What changed in this filing

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Item 1. Financial Statements

2022-05-20 compared with 2021-11-19 · 79 added, 123 removed, 212 unchanged (49% of the section changed)

3 unchanged sentences

(Thousands of dollars)

September 30,

Current Assets

2 unchanged sentences

Prepaid obligations

Derivative asset

Other current assets

Total Current Assets

Property and Equipment, at cost

Oil and gas properties (successful efforts method), net

Field and office equipment, net

Property and Equipment

Oil and gas properties at cost

Accumulated depletion and depreciation

Field and office equipment at cost

Accumulated depreciation

Total Property and Equipment, Net

Derivative asset long-term and other assets

LIABILITIES AND EQUITY

3 unchanged sentences

Due to related parties

Current portion of long-term debt

Current portion of asset retirement and other long-term obligations

8 unchanged sentences

Commitments and Contingencies

Common stock, $.

10 par value;

2,810,000 shares;

1,994,177 shares

Common stock, $ .10 par value;

2022 and 2021:

2,810,000 shares, outstanding 2022:

outstanding 2021:

Retained earnings

1 unchanged sentence

829,111 shares;

Total Stockholders’ Equity – PrimeEnergy Resources

Non-controlling

Total Liabilities and Equity

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

PRIMEENERGY RESOURCES CORPORATION

C ONSOLIDATED

Three and nine months ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

(Thousands of dollars, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Natural gas sales

Natural gas liquids sales

Realized (loss) gain on derivative instruments, net

Realized (loss) on derivative instruments, net

Field service income

Administrative overhead fees

Unrealized (loss) on derivative instruments, net

7 unchanged sentences

Gain on Sale and Exchange of Assets

(Loss) Income from Operations

Income (Loss) from Operations

Other Income (Expense)

Interest Income

Interest Expense

(Loss) Income Before Income Taxes

Income Taxes Expense (Benefit)

Net (Loss) Income

Net Income (Loss) Attributable to Non-Controlling Interests

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 for (Benefit from) Income Taxes

Net Income (Loss)

Net (Loss) Attributable to Non-Controlling

Net Income (Loss) Attributable to PrimeEnergy Resources

Basic Income (Loss) Per Common Share

Diluted Income (Loss) Per Common Share

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

1 unchanged sentence

C ONSOLIDATED

Nine months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

(Thousands of dollars)

1 unchanged sentence

Balance at December 31, 2021

Net Income (Loss)

Purchase of non- controlling interest

Balance at September 30, 2021

Balance at December 31, 2019

Purchase 11,188 shares of common stock

Net Income (Loss)

Balance at September 30, 2020

Balance at March 31, 2022

Balance at December 31, 2020

Balance at March 31, 2021

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

1 unchanged sentence

C ONSOLIDATED

Nine months ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

(Thousands of dollars)

Cash Flows from Operating Activities:

Adjustments to reconcile net loss 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

Gain on sale of properties

Unrealized loss (gain) on derivative instruments, net

Provision for deferred income taxes

Changes in operating assets and liabilities:

Gain on sale and exchange of assets

Unrealized loss on derivative instruments, net

Deferred income taxes

Changes in assets and liabilities:

Accounts receivable

Due to related parties

Prepaids and other assets

Accounts payable

2 unchanged sentences

Cash Flows from Investing Activities:

Capital expenditures

Capital expenditures, including exploration expense

Proceeds from sale of properties and equipment

Net Cash (Used in) Investing Activities

Net Cash Provided by (Used in) Investing Activities

Cash Flows from Financing Activities:

Purchase of stock for treasury

Purchase of non-controlling

Proceeds from long-term bank debt and other long-term obligations

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

Proceeds from long-term bank debt

Repayment of long-term bank debt

Net Cash (Used in) Financing Activities

Net Increase in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Period

6 unchanged sentences

C ONSOLIDATED

September 30, 2021

March 31, 2022

(1) Basis of Presentation:

2 unchanged sentences

for the year ended December 31, 2021.

