OIL AND GAS PROPERTIES

9 Months Ended

Sep. 30, 2021

OIL AND GAS PROPERTIES

NOTE 6- OIL AND GAS PROPERTIES

NOTE 6 – OIL AND GAS PROPERTIES

The following table summarizes the Company’s oil and gas activities by classification for the nine months ended September 30, 2021 (in thousands):

	Balance at December 31, 2020			Additions			Disposals			Transfers		Balance at September 30, 2021
Oil and gas properties, subject to amortization	$	146,950		$	2,432		$	(66	)	$	-	$	149,316
Oil and gas properties, not subject to amortization		4			-			-			-		4
Asset retirement costs		1,108			(46	)		(5	)		-		1,057
Accumulated depreciation, depletion and impairment		(81,064	)		(4,520	)		-			-		(85,584	)
Total oil and gas assets	$	66,998		$	(2,134	)	$	(71	)	$	-	$	64,793

For the nine-month period ended September 30, 2021, the Company incurred $2,432,000 in capital costs related to capital workovers for our Permian Basin Asset, which included four clean outs, converting two wells from electric submersible pumps (“ESP”) to rod pumps, installation of a new ESP, and purchase in place of ESP systems that were previously rentals. The Company incurred additional capital costs upon implementation of a recompletions and reactivation program for our existing vertical wells in the Permian Basin Asset, and in our DJ-Basin Asset, the Company incurred capital costs related to converting a well from gas lift to rod pump.

On March 18, 2021, the Company, through its wholly-owned subsidiary Red Hawk, consummated the sale of certain assets and associated liabilities located in its D-J Basin Asset to third parties pursuant to a Purchase and Sale Agreement. The Company received net cash at closing of $1.9 million. The final purchase price was further subject to customary post-closing adjustments, resulting in an additional $52,000 paid by Red Hawk in July 2021. As a result of the transaction, the Company recognized a $1.8 million gain on sale of oil and gas properties on the Statement of Operations for the nine months ended September 30, 2021.

The depletion recorded for production on proved properties for the three and nine months ended September 30, 2021 and 2020, amounted to $1,576,000 compared to $2,890,000, and $4,520,000, compared to $8,076,000, respectively.