplies.

Global oil price levels will ultimately depend on various factors and consequences beyond the Company’s control, such as (i) the effectiveness of responses to combat the COVID-19

virus and their impact on domestic and worldwide demand, (ii) the ability of OPEC, Russia and other oil producing nations to manage the global oil supply, (iii) the timing and supply impact of any Iranian sanction relief on Iran’s ability to export oil, (iv) additional actions by businesses and governments in response to the pandemic, (v) the global supply chain constraints associated with manufacturing delays, and (vi) political stability of oil consuming countries.

The Company continues to assess the impact of the COVID-19

pandemic on the Company and may modify its response as the impact of COVID-19

continues to evolve.

Effects of the Russian invasion of Ukraine:

The invasion of Ukraine by Russian forces at the end of February 2022 has created increased volatility in both natural gas and oil markets, resulting in increased prices and supply demands.

Changes in these markets will ultimately depend on various factors and consequences beyond the Company’s control.

The Company continues to assess the impact of these changes on the Company and may modify its response as these changes continue to evolve.

Consolidation and Presentation:

The consolidated financial statements include the accounts of PrimeEnergy Resources Corporation, its subsidiaries and the Partnerships, using

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

The consolidated financial statements include the accounts of PrimeEnergy Resources Corporation, its subsidiaries and the Partnerships, using the full consolidation method for those partnerships which are controlled by the Company.

The Company’s 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.

DD&A expense and evaluation of impairment may differ from the Partnership as the Company’s 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:

Certain reclassifications have been made to prior year statements to conform with the current year presentation.

These reclassifications have

no impact on net income and no material impact on any other financial statement captions.

Certain reclassifications have been made to prior year statements to conform with the current year

presentation.

These reclassifications have no impact on net income and no material impact on any other financial statement captions.

Subsequent Events:

Subsequent events have been evaluated through the date that the consolidated financial statements were issued.

During this period, there were

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

During this period, there were no material subsequent items requiring disclosure other than as stated in footnotes 2 and 4 to these financial statements.

Use of Estimates:

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

generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses

during the reporting period.

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

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.

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.

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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:

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.

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.

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.

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.

Capitalization of Interest:

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.

Impairment of

Long-Lived Assets:

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.

Impairment of Long-Lived Assets:

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.

The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and

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

The amount of impairment is based on the estimated fair value of the assets determined by discounting anticipated future net cash flows.

The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and 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.

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 inputs.

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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Asset Retirement Obligation:

The asset retirement obligation 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.

The asset retirement obligation 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.

The Company 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.

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

Income Taxes:

The Company follows the asset and liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are

recorded for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured

using the tax rate in effect for the year in which those temporary differences are expected to turn around.

Under this method, deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured using the tax rate in effect for the year in which those temporary differences are expected to turn around.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change.

allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

As of December 31, 2020, and 2019, we had no valuation allowance.

The Company is required to make judgments, including estimating reserves for potential adverse outcomes regarding tax positions that the

Company has taken.

A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

As of December 31, 2021, and 2020,

had no valuation allowance.

The Company is required to make judgments, including estimating reserves for potential adverse outcomes regarding tax positions that the Company has taken.

The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return.

The effective tax rate and the tax basis of assets and liabilities

reflect managements estimates of the ultimate outcome of various tax uncertainties.

The effective tax rate and the tax basis of assets and liabilities reflect management’s estimates of the ultimate outcome

of various tax uncertainties.

General and Administrative Expenses:

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Earnings Per Common 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.

Statements of Cash Flows:

For purposes of the consolidated statements of cash flows, the Company considers short-term, highly liquid investments with original maturities

of less than ninety days to be cash equivalents.

For purposes of the consolidated statements of cash flows, the Company considers short-term, highly liquid investments with original maturities of less than ninety days to be cash equivalents.

Concentration of Credit Risk:

The Company maintains significant banking relationships with financial institutions in the State of Texas.

The Company limits its risk by

periodically evaluating the relative credit standing of these financial institutions.

The Company limits its risk by periodically evaluating the relative credit standing of these financial institutions.

The Company’s oil and gas production purchasers consist primarily of independent marketers and major gas pipeline companies.

Company periodically enters into oil and gas financial instruments to manage its exposure to oil and gas price volatility.

The oil and gas reference prices upon which the price hedging instruments are based reflect various market indices that have a

high degree of historical correlation with actual prices received by the Company.

