What changed in this filing

/stocks — the workspaceLOADING

Item 2. Properties

2023-04-17 compared with 2022-04-21 · 63 added, 82 removed, 105 unchanged (58% of the section changed)

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The following table sets forth the exploratory and development drilling experience with respect to wells in which we participated during the three years ended December 31, 2022.

In 2021, we participated in the completion of twelve horizontal wells.

Oil and Gas Production

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A net well is the sum of the fractional revenue interests owned in gross wells.

Wells are classified by their primary product.

Some wells produce both oil and gas.

The following table shows our net production of oil, NGL and natural gas for each of the three years ended December 31, 2022.

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In the event that production is not established, or we take no action to extend or renew the terms of our leases, our net undeveloped acreage that will expire over the next three years, as of December 31, 2022, is zero acres for the year ending December 31, 2023, zero in 2024, and zero acres in 2025.

Our interests in proved developed and undeveloped oil and gas properties, including the interests held by the Partnerships, have been evaluated by Ryder Scott Company, L.P.

Our interests in proved developed and undeveloped oil and gas properties have been evaluated by Ryder Scott Company, L.P.

for each of the three years ended December 31, 2022.

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Report on Registrant’s Reserves Estimates.

In matters related to the preparation of our reserve estimates, our district managers report to the Engineering Data manager, who maintains oversight and compliance responsibility for the internal reserve estimate process and provides oversight for the annual preparation of reserve estimates of 100% of our year-end

reserves by our independent third-party engineers, Ryder Scott Company, L.P.

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

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

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

Our Engineering Data manager, the technical person primarily responsible for overseeing the preparation of reserves estimates, has over thirty years of experience, holds a Bachelor degree in Geology and an MBA in finance and is a member of the Society of Petroleum Engineers and American Association of Petroleum Geologist.

See Part II, Item 8 “Financial Statements and Supplementary Data”, for additional discussions regarding proved reserves and their related cash flows.

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

In 2019, in West Texas, we participated in the initial three shallow horizontals on our Kashmir tract with one of each of these wells completed in the Wolfcamp “A”, Jo Mill, and Lower Spraberry.

The Company has 48% interest in two of these wells and 5.3% in one well.

All three wells were brought on production in May of 2019.

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

one for 8.6% interest which was brought into production in July of 2020, and six wells with an average 47.5% interest that were drilled but not completed at year-end

and therefore classified as Proved Undeveloped in the year-end

reserve report.

one with Pioneer Natural Resources for 8.6% interest which was brought into production in July of 2020, and six wells with Apache on our Kashmir tract with an average 47.5% interest that were drilled but not completed at year-end and therefore classified as Proved Undeveloped in the year-end 2020 reserve report.

The Company invested approximately $8.0 million in these seven wells in 2020.

Also in 2020, reserves were added in West Texas through the addition of 11 horizontal wells completed in Midland County, Texas, in which we receive 0.56% to 1% over-riding royalty interest.

In our Gulf Coast Region, in 2020, we successfully recompleted one operated well in the Segno field of Polk County, Texas with a 72.5% interest.

At December 31, 2020, in total, the Company had 3,221 Mboe of proved undeveloped reserves attributable to 13 wells operated by others, 10 of which were drilled but not completed by year-end 2020, and three that were not drilled until 2021.

The three new horizontals along with the six uncompleted wells at year-end were brought online in late September and early October of 2021.

These successful new wells are on our Kashmir tract in Upton County, Texas operated by Apache Corporation.

These nine PUD wells at year-end 2020 accounted for 3,127 Mboe of the total undeveloped.

The four other PUD wells, drilled but not completed at year-end 2020, are located in Grady County, Oklahoma, and accounted for 95 Mboe of the total undeveloped reserves.

In 2021, in West Texas, we participated with Apache in the drilling of three additional horizontals on the Kashmir Tract in Upton County, Texas and completed these three wells in September of 2021 along with six other wells drilled in 2020 on the same lease that were drilled but uncompleted at year-end.

The Company has an average of 47.8% interest in these nine wells and invested approximately $30 million in these horizontal wells.

