EX-99.1 2 q421earningsrelease.htm EX-99.1 Document

Riley Permian Reports Fiscal Fourth Quarter and Year End 2021 Financial and Operating Results

OKLAHOMA CITY, December 13, 2021 -- Riley Exploration Permian, Inc. (NYSE American: REPX) ("Riley Permian" or the "Company"), today reported financial and operational results for the fiscal fourth quarter and year ended September 30, 2021.

HIGHLIGHTS FOR THE FISCAL FULL YEAR ENDING SEPTEMBER 30, 2021
•Increased total production by 22% to 3.15 MMBoe for fiscal year 2021, as compared to fiscal year 2020
•Reported net loss of $65.7 million with income from operations of $59.9 million for the same period
•Generated $89.9 million of Adjusted EBITDAX(1), $86.1 million of operating cash flow from continuing operations and $26.0 million of Free Cash Flow(1)
•Invested total cash capital expenditures before acquisitions of $60.0 million, which corresponds to 70% of operating cash flow from continuing operations
•Paid $18.3 million in dividends on common units/shares, which corresponds to 21% of operating cash flow from continuing operations or 70% of Free Cash Flow(1)
•Increased total proved developed reserves by 38% year-over-year to 41.5 MMBoe and increased total proved reserves by 27% year-over-year to 72.2 MMBoe

HIGHLIGHTS FOR THE FISCAL FOURTH QUARTER ENDING SEPTEMBER 30, 2021
•Increased production by 35% to 9.6 MBoe per day for the three months ended September 30, 2021, as compared to the same period in 2020, or by 5% quarter-over-quarter compared to fiscal third quarter 2021
•Reported net income of $15.7 million with income from operations of $26.9 million for the same period
•Generated $24.5 million of Adjusted EBITDAX(1), $27.2 million of operating cash flow from continuing operations and $7.2 million of Free Cash Flow(1)
•Realized a Cash Margin(1) of $39.08 per Boe before derivative settlements or $26.41 per Boe after derivative settlements
•Declared dividends of $0.28 per share with a record date of July 23, 2021 for a total of $5.5 million

“Riley Permian completed another strong fiscal year,” stated Bobby Riley, Chief Executive Officer and Chairman of the Board of Directors. Mr. Riley continued, “We completed our merger with Tengasco in February, had a successful capital raise in July, began and progressed on our EOR project this fall, and met our operational guidance metrics for the fiscal fourth quarter and the fiscal year. We are proud of the organic growth achieved over the past year and believe our reinvestment for growth is warranted to improve our scale, cost structure and cash flow. At the same time, we achieved this growth while allocating significant cash flow from operations back to shareholders in the form of dividends. Finally, we have continued to progress our efforts in developing CCUS projects, including for permanent storage projects on our property, and we’re optimistic in initiating our first project during 2022. We are engaging in constructive discussions and diligence efforts with counterparties from CO2 source hosts, capture equipment providers and regulatory advisors. We are seeking to construct commercial arrangements that provide attractive economic returns in the current regulatory environment, with potential for improvement should regulations change at the federal or state levels.”