The financial instruments are accounted for in

accordance with applicable accounting standards for derivative instruments and hedging activities.

Such standards require that applicable derivative instruments be measured at fair market value and recognized as assets or liabilities in the balance

The Company periodically enters into oil and gas financial instruments to manage its exposure to oil and gas price volatility.

The oil and gas reference prices upon which the price hedging instruments are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company.

The financial instruments are accounted for in accordance with applicable accounting standards for derivative instruments and hedging activities.

Such standards require that applicable derivative instruments be measured at fair market value and recognized as assets or liabilities in the balance sheet.

The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation is generally established at the inception of a derivative.

For derivatives designated as cash flow hedges

and meeting applicable effectiveness guidelines, changes in fair value, to the extent effective, are recognized in other comprehensive income until the hedged item is recognized in earnings.

Hedge effectiveness is measured at least quarterly

based on the relative changes in fair value between the derivative contract and the hedged item over time.

Any change in fair value of a derivative resulting from ineffectiveness or an excluded component of the gain/loss is recognized immediately in

the statement of operations.

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.

For derivatives designated as cash flow hedges and meeting applicable effectiveness guidelines, changes in fair value, to the extent effective, are recognized in other comprehensive income until the hedged item is recognized in earnings.

Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time.

Any change in fair value of a derivative resulting from ineffectiveness or an excluded component of the gain/loss is recognized immediately in the statement of operations.

Pronouncements Issued But Not Yet Adopted:

In June 2016, the FASB issued ASU 2016-13,

Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The standard’s main goal is to improve financial reporting by

requiring earlier recognition of credit losses on financing receivables and other financial assets in scope.

This guidance is effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2022

, including interim periods within those fiscal periods.

The adoption and implementation of this ASU will not have a material impact on the Company’s financial statements.

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.

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

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.

Historically, the

Company has repurchased the non-controlling

interests of the partners and trust unit holders in certain of the Partnerships, w hich

consist primarily of oil and gas interests.

The Company purchased such non-controlling

interests in an amount totaling $ 44,000 in 2021 and $ 22,000 in 2020.

Such purchases resulted in the non-cash

acquisition of non-controlling

equity interests of $ 14,000 and $ 36,000 respectively.

During 2021 and 2020 the Company liquidated partnerships for total cash payments of $ 632,000 and $ 720,000 respectively, resulting in the non-cash

distribution of non-controlling

interest of $ 647,000 and $ 1,550 million, respectively .

Effective December 31, 2021, all managed partnerships and trusts have been liquidated.

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.

During 2021 the Company acquired 5.9 net acres, located in Midland county, Texas, for approximately

$ 29,500 and sold or farmed out interests in certain non-core

undeveloped and developed oil and natural gas properties in Oklahoma.

In Texas, the Company divested approximately 116 net mineral acres (NMA) located in Martin County, Texas for proceeds of

$ 1.45 million.

In the first quarter of 2022, the Company has sold 1809 net leasehold acres in Reagan and Midland Counties, Texas through two separate transactions receiving gross proceeds of $ 14.1 million.

Additional Balance Sheet Information

4 unchanged sentences

Oil and gas sales

Tax refund receivable

Allowance for doubtful accounts

3 unchanged sentences

Partner advances

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

Accrued liabilities at December 31, 2021 and 2020

consisted of the following:

(Thousands of dollars)

1 unchanged sentence

Property costs

Long-Term Debt

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.

Long-Term Deb

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 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 Company’s financial statements and the estimated value of the Company’s 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 Company’s 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.

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 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.

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

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.

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

total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and exploration costs) 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.

During 2020, the 2017 Credit Agreement was amended to add loans under the Paycheck Protection Program to the Permitted loans, as defined in the agreement.

On February 11, 2021, the Company and its lenders entered into a Sixth Amendment to the 2017 Credit Agreement.

Under this amendment the Company’s 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%.

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 Company’s 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.

The Company’s borrowings under this credit facility approximates fair value because the interest rates are variable and reflective of market rates.

On December 20, 2021 the company entered into a Seventh Amendment to the 2017 Credit Agreement.

At this time ,

Citibank N.A agreed to accept appointment as successor administrative agent from PNC Bank which was the successor to BBVA USA effective October 12, 2021.

Under this amendment the Company’s borrowing base is $ 50 million.

Borrowings under the 2017 .

Credit Agreement will bear interest at alternate base rate(ABR) plus an applicable margin ranging from 2.00 % to 3.00 % or at the Company’s option, at SOFR rate plus an applicable margin ranging from 3.00 % to 4.00 %.

