EX-99.6 10 tm2333324d1_ex99-6.htm EXHIBIT 99.6

Exhibit 99.6

 

HENRY ENERGY LP

 

Condensed Consolidated Unaudited Interim Financial Statements

 

September 30, 2023 and 2022

 

 

 

HENRY ENERGY LP

Table of Contents

 

    Page
Condensed Consolidated Unaudited Interim Financial Statements:    
     
Balance Sheets   1
     
Statements of Operations   2
     
Statements of Changes in Partner’s Capital   3
     
Statements of Cash Flows   4
     
Notes to Condensed Consolidated Unaudited Interim Financial Statements   6

 

 

 

HENRY ENERGY LP

Condensed Consolidated Unaudited Balance Sheets

(in thousands)

 

   September 30,
2023		   December 31,
2022		 
ASSETS          
Current assets:          
Cash and cash equivalents  $57,904   $53,833 
Accounts receivable, net   30,379    43,563 
Affiliate receivable   597    830 
Prepaid expenses and other current assets   338    591 
Total current assets   89,218    98,817 
Oil and natural gas property and equipment, based on full cost method of accounting, net   468,274    407,537 
Other property and equipment, net   34,244    35,906 
Right-of-use assets   10,928    7,349 
Equity method investment   1,801    1,807 
Other assets   1,001    1,104 
Total assets  $605,466   $552,520 
LIABILITIES AND PARTNER’S CAPITAL          
Current liabilities:          
Accounts payable  $28,762   $22,872 
Accrued liabilities   19,282    11,180 
Affiliate note payable   —    418 
Drilling advances   6,695    2,498 
Current portion of debt   1,301    1,274 
Operating lease liability   6,332    5,190 
Total current liabilities   62,372    43,432 
Long-term debt, net   20,751    66,230 
Other noncurrent liabilities:          
Asset retirement obligation   1,484    1,439 
Operating lease liability   4,596    2,159 
Total other noncurrent liabilities   6,080    3,598 
Total liabilities   89,203    113,260 
Commitments and contingencies          
Partner’s capital:          
Limited partner   512,742    435,939 
Noncontrolling interests   3,521    3,321 
Total partner’s capital   516,263    439,260 
Total liabilities and partner’s capital  $605,466   $552,520 

 

The accompanying notes are an integral part of these condensed consolidated unaudited interim financial statements.

 

1

 

 

HENRY ENERGY LP

Condensed Consolidated Unaudited Statements of Operations

(in thousands)

 

   Nine Months Ended September 30, 
   2023   2022 
REVENUES:          
Crude oil, natural gas, and NGL sales, net  $155,846   $218,707 
Drilling and overhead fees   3,194    2,561 
Water disposal fees and pipeline income   8,043    6,930 
Affiliate service fee income   38,804    21,574 
Loss on derivatives, net   —    (4,198)
Other income   1,073    431 
Total revenues, net   206,960    246,005 
           
OPERATING EXPENSES:          
Lease operating and workover expenses   28,048    25,806 
Pipeline operating expenses   5,850    2,886 
Severance and ad valorem taxes   7,594    10,857 
Depletion, depreciation and amortization expense   31,682    26,610 
Accretion expense   89    99 
General and administrative   24,942    18,399 
Total operating expenses   98,205    84,657 
Income from operations   108,755    161,348 
           
OTHER INCOME (EXPENSE):          
Other expense   (1,837)   (529)
Interest expense   (1,002)   (3,640)
Interest income   761    1 
Gain (loss) on sale of assets   16    (59)
Loss from equity method investments   (42)   (39)
Total other expense   (2,104)   (4,266)
NET INCOME   106,651    157,082 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   268    715 
NET INCOME ATTRIBUTABLE TO HENRY ENERGY LP  $106,383   $156,367 

 

The accompanying notes are an integral part of these condensed consolidated unaudited interim financial statements.

