SUPPLEMENTAL OIL AND GAS DISCLOSURES

12 Months Ended

Dec. 31, 2022

Supplemental Oil and Gas Disclosures [Abstract]

(UNAUDITED)

The supplemental data presented herein reflects information for all our oil and natural gas producing activities. Our oil and gas operations are substantially all located in the United States.

Capitalized Costs

The following table presents capitalized costs related to our oil and natural gas activities:


	As of December 31,
	2022		2021
	(In thousands)
Proved properties (1)	$	177,134	$	225,014
Unproved properties (wells in progress)	6,953		422
	184,087		225,436
Accumulated depreciation, depletion, amortization, and impairment	(76,077)		(64,966)
Net capitalized costs	$	108,010	$	160,470

1.Presented gross of any inter-segment eliminations which reduce the consolidated capitalized costs. See Note 22 - Industry Segment Information for detail on inter-segment eliminations.

Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration, and Development Activities

The following table presents costs incurred related to our oil and natural gas activities during the periods indicated:


	Year Ended December 31,
	2022		2021
	(In thousands)
Unproved properties acquired	$	3,963	$	522
Proved properties acquired	—		—
Exploration	—		—
Development	16,070		16,279
Asset retirement obligation	3,018		478
Total costs incurred	$	23,051	$	17,279

Unproved properties not subject to amortization relates to properties which are not individually significant and consist primarily of lease acquisition costs. The evaluation process associated with these properties has not been completed and therefore, the Company is unable to estimate when these costs will be included in the amortization calculation.

The following table presents results of operations for producing activities before inter-segment eliminations during the periods indicated:


	Year Ended December 31,
	2022		2021
	(In thousands)
Revenues from producing activities	$	314,554	$	223,681
Production costs	(73,736)		(62,443)
Depreciation, depletion, amortization, and impairment	(11,192)		(24,261)
	229,626		136,977
Income tax (expense) benefit	45		168
Results of operations for producing activities (excluding corporate overhead and financing costs)	$	229,671	$	137,145

The table below presents estimated quantities of proved developed oil, NGLs, and natural gas reserves and changes in net quantities of proved developed and undeveloped oil, NGLs, and natural gas reserves:


	Oil (MBbls)	NGL (MBbls)	Gas (Mcf)	Total (MBoe)
2021
Proved developed and undeveloped reserves:
Beginning of year	8,267	15,208	144,391	47,541
Revision of previous estimates (1)	2,651	8,723	103,866	28,685
Extensions and discoveries	218	93	961	471
Infill reserves in existing proved fields	713	293	2,158	1,366
Purchases of minerals in place	—	—	—	1
Production	(1,615)	(2,624)	(29,012)	(9,074)
Sales (3)	(1,215)	(169)	(1,725)	(1,672)
Net proved reserves at December 31, 2021	9,019	21,525	220,640	67,318
Proved developed reserves, December 31, 2021	9,019	21,525	220,640	67,318
Proved undeveloped reserves, December 31, 2021	—	—	—	—
2022
Proved developed and undeveloped reserves:
Beginning of year	9,019	21,525	220,640	67,318
Revision of previous estimates (2)	73	1,884	29,295	6,840
Extensions and discoveries	189	133	2,551	747
Infill reserves in existing proved fields	54	18	1,773	368
Purchases of minerals in place	—	—	—	—
Production	(1,281)	(2,148)	(24,211)	(7,464)
Sales (3)	(373)	(1,280)	(17,639)	(4,593)
Net proved reserves at December 31, 2022	7,681	20,132	212,409	63,215
Proved developed reserves, December 31, 2022	7,681	20,132	212,409	63,215
Proved undeveloped reserves, December 31, 2022	—	—	—	—

1.Revisions of previous estimates increased primarily due to changes in the unescalated 12-month average product prices which increased approximately 68% for oil, 136% for NGLs, and 82% for natural gas compared to the December 31, 2020 pricing.