SOFR means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator, in this case the Federal Reserve Bank of New York The 2017 Credit Agreement maturity date remains at February 11, 2023 .

The Company’s borrowings under this credit facility approximates fair value because the interest rates are variable and reflective of market rates.

On December 31, 2021, the Company had a total of $ 36 million of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of 5.38 % and $ 14 million was available for future borrowings.

The combined weighted average interest rate paid on outstanding bank borrowings subject to ABR base rate and SOFR interest was 5.29 % for the year ended December 31, 2021 as compared to 3.95 % for the year ended December

On March 31, 2022, the outstanding borrowings under the Company’s revolving credit facility were $ 9,000,000 .

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).

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

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 Expenses”).

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:

On July 29, 2014, the Company entered into additional equipment financing facilities (Additional Equipment Loans) totaling

$6.0 million with JP Morgan Chase Bank.

In August 2014, the Company drew down $4.8 million of this facility that is secured by field service equipment, carries an interest rate of 3.40% per annum, requires monthly payments (principal

and interest) of $87,800, and has a final maturity date of July 31, 2019.

The remaining $1.2 million under the Additional Equipment Loans was available for interim draws to finance the acquisition of any future field service equipment.

December 2014, the Company made an interim draw of an additional $0.5 million on this facility that is secured by recently purchased field service equipment.

Interim draws on this facility carried a floating interest rate;

payable monthly at

the LIBO published rate plus 2.50% and on June 26, 2015 converted into a fixed term loan, with a rate of 3.50% and requiring monthly payments (principal and interest) of $8,700 with a final maturity date of June 26, 2020.

On January 12, 2018, the Company made a principal payment towards the third interim loan in the amount of $20,858.

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.

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

At this time, all equipment loans were paid

in full and the field service equipment liens secured by these loans were cancelled and all titles returned to the Company.

The Company utilized the PPP Loan proceeds exclusively for Qualifying Expenses during the 24-week

coverage period and has

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

and accrued interest.

The PPP loans have been approved for forgiveness by the Small Business Administration ( SBA) in conjunction with our lender PNC Bank.

The effective date of February

2022 for Eastern Oil Well Service Company in the amount of $

481 thousand in

principal and interest paid to our lender PNC Bank.

The effective date of March 16, 2022 for Prime Operating Company in the amount of $ 1.2 million in principal and interest to our lender PNC Bank.

Effective December 31, 2021 ,

PPP debt and any accrued interest were reclassed from the consolidated balance sheet and recorded in other income on the

consolidated statement of operations.

Operating Leases:

The Company leases office facilities under operating leases and recognizes lease expense on a straight-line basis over the lease term.

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

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

long-term liabilities.

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.

Leases 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 Company’s 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.

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

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, 2020 were $616 thousand.

The exercise of those options is at the Company’s 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.

Operating lease

costs for the year ended December 31, 2021 was $ 577 thousand.

Cash payments included in the operating lease cost for year ended December 31, 2021 was $ 599 thousand.

The weighted-average remaining operating lease terms is 15 months.

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:

The Company amended certain leases for office space in Texas providing for payments of $ 599,000 in 2021, $ 601,000 in 2022 and $ 150,000 in 2023.

Rent expense for office space the year s

ended December 31, 2021 and 2020 was $ 653,000 and $ 663,000 , respectively.

The payment schedule for the Company’s operating lease obligations as of December 31, 2021 is as follows:

(Thousands of dollars)

2 unchanged sentences

Net operating lease liabilities

The Company amended certain leases for office space in Texas and Oklahoma providing for payments of

$461 thousand and $89 thousand in 2020 and 2021, respectively.

Rent expense for office space for the years ended

December 31, 2020 and 2019 was $663,000 and $594,000, respectively.

Asset Retirement Obligation:

9 unchanged sentences

Asset retirement obligation at end of period

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.

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.

Because of the subjectivity of assumptions and the relatively long life of most of the Company’s wells, the costs to ultimately retire the wells may vary significantly from previous estimates.

Contingent Liabilities

as managing general partner of the affiliated Partnerships, is responsible for all Partnership activities, including the drilling of development wells and the production and sale of oil and gas from productive wells.

The Company also provides the

administration, accounting and tax preparation work for the Partnerships, and is liable for all debts and liabilities of the affiliated Partnerships, to the extent that the assets of a given limited Partnership are not sufficient to satisfy its

The Company is subject to environmental laws and regulations.

