What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-12 · 144 added, 97 removed, 131 unchanged (65% of the section changed)

6 unchanged sentences

• Critical Accounting Policies and Estimates.

The financial information with respect to the three-month periods ended March 31, 2021, and 2020, discussed below, is unaudited.

The financial information with respect to the three and six-month periods ended June 30, 2021, and 2020, discussed below, is unaudited.

In the opinion of management, this information contains all adjustments, which consist only of normal recurring adjustments unless otherwise disclosed, necessary to state fairly the accompanying unaudited condensed consolidated financial statements.

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Prior to February 5, 2021, we held assets in the North Park Basin of Colorado, which have been sold in their entirety.

The charts below shows production by product for the three-month periods ended March 31, 2021 and 2020:

(1) For the year three-months ended March 31, 2021, Mid-Continent production was 832 MBoe of natural gas, 521 MBoe of NGLs and 221 MBoe of oil totaling 1,574 MBoe.

North Park Basin had 67 MBoe of oil production.

(2) For the year three-months ended March 31, 2020, Mid-Continent production was 1,116 MBoe of natural gas, 769 MBoe of NGLs and 354 MBoe of oil totaling 2,239 MBoe.

North Park Basin had 328 MBoe of oil production.

Total production for the three-month periods ended March 31, 2021 was comprised of approximately 17.6% oil, 50.7% natural gas and 31.7% NGLs compared to 26.6% oil, 43.4% natural gas and 30.0% NGLs in 2020.

The chart below shows production by product for the three and six-month periods ended June 30, 2021 and 2020:

(1) For the three-months ended June 30, 2021, there was no NPB oil production as a result of the sale.

For the six-months ended June 30, 2021, North Park Basin had 67 MBoe of oil production.

Tabl e of Contents

Mid-continent production for the three-months ended March 31, 2021 was comprised of approximately 14.0% oil, 52.9% natural gas and 33.1% NGLs compared to 15.8% oil, 49.9% natural gas and 34.3% NGLs in 2020.

The decline in Mid-Continent production was primarily due to pro-active well shut-ins in response to a drop in commodity prices in the second quarter of 2020, as well as regular production declines.

(2) For the three and six-months ended June 30, 2020, North Park Basin had 222 MBoe and 550 MBoe, respectively of oil production.

Total production for the three-month periods ended June 30, 2021 and June 30, 2020 were comprised of approximately 13.1% oil, 51.5% natural gas and 35.4% NGLs compared to 24.2% oil, 44.1% natural gas and 31.7% NGLs, respectively.

Total production for the six-month periods ended June 30, 2021 and June 30, 2020 were comprised of approximately 15.3% oil, 51.1% natural gas and 33.6% NGLs compared to 25.5% oil, 43.7% natural gas and 30.8% NGLs, respectively.

Mid-Continent total production for the three and six-month periods ended June 30, 2021 and 2020 was comprised of the following:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Oil 13.1 % 15.4 % 13.5 % 15.6 %

NGL 35.4 % 35.3 % 34.3 % 34.8 %

Natural gas 51.5 % 49.3 % 52.2 % 49.6 %

Total 100.0 % 100.0 % 100.0 % 100.0 %

Recent Events

• In August 2021, our Board of Directors (the “Board”) approved the initiation of a share repurchase program (the "Program") authorizing us to purchase up to an aggregate of $25.0 million of our common stock beginning as early as August 16, 2021.

The Program is in accordance with Rule 10b-18 of the Exchange Act.

Subject to applicable rules and regulations, repurchases under the Program can be made from time to time in open markets at our discretion and in compliance with safe harbor provisions, or in privately negotiated transactions.

The Program does not require any specific number of shares to be acquired, and can be modified or discontinued by the Board at any time.

• On July 26, 2021, we entered into an amendment (the “First Amendment”) to the New Credit Facility.

Pursuant to the First Amendment, we will be permitted to grant liens securing its obligations under swap contracts with certain counterparties to the extent such swap contracts are permitted under the Credit Agreement and approved by our board of directors.