___________________
(1)Non-GAAP financial measure, which is defined and reconciled below.
1


Selected Operating and Financial Data
Three Months Ended September 30,Year Ended September 30,
2021202020212020
Select Financial Data (in thousands):
Oil and natural gas sales, net $48,014 $15,309 $148,636 $73,133 
Net income (loss) $15,654 $(5,084)$(65,666)$35,144 
Adjusted EBITDAX(1)
$24,505 $14,257 $89,938 $68,387 
Production Data, net:
Oil (MBbls)639 497 2,3402,060
Natural gas (MMcf)807 466 2,6021,628
Natural gas liquids (MBbls)109 79 380 260 
Total (MBoe)882 653 3,154 2,592 
Daily combined volumes (Boe/d)9,5817,1008,6407,081
Daily oil volumes (Bbls/d)6,9405,4006,4115,630
Average Prices:
Oil ($ per Bbl)$68.95 $30.89 $58.29 $36.35 
Natural gas ($ per Mcf)(2)
2.36 (0.55)2.88 (0.78)
Natural gas liquids ($ per Bbl)(2)
19.16 2.80 12.41 (1.90)
Total average price ($ per Boe)$54.46 $23.43 $47.12 $28.22 
Average Prices, including the effects of derivative settlements(3):
Oil ($ per Bbl)$52.30 $44.48 $51.47 $49.41 
Natural gas ($ per Mcf)(2)(4)
1.69 (0.55)2.75(0.78)
Natural gas liquids ($ per Bbl)(2)(4)
19.16 2.80 12.41(1.90)
Total average price ($ per Boe)$41.79 $33.77 $41.95 $38.61 
Cash Costs ($ per Boe)(1)
$15.38 $13.80 $14.96 $14.41 
Cash Margin ($ per Boe)(1)
$39.08 $9.63 $32.16 $13.81 
Cash Margin, including derivative settlements ($ per Boe)(1)
$26.41 $19.96 $26.99 $24.19 









_____________________
(1)Non-GAAP financial measure, which is defined and reconciled below.
(2)The Company's natural gas and NGL sales are presented net of gathering, processing and transportation fees which at times exceed the price received and result in negative average prices.
(3)The Company's calculation of the effects of derivative settlements includes gains (losses) on the settlement of its commodity derivative contracts. These gains (losses) are included under other income and expense on the Company’s consolidated statement of operations.
(4)During the years ended September 30, 2021 and 2020, the Company did not have any NGL derivative contracts in place. During the year ended September 30, 2020, the Company did not have any natural gas derivative contracts in place.

2


OPERATIONS UPDATE
Riley Permian increased production by 35% to 9.6 MBoe per day for the three months ended September 30, 2021, as compared to the same period in 2020, or by 5% quarter-over-quarter compared to fiscal third quarter 2021. The Company brought online 6 gross (5.7 net) horizontal wells during the fiscal fourth quarter of 2021. The Company increased total production by 22% to 8.6 MBoe per day for fiscal year 2021, as compared to fiscal year 2020, in line with its budgeted guidance previously disclosed.

During the fiscal year 2021, Riley Permian increased total proved developed reserves by 37% year-over-year to 41.5 MMBoe and increased total proved reserves by 27% year-over-year to 72.2 MMBoe.

Since October 1, 2021, the Company has continued to progress on its EOR pilot program. The Company has drilled six of six currently planned vertical injection wells and has commenced installation of water and CO2 injection lines. Also, the Company executed two agreements in October 2021, including an agreement with the Cortez Pipeline Company relating to the connection and establishment of a delivery point for CO2 for Riley Permian, as well as an agreement with Kinder Morgan CO2 Company LLC, relating to the purchase and sale of CO2.

FINANCIALS UPDATE
The Company reported net income (loss) of $15.7 million and $(65.7) million and operating income of $26.9 million and $59.9 million for the three months and year ended September 30, 2021, respectively. The Company generated Adjusted EBITDAX(1) of $24.5 million and $89.9 million for the three months and year ended September 30, 2021, respectively. Additionally, the Company had operating cash flow from continuing operations of $27.2 million and $86.1 million and Free Cash Flow(1) of $7.2 million and $26.0 million for the three months and year ended September 30, 2021, respectively.