In the opinion of management, the accompanying interim condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, the condensed consolidated results of operations, cash flows and equity for the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, PrimeEnergy’s significant accounting policies are consistent with those discussed in Note 1—Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in PrimeEnergy’s Annual Report on Form 10-K

In the opinion of management, the accompanying interim condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, the condensed consolidated results of operations, cash flows and equity for the three months ended March 31, 2022 and 2021.

As of March 31, 2022, PrimeEnergy’s significant accounting policies are consistent with those discussed in Note 1—Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in PrimeEnergy’s Annual Report on Form 10-K

for the fiscal year ended December 31, 2021.

3 unchanged sentences

(2) Acquisitions and Dispositions

Historically the Company has repurchased the interests of the partners and trust unit holders in the oil and gas limited partnerships (the “Partnerships”) and the asset and business income trusts (the “Trusts”) managed by the Company as general partner and as managing trustee, respectively.

The Company repurchased $ 6,000 of such

non-controlling

interests during the nine months ended September 30, 2021.

In the first quarter of 2022, the Company sold 1,809 net leasehold acres in Reagan and Midland Counties, Texas through two separate transactions receiving gross proceeds of $ 14.0 million.

(3) Additional Balance Sheet Information:

12 unchanged sentences

Property costs

(4) Property and Equipment:

Property and equipment at September 30, 2021 and December 31, 2020 consisted of the following:

(Thousands of dollars)

Proved oil and gas properties, at cost

Accumulated depletion and depreciation

Oil and Gas Properties, Net

Field and office equipment

Accumulated depreciation

Field and Office Equipment, Net

Total Property and Equipment, Net

(4) Long-Term Debt:

3 unchanged sentences

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.

On December 20, 2021 the company entered into a Seventh Amendment to the 2017 Credit Agreement and Citibank N.A was appointed as successor administrative agent replacing PNC Bank.

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

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 a rate equal to the secured overnight financing rate (SOFR rate) as administered by the SOFR Administrator, in this case the Federal Reserve Bank of New York, plus an applicable margin ranging from 3.00 % to 4.00 %.

The 2017 Credit Agreement matures February 11, 2023 .

The current borrowing base review and maturity extension is schedule for June 2022.

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

30, 2021, the Company had a total of $ 31.5 million of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of 5.35 % and $

8.5 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 5.31 % for the

months ended September

30, 2021 as compared to 3.94 % for nine

months ended September

Paycheck Protection Program Loans

During May 2020, Prime Operating Company and Eastern Oil Well Services Corporation, subsidiaries of the Company received loan proceeds in the amount of $ 1.28 million and $ 0.47 million, respectively, under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020.

The PPP Loans are evidenced by a promissory note in favor of the Lender, which bears interest at the rate of 1.00 % per annum.

No payments of principal or interest are due under the note until the date on which the amount of loan forgiveness (if any) under the CARES Act, which can be up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”).

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

Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred prior to February 15, 2020 (the “Qualifying 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 has submitted 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 expi

ration 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 $ 1.

37 million and included as part of the long-term bank debt in the amount of $ 323 thousand.

On March 31, 2022, the Company had a total of $ 9 million of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of 6.74 % and $ 41 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 6.30 % for the quarter ended March 31, 2022 as compared to 5.27 % for the quarter ended March 31, 2021.

On May 20, 2022, there were no outstanding borrowings under the Company’s revolving credit facility.

(5) Other Long-Term Obligations and Commitments:

3 unchanged sentences

A new finance lease for office equipment is included in property and equipment, other current liabilities and other long-term liabilities this quarter.

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.

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 %.

4 unchanged sentences

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

Operating lease costs for the nine months ended September 30, 2021 were

Cash payments included in the operating lease cost for nine months ended September 30, 2021 were

The weighted-average remaining operating lease terms is

The Company amended certain leases for office space in Texas providing for payments of $ 299,000 in 2021, $ 158,000 in 2022 and $ 17,000 in 2023.

Rent expense for office space for the nine months ended September 30, 2021 and 2020 was $ 441,000 and $ 496,000 , respectively.