• In connection with the resignation of our previous Chief Executive Officer ("CEO"), the Board appointed Grayson Pranin as President and CEO effective July 16, 2021 and in addition will maintain his role as Chief Operating Officer.

Pranin’s compensation will be determined at a later time.

Pranin, age 41, has held the role of Senior Vice President and Chief Operating Officer since March 3, 2021.

• On July 9, 2021, Carl F.

submitted his resignation from his positions as CEO, President and as a member of the Board of the Company, effective July 16, 2021 in order to pursue another career opportunity.

Giesler did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

• On April 22, 2021, we announced the acquisition of all the overriding royalty interest assets of SandRidge Mississippian Trust I (the “Trust”).

The gross purchase price is $4.9 million (net $3.6 million, given our 26.9% ownership of the Trust).

• On March 3, 2021, we named Mr.

Grayson Pranin, formerly its Vice President for Reserves and Engineering, as Senior Vice President and Chief Operating Officer.

We also named Mr.

Salah Gamoudi, our Chief Financial Officer and Chief Accounting Officer, as a Senior Vice President.

We also named Mr.

Dean Parrish, formerly our Director of Operations, as our Vice President of Operations.

• On February 5, 2021, we sold all of our oil and natural gas properties and related assets of the North Park Basin ("NPB") in Colorado for a purchase price of $47 million in cash.

We will focus on maximizing free cash flow in 2021 through a combination of cost control measures and the continued exercise of financial discipline and prudent capital allocation, which includes limiting our capital projects to projects we believe will provide high rates of return in the current commodity price environment.

As a result, our planned capital expenditures for 2021 will be similar to our 2020 levels.

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• During the second quarter of 2021, we began returning wells to production that were previously curtailed due to the commodity price downturn in the first half of 2020 and, in many cases, improving their production potential through modest capital improvements.

Focused efforts to improve operating costs, along with commodity prices rebounding from their 2020 lows, have bolstered the economics of these well reactivation projects.

High rates of return and low execution risk support our belief that these projects represent an efficient use of capital.

As of June 30, 2021, we returned 49 wells to production, resulting in average incremental production of 0.8 MBoed in the first half of 2021.

Approximately 30 of these wells required workovers to return to service and accounted for capital expenditures of $0.6 million and $0.8 million of expense workovers.

The balance of the wells required little to no expenditures to reactivate.

• Subsequent to the sale of NPB assets in the first quarter of 2021, we are no longer engaged in the routine flaring of produced natural gas.

Throughout 2021, we have focused and will continue to focus on maximizing free cash flow in 2021 through a combination of cost control measures and the continued exercise of financial discipline and prudent capital allocation, which includes limiting our capital projects to projects we believe will provide high rates of return in the current commodity price environment.

As a result, our planned capital expenditures for 2021 will likely be of similar magnitude, but potentially an increase to 2020 levels.

Given this expected level of capital expenditures, our oil, natural gas and NGL production will likely decline in 2021.

We will consider expanding our capital program after assessing all factors, including commodity prices.

However, wells brought back online during the period, as well as potential future well reactivations may partially stem the natural decline of our base production.

We may consider further expanding our capital program after assessing all factors, including commodity prices.

We will also continue our pursuit of acquisitions and business combinations which provide high margin properties with attractive returns at current commodity prices.

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Demand for oil and natural gas is slowly returning to pre-pandemic levels as COVID-19 vaccination rates and economic activity have increased.

Additionally, we have implemented several additional initiatives to maximize free cash flow, reduce our debt level, maximize our liquidity position and, ultimately realize greater shareholder value.

These initiatives included personnel and non-personnel cost reductions, along with the sale of the Company's headquarters during 2020.

However, the spread of COVID-19 variants and the effectiveness of the vaccines against these variants are significant risk factors to a full and sustained recovery.

If the vaccines currently available are not effective against COVID-19 or its other variants, we will have to continue to rely on mobility and activity restrictions to mitigate the spread, which will lead to a longer, more drawn-out return in demand for certain products.

