What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 118 added, 97 removed, 117 unchanged (65% of the section changed)

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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 2021 Form 10-K.

Our discussion and analysis includes the following subjects:

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• Critical Accounting Policies and Estimates.

The financial information with respect to the three-month periods ended March 31, 2022, and 2021, discussed below, is unaudited.

The financial information with respect to the three and six-month periods ended June 30, 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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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-month periods ended March 31, 2022 and 2021:

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

Total MBoe production for the three-month period ended June 30, 2022 was comprised of approximately 12.8% oil, 53.8% natural gas and 33.4% NGL compared to 13.1% oil, 51.5% natural gas and 35.4% NGL in 2021.

Total MBoe production for the six-month period ended June 30, 2022 was comprised of approximately 13.1% oil, 53.8% natural gas and 33.1% NGL compared to 15.3% oil, 51.1% natural gas and 33.6% NGL in 2021.

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Recent Events

• Consistent with our 2022 Development Program, announced on March 9, 2022, we commenced the drilling of three new wells during the quarter ended June 30, 2022.

• On June 20, 2022 the Audit Committee appointed Moss Adams LLP as our independent registered public accounting firm.

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.

These projects include (1) a continuation of our well reactivation program, (2) artificial lift conversions to more efficient and cost effective systems and (3) focused drilling in high-graded areas.

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

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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.

Our planned capital expenditure activity in 2022 is expected to add incremental production for 2022.

Consolidated Results of Operations

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.

Our consolidated revenues and cash flow are generated from the production and sale of oil, natural gas and NGL.

Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGL we produce, and our ability to find and economically develop and produce our reserves.

Prices for oil, natural gas and NGL 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

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

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

NYMEX Oil (per Bbl) $ 108.83 $ 95.02 $ 77.34 $ 70.59

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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.

Quantitative and Qualitative Disclosures About Market Risk.” As of June 30, 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,

Consolidated revenues for the three and six-month periods ended June 30, 2022, and 2021 are presented in the table below (in thousands):

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

2022 2021 2022 2021

Oil $ 22,602 $ 14,666 $ 42,383 $ 30,214

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Total revenues (1) $ 69,760 $ 34,196 $ 127,247 $ 67,819

(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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(1) Mid-Continent represented $64.6 million, or 95.3% of total consolidated revenues for the six-months ended June 30, 2021.

NPB represented $3.2 million, or 4.7% of total consolidated revenues for the six-months ended June 30, 2021.

Oil, Natural Gas and NGL Production and Pricing

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,

Our production and pricing information for the three and six-month periods ended June 30, 2022, and 2021 is shown in the table below:

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

2022 2021 2022 2021

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 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

The average NYMEX prices for the three month period ended June 30, 2022 were $108.83 for Oil and $7.47 for Natural Gas.

The average NYMEX prices for the three month period ended June 30, 2021 were $66.18 for Oil and $2.98 for Natural Gas.

The average NYMEX prices for the six month period ended June 30, 2022 were $102.01 for Oil and $6.07 for Natural Gas.

The average NYMEX prices for the six month period ended June 30, 2021 were $62.20 for Oil and $2.85 for Natural Gas.

The table below presents production by area of operation for the three and six-month periods ended June 30, 2022, and 2021:

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

2022 2021 2022 2021

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

Mid-Continent 1,620 100.0 % 1,733 100.0 % 3,226 100.0 % 3,307 98.0 %

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Total 1,620 100.0 % 1,733 100.0 % 3,226 100.0 % 3,374 100.0 %

Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the three-month periods ended March 31, 2022, and 2021 are shown in the table below (in thousands):

Three Months Ended March 31, 2022

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

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Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

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

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2022 oil, natural gas and NGL revenues $ 69,760 $ 127,247

(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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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.

Revenues from oil, natural gas and NGL sales increased $35.6 million or 104.0% for the three-months ended June 30, 2022 as compared to the three-months ended June 30, 2021.

Revenues from oil, natural gas and NGL sales increased $59.4 million or 87.6% for the six-months ended June 30, 2022 as compared to the six-months ended June 30, 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, in addition to natural production declines partially offset by our well reactivation program.

See "Item 1A—Risk Factors" included in our 2021 Form 10-K and 10-K/A for additional discussion of the potential impact these events may have on our future revenues.

Operating Expenses

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

Three Months Ended March 31,

Operating expenses for the three and six-month periods ended June 30, 2022, and 2021 consisted of the following (in thousands):

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

2022 2021 2022 2021

Lease operating expenses $ 9,512 $ 9,232 $ 20,374 $ 17,186

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Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) 6.9 % 7.4 % 7.0 % 6.9 %

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 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.