 

2

 

 

HENRY ENERGY LP

Condensed Consolidated Unaudited Statements of Changes in Partner’s Capital

(in thousands)

 

  

Limited
Partner

  

Noncontrolling
Interests

  

Total
Partner’s Capital

 
BALANCE, JANUARY 1, 2022  $283,572   $3,431   $287,003 
Distributions to parent, net   (34,404)   —    (34,404)
Distributions to noncontrolling interests   —    (718)   (718)
Net income   156,367    715    157,082 
BALANCE, September 30, 2022   405,535    3,428    408,963 

 

  

Limited
Partner

  

Noncontrolling
Interests

  

Total
Partner’s Capital

 
BALANCE, JANUARY 1, 2023  $435,939   $3,321   $439,260 
Distributions to parent, net   (29,580)   —    (29,580)
Contributions from noncontrolling interests   —    118    118 
Distributions to noncontrolling interests   —    (186)   (186)
Net income   106,383    268    106,651 
BALANCE, September 30, 2023   512,742    3,521    516,263 

 

The accompanying notes are an integral part of these condensed consolidated unaudited interim financial statements.

 

3

 

 

HENRY ENERGY LP

Condensed Consolidated Unaudited Statements of Cash Flows 

(in thousands)

 

   Nine Months Ended September 30, 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income  $106,651   $157,082 
Adjustments to reconcile net income to net cash provided by operating activities          
Depletion, depreciation and amortization   31,682    26,610 
Accretion expense   89    99 
Loss on derivatives, net   —    4,198 
Cash settlements on commodity derivatives   —    (4,916)
Loss from equity method investments   42    39 
(Gain) loss on sale of assets   (16)   59 
Changes in operating assets and liabilities:          
Accounts receivable, net and affiliate receivable   13,418    (11,767)
Prepaid expenses and other current assets   253    (2,690)
Other assets   103    (588)
Accounts payable   5,891    25,444 
Accrued liabilities   (3,765)   5,583 
Drilling advances   4,198    (7,534)
Other long-term liabilities   (54)   (10)
Net cash provided by operating activities   158,492    191,609 
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions to oil and natural gas properties   (78,879)   (125,593)
Proceeds from the sale of oil and natural gas properties    —    10,119 
Additions to other property and equipment   (814)   (3,999)
Proceeds from the sale of other property and equipment   827    38 
Additions to equity method investments   (36)   (36)
Net cash used in investing activities   (78,902)   (119,471)

 

The accompanying notes are an integral part of these condensed consolidated unaudited interim financial statements.

 

4

 

 

HENRY ENERGY LP

Condensed Consolidated Unaudited Statements of Cash Flows

(in thousands)

 

CASH FLOWS FROM FINANCING ACTIVITIES:        
Distributions to parent, net   (29,581)   (34,404)
Contributions from noncontrolling interests   118    — 
Distributions to noncontrolling interests   (186)   (718)
Payments on airplane note    (952)   (926)
Payments on affiliate note payable   (418)   (407)
Proceeds from senior secured credit facility    8,000    5,000 
Payments on senior secured credit facility   (52,500)   (21,500)
Net cash used in financing activities   (75,519)   (52,955)
Net increase (decrease) in cash and cash equivalents   4,071    19,183 
Cash and cash equivalents at beginning of period    53,833    37,670 
Cash and cash equivalents at end of period  $57,904   $56,853 

 

The accompanying notes are an integral part of these condensed consolidated unaudited interim financial statements.

 

5

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Note 1. Organization and Summary of Significant Accounting Policies

 

Description of the Company

 

The condensed consolidated unaudited interim financial statements and associated footnotes presented herein represent the financial statements of Henry Energy LP and subsidiaries (“Henry Energy”). The subsidiaries of Henry Energy include TAW Reserves 11C Mgmt LLC and subsidiary; Henry TAW Prod Mgmt LLC and subsidiaries; Henry Resources LLC and subsidiary; BITS Energy Mgmt LLC and subsidiary; and Moriah Henry Partners LLC.

 

Henry Energy is engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids (“NGLs”) in the Midland and Delaware Basins, located in Texas. In addition, Henry Energy also operates certain pipelines for the transfer of frac water and saltwater.

 

On September 13, 2023, Henry Energy signed a definitive agreement with Vital Energy, Inc. (“Vital”) to sell substantially all of its oil and gas assets. As of September 30, 2023, any contemplated sale transaction was not deemed to be probable, and therefore, these unaudited condensed consolidated interim financial statements do not present assets held for sale.