In our Oklahoma, Scoop-Stack play, in 2019, we participated in the drilling and completion of six wells on our WM Wallace tract for 7.67% interest, and nine wells, included on Slash, Osborn, and Leon tracts, with an average 1.34% interest.

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

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

Also in Oklahoma, six wells designated as Shut-in

on December 31, 2018, were brought into production in 2019:

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

In 2019, in our Gulf Coast region, we added production through the recompletion of three vertical wells in Polk County, Texas:

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

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

At December 31, 2020, in total, the Company had 3,221 Mboe of proved undeveloped reserves attributable to 13 wells operated by others, 10 of which were drilled but not completed by year-end

2020, and three that were not drilled until 2021.

The three new horizontals along with the six uncompleted wells at year-end

were brought online in late September and early October of 2021.

These successful new wells are on our Kashmir tract in Upton County, Texas operated by Apache Corporation where.

These nine PUD wells at year-end

2020 accounted for 3,127 Mboe of the total undeveloped reserves where the Company has an average 47.5% interest and invested

approximately $30 million dollars in these wells.

The four other PUD wells, drilled but not completed at year-end

2020, are located in Grady County, Oklahoma and accounted for 95 Mboe of the total undeveloped reserves.

At December 31, 2021, the Company had 159 Mboe of proved developed shut-in

reserves attributable to three horizontals drilled and completed in Canadian County, Oklahoma in December of 2021, but not yet online.

Reserves of the four PUD wells in Grady County, Oklahoma were not included in the 2021 year-end

reserve report as the operator does not have near-term plans for their completion.

In the first quarter of 2022, the Company is participating in the drilling of four wells with SEM Operating Company for 10% interest and has received drilling proposals for an additional 17 horizontal wells to be drilled this year.

In total the Company is likely to invest approximately $54 million in these 21 wells.

Additional drilling and future development plans will be established based on an expectation of available cash flows from operations and availability of funds under our revolving credit facility.

We employ technologies to establish proved reserves that have been demonstrated to provide consistent results capable of repetition.

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

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.

Also in 2021, the Company participated with Ovintiv Mid-Continent for 11.25% interest in four two-mile horizontal wells in Canadian County, Oklahoma.

Twelve of these thirteen horizontal wells were successfully completed and placed into production in the fourth quarter of 2021.

One of the Ovintiv wells had a casing leak issue and has been temporarily abandoned.

The Company invested approximately $32 million in these thirteen wells.

In addition, in 2021, the Company added minor reserves through over-riding royalty interest in two wells drilling and completed in Grady County, Oklahoma.

At December 31, 2021, the Company had 159 Mboe of proved developed shut-in reserves attributable to three horizontals drilled and completed in Canadian County, Oklahoma, but not yet online at year-end.

These reserves were converted to proved producing in the first quarter of 2022.

At year-end 2021, we did not include proved undeveloped reserves in our reserve report because we had not yet received definitive drilling proposals from third-party operators for the more than fifteen horizontal wells that we planned to participate in located primarily in West Texas.

In 2022, the Company participated in eight horizontal wells that were drilled and completed;

four located in Irion County, West Texas, operated by SEM Operating Company, in which we have 10.13% interest, and four located in Canadian County, Oklahoma, operated by Ovintiv Mid-Continent, Inc., in which we have an average 9% interest.

Our investment in these eight wells was approximately $4 million and all were brought on production in August of 2022.

In addition, the Company added reserves through 15 wells in which we have various minor over-riding royalty interest.

Eight of these wells are located in West Texas and seven are located in Oklahoma.

In the fourth quarter of 2022, we began participation in the drilling of 20 horizontal wells located in West Texas operated by three different operators.

In Martin County, we are participating with ConocoPhillips in five 2.5-mile-long horizontal wells in which the Company has 20.83% interest with a planned capital investment of $12.1 million.

In Reagan County, we are participating with Hibernia Energy III in 10 two-mile horizontals with 25% interest and an expected investment of $25.6 million.

Also in Reagan County, we are participating with Double Eagle (DE IV) in five two-mile-long horizontals with nearly 50% interest, carrying an expected net

capital outlay of $23.4 million.

All twenty of these West Texas wells are currently drilling or have been completed.

