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Item 9A. Controls and Procedures

2023-04-17 compared with 2022-04-21 · 210 added, 242 removed, 632 unchanged (42% 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”).

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 Commission’s rules and forms.

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 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.

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.

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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, 2022.

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 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.

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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)

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).

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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 ”).

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 5, 2022, is among PRIMEENERGY RESOURCES CORPORATION, a Delaware corporation (the “Borrower”), each of the Lenders from time to time party hereto and CITIBANK, N.A.

(in its individual capacity, “Citibank”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”) (filed as exhibit 10.22.6 of PrimeEnergy Resources Corporation Form 10-Q for the Quarter Ended June 30 2022, and incorporated by reference).

FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 31, 2022 (the “First Amendment Effective Date”), is among PRIMEENERGY RESOURCES CORPORATION, a Delaware corporation (the “Borrower”), CITIBANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”) and as Issuing Bank, each Guarantor party hereto and the financial institutions party hereto as Lenders (filed herewith).

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).

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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

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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 12st, day of April 2022

/s/ Charles E.

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Financial Statements

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

Consolidated Balance Sheets – As of December 31, 2022 and 2021

Consolidated Statements of Income – For the years ended December 31, 2022 and 2021

Consolidated Statements of Equity – For the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows – For the years ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements

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Notes to Supplementary Information

INDEPENDENT AUDITORS’ REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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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, 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”).

We have audited the accompanying consolidated balance sheets of PrimeEnergy Resources Corporation and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, 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.

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Depreciation, Depletion and Amortization and Impairment of Property and Equipment

Description of

Description of the Matter

At December 31, 2022, the carrying value of the Company’s property and equipment was $174.0 million, and depreciation, depletion and amortization (DD&A) expense was $28.1 million for the year then ended.

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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 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.

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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.

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.

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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.

We also utilized the services of an independent auditor-engaged specialist to ensure the methodologies and assumptions utilized by the Company’s independent engineers were reasonable and in accordance with industry standards.

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.

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Accounting for Asset Retirement Obligations

Description of

Description of the Matter

At December 31, 2022, the asset retirement obligation (ARO) balance totaled $15.4 million.

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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 statements of income.

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.

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

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.

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 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.

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 assumptions.

Based on our evaluation, we designed our audit procedures to include, among others, assessing the significant assumptions and inputs used in the valuation, such as retirement cost estimates and timing of settlement assumptions.

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.

/s/ GRASSI & CO., CPAs, P.C.

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

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PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Thousands of dollars)

CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except share data)

As of December 31,

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Prepaid obligations

Due from related parties

Derivative asset short-term

Other current assets

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Total Property and Equipment, Net

Derivative asset long-term and other assets

LIABILITIES AND EQUITY

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Due to related parties

Current portion of long-term debt

Current portion of asset retirement and other long-term obligations

Derivative liability short-term

Total Current Liabilities

Long-Term Bank Debt

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909,000 shares;

Total Stockholders’ Equity – PrimeEnergy

Non-controlling

Total Stockholders’ Equity

Total Liabilities and Equity

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PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(Thousands of dollars, except per share amounts)

For the Year Ended

For the Years Ended

Natural gas sales

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Field service income

Administrative overhead fees

Unrealized (loss) on derivative instruments

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Gain on Sale and Exchange of Assets

Income (Loss) from Operations

Income from Operations

Other Income and Expenses

Interest expense

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

Interest income

PPP Loan Forgiveness

Income Before Provision Income Taxes

Income Tax Expense

Net Income Attributable to Non-Controlling

Net Income Attributable to PrimeEnergy

Basic Income Per Common Share

Diluted Income Per Common Share

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

PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

CONSOLIDATED STATEMENTS OF EQUITY

(Thousands of dollars, except share amounts)

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Balance at December 31, 2020

Purchase 4,801 shares of common stock

shares of common stock

Purchase of non-controlling

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Balance at December 31, 2021

Purchase 2,100 shares of common stock

Purchase of non-controlling

Distributions to non-controlling

shares of common stock

Balance at December 31, 2022

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PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

For the Year Ended

For the Years Ended

Cash Flows from Operating Activities:

Net Income (Loss)

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

Adjustments to reconcile net income 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

Unrealized (gain) loss on derivative instruments

PPP Loan forgiveness

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Accounts receivable

Allowance for doubtful accounts

Due from related parties

Due to related parties

Prepaid expenses and other assets

Prepaid obligations

Other current assets

Accounts payable

Accrued liabilities

Other long-term liabilities

Net Cash Provided by Operating Activities

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Proceeds from sale of properties and equipment

Net Cash (Used in) provided by Investing Activities

Net Cash Provided by (Used in) Investing Activities

Cash Flows from Financing Activities:

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Net Cash Used in Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Year

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The Company operates approximately 630 active wells and owns non-operating

interests and royalties in approximately 822

additional wells.