Fiscal fourth quarter 2021 average realized prices, before derivative settlements were $68.95 per barrel of oil, $2.36 per Mcf of natural gas and $19.16 per barrel of natural gas liquids, resulting in a total equivalent price, before derivative settlements, of $54.46 per Boe. Adjusted for derivative settlements, total equivalent price was $41.79 per Boe, corresponding to realized derivative losses of $12.67 per Boe or $11.2 million.
Riley Permian's total Cash Costs(1) for the fiscal fourth quarter of 2021 were $15.38 per Boe, representing an increase of $0.31 per Boe or 2% compared to the fiscal third quarter of 2021. Fourth quarter Cash Costs(1) included lease operating expense (“LOE”) of $6.45 per Boe, production and ad valorem taxes of $2.92 per Boe, cash G&A expenses(1) of $4.92 per Boe and interest expense of $1.09 per Boe. LOE decreased by 20% on a per unit basis to $6.45 per Boe for the three months ended September 30, 2021, as compared to the same period in 2020, or by 7% on a per unit basis quarter-over-quarter compared to fiscal third quarter 2021. Cash G&A expenses(1) increased by 16% on a per unit basis to $4.92 per Boe for the fiscal fourth quarter 2021 compared to fiscal third quarter 2021, while interest expense decreased by 23% on a per unit basis to $1.09 per Boe for the fiscal fourth quarter 2021 compared to fiscal third quarter 2021.The Company realized a fiscal fourth quarter Cash Margin(1) of $39.08 per Boe before derivative settlements or $26.41 per Boe after derivative settlements.
The Company had $19.5 million in cash drilling and completions capital expenditures during the fiscal fourth quarter, or $57.1 million for fiscal year 2021. Including additions to leasehold and other property and equipment, the Company had $60.0 million in total cash capital expenditures before acquisitions for fiscal year 2021.

During the fiscal fourth quarter 2021, the Company declared common dividends of $0.28 per share or $5.5 million in total. In October 2021, the Company declared common dividends of $0.31 per share or $6.1 million in total.

As of December 8, 2021, we had $65 million drawn and $110 million of availability on our credit facility.








____________________
(1)Non-GAAP financial measure, which is defined and reconciled below.

3

FISCAL FIRST QUARTER AND FULL YEAR 2022 OUTLOOK AND GUIDANCE
Based on current market conditions, the Company forecasts fiscal first quarter 2022 accrued capital expenditures before acquisitions to total approximately $26 million to $32 million.

Riley Permian forecasts fiscal first quarter 2022 oil production to average 7.0 MBbls per day to 7.3 MBbls per day, with total equivalent production to average 9.5 MBoe per day to 10.0 MBoe per day.

The Company forecasts first fiscal quarter of 2022 LOE of approximately $7.25 to $7.75 per Boe and cash G&A expenses(1) of approximately $4.00 to $4.75 per Boe (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements).

Based on current market conditions, the Company forecasts full-year fiscal 2022 accrued capital expenditures before acquisitions to total approximately $85 million to $95 million, which includes amounts for drilling and completions (operated and anticipated non-operated), capital workovers, infrastructure, minor additions to land and existing working interests, as well as investments in our EOR program. We believe this level of capital investment may correspond to full-year production growth of approximately 11% to 15% over full-year fiscal 2021 production levels.


CONFERENCE CALL
Riley Permian management will host a conference call for investors and analysts on December 14, 2021 at 11:00 a.m. CT to discuss the Company's results. Interested parties are invited to participate by calling:
•U.S./Canada Toll Free, (888) 330-2214
•International, +1 (646) 960-0161
•Conference ID number 5405646

An updated company presentation, which will include certain items to be discussed on the call, will be posted prior to the call on the Company's website (www.rileypermian.com). A replay of the call will be available until December 28, 2021 by calling:
•(800) 770-2030 or (647) 362-9199
•Conference ID number 5405646

About Riley Exploration Permian, Inc.
Riley Permian is a growth-oriented, independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and natural gas liquids. For more information please visit www.rileypermian.com.


















