Note 2 - Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

2. ACQUISITIONS AND DIVESTITURES

January 2022 Acquisition

On January 5, 2022 (the “Closing Date”), the Company closed the acquisitions (the “Acquisition”) contemplated by three separate Purchase and Sale Agreements (the “Purchase Agreements” and the “Closing”), entered into by the Company on October 4, 2021, with each of (a) Lubbock Energy Partners LLC (“Lubbock”); (b) Banner Oil & Gas, LLC, Woodford Petroleum, LLC and Llano Energy LLC (collectively, “Banner”), and (c) Synergy Offshore LLC (“Synergy”, and collectively with Lubbock and Banner, (the “Sellers”). Pursuant to the Purchase Agreements, the Company acquired certain oil and gas properties from the Sellers, representing a diversified portfolio of primarily operated, producing, oil-weighted assets located across the Rockies, West Texas, Eagle Ford, and Mid-Continent. The acquisition also included certain wells, contracts, technical data, records, personal property and hydrocarbons associated with the acquired assets (collectively with the oil and gas properties acquired, the “Acquired Assets”).

The Company accounted for the acquisition of the Acquired Assets as an asset acquisition. The purchase price for the Acquired Assets was (a) $125,000 in cash and 6,568,828 shares of our common stock, as to Lubbock; (b) $1,000,000 in cash, the assumption of $3.3 million of debt, and 6,790,524 shares of common stock, as well as the novation of certain hedges which had a mark to market loss of approximately $3.1 million as of the Closing Date, as to Banner; and (c) $125,000 in cash and 6,546,384 shares of common stock, as to Synergy. The aggregate purchase price under all the Purchase Agreements was $66.4 million, representing $1.25 million in cash, the value of 19,905,736 shares of our common stock on the Closing Date of $64.7 million and purchase price adjustments of $0.5 million. In addition, we assumed various liabilities, including the repayment of $3.3 million in debt, as well as a derivative liability from the novation of the hedges discussed above of $3.1 million, suspense accounts and asset retirement obligations.

	Amount
	(in thousands)
Amounts incurred as of the closing date:
Cash	$	1,250
Value of 19,905,736 shares issued		64,694
Purchase price adjustments		487
Transaction costs		1,267
Total consideration paid		67,698
Debt assumed		3,347
Commodity derivative liabilities assumed		3,152
Suspense accounts assumed		1,276
Employee obligations assumed		100
Asset retirement obligations assumed		9,614
Deferred tax liabilities		2,819
Total liabilities assumed		20,308
Total consideration paid and liabilities assumed	$	88,006
Allocation to acquired assets:
Proved oil and gas properties(1)		87,672
Vehicles		165
Deposit account		169
Total allocation to acquired assets	$	88,006

⁽¹⁾ Included in the above purchase price adjustments is settlement for oil in temporary storage in tank batteries at the leases of $1,286. The Company does not separately account for oil in temporary storage until the oil is sold and title transfers to the purchaser. Consistent with the Company’s accounting policy and reporting of similar transactions this amount was recorded within Evaluated Properties on the Company’s Consolidated Balance Sheet.

Liberty County, Texas Acquisition

On May 3, 2022, the Company acquired certain operated oil and gas producing properties in Liberty County, Texas, adjacent to its existing assets in the area, for $1.0 million in an all-cash transaction. The effective date of the transaction was April 1, 2022. The assets include approximately 1,022 acres, which are 100% held by production, a gas pipeline and associated infrastructure. In addition, the Company assumed suspense accounts of $0.2 million and asset retirement obligations of $0.5 million. The Company accounted for the acquisition as an asset acquisition.

East Texas Acquisition

On July 27, 2022, the Company closed a purchase and sale agreement for the acquisition of properties from ETXENERGY, LLC (“ETXENERGY”). The properties are located in Henderson and Anderson Counties, Texas (the “East Texas Assets”). The properties consist of approximately 16,600 net acres, all of which are held by production and certain wells and gathering systems. The initial purchase price for the East Texas Assets was $11.9 million in cash. The effective date of the acquisition of the East Texas Assets was June 1, 2022. The Company accounted for the acquisition as an asset acquisition.

	Amount
	(in thousands)
Amounts incurred as of the closing date:
Cash	$	11,875
Purchase price adjustments		(1,048	)
Transaction costs		63
Total consideration paid		10,890
Suspense accounts assumed		380
Asset retirement obligations assumed		1,689
Total liabilities assumed		2,069
Total consideration paid and liabilities assumed	$	12,959
Allocation to acquired assets:
Proved oil and gas properties(1)	$	12,959

⁽¹⁾ Included in the above purchase price adjustments is settlement for oil in temporary storage in tank batteries at the leases of $557. The Company does not separately account for oil in temporary storage until the oil is sold and title transfers to the purchaser. Consistent with the Company’s accounting policy and reporting of similar transactions this amount was recorded within Evaluated Properties on the Company’s Consolidated Balance Sheet.

Divestitures

During the year ended December 31, 2023, the Company closed on a series of individual divestitures for a total of $7.0 million in net proceeds before transaction costs of $0.4 million.  The divestitures included the Company’s non-operated interests in 152 wells across North Dakota, New Mexico, and Texas, and overriding royalty interests in seven wells in Karnes County, Texas.  These divestitures did not have a significant impact to reserves volumes or the full cost pool depletion rate.  As such, the Company recorded the proceeds, net of transaction costs and purchase price adjustments, to the full cost pool, with no gain or loss recognized.  Relief of associated asset retirement obligations of $0.5 million were also recorded to the full cost pool.

During the year ended  December 31, 2022, the Company divested of the Wildhorse Waterflood Unit in Osage County, Oklahoma, which was included in the assets acquired on January 5, 2022. Net proceeds from sale of the waterflood unit were $1.2 million. In addition, the Company sold its approximately 30% interest in two non-operated wells in Zavala County, Texas and associated acreage of approximately 4,500 acres for $1.1 million.  These divestitures did not have a significant impact to reserves volumes or the full cost pool depletion rate.  As such, the Company recorded the proceeds, net of transaction costs and purchase price adjustments, to the full cost pool, with no gain or loss recognized.  Relief of associated asset retirement obligations of $0.2 million were also recorded to the full cost pool.