 

Basis of Presentation of Condensed Consolidated Unaudited Interim Financial Statements

 

Henry Energy and all wholly owned subsidiaries are considered disregarded entities for federal income tax purposes. Disregarded entities are treated similarly to consolidated subsidiaries under accounting principles generally accepted in the United States of America (“US GAAP”), whereby the financial results are included in Henry Energy and all intercompany transactions are eliminated. As such, all subsidiaries of Henry Energy are consolidated and all intercompany accounts and transactions have been eliminated.

 

The condensed consolidated unaudited interim financial statements (“consolidated financial statements”) have been prepared in accordance with US GAAP and include the accounts of Henry Energy. Certain disclosures normally included in consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. The accompanying consolidated financial statements and notes should be read in conjunction with the financial statements and notes included in the Henry Energy consolidated financial statements as of and for the years ended December 31, 2022, 2021 and 2020. The accompanying consolidated financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Henry Energy’s results of operations and cash flows for the nine-month periods ended September 30, 2023 and 2022 and its financial position as of September 30, 2023.

 

6

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires that a financial asset measured at amortized cost be presented at the net amount expected to be collected. ASU 2016-13 is intended to provide more timely decision-useful information about the expected credit losses on financial instruments. In November 2019, the FASB ASU 2019-19, “Codification Improvements to Topic 326: Financial Instruments – Credit Losses”, which makes amendments to clarify the scope of the guidance, including clarification that receivables arising from operating leases are not within its scope. The amended guidance was effective for Henry Energy on January 1, 2023.

 

Henry Energy determines its allowance for each type of receivable based on the length of time the receivable is past due, its previous loss history, and customers current ability to pay its obligation. Henry Energy also bases its allowance for each type of receivable on its respective credit risks. Henry Energy writes off specific receivables when they become uncollectible. Once an allowance is recorded, any subsequent payments received on such receivables are credited to the allowance for credit losses. To date, Henry Energy has not experienced any pattern of credit losses and therefore has no allowance as of September 30, 2023 or December 31, 2022. Henry Energy will continually monitor the creditworthiness of its counterparties by reviewing credit ratings, financial statements, and payment history. The adoption of ASU 2016-13 did not result in a material impact to the financial position, cash flows, or results of operations of Henry Energy.

 

Note 2. Accounts Receivable

 

Components of accounts receivable include the following (in thousands):

 

   September 30, 2023   December 31, 2022 
Crude oil, natural gas and NGL sales  $17,436   $28,748 
Joint interest billings and other   12,943    14,815 
Gross accounts receivable   30,379    43,563 
Allowance for doubtful accounts   —    — 
Net accounts receivable  $30,379   $43,563 

 

Note 3. Oil and Natural Gas Properties

 

Capitalized Costs

 

The following table reflects the aggregate capitalized costs associated with Henry Energy (in thousands):

 

   September 30, 2023   December 31, 2022 
Oil and natural gas properties:          
Proved properties  $958,184   $867,419 
Total oil and natural gas properties   958,184    867,419 
Less: Accumulated depreciation, depletion and amortization   (489,910)   (459,882)
Oil and natural gas properties, net  $468,274   $407,537 

 

7

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

There were no proved property impairments for the nine months ended September 30, 2023 and 2022. Depletion expense was $30.0 million and $25.1 million for the nine months ended September 30, 2023 and 2022, respectively.

 

Note 4. Other Property and Equipment

 

The following table presents the other property and equipment of Henry Energy (in thousands):

 

   September 30, 2023   December 31, 2022 
Building and improvements  $5,037   $5,412 
Office furniture and equipment   3,137    3,128 
Land   1,635    1,814 
Pipeline   15,443    14,900 
Production equipment   431    425 
Airplane   18,588    18,588 
Total property and equipment   44,271    44,267 
Less: accumulated depreciation   (10,027)   (8,361)
Total property and equipment, net  $34,244   $35,906 

 

For the nine months ended September 30, 2023 and 2022, depreciation expense for other property and equipment was $1.7 million and $1.5 million, respectively.