Management believes that future expenses, before recoveries

from third parties, if any, will not have a material effect on the Companys financial condition.

This opinion is based on expenses incurred to date for remediation and compliance with laws and regulations, which have not been material to the

Companys results of operations.

From time to time, the Company is party to certain legal actions arising in the ordinary course of

Management believes that future expenses, before recoveries from third parties, if any, will not have a material effect on the Company’s financial condition.

This opinion is based on expenses incurred to date for remediation and

compliance with laws and regulations, which have not been material to the Company’s results of operations.

From time to time, the Company is party to certain legal actions arising in the ordinary course of business.

While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.

Stock Options and Other Compensation

In May 1989, non-statutory stock options were granted by the Company to four key executive officers for

the purchase of shares of common stock.

In May 1989, non-statutory

stock options were granted by the Company to four key executive officers for the purchase of shares of common stock.

At December 31, 2021 and 2020, options on 767,500 shares were outstanding and exercisable at prices ranging from $ 1.00 to $ 1.25 .

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, 2020 and 2019 are as follows:

The components of the provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 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

Alternative minimum tax credits

State Net operating loss carry-forwards

1 unchanged sentence

Deferred Tax Liabilities:

Basis differences relating to managed partnerships

Partnership basis difference

Depletion and depreciation

1 unchanged sentence

Net deferred tax liabilities

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:

The total provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 varies from the federal statutory tax rate as a result of the following:

Year Ended December 31,

1 unchanged sentence

Expected tax expense

Executive Compensation

Net changes in deferred assets and liabilities

Permanent differences

State income tax, net of federal benefit

Percentage depletion

AMT and Marginal Well Credits

Provision to return adjustment

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.

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 AMT credit which exceeds the

regular tax liability is refundable in future years.

enacted 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

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).

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

calculated without reference to the basis of the property.

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 calculated without reference to the basis of the property.

To the extent that such depletion exceeds a property’s basis, it creates a permanent difference, which lowers the Company’s effective rate.

The availability of the percentage

depletion deduction is phased out as an entitys production exceeds certain levels, and based on the Companys increasing production the percentage depletion deduction is becoming less significant.

The availability of the percentage depletion deduction is phased out as an entity’s production exceeds certain levels, and based on the Company’s increasing production the percentage depletion deduction is becoming less significant.

The Company is allowed a credit against the Texas Franchise Tax based on net operating losses incurred in prior periods.

The credits allowed

are $89 thousand in the years 2020 through 2026.

The credits allowed are $ 89 thousand in the years 2020 through 2026.

Any credits not utilized in a given year due to the allowable credit exceeding the tax liability may be carried forward.

No credit may be carried forward past 2026 .

The value of the credit is

calculated net of the federal income tax effect.

The value of the credit is calculated net of the federal income tax effect.

The Company has not recorded any provision for uncertain tax positions.

files income tax returns in the U.S.

The Company files income tax returns in the U.S.

federal jurisdiction and various state and local jurisdictions.

The 2004, 2005, 2006, 2009 and 2017 federal income tax returns have been audited by the Internal Revenue Service.

Returns for unexamined earlier

years may be examined and adjustments made to the amount of percentage depletion and AMT credit carryforwards flowing from those years into an open tax year, although in general no assessment of income tax may be made for those years on which the

statute has closed.

State returns for the years 2018 through 2020 remain open for examination by the relevant taxing authorities

Information and Major Customers

The Company operates in one industry oil and gas exploration, development, operation and

Returns for unexamined earlier years may be examined and adjustments made to the amount of percentage depletion and AMT credit carryforwards flowing from those years into an open tax year, although in general no assessment of income tax may be made for those years on which the statute has closed.

State returns for the years 201 9

through 202 1

remain open for examination by the relevant taxing authorities

Segment Information and Major Customers

The Company operates in one industry – oil and gas exploration, development, operation and servicing.

The Company’s 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.

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 Company’s production which represented more than 10 % of the Company’s sales in the year 2021.

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Apache Corporation

Targa Pipeline Mid-Continent West Tex, LLC

Although there are no long-term oil and gas purchasing agreements with these purchasers, the Company believes

that they will continue to purchase its oil and gas products and, if not, could be replaced by other purchasers.

Targa Pipeline Mid-Continent

West Tex, LLC

Although there are no long-term oil and gas purchasing agreements with these purchasers, the Company believes that they will continue to purchase its oil and gas products and, if not, could be replaced by other purchasers.