____________________
(1)Non-GAAP financial measure, which is defined above.
4


CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements contained in this release that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position and potential growth opportunities. Our forward-looking statements do not consider the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” “estimates,” “projects,” “targets” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.
Among the factors that could cause actual future results to differ materially are the risks and uncertainties the Company is exposed to. While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to: fluctuations in the price we receive for our oil, natural gas, and NGL production, including local market price differentials; the impact of the COVID-19 pandemic, including reduced demand for oil and natural gas, economic slowdown, governmental and societal actions taken in response to the COVID-19 pandemic, and stay-at-home orders or illness that may cause interruptions to our operations; cost and availability of gathering, pipeline, refining, transportation, water, CO2, and other midstream and downstream activities and our ability to sell oil, natural gas, and NGLs, which may be negatively impacted by the COVID-19 pandemic; severe weather and other risks and lead to a lack of any available markets; our ability to successfully complete mergers, acquisitions and divestitures; failure of our enhanced oil recovery project to perform as expected or produce the anticipated benefits; risks relating to our operations, including development drilling and testing results and performance of acquired properties and newly drilled wells; any reduction in our borrowing base from time to time and our ability to repay any excess borrowings as a result of such reduction; the impact of our derivative instruments and hedging activities; continuing compliance with the financial covenants contained in our credit agreement; the loss of certain federal income tax deductions or other changes to the Internal Revenue Code; risks associated with executing our business strategy, including any changes in our strategy; inability to prove up undeveloped acreage and maintaining production on leases; risks associated with concentration of operations in one major geographic area; deviations from our forecasts and budgets, including our capital expenditure budget; the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) and other oil exporting nations to agree to, adhere to and maintain oil price and production controls; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions, and disposal of produced water, which may be negatively impacted by the recent change in Presidential administration or legislatures; the ability to receive drilling and other permits or approvals and rights-of-way in a timely manner (or at all), which may be negatively impacted by the impact of COVID-19 restrictions on regulatory employees who process and approve permits, other approvals and rights-of-way and which may be restricted by new Presidential and Secretarial orders and regulation and legislation; risks related to litigation; and cybersecurity threats, technology system failures and data security issues. Additional factors that could cause results to differ materially from those described above can be found in Riley Permian’s Annual Report on Form 10-K for the year ended September 30, 2021 filed with the SEC and available from the Company’s website at www.rileypermian.com under the “Investor” tab, and in other documents the Company files with the SEC.
 
The forward-looking statements in this press release are made as of the date hereof and are based on information available at that time. The Company does not undertake, and expressly disclaims, any duty to update or revise our forward-looking statements based on new information, future events or otherwise.

Source: Riley Exploration Permian, Inc.

5

RILEY EXPLORATION PERMIAN, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2021September 30, 2020
(In thousands, except share amounts)
Assets
Current Assets:
Cash and cash equivalents$17,067 $1,660 
Accounts receivable17,473 10,128 
Accounts receivable - related parties456 55 
Prepaid expenses and other current assets1,730 1,752 
Current derivative assets— 18,819 
Total current assets36,726 32,414 
Oil and natural gas properties, net (successful efforts)345,797 310,726 
Other property and equipment, net3,183 1,801 
Non-current derivative assets106 3,102 
Other non-current assets, net2,419 2,949 
Total Assets$388,231 $350,992 
Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity
Current Liabilities:
Accounts payable$12,234 $4,739 
Accrued liabilities19,355 8,688 
Revenue payable9,008 4,432 
Income taxes payable219 — 
Advances from joint interest owners214 254 
Current derivative liabilities42,144 — 
Other current liabilities441 450 
Total Current Liabilities83,615 18,563 
Non-current derivative liabilities8,932 — 
Asset retirement obligations2,306 2,268 
Revolving credit facility60,000 101,000 
Deferred tax liabilities11,628 1,834 
Other non-current liabilities60 418 
Total Liabilities166,541 124,083 
Commitments and Contingencies
Series A Preferred Units— 60,292 
Members' Equity— 166,617 
Shareholders' Equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding
— — 
Common stock, $0.001 par value, 240,000,000 shares authorized; 19,672,050 and 0 shares issued and outstanding at September 30, 2021 and 2020, respectively
20 — 
Additional paid-in capital270,837 — 
Accumulated deficit(49,167)— 
Total Shareholders' Equity221,690 — 
Total Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity$388,231 $350,992 
6