The payment schedule for the Company’s operating lease obligations as of September 30, 2021 is as follows:

Operating lease costs for the quarter ended March 31, 2022 were $ 142 thousand.

Cash payments included in the operating lease cost for the quarter ended March 31, 2022 were $ 150 thousand.

The weighted-average remaining operating lease terms are 12 months.

The Company amended certain leases for office space in Texas providing for payments of $ 451,000 in 2022 and $ 150,000 in 2023.

Rent expense for office space the quarter ended March 31, 2022 and 2021 was $ 177,000 and $ 163,000

, respectively.

The payment schedule for the Company’s operating lease obligations as of March 31, 2022 is as follows:

(Thousands of dollars)

3 unchanged sentences

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the nine

months ended September 30, 2021

is as follows:

A reconciliation of the liability for plugging and abandonment costs for the three months ended March 31, 2022 is as follows:

(Thousands of dollars)

3 unchanged sentences

Accretion expense

Asset retirement obligation at September

Asset retirement obligation at March 31, 2022

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

(6) Contingent Liabilities:

The Company, 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 obligations.

The Company is subject to environmental laws and regulations.

6 unchanged sentences

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

At September 30, 2021 and 2020, remaining options held by two key executive officers on 767,500 shares were outstanding and exercisable at prices ranging from $ 1.00 to $ 1.25 .

At March 31, 2022 and 2021, remaining options held by two key executive officers 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.

(8) 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 repurchased $ 6,000 of such

non-controlling

interests during the nine months ending September 30, 2021.

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, for oil and gas sales net of expenses.

4 unchanged sentences

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 September 30, 2021 and December 31, 2020:

September 30, 2021

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021:

March 31, 2022

Quoted Prices in

4 unchanged sentences

Inputs (Level 3)

September 30,

(Thousands of dollars)

Commodity derivative contracts

Total liabilities

8 unchanged sentences

Commodity derivative contracts

Commodity derivative contract

Total liabilities

6 unchanged sentences

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 quarter ended September 30, 2021.

(Thousands of dollars)

3 unchanged sentences

Purchases, sales, issuances and settlements

Net Liabilities — September 30, 2021

Net Liabilities — March 31, 2022

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

4 unchanged sentences

Both realized and unrealized gains and losses associated with commodity derivative instruments are recognized in earnings.

The following table sets forth the effect of derivative instruments on the consolidated balance sheets at September 30, 2021 and December 31, 2020:

The following table sets forth the effect of derivative instruments on the consolidated balance sheets at March 31, 2022 and December 31, 2021:

(Thousands of dollars)

2 unchanged sentences

Derivatives not designated as cash-flow hedging instruments:

Natural gas commodity contracts

Derivative asset long-term and

Crude Oil commodity contracts

Derivative asset short-term

Liability Derivatives:

9 unchanged sentences

Total derivative instruments

The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2021 and 2020:

The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the quarters ended March 31, 2022 and 2021:

Location of gain/loss recognized in income

Amount of gain/loss

1 unchanged sentence

(Thousands of dollars)

Location of gain/loss recognized in income

Derivatives not designated as cash-flow hedge instruments:

Natural gas commodity contracts

Unrealized (loss) on derivative instruments,

Crude oil commodity contracts

Unrealized (loss) on derivative instruments,

Natural gas commodity contracts

Realized gain (loss) on derivative instruments, net

Realized (loss) on derivative instruments, net

Crude oil commodity contracts

4 unchanged sentences

The following reconciles amounts reported in the financial statements:

Nine Months Ended September 30,

Effect of dilutive securities:

Three Months Ended September 30,

Quarter Ended March 31,

Effect of dilutive securities:

The effect of the 767,500 outstanding stock options is antidilutive for the nine and three months ended September 30, 2021 due to net loss for these periods.

The effect of the 767,000 outstanding stock options is antidilutive for the quarter ended March 31, 2021, due to net loss for this period.

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-Q

Item 1. Financial Statements