What changed in this filing

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Item 1. Financial Statements

2023-05-22 compared with 2022-11-21 · 100 added, 123 removed, 204 unchanged (52% of the section changed)

2 unchanged sentences

C ONSOLIDATED

(Thousands of dollars)

September 30,

Thousands of dollars, except share data

Current Assets

2 unchanged sentences

Prepaid obligations

Due from related parties

Derivative asset

Other current assets

11 unchanged sentences

Accrued liabilities

Due to related parties

Current portion of asset retirement and other long-term obligations

3 unchanged sentences

Asset Retirement Obligations

Derivative Liability Long-Term

Deferred Income Taxes

5 unchanged sentences

2,810,000 shares, outstanding 2023:

1,930,700 shares;

outstanding 2022:

1,901,000 shares

Additional paid-in

Retained earnings

1 unchanged sentence

940,440 shares;

817,923 shares

Total Liabilities and Equity

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

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

PRIMEENERGY RESOURCES CORPORATION

C ONSOLIDATED

Three and nine months ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

(Thousands of dollars, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Natural gas sales

Natural gas liquids sales

Realized (loss) on derivative instruments, net

Realized loss

on derivative instruments, net

Field service income

Unrealized gain (loss) on derivative instruments, net

Unrealized gain (loss)

on derivative instruments, net

Total Revenues

2 unchanged sentences

Field service expense

Depreciation, depletion, amortization and accretion on discounted liabilities

Depreciation, depletion, amortization

Accretion of discount on asset retirement obligations

General and administrative expense

1 unchanged sentence

Gain on Sale and Exchange of Assets

Income (Loss) from Operations

Income from Operations

Other Income (Expense)

Interest Income

Interest Expense

Income (Loss) Before Income Taxes

Income Taxes Expense (Benefit)

Net Income (Loss)

Net Income Attributable to Non-Controlling

Net Income (Loss) Attributable to PrimeEnergy

Basic Income (Loss) Per Common Share

Diluted Income (Loss) Per Common Share

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

Interest Income

Income Before Provision for Income Taxes

Provision for Income Taxes

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

C ONSOLIDATED

Nine months Ended September 30, 2022 and 2021

(Thousands of dollars)

Stockholders’

Three Months Ended March 31, 2023 and 2022

Thousands of dollars, except share amounts

Balance at December 31, 2021

Purchase 11,188 shares of common stock

Balance at September 30, 2022

Balance at March 31, 2022

Balance at December 31, 2022

Net (Loss) Income

Purchase of non-

controlling interest

Balance at September 30, 2021

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

Purchase 31,440 shares of common stock

Balance at March 31, 2023

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

PRIMEENERGY RESOURCES CORPORATION

C ONSOLIDATED

Nine months ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

(Thousands of dollars)

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

Gain on sale and exchange of assets

Unrealized (gain) loss on derivative instruments, net

Provision for deferred income taxes

Changes in operating assets and liabilities:

Deferred income taxes

Changes in assets and liabilities:

Accounts receivable

Due to related parties

Due from related parties

Prepaids obligations

Other long-term obligations

Accounts payable

2 unchanged sentences

Cash Flows from Investing Activities:

Capital expenditures

Capital expenditures, including exploration expense

Proceeds from sale of properties and equipment

Net Cash Provided by (Used in) Investing Activities

Net Cash (Used in) Provided by Investing Activities

Cash Flows from Financing Activities:

Purchase of stock for treasury

Purchase of non-controlling

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

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

Net Cash (Used in) Financing Activities

Net Increase in Cash and Cash Equivalents

Net (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Period

1 unchanged sentence

Supplemental Disclosures:

Income taxes paid

Interest paid

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

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

PRIMEENERGY RESOURCES CORPORATION

C ONSOLIDATED

September 30, 2022

March 31, 2023

(1) Basis of Presentation:

2 unchanged sentences

for the year ended December 31, 2022.

In the opinion of management, the accompanying interim condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, and the condensed consolidated statements of operations, equity and cash flows for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, PrimeEnergy’s significant accounting policies are consistent with those discussed in Note 1—Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in PrimeEnergy’s Annual Report on Form 10-K

In the opinion of management, the accompanying interim consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated balance sheets as of March 31, 2023, and December 31, 2022, the consolidated results of operations, cash flows and equity for the three months ended March 31, 2023, and 2022.

As of March 31, 2023, PrimeEnergy’s significant accounting policies are consistent with those discussed in Note 1—Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in PrimeEnergy’s Annual Report on Form 10-K

for the fiscal year ended December 31, 2022.

1 unchanged sentence

The results for interim periods are not necessarily indicative of annual results.

For purposes of disclosure in the condensed consolidated financial statements, subsequent events have been evaluated through the date the statements were issued and included in Footnote 2.

For purposes of disclosure in the consolidated financial statements, subsequent events have been evaluated through the date the statements were issued.

(2) Acquisitions and Dispositions

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.

the second quarter of 2022, the Company sold

241 net acres in Canadian County, Oklahoma for $

the third quarter of 2022, the Company sold an additional

113 net acres in Canadian County, Oklahoma for $

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

contiguous acres.

The Company entered into an agreement, including this acreage, to create a

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 $

In the first quarter of 2023, the Company sold 7.8 surface acres in Midland County, Texas receiving gross proceeds of $ 436,050 and recognizing a gain of $ 47,000 .

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

(3) Additional Balance Sheet Information:

1 unchanged sentence

(Thousands of dollars)

September 30,

Accounts Receivable:

6 unchanged sentences

Partner advances

(Thousands of dollars)

September 30,

Accrued Liabilities:

2 unchanged sentences

(4) 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 .

Under the 2017 Credit Agreement, the Company has a revolving line of credit and letter of credit facility of up to $ 300 million subject to a borrowing base that is determined semi-annually by the lenders based upon the Company’s financial statements and the estimated value of the Company’s oil and gas properties, in accordance with the Lenders’ customary practices for oil and gas loans.

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

The 2017 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio 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 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 a rate equal to the secured overnight financing rate (SOFR rate) as administered by the SOFR Administrator, in this case the Federal Reserve Bank of New York, plus an applicable margin ranging from 3.00 % to 4.00 %.

The 2017 Credit Agreement matures February 11, 2023 .

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

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

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

Under the 2022 Credit Agreement, the Company has a revolving line of credit and letter of credit facility of up to $ 300 million subject to a borrowing base that is determined semi-annually by the lenders based upon the Company’s financial statements and the estimated value of the Company’s oil and gas properties, in accordance with the Lenders’ customary practices for oil and gas loans.

The initial borrowing base of the agreement is $ 75 million.

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

The 2022 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio and total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and exploration costs) ratio, as defined, and restrictions are placed on the payment of dividends, the amount of treasury stock the Company may purchase, and commodity hedge agreements.

As of September 30, 2022 the Company had

no borrowings outstanding under its current revolving credit facility.

The Company maintains a revolving corporate credit facility (the “Credit Facility”) with a group of financial institutions with aggregate loan commitments of $ 300 million, subject to a borrowing base that is determined semi-annually, with a maturity date of June 1, 2026 .

As of December 31, 2022, the borrowing base was $ 75 million and the Company had $ 11 million outstanding borrowings under the Credit Facility.

The Credit Facility requires 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, and places restrictions on the payment of dividends, the amount of treasury stock the Company may purchase, and commodity hedge agreements.

As of March 31, 2023, the Company was in compliance with its debt covenants.

Borrowings bear interest, at the option of the Company, based on a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50 % and (c) Adjusted Term SOFR (secured overnight financing rate as administered by the Federal Reserve Bank of New York) for a one-month

tenor in effect on such day plus 1.00 %, or a Term SOFR.

Both options are subject to an additional margin, determined based upon the utilization of the borrowing base then in effect, ranging from 2.25 % to 4.25 % per annum.

The Company also pays commitment fees on undrawn amounts under the Credit Facility of 0.50 % per annum.

Borrowings under the Credit Facility are secured by substantially all of the Company’s oil and gas properties.

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 had

no outstanding borrowings under the Credit Facility.

(5) Other Long-Term Obligations and Commitments:

2 unchanged sentences

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.

A new finance lease for office equipment is included in property and equipment, current portion of asset retirement and other long-term obligations this quarter.

As most of the Company’s lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

5 unchanged sentences

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

lease costs for the nine months ended September 30, 2022 were $

468 thousand.

Cash payments included in the operating lease costs for the nine months ended September 30, 2022 were $

499 thousand.

The remaining operating lease terms range between

The Company amended certain leases for office space in Texas providing for remaining payments of $ 174,000 in 2022, $ 251,000 in 2023, $ 107,000 in 2024 and $ 27,000 in 2025.

space rent expense for the nine months ended September 30, 2022 and 2021 was $ 563,000 and $ 441,000 , respectively.

The payment schedule for the Company’s operating lease obligations as of September 30, 2022 is as follows:

Operating lease costs for the three months ended March 31, 2023, and 2022 were $ 165 thousand and $ 142 thousand, respectively.

Cash payments included in the operating lease cost for the three months ended March 31, 2023, and 2022 were $ 178 thousand and $ 150 thousand, respectively.

The weighted average remaining operating lease terms as of March 31, 2023, and 2022 were 9.63 months and 12 months, respectively.

The Company acquired and amended certain leases for office space in Texas providing for payments of $ 561,000 in 2023, $ 275,000 in 2024, and $ 45,000 in 2025.

Rent expense for office space the quarter ended March 31, 2023 and 2022 was $ 141,000 and $ 177,000 , respectively.

The payment schedule for the Company’s operating lease obligations as of March 31, 2023 is as follows:

(Thousands of dollars)

Operating Leases

Total undiscounted lease payments

Amount associated with discounting

Net operating lease liabilities

Total net operating lease liabilities

Current portion included in Current portion of asset retirement and Other Long-Term Obligations

portion included in Other Long-Term Obligations

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the nine months ended September 30, 2022 is as follows:

A reconciliation of the liability for plugging and abandonment costs for the three months ended March 31, 2023 is as follows:

(Thousands of dollars)

September 30,

Asset retirement obligation at December 31, 2022

Liabilities incurred

Liabilities settled

Accretion expense

Asset retirement obligation at September 30, 2022

Accretion of discount

Asset retirement obligation at March 31, 2023

Less current portion of asset retirement obligations

Asset retirement obligations, long-term

The Company’s liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive life of wells and a risk-adjusted interest rate.

Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation.

Revisions to the asset retirement obligation are recorded with an offsetting change to producing properties, resulting in prospective changes to depreciation, depletion and amortization expense and accretion of discount.

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

(6) Contingent Liabilities:

7 unchanged sentences

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

At September 30, 2022 and 2021, remaining options held by two key executive officers on 767,500 shares were outstanding and exercisable at prices ranging from $ 1.00 to $ 1.25 .

At March 31, 2023 and 2022, remaining options held by two key executive officers on 767,500 shares were outstanding and exercisable at prices ranging from $ 1.00 to $ 1.25 .

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

(8) Related Party Transactions:

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

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.

(9) Financial Instruments

Fair Value Measurements:

Authoritative

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

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

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

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

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

September 30, 2022

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022:

March 31, 2023

Quoted Prices in

4 unchanged sentences

Inputs (Level 3)

September 30,

(Thousands of dollars)

Commodity derivative contracts

March 31, 2023

Quoted Prices in

Active Markets

For Identical

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

(Thousands of dollars)

Commodity derivative contracts

9 unchanged sentences

Commodity derivative contracts

Total liabilities

6 unchanged sentences

Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2022.

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2023.

(Thousands of dollars)

3 unchanged sentences

Purchases, sales, issuances and settlements

Net Liabilities - September 30, 2022

Net Liabilities — March 31, 2023

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

4 unchanged sentences

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

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

The following table sets forth the effect of derivative instruments on the consolidated balance sheets at March 31, 2023 and December 31, 2022:

(Thousands of dollars)

Balance Sheet Location

September 30,

Asset Derivatives:

Derivatives not designated as cash-flow hedging instruments:

Crude oil commodity contracts

Derivative asset short-term

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 nine months ended September 30, 2022 and 2021:

The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the three months ended March 31, 2023 and 2022:

Amount of gain/loss

4 unchanged sentences

Natural gas commodity contracts

Unrealized (loss) 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

3 unchanged sentences

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:

Nine Months Ended September 30,

Effect of dilutive securities:

Three Months Ended September 30,

The following reconciles amounts reported in th e consolidated fin

ancial statements:

Quarter Ended March 31,

Effect of dilutive securities:

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

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

What changed 10-Q

Item 1. Financial Statements