All are expected to be online in the second quarter of 2023.

In January of 2023, the Company joined Ovintiv USA, Inc.

in the spudding of three 3-mile-long horizontal wells in Canadian County, Oklahoma with 1.96% interest and an expected investment of $645,000.

Production is expected to begin in May 2023.

In addition, in March of 2023, Apache Corporation spud two 3-mile-long horizontals in Upton County, Texas in which the Company has 49.4% interest with an expected total capital investment of $16.1 million.

We anticipate completion of these two 15,000’ long horizontals in Upton County in May and production to occur in June of 2023.

At December 31, 2022, the Company had 6,366 Mboe of proved undeveloped reserves attributable to the 25 horizontal wells described above.

In total, the Company expects to invest $78 million in these 25 horizontal wells, all of which are expected to be completed and online in the second quarter of 2023.

The estimated future net revenue (using current prices and costs as of those dates) and the present value of future net revenue (at a 10% discount for estimated timing of cash flow) for our proved developed and proved undeveloped oil and gas reserves at the end of each of the three years ended December 31, 2022, are summarized as follows (in thousands of dollars):

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We use this measure when assessing the potential return on investment related to oil and gas properties.

The PV10 of future income taxes represents the sole reconciling item between this non-GAAP

PV10 Value versus the GAAP measure presented in the standardized measure of discounted cash flow.

The PV10 of future income taxes represents the sole reconciling item between this non-GAAP PV10 Value versus the GAAP measure presented in the standardized measure of discounted cash flow.

A reconciliation of these values is presented in the last three columns of the table above.

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“Proved undeveloped” oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

Our reserves include amounts attributable to non-controlling

interests in the Partnerships.

These interests represent less than 10% of our reserves.

In accordance with U.S.

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generally accepted accounting principles, changes in market prices subsequent to December 31 are not considered.

While it may be reasonably anticipated that the prices received for the sale of our production may be higher or lower than the prices used in this evaluation, as described above, and the operating costs relating to such production may also increase or decrease from existing levels, such possible changes in prices and costs were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation for the SEC case.

accordance with rules adopted by the SEC, omitted from consideration in making this evaluation for the SEC case.

Actual volumes produced, prices received and costs incurred may vary significantly from the SEC case.

Natural gas prices, based on the twelve-month average of the first of the month Henry Hub index price, were $6.358 per MMBtu in 2022 as compared to $3.598 per MMBtu in 2021, and $1.985 per MMBtu in 2020.

Oil prices, based on the NYMEX first of the month average price, were $66.56 per barrel in 2021 as compared to $39.57 per barrel in 2020, and $55.69 per barrel in 2019.

Oil prices, based on the West Texas Intermediate (WTI) Light Sweet Crude first of the month average spot price, were $93.67 per barrel in 2022 as compared to $66.56 per barrel in 2021, and $39.57 per barrel in 2020.

Since January 1, 2022, we have not filed any estimates of our oil and gas reserves with, nor were any such estimates included in any reports to, any federal authority or agency, other than the Securities and Exchange Commission.

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We had 150 producing wells (69 net) in the Gulf Coast region as of December 31, 2022, of which 89 wells are operated by us.

Average net daily production in our Gulf Coast Region in 2021 was 336 Boe.

Average net daily production in our Gulf Coast Region at year-end 2022 was 227 Boe.

At December 31, 2022, we had 790 MBoe of proved reserves in the Gulf Coast region, which represented 4.7% of our total proved reserves.

We maintain an acreage position of over 11,500 gross (3,967 net) acres in this region,

primarily in Dimmit and Polk counties.

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

We maintain an acreage position of over 10,700 gross (3,215 net) acres in this region, primarily in Dimmit and Polk counties.

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

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

As of March 31, 2023, the Gulf Coast region has no operated wells in the process of being drilled, no waterfloods in the process of being installed and no other related activities of material importance.

Mid-Continent

Our Mid-Continent

activities are concentrated in central Oklahoma.

Mid-Continent Region

Our Mid-Continent activities are concentrated in central Oklahoma.

This region is managed from our office in Oklahoma City, Oklahoma.

As of December 31, 2021, we had 549 producing wells (189 net) in the Mid-Continent

area, of which 195 wells are operated by us.