RILEY EXPLORATION PERMIAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands, except per share/unit amounts)
Revenues:
Oil and natural gas sales, net$48,014 $15,309 $148,636 $73,133 
Contract services - related parties600 650 2,400 3,800 
Total Revenues48,614 15,959 151,036 76,933 
Costs and Expenses:
Lease operating expenses5,686 5,254 21,975 20,243 
Production and ad valorem taxes2,575 944 8,636 4,280 
Exploration costs884 692 9,566 9,923 
Depletion, depreciation, amortization and accretion6,692 5,459 26,015 21,479 
General and administrative:
Administrative costs4,790 2,157 13,966 10,826 
Unit-based compensation expense— 313 689 963 
Share-based compensation expense751 — 6,104 — 
Cost of contract services - related parties147 100 477 503 
Transaction costs198 1,389 3,732 1,431 
Total Costs and Expenses21,723 16,308 91,160 69,648 
Income (Loss) From Operations26,891 (349)59,876 7,285 
Other Income (Expense):
Interest expense(963)(1,213)(4,534)(5,299)
Gain (loss) on derivatives(14,987)(3,123)(89,195)33,876 
Total Other Income (Expense)(15,950)(4,336)(93,729)28,577 
Net Income (Loss) from Continuing Operations Before Income Taxes10,941 (4,685)(33,853)35,862 
Income tax benefit (expense)3,937 (399)(13,016)(718)
Net Income (Loss) From Continuing Operations14,878 (5,084)(46,869)35,144 
7

RILEY EXPLORATION PERMIAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands, except per share/unit amounts)
Discontinued Operations:
Income (Loss) from discontinued operations775 — (18,738)— 
Income tax benefit (expense) on discontinued operations1 — (59)— 
Income (Loss) on discontinued operations776 — (18,797)— 
Net Income (Loss)15,654 (5,084)(65,666)35,144 
Dividends on preferred units— (904)(1,491)(3,535)
Net Income (Loss) Attributable to Common Shareholders/Unitholders$15,654 $(5,988)$(67,157)$31,609 
Net Income (Loss) per Share/Unit from Continuing Operations:
Basic$0.77 $(0.41)$(3.02)$2.54 
Diluted$0.76 $(0.41)$(3.02)$2.13 
Net Income (Loss) per Share/Unit from Discontinued Operations:
Basic$0.04 $— $(1.17)$— 
Diluted$0.04 $— $(1.17)$— 
Net Income (Loss) per Share/Unit:
Basic$0.81 $(0.48)$(4.19)$2.54 
Diluted$0.80 $(0.48)$(4.19)$2.13 
Weighted Average Common Shares/Units Outstanding(1):
Basic19,434 12,468 16,021 12,457 
Diluted19,540 12,468 16,021 16,509 
______________________
(1)Amounts for the three months and year ended September 30, 2021 were computed using a retroactive application of the Exchange Ratio and the one-for-twelve reverse stock split that occurred in connection with the Merger.
8

RILEY EXPLORATION PERMIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Cash Flows from Operating Activities:
Net income (loss)$15,654 $(5,084)$(65,666)$35,144 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss (income) from discontinued operations(776)— 18,797 — 
Oil and gas lease expirations732 614 9,347 7,902 
Depletion, depreciation, amortization and accretion6,692 5,321 26,015 21,341 
(Gain) loss on plugging liabilities— 138 — 138 
(Gain) loss on derivatives14,987 3,123 89,195 (33,876)
Settlements on derivative contracts(11,171)6,753 (16,304)26,914 
Amortization of deferred financing costs170 164 653 648 
Unit-based compensation expense— 313 689 963 
Share-based compensation expense751 — 6,104 — 
Deferred income tax expense (benefit)(4,223)346 12,962 665 
Changes in operating assets and liabilities:
Accounts receivable(1,800)(4,128)(7,345)1,515 
Accounts receivable – related parties1,539 290 (401)449 
Prepaid expenses and other current assets735 1,263 201 839 
Other non-current assets— 2 — 84 
Accounts payable and accrued liabilities2,229 2,800 7,445 16 
Income taxes payable286 — (54)— 
Revenue payable1,570 1,115 4,576 (84)
Advances from joint interest owners(52)11 (40)(108)
Other liabilities(77)— (101)— 
Net Cash Provided By Operating Activities - Continuing Operations27,246 13,041 86,073 62,550 
Cash Flows from Investing Activities:
Additions to oil and natural gas properties(19,746)(5,955)(58,329)(47,183)
Acquisitions of oil and natural gas properties— 696 (445)(4,110)
Additions to other property and equipment(541)(60)(1,714)(228)
Tengasco acquired cash— — 860 — 
Net Cash Used In Investing Activities - Continuing Operations(20,287)(5,319)(59,628)(51,521)
9

RILEY EXPLORATION PERMIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Cash Flows from Financing Activities:
Deferred financing costs(4)(1,183)(139)(1,476)
Proceeds from revolving credit facility— 2,500 5,500 16,500 
Repayment under revolving credit facility(37,500)(5,500)(46,500)(12,500)
Payment of common share/unit dividends(5,452)(2,797)(18,286)(15,297)
Proceeds from issuance of common stock50,000 — 50,000 — 
Public offering costs(3,316)— (3,316)— 
Payment of preferred unit dividends— — (1,491)— 
Common stock repurchased for tax withholding(514)— (514)— 
Purchase of common units under long-term incentive plan— — (191)(322)
Net Cash Provided By (Used in) Financing Activities - Continuing Operations3,214 (6,980)(14,937)(13,095)
Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations10,173 742 11,508 (2,066)
Cash Flows from Discontinued Operations:
Operating activities— — 7 — 
Investing activities— — 3,892 — 
Net Increase (Decrease) in Cash and Cash Equivalents from Discontinued Operations— — 3,899 — 
Net Increase (Decrease) in Cash and Cash Equivalents10,173 742 15,407 (2,066)
Cash and Cash Equivalents, Beginning of Period6,894 918 1,660 3,726 
Cash and Cash Equivalents, End of Period$17,067 $1,660 $17,067 $1,660 



10

OIL AND NATURAL GAS RESERVES
Netherland, Sewell & Associates, Inc. prepared the estimates of the Company's proved reserves in accordance with the rules and regulations of the Securities and Exchange Commission. The table below presents our total proved reserves as of September 30, 2021.

Total Proved Developed ReservesTotal Proved Reserves
Oil (MBbls)26,170 46,263
Natural Gas (MMcf)46,173 76,019
Natural Gas Liquids (MBbls)7,650 13,229
Total Proved Reserves (MBoe)41,516 72,163

Estimates of reserves were prepared using an average price equal to the unweighted arithmetic average of hydrocarbon prices received on a field-by-field basis on the first day of each month within the 12-month period ended September 30, 2021 in accordance with SEC guidelines. Reserve estimates do not include any value for probable or possible reserves that may exist, nor do they include any value for undeveloped acreage. The reserve estimates represent our net revenue interest in our properties, all of which are located within the continental United States.

11


DERIVATIVE CONTRACTS
The following table summarizes the open financial derivative positions as of December 8, 2021, related to oil and natural gas production. Derivative positions in the table for calendar Q4 2021 are as of September 30, 2021.
Weighted Average Price
Calendar QuarterNotional VolumeFixedPutCall
($ per unit)
Oil Swaps (Bbl)
Q4 2021558,116 $51.65 $— $— 
Q1 2022345,000 $57.47 $— $— 
Q2 2022345,000 $57.47 $— $— 
Q3 2022270,000 $56.03 $— $— 
Q4 2022270,000 $56.03 $— $— 
Q1 2023225,000 $53.65 $— $— 
Q2 2023195,000 $53.89 $— $— 
Q3 2023150,000 $52.58 $— $— 
Q4 2023150,000 $52.58 $— $— 
Natural Gas Swaps (Mcf)
Q4 2021555,000 $3.03 $— $— 
Q1 2022540,000 $3.26 $— $— 
Q2 2022540,000 $3.26 $— $— 
Q3 2022540,000 $3.26 $— $— 
Q4 2022540,000 $3.26 $— $— 
Oil Collars (Bbl)
Q1 202290,000 $— $35.00 $42.63 
Q2 202290,000 $— $35.00 $42.63 
Q3 202290,000 $— $35.00 $42.63 
Q4 202290,000 $— $35.00 $42.63 
Oil Basis (Bbl)
Q4 2021435,000 $0.40 $— $— 
Q1 2022180,000 $0.40 $— $— 
Q2 2022180,000 $0.40 $— $— 
Q3 2022180,000 $0.40 $— $— 
Q4 2022180,000 $0.40 $— $— 

12

NON-GAAP MEASURES
The Company presents certain non-GAAP financial measures to supplement its financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The non-GAAP financial measures include Adjusted Net Income, Adjusted EBITDAX, Cash G&A, Cash Costs and Cash Margin and Free Cash Flow. A reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure is presented below.
We believe that these non-GAAP measures presented, in conjunction with our financial and operating results prepared in accordance with GAAP, provide a more complete understanding of the Company’s performance. We use these non-GAAP measures to compare our financial and operating performance with that of other companies in the oil and natural gas industry as well as our financial and operating performance for current and historical periods. These non-GAAP measures should not be considered in isolation or as a substitute for GAAP measures, such as net income (loss), operating income (loss), total costs and expenses, general and administrative expenses or net cash provided by operating activities or any other GAAP measure of financial position or results of operations.
As not all companies use the same calculation, our non-GAAP measures may not be comparable to similarly titled measures presented by other companies.

Adjusted Net Income: We define Adjusted Net Income as net income (loss) plus (income) loss on discontinued operations, unrealized (gain) loss on derivative contracts, transaction costs, income tax expense related to our change in tax status and the associated changes in estimated income tax. We believe that Adjusted Net Income is a widely followed measure of operating performance and is one of many metrics used by investors as well as our management team. For example, Adjusted Net Income can be used to assess our operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure and to assess the financial performance of our assets and our company without regard to capital structure or historical cost basis. The following table provides a reconciliation of Net Income (Loss) to Adjusted Net Income for the periods indicated:

Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Net income (loss)$15,654 $(5,084)$(65,666)$35,144 
Loss (income) on discontinued operations(776)— 18,797 — 
Unrealized loss (gain) on derivatives3,816 9,876 72,891 (6,962)
Transaction costs and other458 1,389 3,992 1,823 
Income tax expense from change in tax status— — 13,581 — 
Tax effect of adjustments(1)
(755)— (20,657)— 
Adjusted Net Income$18,397 $6,181 $22,938 $30,005 
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(1)Computed by applying a combined federal and state statutory rate of 21.59% effective as of September 30, 2021. The Company was a flow-through entity for federal and state income tax purposes for the three months and year ended September 30, 2020.


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Adjusted EBITDAX: We define Adjusted EBITDAX as net income (loss) adjusted for loss (income) on discontinued operations, exploration expense, depletion, depreciation, amortization and accretion, equity-based compensation expense, interest expense, unrealized (gain) loss on commodity derivative contracts, income taxes, and transaction costs. We believe Adjusted EBITDAX is useful to investors because it provides an effective way to evaluate our operating performance and compare the results of our operations from period to period as well as to other companies in the oil and natural gas industry without regard to our financing methods or capital structure. The following table provides a reconciliation from the GAAP measure of Net income (loss) to Adjusted EBITDAX.
Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Net income (loss)$15,654 $(5,084)$(65,666)$35,144 
Loss (income) on discontinued operations(776)—18,797—
Exploration expense8846929,5669,923
Depletion, depreciation, amortization and accretion6,6925,45926,01521,479
Unit-based compensation expense—313689963
Share-based compensation expense751—6,104—
Interest expense9631,2134,5345,299
Unrealized loss (gain) on derivatives3,8169,87672,891(6,962)
Income tax expense (benefit)(3,937)39913,016718
Transaction costs and other4581,3893,9921,823
Adjusted EBITDAX$24,505 $14,257 $89,938 $68,387 

Cash G&A: Cash G&A is defined as general and administrative expense less share-based and unit-based compensation and contract services–related parties revenue plus cost of contract services–related parties. We believe Cash G&A is used by analysts and others in valuation, comparison and investment recommendations of companies in our industry to allow for analysis of cash G&A spend without regard to equity based compensation programs or amounts related to contract services. Administrative costs exclude share-based and unit-based compensation as those expenses are presented separately as components of general and administrative expense on our statement of operations. The following table provides a calculation for Cash G&A for the periods indicated:

Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Administrative costs$4,790 $2,157 $13,966 $10,826 
Plus: Costs of contract services - related parties147 100 477 503 
Less: Contract services revenues - related parties(600)(650)(2,400)(3,800)
Total Cash G&A$4,337 $1,607 $12,043 $7,529 


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Cash Costs and Cash Margin per Boe: Cash Costs is a non-GAAP financial measure that we use as an indicator of our total cash-based cost of production and operations. We define “Cash Costs” as lease operating expenses plus production and ad valorem taxes, cash G&A, and interest expense. Management believes that Cash Costs is an important financial measure for use in evaluating the Company’s operating and financial performance and for comparison to other companies in the oil and natural gas industry. We believe this is a useful measure for investors in evaluating our results against other oil and natural gas companies. Cash Costs should be considered in addition to, rather than as a substitute for, Total Costs and Expenses. The following table provides a calculation for Cash Costs and Cash Margin for the periods indicated:

Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands, except per Boe amounts)
Cash Costs:
Lease operating expenses$5,686 $5,254 $21,975 $20,243 
Production and ad valorem taxes2,575 944 8,636 4,280 
Cash G&A(1)
4,337 1,607 12,043 7,529 
Interest expense 963 1,213 4,534 5,299 
Total Cash Costs$13,561 $9,018 $47,188 $37,351 
Total Production (MBoe)882 653 3,154 2,592 
Cash Margin ($ per Boe):
Total average realized price ($ per Boe)$54.46 $23.43 $47.12 $28.22 
Less:
Lease operating expenses6.45 8.04 6.97 7.81 
Production and ad valorem taxes2.92 1.44 2.74 1.65 
Cash G&A(1)
4.92 2.46 3.82 2.91 
Interest expense1.09 1.86 1.44 2.04 
Total Cash Costs per Boe15.38 13.80 14.96 14.41 
Cash Margin per Boe$39.08 $9.63 $32.16 $13.81 
Realized gain (loss) on derivatives ($ per Boe)(12.67)10.34 (5.17)10.39 
Cash Margin per Boe, including derivative settlements$26.41 $19.96 $26.99 $24.19 
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(1)A non-GAAP financial measure which is reconciled above.


Free Cash Flow: Free Cash Flow is a measure that we use as an indicator of our ability to fund our development activities and generate excess cash for other corporate purposes. We define Free Cash Flow as Cash Flow from Continuing Operations, less capital expenditures before acquisitions. Free Cash Flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities as a measure of our liquidity. The following table provides a reconciliation of Net Cash Provided by Operating Activities - Continuing Operations to Free Cash Flow for the periods indicated:

Three Months Ended September 30,Year Ended September 30,
2021202020212020
(In thousands)
Net Cash Provided by Operating Activities - Continuing Operations$27,232 $13,041 $86,073 $62,550 
Additions to oil and natural gas properties(19,447)(5,955)(58,329)(47,183)
Additions to other property and equipment(542)(60)(1,714)(228)
Free Cash Flow$7,243 $7,026 $26,030 $15,139 


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