What changed in this filing

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Item 1. Financial Statements

2022-08-19 compared with 2022-05-20 · 55 added, 47 removed, 244 unchanged (29% of the section changed)

7 unchanged sentences

Prepaid obligations

Derivative asset

Other current assets

25 unchanged sentences

2,810,000 shares, outstanding 2022:

1,952,645 shares;

outstanding 2021:

1,992,077 shares .

Retained earnings

4 unchanged sentences

C ONSOLIDATED

Three Months Ended March 31, 2022 and 2021

Three and six months ended June 30, 2022 and 2021

(Thousands of dollars, except per share amounts)

Three Months Ended

Six Months Ended

Natural gas sales

2 unchanged sentences

Field service income

Unrealized (loss) on derivative instruments, net

Unrealized gain (loss) on derivative instruments, net

Total Revenues

10 unchanged sentences

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

Provision for (Benefit from) Income Taxes

Net Income (Loss)

(Benefit) Provision for Income Taxes

Net (Loss) Income

Net (Loss) Attributable to Non-Controlling

Net Income (Loss) Attributable to PrimeEnergy Resources

Net Income (Loss) Attributable to PrimeEnergy

Basic Income (Loss) Per Common Share

3 unchanged sentences

C ONSOLIDATED

Three Months Ended March 31, 2022 and 2021

Six months Ended June 30, 2022 and 2021

(Thousands of dollars)

2 unchanged sentences

Purchase 39,432 shares of Common stock

Balance at March 31, 2022

Balance at June 30, 2022

Balance at December 31, 2020

Balance at March 31, 2021

Balance at June 30, 2021

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

1 unchanged sentence

C ONSOLIDATED

Three Months Ended March 31, 2022 and 2021

Six Months Ended June 30, 2022 and 2021

(Thousands of dollars)

19 unchanged sentences

Purchase of stock for treasury

Proceeds from long-term bank debt

Repayment of long-term bank debt

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

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

Net Cash Used in Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Period

6 unchanged sentences

C ONSOLIDATED

March 31, 2022

June 30, 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 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

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 June 30, 2022 and December 31, 2021, the condensed consolidated results of operations, cash flows and equity for the six

months ended June 30, 2022 and 2021.

As of June 30, 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.

4 unchanged sentences

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.

In the second quarter of 2022, the Company sold 241 net acres in Canadian County, Oklahoma for $ 845,000 .

(3) Additional Balance Sheet Information:

21 unchanged sentences

The 2017 Credit Agreement matures February 11, 2023 .

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

The current borrowing base review and maturity extension was completed on July 5, 2022.

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

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.

On June 30, 2022, the Company had no borrowings outstanding under its revolving credit facility and $ 50 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 5.98 % for the six months ended June 30, 2022 as compared to 5.31 % for the six months ended June 30, 2021.

On July 5, 2022 , the Company and its lenders entered into a Fourth Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with a maturity date of June 1, 2026.

Under the 2022 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 initial borrowing base of the agreement is $ 75 million.

The credit facility is secured by substantially all of the Company’s oil and gas properties.

The 2022 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, and commodity hedge agreements.

As of August 15, 2022 the Company has no borrowings outstanding under its current revolving credit facility.

(5) Other Long-Term Obligations and Commitments:

1 unchanged sentence

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

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

Leased 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.

6 unchanged sentences

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

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:

Operating lease costs for the six months ended June 30, 2022 was $ 306 thousand.

Cash payments included in the operating lease cost for the six months ended June 30, 2022 was $ 324 thousand.

The weighted-average remaining operating lease terms is 9 months.

The Company amended certain leases for office space in Texas providing for payments of $ 349,000 in 2022, $ 251,000 in 2023, $ 106,000 in 2024 and $ 27,000 in 2025.

Rent expense for office space six months ended June 30, 2022 and 2021 was $ 392,000 and $ 328,000 , respectively.

The payment schedule for the Company’s operating lease obligations as of June 30, 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 three months ended March 31, 2022 is as follows:

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

months ended June 30, 2022 is as follows:

(Thousands of dollars)

Asset retirement obligation at December 31, 2021

Liabilities incurred

Liabilities settled

Accretion expense

Asset retirement obligation at March 31, 2022

Asset retirement obligation at June 30, 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.

11 unchanged sentences

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

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 .

At June 30, 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.

6 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 March 31, 2022 and December 31, 2021:

March 31, 2022

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021:

June 30, 2022

Quoted Prices in

25 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 March 31, 2022.

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 six months ended June 30, 2022.

(Thousands of dollars)

3 unchanged sentences

Purchases, sales, issuances and settlements

Net Liabilities — March 31, 2022

Net Liabilities — June 30, 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 March 31, 2022 and December 31, 2021:

The following table sets forth the effect of derivative instruments on the consolidated balance sheets at June 30, 2022 and December 31, 2021:

(Thousands of dollars)

Balance Sheet Location

Asset Derivatives:

Derivatives not designated as cash-flow hedging instruments:

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 quarters ended March 31, 2022 and 2021:

The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021:

Location of gain/loss recognized in income

2 unchanged sentences

(Thousands of dollars)

Derivatives not designated as cash-flow hedge instruments:

Derivatives not designated as cash-

flow hedge instruments:

Natural gas commodity contracts

Unrealized (loss) on derivative instruments,

Unrealized (loss) on derivative instruments, net

Crude oil commodity contracts

Unrealized (loss) on derivative instruments,

Unrealized (loss) on derivative instruments, net

Natural gas commodity contracts

6 unchanged sentences

The following reconciles amounts reported in the financial statements:

Quarter Ended March 31,

Six Months Ended June 30,

Effect of dilutive securities:

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.

Three Months Ended June 30,

Effect of dilutive securities:

The effect of the 767,500 outstanding stock options is anti-dilutive for the three and six months ended June 30, 2021 due to the net loss for these periods.

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