Additionally, we have implemented several additional initiatives to maximize free cash flow, our liquidity position and, ultimately realize greater shareholder value.

These initiatives included personnel and non-personnel cost reductions, along with the sale of our headquarters during 2020.

Prior to February 5, 2021, we held assets in the North Park Basin, which have been sold in their entirety.

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Three month periods ended

March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

NYMEX Oil (per Bbl) $ 66.18 $ 58.09 $ 42.58 $ 40.92

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In order to reduce our exposure to price fluctuations, we have historically entered into commodity derivative contracts for a portion of our anticipated future oil and natural gas production as discussed in “Item 3.

Quantitative and Qualitative Disclosures About Market Risk.” As of March 31, 2021, we had no open commodity derivative contracts and there was no commodity derivative activity during the quarter ended March 31, 2021.

Quantitative and Qualitative Disclosures About Market Risk.” As of June 30, 2021, we had no open commodity derivative contracts and there was no commodity derivative activity during the three and six-month periods ended June 30, 2021.

Tabl e of Contents

Consolidated revenues for the three-month periods ended March 31, 2021, and 2020 are presented in the table below (in thousands):

Three Months Ended March 31,

Consolidated revenues for the three and six-month periods ended June 30, 2021, and 2020 are presented in the table below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Oil $ 14,666 $ 11,554 $ 30,214 $ 40,208

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Natural gas 8,905 3,303 18,124 8,854

Other — 207 — 397

Total revenues (1) $ 34,196 $ 16,655 $ 67,819 $ 56,984

(1) Mid-Continent represented $30.4 million, or 90.6% and $27.5 million, or 68.4% of total consolidated revenues for the three-months ended March 31, 2021 and 2020, respectively.

NPB represented $3.2 million, or 9.4% and $12.8 million, or 31.6% of total consolidated revenues for the three-months ended March 31, 2021 and 2020, respectively.

Oil, Natural Gas and NGL Production and Pricing

The Company's production and pricing information for the three-month periods ended March 31, 2021, and 2020 is shown in the table below:

Three Months Ended March 31,

Our production and pricing information for the three and six-month periods ended June 30, 2021, and 2020 is shown in the table below:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Production data

Oil (MBbls) 227 520 515 1,202

NGL (MBbls) 613 681 1,134 1,451

Natural gas (MMcf) 5,356 5,697 10,349 12,391

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NGL (per Bbl) $ 17.33 $ 2.34 $ 17.18 $ 5.19

$ 17.00 $ 7.72

Natural gas (per Mcf) $ 1.66 $ 0.58 $ 1.75 $ 0.71

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Oil (per Bbl) $ 64.73 $ 33.47 $ 58.70 $ 41.72

$ 53.99 $ 48.01

NGL (per Bbl) $ 17.33 $ 2.34 $ 17.18 $ 5.19

Natural gas (per Mcf) $ 1.66 $ 0.69 $ 1.75 $ 0.77

$ 1.85 $ 0.83

Total (per Boe) $ 19.74 $ 10.67 $ 20.10 $ 14.24

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(1) Prices represent actual average sales prices for the periods presented and do not include effects of derivatives.

Tabl e of Contents

The table below presents production by area of operation for the three-month periods ended March 31, 2021, and 2020:

Three Months Ended March 31,

Production (MBoe) % of Total Production (MBoe)

The table below presents production by area of operation for the three and six-month periods ended June 30, 2021, and 2020:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Production (MBoe) % of Total Production (MBoe) % of Total Production (MBoe) % of Total Production (MBoe) % of Total

Mid-Continent 1,733 100.0 % 1,929 89.7 % 3,307 98.0 % 4,168 88.3 %

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Total 1,733 100.0 % 2,151 100.0 % 3,374 100.0 % 4,718 100.0 %

Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the three-month periods ended March 31, 2021, and 2020 are shown in the table below (in thousands):

Three Months Ended March 31, 2021

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Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the three and six-month periods ended June 30, 2021, and 2020 are shown in the table below (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

2020 oil, natural gas and NGL revenues $ 16,448 $ 56,587

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2021 oil, natural gas and NGL revenues $ 34,196 $ 67,819

Revenues from oil, natural gas and NGL sales decreased $6.5 million or 16.2%for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Revenue has declined primarily due to the divestiture of the North Park Basin properties and natural production declines in our existing producing wells in the Mid-Continent partially offset by increased realized commodity prices.

Mid-Continent represented $30.4 million, or 90.6% and $27.5 million, or 68.4% of total consolidated revenues for the three-months ended March 31, 2021 and 2020, respectively.

NPB represented $3.2 million, or 9.4% and $12.8 million, or 31.6% of total consolidated revenues for the three-months ended March 31, 2021 and 2020, respectively.

See "Item 1A—Risk Factors" included in the Company's 2020 Form 10-K for additional discussion of the potential impact these events may have on our future revenues.

Revenues from oil, natural gas and NGL sales increased $17.7 million or 107.9% for three-months ended June 30, 2021 as compared to the three-months ended June 30, 2020.

Revenues from oil, natural gas and NGL sales increased $11.2 million or 19.8% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Revenue for the three and six months ended has increased primarily due to increased oil, natural gas and NGL realized prices primarily as a result of increased economic activity and recovery from the COVID-19 pandemic and related increase in energy demand, in addition to a contraction of differentials on realized commodity prices.

Further, natural gas revenue increased due to higher realized prices as a result of growth in demand outpacing supply.

These increases were partially offset by an overall decline in production due to the natural declines in our existing producing wells and divestiture of the NPB properties, partially stemmed by the reactivation of wells.

Mid-Continent and North Park revenues for the three and six-month periods ended June 30, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

$ % of Total $ % of Total $ % of Total $ % of Total

Mid-Continent $ 34,196 100.0 % $ 11,821 71.9 % $ 64,649 95.3 % $ 39,201 69.3 %

North Park $ — — % $ 4,627 28.1 % $ 3,170 4.7 % $ 17,386 30.7 %

See "Item 1A—Risk Factors" included in our 2020 Form 10-K for additional discussion of the potential impact these events may have on our future revenues.

Operating Expenses

Operating expenses for the three-month periods ended March 31, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended March 31,

Operating expenses for the three and six-month periods ended June 30, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Lease operating expenses $ 9,232 $ 8,698 $ 17,186 $ 24,340

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Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 7.4 % 11.3 % 6.9 % 8.9 %

Lease operating expenses decreased by $7.7 million or $1.24/Boe for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020 .

These decreases primarily resulted from field personnel reductions in force, the sale of NPB and the shut-in of wells that had become uneconomic due to natural production declines.

NPB represented $0.9 million, or 11.6% and $3.5 million, or 22.7% of consolidated Lease operating expense for the three months ended March 31, 2021 and 2020, respectively.

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Production, ad valorem, and other taxes have continued to decrease primarily due to declining production and revenues as discussed above.

Further, they have decreased as a percentage of oil, natural gas, and NGL revenue for the three months ended March 31, 2021 as compared to the same period in 2020, primarily due to decreases in ad valorem taxes as a result of credits and deductions earned on production taxes.

NPB represented $0.2 million, or 11.4% and $0.8 million, or 24.1% of consolidated Production, ad valorem and other taxes for the three months ended March 31, 2021 and 2020, respectively.

The average depreciation and depletion rate for our oil and natural gas properties for the three months ended March 31, 2021 decreased by $8.15/Boe from the three months ended March 31, 2020.

This decrease is primarily due to the sale of the North Park Basin properties and full cost ceiling test impairments recorded during 2020, which lowered the net cost basis of oil and gas properties significantly.

We did not record a full cost ceiling limitation impairment during the three months ended March 31, 2021.

We recorded a full cost ceiling limitation impairment of $8.0 million during the three months ended March 31, 2020, which resulted from various factors including a decrease in the trailing twelve-month weighted average natural gas price in the first quarter of 2020.