 

Note 5. Equity Method Investments

 

Henry Energy owns an approximate 25.0% interest in Eagles Nest Aviation, LLC (“Eagles Nest”). Eagles Nest owns and operates an airplane hanger that is utilized by Henry Energy along with other equity owners.

 

The following table presents Henry Energy’s proportionate investment in Eagles Nest at September 30, 2023 and December 31, 2022 (in thousands):

 

  

Nine Months Ended
September 30, 2023

  

Year Ended
December 31, 2022

 
Investment balance, beginning of period  $1,807   $1,789 
Contributions   36    72 
Loss from equity investments   (42)   (54)
Investment balance, end of period  $1,801   $1,807 

 

8

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Note 6. Revenue

 

Disaggregation of Revenue

 

The following table presents the disaggregation of crude oil, natural gas and NGL revenue of Henry Energy (in thousands):

 

   Nine Months Ended September 30, 
   2023   2022 
Crude oil  $138,257   $185,451 
Natural gas and NGL sales   17,589    33,256 
Total crude oil, natural gas and NGL sales, net  $155,846   $218,707 

 

Receivable Balances

 

At September 30, 2023 and December 31, 2022, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers was $16.7 million and $28.0 million, respectively. As of January 1, 2022, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers was $17.5 million.

 

Note 7. Derivative Financial Instruments

 

Commodity Derivatives

 

Derivative instruments are recognized at fair value and subsequently settled over the contract terms. As of September 30, 2023 and December 31, 2022, Henry Energy did not have any open derivative positions.

 

Derivative Gains and Losses

 

Cash receipts and payments reflect the gains or losses on derivative contracts which matured during the applicable period, calculated as the difference between the contract price and the market settlement price of matured contracts. The derivative contracts of Henry Energy are settled based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate pricing and natural gas derivative settlements based primarily on NYMEX Henry Hub pricing. Non-cash gains and losses represent the change in fair value of derivative instruments which continued to be held at period end and the reversal of previously recognized non-cash gains or losses on derivative contracts that matured during the period. There were no derivative gains or losses for the nine months ended September 30, 2023 as Henry Energy did not have any open derivative positions during that time period.

 

The following table summarizes the commodity derivative activity of Henry Energy (in thousands):

 

   Nine Months Ended
September 30, 2022		 
Cash paid on derivatives  $(4,916)
Non-cash loss on derivatives   718 
Loss on derivatives, net  $(4,198)

 

9

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Note 8. Asset Retirement Obligations

 

The following table presents changes in asset retirement obligations of Henry Energy (in thousands):

 

  

Nine Months Ended
September 30, 2023

  

Year Ended
December 31, 2022

 
Asset retirement obligations at beginning of period  $1,439   $1,509 
Liabilities incurred and assumed through acquisitions   8    188 
Liabilities settled and divested   (52)   (367)
Revision of estimated obligation   —    (23)
Accretion expense on discounted obligation   89    132 
Asset retirement obligations at end of period  $1,484   $1,439 

 

Note 9. Debt and Related Expenses

 

The following table presents the outstanding debt and related expenses of Henry Energy (in thousands):

 

   September 30, 2023   December 31, 2022 
Senior Secured Credit Facility  $8,500   $5,300 
Airplane Note   13,552    14,504 
Total debt, including current portion   22,052    67,504 
Less: current portion of debt   1,301    1,274 
Long-term debt, net  $20,751   $66,230 

 

Senior Secured Credit Facility

 

On May 10, 2016, Henry Energy, as borrower, and InterBank, as lender, entered into a loan agreement (“Senior Secured Credit Facility”). Henry Energy Exploration LP and Henry Reserves LP are jointly and severally liable for the Senior Secured Credit Facility. The Senior Secured Credit Facility is secured by a first lien on at least 80.0% of the proved developed producing and proved developed nonproducing oil and natural gas properties of Henry Energy, Henry Exploration LP and Henry Reserves LP.

 

On April 1, 2023, Henry Energy entered into the Thirteenth Amendment to the Senior Secured Credit Facility (“Thirteenth Amendment”). The Thirteenth Amendment reduced the borrowing base to $50.0 million, updated the annual redetermination to be on June 1 of each year, and extended the maturity date to June 1, 2025.