Lease operating expenses increased $0.3 million or $0.54/Boe for the three-months ended June 30, 2022, as compared to the three-months ended June 30, 2021 .

Lease operating expenses increased by $3.2 million or $1.23/Boe for the six-months ended June 30, 2022, as compared to the six-months ended June 30, 2021 .

The increase was primarily due to a higher number of producing wells, higher workover expense due to our well reactivation program and inflationary pressures.

Production, ad valorem, and other taxes has increased primarily due to higher commodity prices and related revenues as discussed above for the three-and six-months ended June 30, 2022.

Further, it decreased as a percentage of oil, natural gas, and NGL revenue for the three-months ended June 30, 2022 as compared to the same period in 2021, primarily due to reduced ad valorem taxes as a result of the sale of NPB.

Further, production tax as a percentage of oil, natural gas, and NGL revenue for the six-months ended June 30, 2022 as compared to the same period in 2021, remained flat.

The average depreciation and depletion rate for our oil and natural gas properties for the three-months ended June 30, 2022 increased by $0.47/Boe from the three months ended June 30, 2021.

The average depreciation and depletion rate for our oil and natural gas properties for the six-months ended June 30, 2022 increased by $0.23/Boe from the six-months ended June 30, 2021.

The increases are primarily due to higher capitalized costs due to our well reactivation, drilling and other capital expenditure activities.

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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.

A ceiling limitation calculation is performed at the end of each quarter.

If the full cost pool balance exceeds the ceiling limitation, an impairment of the full cost pool is required.

Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month first-day-of-the-month index prices (“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, 2022 were $85.78 per barrel of oil and $5.13 per Mcf of natural gas, before price differential adjustments.

The ceiling limitation was not exceeded, therefore no full cost ceiling limitation impairments were recorded during the three and six-month periods ended June 30, 2022 or 2021.

During certain periods within the past five years the SEC prices used in the full cost ceiling test have been lower than the SEC prices used for the June 30, 2022 full cost ceiling test and resulted in material ceiling limitation impairments.

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

Based on the SEC prices over the ten months ended July 1, 2022, as well as two month of NYMEX strip pricing for August and September of 2022 as of July 28, 2022, we anticipate the SEC prices utilized in the September 30, 2022 full cost ceiling test may be $92.59 per barrel of oil and $6.09 per Mcf of natural gas, (the "estimated third quarter prices").

Applying these estimated second quarter prices, and holding all other inputs constant to those used in the calculation of our June 30, 2022 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the third quarter of 2022.

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.

Other Operating Expenses

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,

Other operating expenses for the three and six-month periods ended June 30, 2022, and 2021 consisted of the following (in thousands):

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

2022 2021 2022 2021

General and administrative $ 2,171 $ 2,522 $ 4,701 $ 4,612

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Employee termination benefits — — — 49

(Gain) loss on derivative contracts 1,064 —

(Gain) loss on sale of assets — (19,713)

Other operating (income) expense (64) (48)

Loss on derivative contracts — — 1,064 —

Gain on sale of assets — — — (19,713)

Other operating income (51) (65) (115) (113)

Total non-operating expenses $ 2,553 $ 2,713 $ 6,292 $ (12,855)

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.

General and administrative expenses decreased by $0.4 million for the three-months ended June 30, 2022, compared to the same period in 2021.

The decrease primarily relates to a decreases in professional fees and employee compensation.

General and administrative expenses were flat for the six-months ended June 30, 2022, compared to the same period in 2021.

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

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 $ —

Cash received (paid) on settlements $ (1,085) $ —

Restructuring expenses increased by $0.2 million and decreased by $1.7 million for the three and six-month periods ended June 30, 2022, compared to the same period in 2021.

For the six-month period ended June 30, 2022 the decrease primarily relates to payments of $1.3 million, made during the first half of 2021, to settle general unsecured claims related to our 2016 bankruptcy.

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The following table summarizes derivative activity for the three and six-month periods ended June 30, 2022, and 2021 (in thousands):

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

2022 2021 2022 2021

Loss on commodity derivative contracts $ — $ — $ 1,064 $ —

Cash paid on settlements $ — $ — $ (1,085) $ —

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

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

and, cash is paid on settlement of contracts due to higher oil and natural gas prices at the time of settlement, compared to the contract price for our commodity derivative contracts.

Internally, management has historically viewed the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil, natural gas and NGL 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, natural gas and NGL 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.

(Gain) loss on sale of assets decreased by $19.7 million for the six-month period ended June 30, 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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See “ Acquisitions and Divestitures ” to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report for additional information regarding the sale of NPB.

Other Income (Expense)

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,

Our other income (expense) for the three and six-month periods ended June 30, 2022, and 2021 are presented in the table below (in thousands):

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

2022 2021 2022 2021

Other income (expense)

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$ (27) $ (84) $ (179) $ (131)

Other income (expense), net

Other income, net

12 287 88 315

Total other income (expense)

$ (15) $ 203 $ (91) $ 184

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.

Interest expense incurred during the three-month period ended June 30, 2022 is primarily comprised of interest related to letters of credit.

Interest expense incurred during the six-month period ended June 30, 2022 is primarily comprised of interest paid on royalty obligations of $0.1 million.

Interest expense incurred during the three and six-month periods ended June 30, 2021 is primarily comprised of interest paid on the prior 2020 Credit Facility as discussed in our 2021 10-K and 10-K/A.

The Other income (expense), net line item for the three and six-month periods ended June 30, 2022, and 2021 primarily relates to a gain on the sale of fleet vehicles.

Liquidity and Capital Resources

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

As of June 30, 2022, our cash and cash equivalents, including restricted cash was $205.2 million.

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

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

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.

Our working capital increased to $166.1 million at June 30, 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 June 30, 2022 as a result of cash flows from operations, partially offset by increased accrued liabilities due to our increased capital expenditure activity in 2022.

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Our cash flows from operations are substantially dependent on current and future prices for oil, natural gas and NGL, 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 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

Our cash flows for the six-month periods ended June 30, 2022, and 2021 are presented in the following table and discussed below (in thousands):

Six Months Ended June 30,

Cash flows provided by operating activities $ 79,156 $ 33,231

Cash flows provided by (used in) investing activities (13,133) 29,907

Cash flows provided by (used in) financing activities (320) (167)

Net increase (decrease) in cash and cash equivalents $ 26,254 $ 48,249

Cash flows used in financing activities (362) (795)

Net increase in cash and cash equivalents and restricted cash $ 65,661 $ 62,343

Cash Flows from Operating Activities

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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The $45.9 million increase in cash flow from operations for the six-month period ended June 30, 2022 compared to the same period in 2021, is primarily due to higher revenues as a result of improved commodity prices as discussed above offset by a slight decrease in production.

The changes in operating assets and liabilities do not include changes in accounts payable or accrued expenses attributable to capital expenditures noted in the capital expenditure table below.

Cash Flows from Investing Activities

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.

Our cash flows provided from investing activities during the six-month period ended June 30, 2022 reflects capital expenditures of $12.0 million primarily related to capital expenditures made for drilling, capital workovers, well reactivations, inventory purchases and an acreage acquisition for $1.4 million.

The increase was partially offset by $0.3 million of proceeds from the sale of assets.

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

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 for the six-month periods ended June 30, 2022, and 2021 are summarized below (in thousands):

Six Months Ended June 30,

Capital Expenditures

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Capital expenditures, including acquisitions 23,219 7,129

Change in capital accruals (349) 946

Changes in accounts payable and accrued expenses (9,829) 864

Total cash paid for capital expenditures $ 13,390 $ 7,993

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

(1) The Company capitalized $4.5 million in inventory purchases, net of inventory utilized during 2022 on drilling, completion, capital workover and well reactivation activities.

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Cash Flows from Financing Activities

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.

Cash used in financing activities for the six-month period ended June 30, 2022 consisted primarily of $0.2 million of cash used to pay employee tax obligations, for vested stock awards that were settled by net exercise, and finance lease payments of $0.2 million offset by immaterial proceeds from the exercise of stock options.

Cash used in financing activities for the six-month period ended June 30, 2021 consisted primarily of finance lease payments and cash used to pay employee tax obligations for vested stock awards that were settled by net exercise.

Net exercises of stock awards allows the holder of a stock award to tender back to us a number of shares at fair value upon the vesting of such stock award, that equals the employee payroll tax obligation due.

We then remit a cash payment to the relevant taxing authority on behalf of the employee for their payroll tax obligations resulting from the vesting of their stock award.

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.

See item 7 “Liquidity and Capital Resources” in the Company’s 2021 Form 10-K and 10-K/A.

Contractual Obligations and Off-Balance Sheet Arrangements

At March 31, 2022, our contractual obligations included asset retirement obligations, leases and other individually insignificant obligations.

At June 30, 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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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 2021 Form 10-K.

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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 Form10-K and 10-K/A.

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 2021 Form 10-K .

Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2021 Form 10-K and 10-K/A .

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

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

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

Tabl e of Contents

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