SANDRIDGE ENERGY INC 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Introduction The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report, as well as our audited consolidated financial statements and the accompanying notes included in the 2020 Form 10-K. Our discussion and analysis includes the following subjects: • Overview; • Consolidated Results of Operations; • Liquidity and Capital Resources; and • Critical Accounting Policies and Estimates. 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. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year. Overview 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 ("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. 20 Tabl e of Contents (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 Oil 12.7 % 13.6 % 13.3 % 15.0 % NGL 32.1 % 35.0 % 33.5 % 34.9 % Natural gas 55.2 % 51.4 % 53.2 % 50.1 % Total 100.0 % 100.0 % 100.0 % 100.0 % 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. 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. We did not repurchase any common stock under the Program during the third quarter ended September 30, 2021. Outlook 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. 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 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. 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. 21 Tabl e of Contents Consolidated Results of Operations The majority of our consolidated revenues and cash flow are generated from the production and sale of oil, natural gas and NGLs. Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGLs we produce, and our ability to find and economically develop and produce our reserves. Prices for oil, natural gas and NGLs fluctuate widely and are difficult to predict. To provide information on the general trend in pricing, the average New York Mercantile Exchange "NYMEX" prices for oil and natural gas are shown in the table below: Three month periods ended 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, 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. Revenues 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 Oil $ 15,198 $ 17,071 $ 45,412 $ 57,279 NGL 14,863 4,983 34,344 12,508 Natural gas 16,523 5,493 34,647 14,347 Other — 129 — 526 Total revenues (1) $ 46,584 $ 27,676 $ 114,403 $ 84,660 22 Tabl e of Contents Oil, Natural Gas and NGL Production and Pricing 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 Production data Oil (MBbls) 219 454 734 1,656 NGL (MBbls) 552 646 1,686 2,096 Natural gas (MMcf) 5,710 5,686 16,059 18,078 Total volumes (MBoe) 1,722 2,048 5,096 6,765 Average daily total volumes (MBoe/d) 18.7 22.3 18.7 24.7 Average prices—as reported (1) Oil (per Bbl) $ 69.40 $ 37.60 $ 61.87 $ 34.59 NGL (per Bbl) $ 26.93 $ 7.71 $ 20.37 $ 5.97 Natural gas (per Mcf) $ 2.89 $ 0.97 $ 2.16 $ 0.79 Total (per Boe) $ 27.06 $ 13.45 $ 22.45 $ 12.44 Average prices—including impact of derivative contract settlements Oil (per Bbl) $ 69.40 $ 37.60 $ 61.87 $ 40.59 NGL (per Bbl) $ 26.93 $ 7.71 $ 20.37 $ 5.97 Natural gas (per Mcf) $ 2.89 $ 1.07 $ 2.16 $ 0.86 Total (per Boe) $ 27.06 $ 13.76 $ 22.45 $ 14.09 __________________ (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 Production (MBoe) % of Total Production (MBoe) % of Total Production (MBoe) % of Total Production (MBoe) % of Total Mid-Continent 1,722 100.0 % 1,845 90.1 % 5,029 98.7 % 6,013 88.9 % North Park Basin — — % 203 9.9 % 67 1.3 % 752 11.1 % Total 1,722 100.0 % 2,048 100.0 % 5,096 100.0 % 6,765 100.0 % 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 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 Change due to production volumes (8,819) (37,471) Change due to average prices 27,856 67,740 2021 oil, natural gas and NGL revenues $ 46,584 $ 114,403 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 23 Tabl e of Contents $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 $ % of Total $ % of Total $ % of Total $ % of Total Mid-Continent $ 46,584 100.0 % $ 20,464 74.3 % $ 111,233 97.2 % $ 59,665 70.9 % North Park $ — — % $ 7,083 25.7 % $ 3,170 2.8 % $ 24,469 29.1 % 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 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 Lease operating expenses $ 9,080 $ 8,069 $ 26,266 $ 32,409 Production, ad valorem, and other taxes 2,219 2,333 6,929 7,386 Depreciation and depletion—oil and natural gas 2,092 7,525 6,790 45,728 Depreciation and amortization—other 1,513 1,698 4,482 6,071 Total operating expenses $ 14,904 $ 19,625 $ 44,467 $ 91,594 Lease operating expenses ($/Boe) $ 5.27 $ 3.94 $ 5.15 $ 4.79 Production, ad valorem, and other taxes ($/Boe) $ 1.29 $ 1.14 $ 1.36 $ 1.09 Depreciation and depletion—oil and natural gas ($/Boe) $ 1.22 $ 3.67 $ 1.33 $ 6.76 Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 4.8 % 8.5 % 6.1 % 8.8 % 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 $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 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. 24 Tabl e of Contents Impairment 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 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. 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. Other Operating Expenses 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 General and administrative $ 2,229 $ 2,493 $ 6,841 $ 12,290 Restructuring expenses (1,696) 1,199 614 1,643 Employee termination benefits — 3,184 49 8,431 (Gain) loss on derivative contracts 4,129 5,299 4,129 (7,168) (Gain) loss on sale of assets 761 (178) (18,952) (100) Other operating (income) expense (202) 62 (315) 369 Total non-operating expenses $ 5,221 $ 12,059 $ (7,634) $ 15,465 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. 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 reduction 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 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 25 Tabl e of Contents 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. (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 (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 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. Other Income (Expense) 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 Other income (expense) Interest expense, net $ (256) $ (569) $ (387) $ (1,653) Other income (expense), net 2,396 (129) 2,711 5 Total other income (expense) $ 2,140 $ (698) $ 2,324 $ (1,648) 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. 26 Tabl e of Contents Liquidity and Capital Resources 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 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 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. Cash Flows Our cash flows from operations are substantially dependent on current and future prices for oil and natural gas, which historically have been, and may continue to be, volatile. 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 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, 2021 2020 Cash flows provided by (used in ) operating activities $ 66,315 $ 27,356 Cash flows provided by (used in) investing activities 25,867 25,857 Cash flows provided by (used in) financing activities (21,446) (46,540) Net increase (decrease) in cash and cash equivalents $ 70,736 $ 6,673 Cash Flows from Operating Activities 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 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. 27 Tabl e of Contents 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, 2021 2020 Capital Expenditures Drilling, completion and capital workovers $ 6,374 $ 3,306 Leasehold and geophysical 467 896 Capital expenditures, excluding acquisitions (on an accrual basis) 6,841 4,202 Acquisitions 3,604 3,276 Capital expenditures, including acquisitions 10,445 7,478 Change in capital accruals 1,774 3,908 Total cash paid for capital expenditures $ 12,219 $ 11,386 Cash Flows from Financing Activities 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. Indebtedness 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 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. The underlying liabilities insured by these instruments are reflected in our balance sheets, where applicable. Therefore, no additional liability is reflected for the surety bonds or other instruments. There were no other significant changes in total contractual obligations and off-balance sheet arrangements from those reported in the 2020 Form 10-K. Critical Accounting Policies and Estimates For a description of our critical accounting policies and estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2020 Form 10-K . 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 nine months of 2021. 28 Tabl e of Contents