Note 5 - Other Long-Term Obligations and Commitments

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Other Long Term Obligations And Commitments Disclosure [Text Block]

(5) Other Long-Term Obligations and Commitments:

Operating Leases:

The Company leases office facilities under operating leases and recognizes lease expense on a straight-line basis over the lease term. Lease assets and liabilities are initially recorded at commencement date based on the present value of lease payments over the lease term. As most of the Company’s lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted average discount rate used was 9.71%. Certain leases may contain variable costs above the minimum required payments and are not included in the right-of-use assets or liabilities. Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease. The exercise of those options is at the Company’s sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required.

Operating lease costs for the three months ended March 31, 2024 and 2023 were $179,000 and $165,000, respectively. Cash payments included in the operating lease cost for the three months ended March 31, 2024 and 2023 were $191,000 and $178,000, respectively. The weighted-average remaining operating lease terms as of March 31, 2024 and 2023 were 7.81 months and 9.63 months, respectively. As of March 31, 2024, the Company had certain leases for office space in Texas which included future payments of $601,000 for 2024 and $149,000 for 2025.

All current leases have been included within the current balance sheet and the Company has not entered into any new leases since the reporting date. Rent expense for office space for the three months ended March 31, 2024 and 2023 was $204,000 and $141,000, respectively.

The payment schedule for the Company’s operating lease obligations as of March 31, 2024 is as follows:

(Thousands of dollars)	Operating Leases
2024	$	601
2025		149
Total undiscounted lease payments	$	750
Less: Amount associated with discounting		(58	)
Total net operating lease liabilities	$	692
Less: Current portion asset retirement and other long-term obligations		692
Non-current portion included in Other long-term obligations	$	-

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the three months ended March 31, 2024 is as follows:

(Thousands of dollars)	March 31, 2024
Asset retirement obligation at December 31, 2023	$	15,153
Liabilities settled		(229	)
Accretion of discount		171
Asset retirement obligation at March 31, 2024	$	15,095
Less current portion of asset retirement obligations		446
Asset retirement obligations, long-term	$	14,649

The Company’s liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive life of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation. Revisions to the asset retirement obligation are recorded with an offsetting change to producing properties, resulting in prospective changes to depreciation, depletion and amortization expense and accretion of discount. Because of the subjectivity of assumptions and the relatively long life of most of the Company’s wells, the costs to ultimately retire the wells may vary significantly from previous estimates.