Principal producing intervals are in the Roberson, Avant, Skinner, Sycamore, Bromide, McLish, Hunton, Mississippian, Oswego, Red Fork, and Chester formations at depths ranging from 1,100 to 10,500 feet.

Average net daily production in our Mid-Continent

Region in 2021 was 747 Boe.

At December 31, 2021, we had 2,383 MBoe of proved reserves in the Mid-Continent

area, representing 20% of our total proved reserves.

As of December 31, 2022, we had 508 producing wells (169 net) in the

Mid-Continent area, of which 176 wells are operated by us.

Principal producing intervals are in the Robberson, Avant, Skinner, Sycamore, Bromide, McLish, Hunton, Mississippian, Oswego, Red Fork, and Chester formations at depths ranging from 1,100 to 10,500 feet.

Average net daily production in our Mid-Continent Region in 2022 was 897 Boe.

At December 31, 2022, we had 2,659 MBoe of proved reserves in the Mid-Continent area, representing 16% of our total proved reserves.

We maintain an acreage position of approximately 47,120 gross (10,297 net) acres in this region, primarily in Canadian, Kingfisher, Grant, Major, and Garvin counties.

Our Mid-Continent

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

As of March 31, 2022, in the Mid-Continent

region, the Company has agreed to participate with 9.38% interest in the drilling of four horizontal wells in Canadian County, Oklahoma operated by Ovintiv Mid-Continent

The first of these is slated to begin drilling in early April and completion of all four wells is expected in June of this year.

These proved undeveloped drilling plans and their reserves were not included in the 2021 year-end

reserve report.

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

As of March 31, 2023, in the Mid-Continent region, the Company is participating with 1.96% interest in the drilling of three 15,000’ long horizontal wells in Canadian County, Oklahoma operated by Ovintiv Mid-Continent Inc.

All three wells were spud in January and completions are expected in April of this year.

These proved undeveloped drilling plans and their reserves are included in the 2022 year-end reserve report as proved undeveloped.

West Texas Region

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

Average net daily production in Our West Texas Region in 2021 was 2,878 Boe.

Average net daily production in Our West Texas Region at year end 2022 was 3,257 Boe.

At December 31, 2022, we had 13,256 MBoe of proved reserves in the West Texas area, or 79.3 % of our total proved reserves.

We maintain an acreage position of approximately 16,939 gross (9,969 net) acres in the Permian Basin in West Texas, primarily in Reagan, Upton, Martin and Midland counties and believe this acreage has significant resource potential for horizontal drilling in the Spraberry, Jo Mill, and Wolfcamp intervals.

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

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

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

As of March 31, 2022, the Company was participating with 10.3% interest in the drilling of four horizontal wells in Irion County, Texas operated by SEM Operating Company, LLC.

These four wells are expected to be completed in the second quarter of 2022.

In addition, the Company has received proposals for 13 new horizontal wells in West Texas and intends to participate for 50% interest in the drilling of nine horizontal wells in Reagan

County, Texas with BTA Oil Producers, Inc and to participate for 38% in the drilling of four horizontal wells in Martin County, Texas with Conoco Inc.

These 13 wells are planned to be drilled in the third quarter of 2022.

These proved undeveloped drilling plans have been added in the first quarter of 2022 and were not included in the year-end

2021 reserves report.

As of March 31, 2023, the Company was participating in the drilling of 15 two-mile-long horizontal wells in Reagan County, Texas with 49.7% interest in five wells operated by Double Eagle and 25% interest in ten wells operated by Hibernia Energy.

In Upton County, Texas, the Company was also participating with Apache in the drilling of two 3-mile-long horizontals with 47.52% ownership.

In Martin County, Texas, the Company is participating with ConocoPhillips in the drilling of five 2.5-mile-long horizontal with 20.83% interest.

Combined, we expect to spend approximately $78 million in the drilling and completion of these 22 West Texas horizontals and their associated facilities.

These 22 wells and their forecast reserves are included in the 2022 year-end reserve report as proved undeveloped.

Additional development of each of these project areas is anticipated in the near future.

LEGAL PROCEEDINGS.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties