What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-10 · 97 added, 147 removed, 117 unchanged (68% of the section changed)

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• 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.

The financial information with respect to the three-month periods ended March 31, 2022, and 2021, 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 ("Mid-Con").

Mid-Continent region (“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 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.

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.

The chart below shows production by product for the three-month periods ended March 31, 2022 and 2021:

(1) Excludes 67 MBoe of oil production from North Park Basin, which was sold on February 5, 2021.

Total production for the three-month period ended March 31, 2022 was comprised of approximately 13.3% oil, 53.9% natural gas and 32.8% NGLs compared to 17.6% oil, 50.7% natural gas and 31.7% NGLs in 2021.

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We will continue to focus on growing the cash value and generation capability of our asset base in a safe, responsible and efficient manner, while exercising prudent capital allocations to projects we believe provide high rates of returns in the current commodity price environment.

These projects include a continuation of our well reactivation program, artificial lift conversions to more efficient and cost effective systems, as well as focused drilling in high-graded areas, which will aide in partially offsetting the natural decline of our producing asset's.

Stabilization of forward looking commodity prices, results, costs and other factors will shape our development decisions in 2022 and beyond.

We will also remain open, patient and maintain optionality for opportunistic, value-accretive acquisitions and business combinations.

Demand for natural gas has increased in the United States with inventory levels falling below the five-year average, coupled with only modest increases in production.

This has resulted in upward pressure on natural gas pricing.

The rising consumption of crude oil, oil supply disruptions due to geopolitical events, and the risk of supply outages amid low global inventory levels have caused oil prices to rise.

An increase in current and future oil supply is needed to meet forecasted demand in order to ease pressure on oil pricing.

Our planned capital expenditure activity in 2022 is expected to add incremental production for 2022 to help offset our base production declines.

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 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.

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Three month periods ended

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

March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021

NYMEX Oil (per Bbl) $ 95.02 $ 77.34 $ 70.59 $ 66.18

NYMEX Natural gas (per MMBtu) $ 4.67 $ 4.76 $ 4.32 $ 2.98

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

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

Quantitative and Qualitative Disclosures About Market Risk.” As of March 31, 2022, we had no open commodity derivative contracts.

However, we had commodity derivative activity during the quarter ended March 31, 2022.

See “Note 3 - Derivatives” to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report for additional information regarding our commodity derivatives.

Consolidated revenues for the three-month periods ended March 31, 2022, and 2021 are presented in the table below (in thousands):

Three Months Ended March 31,

Oil $ 19,781 $ 15,548

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Natural gas 19,964 9,219

Other — 129 — 526

Total revenues (1) $ 57,487 $ 33,623

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

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

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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

Our production and pricing information for the three-month periods ended March 31, 2022, and 2021 is shown in the table below:

Three Months Ended March 31,

Production data

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(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

The average NYMEX prices for the three month period ended March 31, 2022 were $95.02 for Oil and $4.67 for Natural Gas.

The average NYMEX prices for the three month period ended March 31, 2021 were $58.09 for Oil and $2.72 for Natural Gas.

The table below presents production by area of operation for the three-month periods ended March 31, 2022, and 2021:

Three Months Ended March 31,

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

Mid-Continent 1,606 100.0 % 1,574 95.9 %

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Total 1,606 100.0 % 1,641 100.0 %

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

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, 2022, and 2021 are shown in the table below (in thousands):

Three Months Ended March 31, 2022

2021 oil, natural gas and NGL revenues $ 33,623

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2022 oil, natural gas and NGL revenues $ 57,487

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

(1) The decrease in production volumes is attributable to 67 MBoe from NPB, sold on February 5, 2021, partially offset by an increase in Mid-Con production volumes for the three months ended March 31, 2022.

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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

$ % 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 %

Revenues from oil, natural gas and NGL sales increased $23.9 million or 71.0% for the three-months ended March 31, 2022 as compared to the three-months ended March 31, 2021.

Revenue increased primarily due to favorable realized commodity prices offset by a slight decrease in production primarily as a result of the sale of NPB, with natural production declines in the Mid-Con reduced by our well reactivation program.

The average prices for oil, natural gas and NGL’s increased primarily as a result of decreased supply of global commodities.

See "Item 1A—Risk Factors" included in our 2021 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

Operating expenses for the three-month periods ended March 31, 2022, and 2021 consisted of the following (in thousands):

Three Months Ended March 31,

Lease operating expenses $ 10,862 $ 7,954

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Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 7.1 % 6.5 %

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.

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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.

Lease operating expenses increased by $2.9 million or $1.92/Boe for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 .

The increase is primarily due to a higher number of producing wells, higher workover expense due to our well reactivation program and higher service and material costs driven by inflation.

Production, ad valorem, and other taxes has increased primarily due to higher commodity prices as discussed above.

Further, it also increased as a percentage of oil, natural gas, and NGL revenue for the three months ended March 31, 2022 as compared to the same period in 2021, primarily due to increases in production taxes and the sale of NPB.

The average depreciation and depletion rate for our oil and natural gas properties for the three months ended March 31, 2022 decreased by $0.03/Boe from the three months ended March 31, 2021.

The decrease is primarily due to an increase in estimated proved reserves.

We did not record a full cost ceiling limitation impairment during the three months ended March 31, 2022 or March 31, 2021.

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.

The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at March 31, 2022 were $75.24 per barrel of oil and $4.09 per Mcf of natural gas, before price differential adjustments.

Based on the SEC prices over the ten months ended April 30, 2022, as well as two month of NYMEX strip pricing for May and June of 2022 as of April 25, 2022, we anticipate the SEC prices utilized in the June 30, 2022 full cost ceiling test may be $83.80 per barrel of oil and $4.98 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, 2022 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the second quarter of 2022.

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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 2022 could be material to our net earnings.

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

Full cost pool ceiling limitation 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

Other operating expenses for the three-month periods ended March 31, 2022, and 2021 consisted of the following (in thousands):

Three Months Ended March 31,

General and administrative $ 2,530 $ 2,090

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Total non-operating expenses $ 3,739 $ (15,568)

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.

General and administrative expenses increased by $0.4 million for the three-months ended March 31, 2022, compared to the same period in 2021.

The increase primarily relates to a $0.4 million legal retainer refund that was recorded as a credit, reducing general and administrative expense in the first quarter of 2021.

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.

(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

Restructuring expenses decreased by $1.8 million for the three-months ended March 31, 2022, compared to the same period in 2021.

The decrease primarily relates to 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 period ended March 31, 2021 included cash and share-based severance costs incurred for the sale of NPB and other employee terminations in the relevant periods.

The following table summarizes derivative activity for the three-month periods ended March 31, 2022, and 2021 (in thousands):

Three Months Ended March 31,

(Gain) loss on commodity derivative contracts $ 1,064 $ —

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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.

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.

See further discussion of derivative contracts in “Item 3.

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

(Gain) loss on sale of assets decreased by $19.7 million for the three-month period ended March 31, 2022, compared to the same period in 2021.

The decrease relates to the gain from sale of NPB in February 2021.

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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

Our other income (expense) for the three-month periods ended March 31, 2022, and 2021 are presented in the table below (in thousands):

Three Months Ended March 31,

Other income (expense)

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Other income (expense), net

2,396 (129) 2,711 5

Total other income (expense)

$ (76) $ (19)

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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Interest expense incurred during the three-month period ended March 31, 2022 is primarily comprised of interest paid on royalty obligations of $0.1 million.

Interest expense incurred during the three-month period ended March 31, 2021 is primarily comprised of interest paid on the prior 2020 Credit Facility as discussed in our 2021 10-K.

The Other income, net line item for the three-month period ended March 31, 2022 primarily relates to a gain on the sale of fleet vehicles.

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.

As of March 31, 2022, our cash and cash equivalents, including restricted cash was $165.8 million.

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.

The Company has no outstanding term or revolving debt obligations.

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.

Our working capital increased to $130.4 million at March 31, 2022, compared to $97.7 million at December 31, 2021.

The positive impact on working capital resulted primarily from an increase in cash and cash equivalents at March 31, 2022 as a result of cash flows from operations.

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,

Our cash flows for the three-month periods ended March 31, 2022, and 2021 are presented in the following table and discussed below (in thousands):

Three Months Ended March 31,

Cash flows provided by (used in ) operating activities $ 32,193 $ 14,331

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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.

The $17.9 million increase in cash flow from operations for the three-month period ended March 31, 2022 compared to the same period in 2021, is primarily due to higher revenues as a result of improved commodity prices as discussed above and consistent production as a result of the well reactivation program, partially offset by the sale of NPB.

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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.

Our cash flows provided from investing activities during the three-month period ended March 31, 2022 reflects capital expenditures of $5.6 million primarily related to purchases of inventory in preparation of the drilling program and workovers related to the well reactivation program.

The increase was partially offset by proceeds from the sale assets of $0.1 million.

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

See "Note 5 — Acquisitions and Divestitures" to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report for additional information.

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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 for the three-month periods ended March 31, 2022, and 2021 are summarized below (in thousands):

Three Months Ended March 31,

Capital Expenditures

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Total cash paid for capital expenditures $ 5,629 $ 3,153

(1) The Company capitalized $3.9 million in inventory primarily associated with the planned 2022 drilling program.

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.

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.

Cash used in financing activities for the three-month period ended March 31, 2022 consisted primarily of cash paid for tax obligations on vested stock awards of $0.2 million and finance lease payments of $0.1 million offset by immaterial proceeds from the exercise of stock options.

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

Credit Facility

On September 2, 2021, we repaid our $20.0 million term loan in full and terminated all commitments and obligations under the 2020 Credit Facility, between us, as Borrower, IEP Energy Holding LLC, as Lender, and Icahn Agency Services LLC, as Administrative Agent.

The 2020 Credit Facility consisted of a $10 million revolving loan facility and a $20 million term loan facility.

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.

See item 7 “Liquidity and Capital Resources” in the Company’s Form 10-K.

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.

At March 31, 2022, our contractual obligations included asset retirement obligations, 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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There were no other significant changes in total contractual obligations and off-balance sheet arrangements from those reported in the 2021 Form 10-K.

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Critical Accounting Policies and Estimates

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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 nine months of 2021.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first three months of 2022.

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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