North Park Lease operating expenses and Production, ad valorem, and other taxes for the three and six-month periods ended June 30, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

$ % of Total $ % of Total $ % of Total $ % of Total

Lease operating expense $ — — % $ 2,225 25.6 % $ 921 5.4 % $ 5,774 23.7 %

Production, ad valorem and other taxes $ — — % $ 309 16.7 % $ 249 5.3 % $ 1,080 21.4 %

Lease operating expenses increased by $0.5 million or $1.28/Boe for the three-months ended June 30, 2021, as compared to the three months ended June 30, 2020 .

The increase was the result of reactivating wells that are now considered economic due to increased commodity prices.

Lease operating expenses decreased by $7.2 million or $0.06/Boe for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020 .

These decreases primarily resulted from field personnel reductions in force, the sale of NPB and other cost reduction efforts.

Production, ad valorem, and other taxes for the three months ended June 30, 2021 have increased primarily due to increases in revenues.

Further, they have decreased as a percentage of oil, natural gas, and NGL revenue for the three months ended June 30, 2021 as compared to the same period in 2020, primarily due to ad valorem taxes remaining flat and increased revenue.

Production, ad valorem, and other taxes for the six months ended June 30, 2021 have decreased primarily due to declining production as discussed above, partially offset by higher commodity prices.

Further, they have decreased as a percentage of oil, natural gas, and NGL revenue for the six months ended June 30, 2021 as compared to the same period in 2020, primarily due to decreases in production taxes as a result of tax credits and deductions.

The average depreciation and depletion rate for our oil and natural gas properties for the three months ended June 30, 2021 decreased by $4.94/Boe from the three months ended June 30, 2020.

The average depreciation and depletion rate for our oil and natural gas properties for the six months ended June 30, 2021 decreased by $6.71/Boe from the six months ended June 30, 2020 .

These decreases are primarily due to the sale of the North Park Basin properties and full cost ceiling test impairments recorded during 2020, which lowered the net cost basis of our oil and gas properties significantly.

We did not record a full cost ceiling limitation impairment during the three and six-months ended June 30, 2021.

In the three-month period ended June 30, 2020, we recorded a total impairment charge of $201.8 million, which included a full cost ceiling limitation impairment charge of $163.8 million, and an impairment charge of $38.0 million to write down the value of our office headquarters to its estimated fair value less estimated costs to sell the building.

The ceiling limitation impairment charges recorded in the three and six-month periods ended June 30, 2020 resulted from various factors including a decrease in the trailing twelve-month weighted average natural gas price in 2020.

Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month SEC Prices as adjusted for price differentials and other contractual arrangements.

The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at March 31, 2021 were $40.01 per barrel of oil and $2.16 per Mcf of natural gas, before price differential adjustments.

Based on the SEC prices over the eleven months ended May 1, 2021, as well as one month of NYMEX strip pricing for June of 2021 as of May 7, 2021 we anticipate the SEC prices utilized in the June 30, 2021 full cost ceiling test may be $49.54 per barrel of oil and $2.44 per Mcf of natural gas, (the "estimated second quarter prices").

Applying these estimated second quarter prices, and holding all other inputs constant to those used in the calculation of our March 31, 2021 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the second quarter of 2021.

Any actual full cost ceiling limitation impairment recognized in future quarters may fluctuate significantly from projected amounts based on the outcome of numerous other factors such as additional declines in the actual trailing twelve-month SEC prices, lower NGL pricing, changes in estimated future development costs and operating expenses, and other adjustments to our levels of proved reserves.

The SEC Prices utilized in the calculation of proved reserves included in the full cost ceiling test at June 30, 2021 were $49.78 per barrel of oil and $2.43 per Mcf of natural gas, before price differential adjustments.

Based on the SEC Prices over the eleven months ended August 1, 2021, as well as one month of NYMEX strip pricing for September of 2021 as of August 5 2021 we anticipate the SEC Prices utilized in the June 30, 2021 full cost ceiling test may be $57.70 per barrel of oil and $2.93 per Mcf of natural gas, (the "estimated third quarter prices").

Applying these estimated third quarter prices, and holding all other inputs constant to those used in the calculation of our June 30, 2021 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the third quarter of 2021.

Any actual full cost ceiling limitation impairment recognized in future quarters may fluctuate significantly from projected amounts based on the outcome of numerous other factors such as declines in the actual trailing twelve-month SEC Prices, lower NGL pricing, changes in estimated future development costs and operating expenses, and other adjustments to our levels of proved reserves.

Any such ceiling test impairments in 2021 could be material to our net earnings.

Full cost pool impairments have no impact to our cash flow or liquidity.

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Other Operating Expenses

Other operating expenses for the three-month periods ended March 31, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended March 31,

Other operating expenses for the three and six-month periods ended June 30, 2021, and 2020 consisted of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

General and administrative $ 2,522 $ 4,314 $ 4,612 $ 9,797

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Total non-operating expenses $ 2,713 $ 4,618 $ (12,855) $ 3,406

General and administrative expenses decreased by $3.4 million for the three months ended March 31, 2021, compared to the same period in 2020.

These decreases resulted primarily from a reduction in compensation related costs after completing reductions in force during 2020, significant reductions in information technology and software costs and overhead related to the Company's previously held corporate headquarters building.

General and administrative expenses decreased by $1.8 million for the three months ended June 30, 2021, compared to the same period in 2020.

General and administrative expenses decreased by $5.2 million for the six months ended June 30, 2021, compared to the same period in 2020.

These decreases resulted primarily from a reduction in compensation related costs after completing reductions in force during 2020, significant reductions in information technology and software costs and overhead related to our previously held corporate headquarters building and other cost cutting efforts.

Part of the decrease is also due to reductions in professional costs such as legal expenses, audit fees and consulting services.

General and administrative expenses for the first three months of 2021 were impacted by a refund of a $0.4 million legal retainer related to prior periods.

Tabl e of Contents

General and administrative expenses for the first six months of 2021 were impacted by a refund of a $0.4 million legal retainer related to prior periods.

Restructuring expenses represent fees and costs associated with the 2016 bankruptcy and exit from North Park Basin in Colorado.

Restructuring expenses included payments of $1.3 million to settle general unsecured claims related to our 2016 bankruptcy during the quarter ended March 31, 2021.

Employee termination benefits for the three-month periods ended March 31, 2021 and 2020 include cash and share-based severance costs incurred for the reduction in force, sale of NPB and other employee terminations in the relevant periods.

Restructuring expenses included payments of $1.3 million to settle general unsecured claims related to our 2016 bankruptcy during the six-month period ended June 30, 2021.

Employee termination benefits for the three and six-month periods ended June 30, 2021 and 2020 include cash and share-based severance costs incurred for the reduction in force, sale of NPB and other employee terminations in the relevant periods.

See “ Note 1 3 - Employee Termination Benefits ” in the accompanying unaudited condensed consolidated financial statements for additional discussion of these expenses.

The following table summarizes derivative activity for the three-month periods ended March 31, 2021, and 2020 (in thousands):

Three Months Ended March 31,

The following table summarizes derivative activity for the three and six-month periods ended June 30, 2021, and 2020 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Gain) loss on commodity derivative contracts $ — $ (2,241) $ — $ (12,467)

Cash (received) paid on settlements $ — $ (4,087)

There were no open commodity derivative contracts during the three months ended March 31, 2021.

Cash received on settlements $ — $ 6,490 $ — $ 10,577

There were no open commodity derivative contracts during the three and six-months periods ended June 30, 2021.

As applicable, our derivative contracts were not designated as accounting hedges and, as a result, changes in their fair values were recorded each quarter as a component of operating expenses.

Internally, management has historically viewed the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil and natural gas production to determine “effective prices.” In general, cash is received on settlement of contracts due to lower oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts, and cash is paid on settlement of contracts due to higher oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts.

Management has historically viewed the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil and natural gas production to determine “effective prices.” In general, cash is received on settlement of contracts due to lower oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts, and cash is paid on settlement of contracts due to higher oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts.

See further discussion of derivative contracts in “Item 3.

Quantitative and Qualitative Disclosures about Market Risk” included in Part I of this Quarterly Report.

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Other Income (Expense)

The Company’s other income (expense) for the three-month periods ended March 31, 2021, and 2020 are presented in the table below (in thousands):

Three Months Ended March 31,

Our other income (expense) for the three and six-month periods ended June 30, 2021, and 2020 are presented in the table below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Other income (expense)

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Other income (expense), net

Total other expense

287 58 315 134

Interest expense incurred during the three-month period ended March 31, 2021 is primarily comprised of interest paid on the New Credit Facility.

Interest expense incurred during the three-month period ended March 31, 2020 is primarily comprised of interest and fees paid on the prior credit facility that was terminated on November 30, 2020.

Total other income (expense)

$ 203 $ (389) $ 184 $ (950)

Interest expense incurred during the three and six-month periods ended June 30, 2021 is primarily comprised of interest paid on the New Credit Facility.

Interest expense incurred during the three and six-month periods ended June 30, 2020 is primarily comprised of interest and fees paid on the prior credit facility that was terminated on November 30, 2020.

Interest expense is net of amounts capitalized.

Liquidity and Capital Resources

As of March 31, 2021, we had cash and cash equivalents, excluding restricted cash, of $73.9 million.

As of June 30, 2021, we had cash and cash equivalents, excluding restricted cash, of $88.3 million.

Additionally, we had a $20.0 million term loan outstanding and $10.0 million available under our $30.0 million New Credit Facility, which matures on November 30, 2023.

See "Note—8 Long-Term Debt" to the accompanying condensed consolidated financial statements in Item 1 of this report.

As of May 7, 2021, we had approximately $81.2 million of cash on hand, excluding restricted cash, $20.0 million outstanding under its term loan facility and no balance outstanding under the $10.0 million revolving loan facility.

See "Note 8—Long-Term Debt" to the accompanying condensed consolidated financial statements in Item 1 of this Quarterly Report.

As of August 6, 2021, we had approximately $104.9 million of cash on hand, including restricted cash, $20.0 million outstanding under our term loan facility and no balance outstanding under the $10.0 million revolving loan facility.

For the next twelve months, we expect to have ample liquidity with amounts available to be drawn on our New Credit Facility, cash on hand, and cash from operations.

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On July 26, 2021, we entered into the First Amendment to the New Credit Facility.

Pursuant to the First Amendment, we will be permitted to grant liens securing our obligations under swap contracts with certain counterparties to the extent such swap contracts are permitted under the Credit Agreement and approved by our board of directors.

In August, 2021, our Board approved the initiation of a share repurchase program authorizing us to purchase up to an aggregate of $25.0 million of our Company’s common stock beginning as early as August 16, 2021.

Working Capital and Sources and Uses of Cash

Our principal sources of liquidity for the next year include cash flows from operations, cash on hand and amounts available under our New Credit Facility, as discussed in “Note 8— Long-Term Debt” to the accompanying unaudited condensed consolidated financial statements and “Item 1A.

Risk Factors” included in Part I of the Company's Form 10-K Report, we expect market volatility factors to have a material, adverse impact on future revenue growth and overall profitability for the foreseeable future.

Our working capital increased to $39.8 million at March 31, 2021, compared to a deficit of $18.1 million at December 31, 2020, the positive impact on working capital resulted primarily from an increase in cash and cash equivalents at March 31, 2021 as a result of proceeds from the sale of NPB and cash from operations.

Risk Factors” included in Part I of our Form 10-K Report, we expect market volatility factors to have a material, adverse impact on future revenue growth and overall profitability for the foreseeable future.

Our working capital increased to $54.3 million at June 30, 2021, compared to a deficit of $18.1 million at December 31, 2020, the positive impact on working capital resulted primarily from an increase in cash and cash equivalents at June 30, 2021 as a result of proceeds from the sale of NPB and cash from operations.

In addition, accounts payable and accrued liabilities decreased due to our continuous cost reduction efforts, the sale of NPB and the timing of payments.

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Cash flows from operations are also affected by timing of cash receipts and disbursements and changes in other working capital assets and liabilities.

Our cash flows for the three-month periods ended March 31, 2021, and 2020 are presented in the following table and discussed below (in thousands):

Three Months Ended March 31,

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Our cash flows for the six-month periods ended June 30, 2021, and 2020 are presented in the following table and discussed below (in thousands):

Six Months Ended June 30,

Cash flows provided by (used in ) operating activities $ 33,231 $ 13,462

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Cash Flows from Operating Activities

The $3.8 million decrease in operating cash flows for the three-month period ended March 31, 2021 compared to the same period in 2020, is primarily due to the declines in revenues, partially offset by reduction in accounts payable and accrued expenses and reductions in expenses due to our cost reduction efforts.

See “—Condensed Consolidated Results of Operations” for further analysis of the changes in revenues and operating expenses, and see “Note 13—Employee Termination Benefits” to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this report for additional detail on cash paid for employee termination benefits.

The $19.8 million increase in operating cash flows for the six-month period ended June 30, 2021 compared to the same period in 2020, is primarily due to the increases in revenues as a result of improved commodity prices as discussed above and reductions in expenses due to our cost reduction efforts.

Cash Flows from Investing Activities

Our cash flows provided in investing activities during the three-month period ended March 31, 2021 primarily reflects $37.2 million of net cash proceeds from the sale of assets offset by capital expenditures of $3.1 million.

See "Note 6 — Acquisitions and Divestitures" to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this report for additional information.

During the three-month period ended March 31, 2020, cash flows used in investing activities primarily reflects cash payments made for capital expenditures accrued at December 31, 2019.

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Capital expenditures for the three-month periods ended March 31, 2021, and 2020 are summarized below (in thousands):

Three Months Ended March 31,

Our cash flows provided in investing activities during the six-month period ended June 30, 2021 primarily reflects $37.9 million of net cash proceeds from the sale of assets offset by capital expenditures of $4.4 million.

See "Note 6 — Acquisitions and Divestitures" to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report for additional information.

During the six-month period ended June 30, 2020, cash flows used in investing activities primarily reflects cash payments made for capital expenditures accrued at December 31, 2019.

Capital expenditures for the six-month periods ended June 30, 2021, and 2020 are summarized below (in thousands):

Six Months Ended June 30,

Capital Expenditures

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Cash Flows from Financing Activities

Cash used in financing activities for the three-month period ended March 31, 2021 consisted primarily of finance lease payments and cash paid for tax obligations on vested awards.

See “Note 8—Long-Term Debt” to the accompanying unaudited condensed consolidated financial statements for additional discussion of the Company's debt at March 31, 2021 and December 31, 2020.

Cash used in financing activities for the six-month period ended June 30, 2021 consisted primarily of finance lease payments and cash paid for tax obligations on vested awards.

See “Note 8—Long-Term Debt” to the accompanying unaudited condensed consolidated financial statements for additional discussion of our debt at June 30, 2021 and December 31, 2020.

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Contractual Obligations and Off-Balance Sheet Arrangements

At March 31, 2021, our contractual obligations included asset retirement obligations, long-term debt obligations and short-term leases and other individually insignificant obligations.

At June 30, 2021, our contractual obligations included asset retirement obligations, long-term debt obligations and short-term leases and other individually insignificant obligations.

Additionally, we have certain financial instruments representing potential commitments that were incurred in the normal course of business to support our operations, including surety bonds.

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For a discussion of recent accounting pronouncements, newly adopted and recent accounting pronouncements not yet adopted, see “Note 1 - Basis of Presentation” to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first three months of 2021.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first six months of 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis