What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-11 · 114 added, 125 removed, 150 unchanged (61% of the section changed)

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• Critical Accounting Policies and Estimates.

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

The financial information with respect to the three and nine-month periods ended September 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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We are an independent oil and natural gas company with a principal focus on acquisition, development and production activities in the U.S.

Mid-Continent.

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

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.

Mid-Continent ("Mid-Con").

Prior to February 5, 2021, we held assets in the North Park Basin ("NPB" or “North Park") of Colorado, which have been sold in their entirety.

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

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

For the nine-months ended September 30, 2021, NPB had 67 MBoe of oil production.

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(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,

(2) For the three and nine-months ended September 30, 2020, NPB had 203 MBoe and 752 MBoe, respectively of oil production.

Total production for the three-month periods ended September 30, 2021 and September 30, 2020 were comprised of approximately 12.7% oil, 55.2% natural gas and 32.1% NGLs compared to 22.2% oil, 46.3% natural gas and 31.5% NGLs, respectively.

Total production for the nine-month periods ended September 30, 2021 and September 30, 2020 were comprised of approximately 14.4% oil, 52.5% natural gas and 33.1% NGLs compared to 24.5% oil, 44.5% natural gas and 31.0% NGLs, respectively.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Recent Events

• On September 2, 2021, we repaid our $20.0 million term loan in full and terminated all commitments and obligations under the New Credit Facility.

Our repayment of the term loan satisfied all of our remaining term debt and revolving debt obligations.

• 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.

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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).

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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.

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 did not repurchase any common stock under the Program during the third quarter ended September 30, 2021.

Throughout 2021, we have focused, and will continue to focus, on maximizing free cash flow through a combination of cost control measures and the continued exercise of financial discipline and prudent capital allocation.

This combination includes limiting our capital projects to projects we believe will provide high rates of return in the current commodity price environment.

Given our levels of capital expenditures in 2020 and 2021, our oil, natural gas and NGL production has declined and may continue to decline prospectively.

However, wells brought back online during the period, as well as potential future well reactivations may partially offset 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.

The COVID-19 pandemic reduced global economic activity and negatively impacted energy demand during the previous twelve months.

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

As the impact of the COVID-19 lessens, demand for commodities is continuing to rise to pre-pandemic levels with United States commodities inventory being below five-year average levels.

The continued demand with the noted lower inventory levels have led to favorable commodity prices during the quarter ended September 30, 2021.

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.

If the vaccines currently available are not effective against COVID-19 or its other variants, we may have to rely on mobility and activity restrictions to mitigate the spread, which could lead to reduced 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.

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

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Consolidated Results of Operations

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Three month periods ended

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

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

NYMEX Oil (per Bbl) $ 70.59 $ 66.18 $ 58.09 $ 42.58 $ 40.92

NYMEX Natural gas (per MMBtu) $ 4.32 $ 2.98 $ 2.72 $ 2.76 $ 2.12

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 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.

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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,

In order to reduce our exposure to price fluctuations, from time to time we enter 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.” During periods where the strike prices for our commodity derivative contracts are below market prices at the time of settlement, we may not fully benefit from increases in the market price of oil and natural gas.

Conversely, during periods of declining oil and natural gas market prices, our commodity derivative contracts may partially offset declining revenues and cash flow to the extent strike prices for our contracts are above market prices at the time of settlement.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Total revenues (1) $ 46,584 $ 27,676 $ 114,403 $ 84,660

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Oil, Natural Gas and NGL Production and Pricing

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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__________________

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

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,

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Total 1,722 100.0 % 2,048 100.0 % 5,096 100.0 % 6,765 100.0 %

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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

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 nine-month periods ended September 30, 2021, and 2020 are shown in the table below (in thousands):

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

2020 oil, natural gas and NGL revenues $ 27,547 $ 84,134

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2021 oil, natural gas and NGL revenues $ 46,584 $ 114,403

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,

Revenues from oil, natural gas and NGL sales increased $19.0 million or 69.1% for the three-months ended September 30, 2021 as compared to the three-months ended September 30, 2020.

Revenues from oil, natural gas and NGL sales increased

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$30.3 million or 36.0% for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Revenue for the three and nine 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 the related increase in energy demand, in addition to a contraction of differentials on realized commodity prices offset by a slight decrease in oil revenue due to lower production as a result of the sale of NPB.

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.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Operating Expenses

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 4.8 % 8.5 % 6.1 % 8.8 %

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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 .

Lease operating expenses increased by $1.0 million or $1.33/Boe for the three-months ended September 30, 2021, as compared to the three-months ended September 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 .

Lease operating expenses decreased by $6.1 million or $0.36/Boe for the nine months ended September 30, 2021, as compared to the nine months ended September 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 .

Production, ad valorem, and other taxes for the three and nine-months ended September 30, 2021 decreased primarily due to a decline in ad valorem taxes due to the sale of NPB in Colorado and a change in estimate for the last ad valorem tax payment related to NPB partially offset by an increase in production taxes due to an increase in revenues as discussed above.

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

The average depreciation and depletion rate for our oil and natural gas properties for the three-months ended September 30, 2021 decreased by $2.46/Boe from the three-months ended September 30, 2020.

The average depreciation and depletion rate for our oil and natural gas properties for the nine-months ended September 30, 2021 decreased by $5.43/Boe from the nine-months ended September 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.

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

In the three-month period ended September 30, 2020, we recorded a total impairment charge of $44.0 million.

In the nine-month period ended September 30, 2020, we recorded a total impairment charge of $253.8 million, which included a full cost ceiling limitation impairment charge of $215.8 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 nine-month periods ended September 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 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.

The SEC Prices utilized in the calculation of proved reserves included in the full cost ceiling test at September 30, 2021 were $57.69 per barrel of oil and $2.94 per Mcf of natural gas, before price differential adjustments.

Based on the SEC Prices over the trailing eleven months ended November 1, 2021, as well as one month of NYMEX strip pricing for December of 2021 as of November 1, 2021, we anticipate the SEC Prices utilized in the December 31, 2021 full cost ceiling test may be $67.97 per barrel of oil and $3.64 per Mcf of natural gas, (the "estimated year-end prices").

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

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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 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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Total non-operating expenses $ 5,221 $ 12,059 $ (7,634) $ 15,465

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.

General and administrative expenses decreased by $0.3 million for the three-months ended September 30, 2021, compared to the same period in 2020.

The decrease related to lower salaries and wages as a result of reductions in personnel costs.

General and administrative expenses decreased by $5.4 million for the nine months ended September 30, 2021, compared to the same period in 2020.

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 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 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.

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

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

Restructuring expenses decreased by $2.9 million for the three-months ended September 30, 2021, compared to the same period in 2020.

Restructuring expenses decreased by $1.0 million for the nine months ended September 30, 2021, compared to the same period in 2020.

These decreases are primarily related to previously accrued expenses for the 2016 Bankruptcy that were

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removed as a result of the notice of completion of final distribution being filed in the United States Bankruptcy Court for the Southern District of Texas on July 26, 2021.

Employee termination benefits for the three and nine-month periods ended September 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 13 - 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 and six-month periods ended June 30, 2021, and 2020 (in thousands):

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

(Gain) loss on sale of assets decreased by $0.9 million for the three-months ended September 30, 2021, compared to the same period in 2020.

The decrease primarily relates to a reduction to the NPB sales price as a result of post-closing adjustments.

(Gain) loss on sale of assets increased by $18.9 million for the nine months ended September 30, 2021, compared to the same period in 2020.

The increase is directly related to the gain on sale for the sale of NPB assets in Colorado in February 2021.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Gain) loss on commodity derivative contracts $ 4,129 $ 5,299 $ 4,129 $ (7,168)

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.

Cash received (paid) on settlements $ — $ 619 $ — $ 11,197

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.

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 views 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)

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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$ 2,140 $ (698) $ 2,324 $ (1,648)

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 incurred during the three and nine-month periods ended September 30, 2021 is primarily comprised of interest paid on the New Credit Facility.

The New Credit Facility has been fully repaid and terminated as of September 2, 2021.

As a result of the termination of the New Credit Facility, $0.2 million of deferred financing costs were expensed to Interest expense.

Interest expense incurred during the three and nine-month periods ended September 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.

The Other income (expense), net line item for the three and nine-month periods ended September 30, 2021 includes the removal of an allowance for doubtful accounts recorded for the year ended December 31, 2020 as a result of management determining the receivable from a government agency is collectible.

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Liquidity and Capital Resources

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.

As of September 30, 2021, we had cash and cash equivalents, including restricted cash, of $99.0 million.

The New Credit Facility was terminated, as discussed below.

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.

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.

As of November 5, 2021, we had approximately $115.8 million of cash on hand, including restricted cash.

For the next twelve months, we expect to have ample liquidity with cash on hand and cash from operations.

On September 2, 2021, we repaid our $20.0 million term loan in full and terminated all commitments and obligations under the New Credit Facility, between us, as Borrower, IEP Energy Holding LLC, as Lender, and Icahn Agency Services LLC, as Administrative Agent.

Our payment to the Lender under the Credit Agreement satisfied all of our term debt and revolving debt obligations.

We did not incur any early termination penalties as a result of the repayment of indebtedness or termination of the Credit Agreement.

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 common stock beginning as early as August 16, 2021.

We did not repurchase any common stock under the Program during the third quarter ended September 30, 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 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.

Our principal sources of liquidity for the next year include cash flows from operations and cash on hand.

Our working capital increased to $62.1 million at September 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 September 30, 2021 as a result of proceeds from the sale of NPB and cash flows 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.

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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,

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

Nine Months Ended September 30,

Cash flows provided by (used in ) operating activities $ 66,315 $ 27,356

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Cash Flows from Operating Activities

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.

The $39.0 million increase in operating cash flows for the nine-month period ended September 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 partially offset by the gain on sale of assets primarily related to NPB.

Cash Flows from Investing Activities

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.

Our cash flows provided in investing activities during the nine-month period ended September 30, 2021 reflects $38.1 million of net cash proceeds from the sale of assets offset primarily by capital expenditures of $8.6 million and acquisition of overriding royalty interests for $3.6 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,

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During the nine-month period ended September 30, 2020, cash flows provided in investing activities primarily reflects $35.4 million net cash proceeds from the sale of the corporate office building offset by cash payments made for capital expenditures and of acquisition of overriding royalty interests for $3.3 million.

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

Nine Months Ended September 30,

Capital Expenditures

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Total cash paid for capital expenditures $ 12,219 $ 11,386

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Reflects cash paid or adjustments to accruals during the period presented for expenditures related to prior period capital expenditures program.

Cash Flows from Financing Activities

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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Cash used in financing activities for the nine-month period ended September 30, 2021 consisted primarily of repayments of borrowings under the New Credit Facility of $20.0 million, finance lease payments of $0.5 million and cash paid for tax obligations on vested stock awards of $0.9 million.

Cash used by financing activities for the nine-month period ended September 30, 2020 consisted primarily of repayments of borrowings under the credit facility of $84.5 million, finance lease payments of $1.0 million and cash paid for tax obligations on vested stock awards of $0.1 million partially offset by borrowings of $39.0 million.

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

Contractual Obligations and Off-Balance Sheet Arrangements

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

At September 30, 2021, our contractual obligations included asset retirement obligations, 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 six months of 2021.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first nine 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