Financial Instruments

Fair Value Measurements:

Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the

related disclosure requirements.

Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements.

The Company follows a three-level hierarchy, prioritizing and defining the types of inputs used to measure fair value.

The fair values of the Companys interest rate swaps, natural gas and crude oil price

collars and swaps are designated as Level 3.

The following fair value hierarchy table presents information about the Companys assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and

December 31, 2019:

The fair values of the Company’s interest rate swaps, natural gas and crude oil price collars and swaps are designated as Level 3.

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2021 and December 31, 2020:

December 31, 2021

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Commodity derivative contract

Total liabilities

tal liabilities

The derivative contracts were measured based on quotes from the Company’s counterparties.

have been derived using valuation models that consider various inputs including current market and contractual prices for the underlying instruments, quoted forward prices for natural gas and crude oil, volatility factors and interest rates, such as

a LIBOR curve for a similar length of time as the derivative contract term as applicable.

Such quotes have been derived using valuation models that consider various inputs including current market and contractual prices for the underlying instruments, quoted forward prices for natural gas and crude oil, volatility factors and interest rates, such as a LIBOR curve for a similar length of time as the derivative contract term as applicable.

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.

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.

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

An increase (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.

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 2021.

(Thousands of dollars)

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Net Liabilities — December 31, 2021

Derivative instruments are reported in revenues as realized gain/loss and on a separately reported line item

captioned unrealized gain/loss on derivative instruments.

Derivative instruments are reported in revenues as realized gain/loss and on a separately reported line item captioned unrealized gain/loss on derivative instruments.

Derivative Instruments:

The Company is exposed to commodity price and interest rate risk, and management considers periodically the Companys exposure to cash

flow variability resulting from the commodity price changes and interest rate fluctuations.

Futures, swaps and options are used to manage the Companys exposure to commodity price risk inherent in the Companys oil and gas production

The Company is exposed to commodity price and interest rate risk, and management considers periodically the Company’s exposure to cash flow variability resulting from the commodity price changes and interest rate fluctuations.

Futures, swaps and options are used to manage the Company’s exposure to commodity price risk inherent in the Company’s oil and gas production operations.

The Company does not apply hedge accounting to any of its commodity-based derivatives.

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Natural gas commodity contracts

Derivative asset short-term

Natural gas liquid contracts

Derivative asset short-term

Crude oil commodity contracts

Derivative asset short-term

Natural gas commodity contracts

Derivative asset long-term and

Crude oil commodity contracts

Derivative asset short-term

and other assets

Liability Derivatives:

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Derivative liability short-term

Natural gas liquid contracts

Derivative liability short-term

Crude oil commodity contracts

Derivative liability long-term

Natural gas commodity contracts

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Total derivative instruments

The following table sets forth the effect of derivative instruments on the consolidated

statements of operations for the years ended December 31, 2020 and 2019:

The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the years ended December 31, 2021 and 2020:

(Thousands of dollars)

Location of gain/loss recognized in income

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recognized in income

(Thousands of dollars)

Derivatives not designated as cash-flow hedge instruments:

Natural gas commodity contracts

Unrealized gain on derivative

instruments, net

Unrealized (loss) gain on derivative instruments, net

Crude oil commodity contracts

Unrealized gain (loss) on

derivative instruments, net

Natural gas liquids contracts

Unrealized (loss) on

derivative instruments, net

Unrealized (loss) gain on derivative instruments, net

Natural gas commodity contracts

Realized (loss) gain on

derivative instruments, net

Realized (loss) on derivative instruments, net

Crude oil commodity contracts

Realized gain (loss) on

derivative instruments, net

Realized (loss) gain on derivative instruments, net

Related Party Transactions

The Company, as managing general partner or managing trustee, makes an annual offer to repurchase the interests of the partners and trust unit

holders in certain of the Partnerships or Trusts.

The Company, as managing general partner or managing trustee, makes an annual offer to repurchase the interests of the partners and trust unit holders in certain of the Partnerships or Trusts.

The Company purchased such interests in an amount totaling $ 676,000 during 2021 and $ 742,000 during 2020.

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

include members of the Companys Board of Directors, during a specific reporting year, for oil and gas sales net of expenses.

Salary Deferral

The Company maintains a salary deferral plan (the Plan) in accordance with Internal Revenue Code Section 401(k),

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

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.

Payables owed to related parties primarily represent receipts collected by the Company as agent for the joint venture partners, which may include members of the Company’s Board of Directors, during a specific reporting year, for oil and gas sales net of expenses.

Salary Deferral Plan

The Company maintains a salary deferral plan (the “Plan”) in accordance with Internal Revenue Code Section 401(k), as amended.

The Plan provides for matching contributions, of which $

304,955 and $

341,000 were made in 2021 and 2020, 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.

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,

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EXPLORATION AND DEVELOPMENT ACTIVITIES

(Unaudited) cash flow sched

Year Ended December 31,

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RELATING TO PROVED OIL AND GAS RESERVES

following are the principal sources of change in the standardized measure of discounted future net cash flows during 2020 and 2019:

The following are the principal sources of change in the standardized measure of discounted future net cash flows during 2021 and 2020:

Year Ended December 31,

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Converted to developed reserves

Reserves Sold

Total Proved Reserves at the End of the Year

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Total Costs and Expenses

Results of Operations from Producing Activities (excluding corporate overhead and interest

Results of Operations from Producing Activities (excluding corporate overhead and interest costs)

See accompanying Notes to Supplementary Information

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NOTES TO SUPPLEMENTARY INFORMATION

Presentation of Reserve

Disclosure Information

Presentation of Reserve Disclosure Information

Reserve disclosure information is presented in accordance with U.S.

generally accepted accounting principles.

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

The Company’s reserves include amounts attributable to non-controlling

interests in the Partnerships.

These interests represent less than 10 % of the Company’s reserves.

Determination of Proved Reserves

estimates of the Companys proved reserves were determined by an independent petroleum engineer in accordance with U.S.

The estimates of the Company’s proved reserves were determined by an independent petroleum engineer in accordance with U.S.

generally accepted accounting principles.

The estimates of proved reserves are inherently imprecise and are continually

subject to revision based on production history, results of additional exploration and development and other factors.

Estimated future net revenues were computed by reserves, less estimated future development and production costs based on current

Proved reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved

reserves and in the projection of future rates of production and the timing of development expenditures.

The estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development and other factors.

Estimated future net revenues were computed by reserves, less estimated future development and production costs based on current costs.

Proved reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures.

The accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment.

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Further, the volumes considered to be commercially recoverable fluctuate with changes in prices and operating costs.

Company emphasizes that proved reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and gas properties.

Accordingly, these estimates are expected to change as

additional information becomes available in the future.

The Company emphasizes that proved reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and gas properties.

Accordingly, these estimates are expected to change as additional information becomes available in the future.

Results of Operations from Oil and Gas Producing Activities

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Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves

The standardized measure of discounted future net cash flows relating to proved oil and gas reserves and the changes of standardized measure of

discounted future net cash flows relating to proved oil and gas reserves were prepared in accordance with U.S.

The standardized measure of discounted future net cash flows relating to proved oil and gas reserves and the changes of standardized measure of discounted future net cash flows relating to proved oil and gas reserves were prepared in accordance with U.S.

generally accepted accounting principles.

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quantities of proved reserves.

Future production and development costs are computed estimating the expenditures to be incurred in

developing and producing the oil and gas reserves at year-end, based on year-end costs and assuming continuation of existing economic conditions.

Future production and development costs are computed estimating the expenditures to be incurred in developing and producing the oil and gas reserves at year-end,

based on year-end

costs and assuming continuation of existing economic conditions.

Future income tax expenses are calculated by applying the U.S.

tax rate to future pre-tax cash

inflows relating to proved oil and gas reserves, less the tax basis of properties involved.

tax rate to future pre-tax

cash inflows relating to proved oil and gas reserves, less the tax basis of properties involved.

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

The 2020 and 2019 extensions and discoveries reflect the drilling activity in the Companys West Texas and

Mid-Continent areas.

The 2021 and 2020 extensions and discoveries reflect the drilling activity in the Company’s West Texas and Mid-Continent

The Company is employing 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 its proved reserves include, but are not limited to, electrical logs, radioactivity logs, geologic maps, production data and well test data.

The estimated reserves of wells with sufficient production history are estimated

using appropriate decline curves.

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

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.

These wells are considered analogous based

on production performance from the same formation and with similar completion techniques.

Future development plans are reflective of the current commodity prices and have been established based on an expectation of available cash flows from

operations and availability under our revolving credit facility.

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

Future development plans are reflective of the current commodity prices and have been established based on an expectation of available cash flows from operations and availability under our revolving credit facility.

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