 

As of September 30, 2023, the Senior Secured Credit Facility has a borrowing base of $50.0 million and matures on June 1, 2025. As of September 30, 2023, Henry Energy had $8.5 million in outstanding borrowings under the Senior Secured Credit Facility. Amounts borrowed under the Senior Secured Credit Facility bear interest, payable quarterly, at a floating rate per annum equal to the Prime Rate, a per annum rate of interest equal to the base rate on corporate loans posted by at least seventy percent (70.0%) of the ten largest U.S. banks plus 0.5%. The effective interest rate during the nine months ended September 30, 2023 and 2022 was 8.6% and 4.7%, respectively.

 

10

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

The Senior Secured Credit Facility contains various covenants that restrict Henry Energy’s indebtedness, limits its ability to create liens securing certain indebtedness, make restricted payments and make or permit investments, among other matters.

 

Airplane Note

 

On March 11, 2021, Henry Energy entered into a loan and security agreement with JP Morgan Chase Bank, N.A., maturing in March 2026 on a 60-month term for $16.7 million to finance the acquisition of an airplane (“Airplane Note”). The Airplane Note is an amortizing loan with monthly payments of $0.1 million and a lump sum payment of $10.4 million due on March 11, 2026. The Airplane Note has a stated interest rate of 2.8%. As of September 30, 2023 and December 31, 2022, Henry Energy had an outstanding balance of $13.6 million and $14.5 million, respectively, on the Airplane Note.

 

Note 10. Affiliate Note Payable

 

On August 15, 2018, Henry Energy entered into a promissory note with an affiliate (“Affiliate Note”) for the purpose of acquiring oil and gas interests. The Affiliate Note requires quarterly payments of principal and accrued interest at a rate of 2.8% and matured on July 1, 2023. The Affiliate Note is unsecured and had a balance of $0.4 million at December 31, 2022. On July 1, 2023, Henry Energy paid the balance of the Affiliate Note in full, including accrued interest.

 

Note 11. Leases

 

Short-term leases are variable costs included in “general and administrative” and “lease operating and workover expenses” in the condensed consolidated unaudited interim statements of operations. The lease costs of Henry Energy were as follows for the nine months ended September 30, 2023 (in thousands):

 

  

Nine Months Ended
September 30, 2023

 
Operating lease cost  $5,757 
Short term costs   11,474 
Variable lease cost   1,804 
Total lease costs  $19,035 

 

The following table presents additional lease information of Henry Energy for the nine months ended September 30, 2023:

 

Operating cash flows for operating leases  $5,757 
Right-of-use assets obtained in exchange for operating lease liabilities  $9,111 
Weighted-average remaining lease term (years) — operating   1.9 
Weighted-average discount rate — operating   3.2%

 

11

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

The following table presents the maturity analysis of Henry Energy as of September 30, 2023 for leases expiring in each of the next 5 years and thereafter.

 

2023   $6,598 
2024    3,540 
2025    1,185 
2026    — 
2027    — 
Thereafter    — 
Total lease payments    11,323 
Less: interest    (395)
Present value of lease liabilities   $10,928 

 

Note 12. Commitments and Contingencies

 

Environmental Remediation

 

Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the operations and the cost of crude oil and natural gas exploration, development, and production operations of Henry Energy. Henry Energy does not anticipate that it will be required in the near future to expend significant amounts for compliance with such federal, state and local laws and regulations, and therefore, no amounts have been accrued for such purposes.

 

Litigation

 

Henry Energy is involved in various legal proceedings including, but not limited to, commercial disputes, claims from royalty and surface owners, property damage claims, personal injury claims, regulatory compliance matters, disputes with tax authorities and other matters. While the outcome of these legal matters cannot be predicted with certainty, Henry Energy does not expect any such matters to have a material effect on its financial condition, results of operations or cash flows.

 

Note 13. Concentrations of Credit Risk

 

Henry Energy is subject to credit risk resulting from the concentration of its crude oil, natural gas and NGL receivables with significant purchasers. Receivables from purchasers are generally unsecured as Henry Energy does not require collateral. Henry Energy does not believe the loss of any single purchaser would materially impact its financial position, results of operations, or cash flows as crude oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers in its areas of operations. For the years nine months ended September 30, 2023 and 2022, Henry Energy has experienced no such credit losses.