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 Company’s activities and providing contract services for third parties.

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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:

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:

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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 footnotes 2 and 4 to these financial statements.

During this period, there were no material subsequent items requiring disclosure, other than as stated in Footnote 4, to these consolidated 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.

The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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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.

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.

Oil and gas properties:

The Company utilizes the successful efforts method of accounting for its oil and gas properties.

Under this method, all costs associated with productive wells and nonproductive development wells are capitalized while nonproductive explorat ion costs an

d geological and geophysical expenditures are expensed.

Oil and gas leasehold acquisition costs are capitalized when incurred and included as unproved oil and gas properties in the consolidated balance sheets.

The Company does not carry the costs of drilling an exploratory well as an asset in its consolidated balance sheets following the completion of drilling unless both of the following conditions are met:

(i) the well has found a sufficient quantity of reserves to justify its completion as a producing well and (ii) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

The Company’s exploratory wells include extension wells that extend the limits of a known reservoir.

Due to the capital intensive nature and the geographical location of certain projects, it may take an extended period of time to evaluate the future potential of an exploration project and the economics associated with making a determination on its commercial viability.

In these instances, the project’s feasibility is not contingent upon price improvements or advances in technology, but rather the Company’s ongoing efforts and expenditures related to accurately predicting the hydrocarbon recoverability based on well information, gaining access to other companies’ production data in the area, transportation or processing facilities, and/or getting partner approval to drill additional appraisal wells.

These activities are ongoing and being pursued constantly.

Consequently, the Company’s assessment of suspended exploratory/extension well costs is continuous until a decision can be made that the project has found sufficient proved reserves to sanction the project or is determined to be noncommercial and is charged to exploration and abandonments expense.

As of December 31, 2022, the Company had no such suspended well costs.

The capitalized costs of proved properties are depleted using the unit-of-production

method based on proved reserves.

Costs of significant nonproducing properties, wells in the process of being drilled and in-process

development projects are excluded from depletion until the related project is completed and proved reserves are established or, if unsuccessful, abandonments expense is recognized.

Proceeds from the sales of individual properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depletion, depreciation and amortization, if doing so does not materially impact the depletion rate of its amortization base.

Generally, no gain or loss is recorded until an entire amortization base is sold.

However, gain or loss is recorded from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base.

Field and office Equipment:

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.

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hence, these valuations have the lowest priority.

Revenue recognition:

The majority of the Company’s production is operated by third party operators where we elect to market our products under the joint operating agreements.

Accordingly, we receive our proportionate share of revenue proceeds for production sold by the operator under the operator’s marketing agreements.

The Company recognizes revenue and any costs indicated by the operator in the related production period.

The Company recognizes revenue related to production from properties operated by the Company when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The Company recognizes oil sales revenue when (i) control/custody transfers to the purchaser and (ii) the agreed-upon index price, net of any price differentials, is fixed and determinable.

Any costs incurred prior to the transfer of control to the customer, such as gathering and transportation costs, are recognized as oil and gas production costs.

NGL and gas sales

Under the majority of the Company’s gas processing contracts, gas is delivered to a midstream processing entity and the Company recognizes revenue when the products are delivered to the midstream gathering or processing entity at a specified index price, net of downstream gathering and processing fees.

Asset Retirement Obligation:

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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 statements of income.

Income Taxes:

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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.

As of December 31, 2022 and 2021, The Company 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 management’s 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:

10 unchanged sentences

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 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.

3 unchanged sentences

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.

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

Acquisitions and Dispositions

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 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

2022 Transactions

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 $

In the third quarter of 2022, the Company sold an additional

113 net acres in Canadian County, Oklahoma for $

On November 14, 2022, the Company completed an acreage exchange of approximately 725 net acres in the Midland Basin creating a block of 1,200 contiguous acres.

The Company entered into an agreement, including this acreage, to create a 2,560 -acre

AMI for the joint development of horizontal wells.

As part of the agreement, the Company sold a portion of its interest in this acreage to the joint development partner for proceeds of $ 16.1 million.

2021 Transaction

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

undeveloped and developed oil and natural gas properties in Oklahoma.

1 unchanged sentence

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.

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

distribution of non-controlling

interest of $ 647,000 .

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

Additional Balance Sheet Information

Accounts receivable at December 31, 2021 and 2020 consisted of the following:

Accounts receivable, net at December 31, 2022 and 2021 consisted of the following:

(Thousands of dollars)

7 unchanged sentences

Partner advances

Accrued liabilities at December 31, 2021 and 2020

consisted of the following:

Accrued liabilities at December 31, 2022 and 2021 consisted of the following:

(Thousands of dollars)

1 unchanged sentence

Property costs

Long-Term Deb

Long-Term Debt

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.

Under the 2017 Credit Agreement, the Company had 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 consolidated 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 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 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 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 .

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.

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 was $ 50 million.

Borrowings under the 2017 Credit Agreement would 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 was set to mature on February 11, 2023 .

On December 31, 2021, the Company had a total of $ 36 million of borrowings outstanding under its revolving credit and $ 14 million was available for future borrowings.

The 2017 Credit Agreement was terminated on July 5th, 2022 with the issuance of the Fourth Amended and Restated Credit Agreement.

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 consolidated 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.

On December 31, 2022, the Company had a total of $ 11 million of borrowings outstanding under its revolving credit facility and $ 64 million was available for future borrowings.

Effective January 20, 2023 , in lieu of a formal amendment, a borrowing base letter authorized by all lenders and Prime of the 2022 Credit Agreement resulted in an adjustment to decrease the amount of the Borrowing Base available from $ 75 million to $ 60 million until such time as the next redetermination date as required by the agreement.

As of March 31, 2023, the borrowing base was $ 60 million and the Company no outstanding borrowings under the Credit Facility.

Paycheck Protection Program Loans

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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.

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 and accrued interest.

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 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 February 18, 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.

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 statements of income.

(5) Other Long-Term Obligations and Commitments:

Operating Leases:

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 .

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

Lease 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, Current portion of asset retirement and Other Long-Term Obligations in 2022.

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.

5 unchanged sentences

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 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.

Operating lease costs for the years ended December 31, 2022 and 2021 were $ 628 thousand and $ 577 thousand, respectively.

Cash payments included in the operating lease cost for years ended December 31, 2022 and 2021 were $ 673 thousand and $ 599 thousand, respectively.

The weighted-average remaining operating lease terms for the years ended December 31, 2022 and 2021 were 11 months and 15 months, respectively.

The Company acquired and amended certain leases for office space in Texas providing for payments of $ 673,000 in 2022, $ 684,000 in 2023, $ 202,000 in 2024 and $ 27,000 in 2025.

Rent expense for office space the years ended December 31, 2022 and 2021 was $ 755,000 and $ 653,000 , respectively.

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

2 unchanged sentences

Amount associated with discounting

Net operating lease liabilities

Total net operating lease liabilities

Current portion included in Other current liabilities

portion included in Other liabilities

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the years ended December 31, 2022 and 2021 is as follows:

Year Ended December 31,

(Thousands of dollars)

Asset retirement obligation at beginning of period

Liabilities incurred

Net wells placed on production

Liabilities settled

Liabilities divested

Accretion expense

1 unchanged sentence

Asset retirement obligation at end of period

Current portion included in Current portion of asset retirement and other long-term obligations

Long-term Asset Retirement Obligations included in Asset Retirement Obligations

5 unchanged sentences

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.

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.

5 unchanged sentences

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

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

Year Ended December 31,

The components of the provision for income taxes for the years ended December 31, 2022 and 2021 are as follows:

(Thousands of dollars)

8 unchanged sentences

Derivative Contracts

Partnership basis difference

State Net operating loss carry-forwards

1 unchanged sentence

Deferred Tax Liabilities:

Partnership basis difference

Depletion and depreciation

1 unchanged sentence

Net deferred tax liabilities

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,

The total provision for income taxes for the years ended December 31, 2022 and 2021 varies from the federal statutory tax rate as a result of the following:

(Thousands of dollars)

4 unchanged sentences

Provision to return adjustment

Total income tax provision (benefit)

Total income tax provision

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

On December 22, 2017, the U.S.

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

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”).

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.

11 unchanged sentences

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

Federal and State returns for the years 2020 through 2022 remain open for examination by the relevant taxing authorities.

Enactment of the Inflation Reduction Act of 2022

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”), which includes, among other things, a corporate alternative minimum tax (the “CAMT”).

Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of “applicable corporations,” which is effective for tax years beginning after December 31, 2022.

The CAMT generally treats a corporation as an “applicable corporation” in any taxable year in which the “average annual adjusted financial statement income” of the corporation and certain of its subsidiaries and affiliates for a three taxable-year period ending prior to such taxable year exceeds $ 1 billion.

The IRA also establishes a one percent excise tax on stock repurchases made by publicly traded U.S.

corporations.

The excise tax is effective for any stock repurchases after December 31, 2022.

The IRA did not impact the Company’s current year tax provision or the Company’s consolidated financial statements, but the new provisions could impact future periods.

Enactment of the Consolidated Appropriations Act, 2021

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the “Act”).

The Act includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, among other things.

The Act did not have a material impact on the Company’s tax provisions or the Company’s consolidated financial statements.

Enactment of the Coronavirus Aid, Relief and Economic Security Act.

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, alternative minimum tax 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.

Segment Information and Major Customers

1 unchanged sentence

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.

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

Apache Corporation

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 for the years ended 2022 and 2021.

APA Corporation

Plains All American Inc.

Natural gas and liquids:

Apache Corporation

APA Corporation

Targa Pipeline Mid-Continent

28 unchanged sentences

Commodity derivative contract

tal liabilities

Total liabilities

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

9 unchanged sentences

Total realized and unrealized gains (losses):

Included in earnings (a)

Included in earnings

Purchases, sales, issuances and settlements

11 unchanged sentences

Derivatives not designated as cash-flow hedging instruments:

Natural gas commodity contracts

Derivative asset long-term and

Crude oil commodity contract

Other current assets

Natural gas commodity contract

Other current assets

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 years ended December 31, 2021 and 2020:

(Thousands of dollars)

The following table sets forth the effect of derivative instruments on the consolidated statements of income for the years ended December 31, 2022 and 2021:

Location of gain/loss recognized in income

1 unchanged sentence

recognized in income

(Thousands of dollars)

Derivatives not designated as cash-flow hedge instruments:

Natural gas commodity contracts

Unrealized (loss) gain on derivative instruments, net

Unrealized gain (loss) on derivative instruments, net

Crude oil commodity contracts

1 unchanged sentence

Natural gas commodity contracts

Realized (loss) on derivative instruments, net

Realized gain (loss) on derivative instruments, net

Crude oil commodity contracts

Realized (loss) gain on derivative instruments, net

Realized (loss) 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 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 Company’s Board of Directors, during a specific reporting year, for oil and gas sales net of expenses.

During 2021 the Company, as managing general partner or managing trustee, repurchased the interests of the partners and trust unit holders in certain of the Partnerships or Trusts in an amount totaling $ 676,000 .

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

Amounts due to or from related parties primarily represent receipts or expenses, related to oil and gas properties, collected or paid by the Company as agent for the joint venture partners, which may include members of the Company’s Board of Directors.

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

The Plan provides for matching contributions, of which $ 301,837 and $ 304,955 were made in 2022 and 2021, respectively

Earnings per Share

1 unchanged sentence

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:

Year Ended December 31,

The following reconciles amounts reported in the consolidated financial statements:

Years Ended December 31,

Effect of dilutive securities:

The effect of the 767,000 outstanding stock options is antidilutive for the year ended December 31, 202 0

, due to net loss for this period.

PRIMEENERGY RESOURCES CORPORATION AND SUBSIDIARIES

11 unchanged sentences

EXPLORATION AND DEVELOPMENT ACTIVITIES

(Unaudited) cash flow sched

Year Ended December 31,

Years Ended December 31,

(Thousands of dollars)

12 unchanged sentences

See accompanying Notes to Supplementary Information

PRIMEENERGY RESOURES CORPORATION AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

STANDARDIZED MEASURE OF DISCOUNTED FUTURE

2 unchanged sentences

The following are the principal sources of change in the standardized measure of discounted future net cash flows during 2022 and 2021:

Year Ended December 31,

(Thousands of dollars)

33 unchanged sentences

Years Ended December 31, 2022 and 2021

Year Ended December 31,

Years Ended December 31,

(Thousands of dollars)

43 unchanged sentences

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

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.

8 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures