Commitment and Contingencies

12 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Matters

The Company has been named as a defendant in an action commenced on November 30, 2021 in United States Bankruptcy Court For the Northern District of Texas Dallas Division by the Trustee for the Chapter 11 Bankruptcy of Hoactzin Partners, L.P. (“Hoactzin”), an affiliate of Peter Salas (“Salas”). The complaint alleges that, through a series of transactions involving Salas and various Hoactzin affiliates spanning 2014 through 2018, Hoactzin fraudulently transferred its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to Dolphin Direct Equity Partners, L.P. (“DDEP”), an entity substantially owned and controlled by Salas. Subsequently, DDEP sold the Kansas Working Interests to the Company in October 2018, one year prior to Hoactzin bankruptcy filing in October 2019, for an amount the complaint alleges was purportedly less than the reasonable value of such Kansas Working Interests. The action seeks, among other things, to recover approximately $14 million in damages, as well as an unspecified amount of punitive damages and attorney’s fees.

The complaint alleges that Salas, DDEP and the Company are jointly and severally liable for the damages incurred by Hoactzin, During the period of the purported fraudulent transfers giving rise to the claims set forth in the complaint, Salas was Chairman of the Board of Tengasco, Inc., which subsequently merged with Riley Exploration - Permian, LLC on February 26, 2021 and was renamed Riley Exploration Permian, Inc. Concurrently with the closing of the merger, Salas resigned his position from the Board and no longer holds any position as a director or officer of the Company. On April 2, 2021, the Company closed on the sale of all assets it held in Kansas to a third party for an adjusted purchase price of $3.3 million, after customary closing adjustments. This lawsuit is in the early stages and, accordingly, an estimate of reasonably possible losses associated with this action, if any, cannot be made until the facts, circumstances and legal theories relating to the claims and the defenses are fully disclosed and analyzed. The Company has not established any reserves relating to this action.

Due to the nature of the Company's business, the Company may at times be subject to claims and legal actions. The Company accrues liabilities when it is probable that future costs will be incurred, and such costs can be reasonably estimated. Such accruals are based on developments to date and the Company’s estimates of the outcomes of these matters. The Company did not recognize any material liability as of September 30, 2021 and September 30, 2020. Management believes it is remote that the impact of such matters will have a materially adverse effect on the Company’s financial position, results of operations, or cash flows.

Environmental Matters

The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. The Company had no environmental liabilities as of September 30, 2021 or 2020.

Contractual Commitments

In July 2021, as part of a planned expansion of Stakeholder’s primary gas processing plant, the Company committed to annually drill, complete and connect a minimum number of wells or deliver an annual target volume to Stakeholder's gathering system. While the minimum number of wells is below our planned development activity, there are financial penalties if the minimum activity levels are not met. The annual well or volume target is for each of five years beginning January 2022. The additional capacity from the gas processing plant expansion is expected to lead to increased natural gas sales and decreased gas flaring for the Company.

In August 2021, the Company entered into a purchase agreement for supplies for its EOR project. Under the agreement, the Company committed to purchasing supplies totaling approximately $1.2 million and $3.3 million by January 2022 and April 2022, respectively.