 

Henry Energy maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. Henry Energy has not experienced any losses related to amounts in excess of FDIC limits and believes it is not exposed to significant credit risk in this area.

 

12

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Note 14. Transactions with Affiliates

 

Oil and Natural Gas Operations

 

Certain affiliates as well as employees participate in wells operated by Henry Energy. Henry Energy invoices these affiliates for drilling and completion, lease operating costs and other related expenses and service and incentive fees.

 

During the nine months ended September 30, 2023 and 2022, these affiliates were invoiced the following amounts (in thousands):

 

   Nine Months Ended September 30, 
   2023   2022 
Henry Reserves  $1   $6,801 
Henry TAW LP   1    452 
Davlin LLC   1,769    933 
DSD, LTD   100    100 
Challenger Crude, LTD   100    20 
Henry Heirs LTD   50    1 
Henry Production LLC   1    1 
Employee participants and affiliated companies   4,691    4,955 
Total  $6,713   $13,263 

 

Henry Energy has received reimbursement for all amounts shown above, with the exception of certain amounts reflected as affiliate receivables on the condensed consolidated unaudited interim balance sheet. Affiliate receivables were $0.6 million and $0.8 million at September 30, 2023 and December 31, 2022, respectively.

 

Henry Energy receives revenue earned by its oil and natural gas properties and distributes such revenues to the various working interest owners. Certain affiliates and employees of Henry Energy receive a portion of these revenue distributions. During the nine months ended September 30, 2023 and 2022, these affiliates received revenue distributions in the following amounts (in thousands):

 

   Nine Months Ended September 30, 
   2023   2022 
Davlin LLC  $1,481   $2,235 
Employee participants and affiliated companies   7,670    9,609 
Total  $9,151   $11,844 

 

13

 

 

HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Affiliate Service Fee Income

 

Henry Energy has two separate agreements (“G&A Agreements”) with Henry Reserves LP and Henry TAW LP. These G&A Agreements were both entered into to pay all the general and administrative expenses of Henry Reserves LP and Henry Taw LP. These expenses include accounting fees, bank fees, consulting fees, interest charges, payroll expenses and other expenses as outlined in the G&A Agreements. In return, Henry Energy will receive a monthly fee based upon predetermined rates. The affiliate service fee income is presented net of interest expense paid by Henry Energy. For the nine months ended September 30, 2023 and 2022, Henry Energy recorded $38.8 million and $21.6 million of affiliate service fee income in the condensed consolidated unaudited statements of operations.

 

Note 15. Supplemental Disclosures to Consolidated Financial Statements

 

Accrued Liabilities

 

Accrued liabilities consisted of the following at the dates indicated (in thousands):

 

   September 30, 2023   December 31, 2022 
Accrued oil and natural gas capital expenditures  $15,082   $3,215 
Accrued lease operating and workover expenses   4,200    7,965 
Total accrued liabilities  $19,282   $11,180 

 

Supplemental Cash Flow Information

 

The following table provides certain supplemental cash flow information for the periods indicated (in thousands):

 

   Nine Months Ended September 30, 
   2023   2022 
Supplemental Disclosure of Cash Flow Information:        
Interest paid  $1,002    3,640 
Supplemental Disclosure of Non-Cash Information:          
Additions to oil and natural gas properties included in accounts payable and accrued liabilities  $11,867   $7,282 
Revisions and additions to asset retirement obligations, net  $7   $81 
Non-Cash Financing Activities:          
ROU assets obtained in exchange for operating lease liabilities  $9,111   $— 

 

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HENRY ENERGY LP

Notes to Condensed Consolidated Unaudited Interim Financial Statements

September 30, 2023 and 2022

 

Note 16. Subsequent Events

 

In preparing the accompanying consolidated financial statements of Henry Energy, management has evaluated all subsequent events and transactions for potential recognition or disclosure through November 1, 2023, the date the consolidated financial statements of Henry Energy were available for issuance.

 

Subsequent to September 30, 2023, the following events and transactions have occurred:

 

•As of October 24, 2023, Henry Energy had reduced the outstanding balance of the Senior Secured Credit Facility to approximately $6.0 million.

 

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