2.Revisions of previous estimates increased primarily due to changes in the unescalated 12-month average product prices which increased approximately 41% for oil and 77% for natural gas compared to the December 31, 2021 pricing.

3.See Note 5 - Acquisitions And Divestitures for discussion of the assets divested during the years ended December 31, 2022 and 2021, respectively.

Estimates of oil, NGLs, and natural gas reserves require extensive judgments of reservoir engineering data. Assigning monetary values to such estimates does not reduce the subjectivity and changing nature of such reserve estimates. Indeed, the uncertainties inherent in the disclosure are compounded by applying additional estimates of the rates and timing of production and the costs that will be incurred in developing and producing the reserves. The information set forth in this report is, therefore, subjective and, since judgments are involved, may not be comparable to estimates submitted by other oil and natural gas producers. In addition, since prices and costs do not remain static, and no price or cost escalations or de-escalations have been considered, the results are not necessarily indicative of the estimated fair market value of estimated proved reserves, nor of estimated future cash flows.

The standardized measure of discounted future net cash flows (SMOG) was calculated using 12-month average prices and year end costs adjusted for permanent differences that relate to existing proved oil, NGLs, and natural gas reserves. Future income tax expenses consider the Tax Act statutory tax rates.

The following table presents the components of the standardized measure of discounted future net cash flows:


	2022		2021
	(In thousands)
Future cash inflows	$	2,918,116	$	1,977,529
Future production costs	(1,142,754)		(835,430)
Future development costs	(1,724)		—
Future income tax expenses	(355,350)		(185,395)
Future net cash flows	1,418,288		956,704
10% annual discount for estimated timing of cash flows	(633,263)		(385,560)
Standardized measure of discounted future net cash flows relating to proved oil, NGLs, and natural gas reserves	$	785,025	$	571,144

The following table presents the principal sources of changes in the standardized measure of discounted future net cash flows:


	2022		2021
	(In thousands)
Sales and transfers of oil and natural gas produced, net of production costs	$	(240,818)	$	(161,238)
Net changes in prices and production costs	377,923		334,291
Revisions in quantity estimates and changes in production timing	109,772		320,774
Extensions, discoveries, and improved recovery, less related costs	34,121		45,019
Changes in estimated future development costs	(1,615)		—
Previously estimated cost incurred during the period	—		—
Purchases of minerals in place	—		—
Sales of minerals in place	(28,704)		(4,161)
Accretion of discount	65,826		19,306
Net change in income taxes	(84,421)		(87,078)
Changes in timing and other	(18,203)		(88,791)
Net change	213,881		378,123
Beginning of year	571,144		193,021
End of year	$	785,025	$	571,144

Certain information concerning the assumptions used in computing SMOG and their inherent limitations are discussed below. We believe this information is essential for a proper understanding and assessment of the data presented.

The assumptions used to compute SMOG do not necessarily reflect our expectations of actual revenues to be derived from neither those reserves nor their present worth. Assigning monetary values to the reserve quantity estimation process does not reduce the subjective and ever-changing nature of reserve estimates. Additional subjectivity occurs when determining present values because the rate of producing the reserves must be estimated. In addition to difficulty inherent in predicting the future, variations from the expected production rate could result from factors outside of our control, such as unintentional delays in development, environmental concerns or changes in prices or regulatory controls. Also, the reserve valuation assumes that all reserves will be disposed of by production. However, other factors such as the sale of reserves in place could affect the amount of cash eventually realized.

The December 31, 2022 future cash flows were computed by applying the 12-month 2022 average unescalated prices of $93.67 per barrel of oil and $6.36 per Mcf of natural gas, then adjusted for price differentials, over the estimated life of each of our oil and natural gas properties. NGL pricing was estimated as a percentage of the pricing per barrel of oil. Future price changes are considered only to the extent provided by contractual arrangements in existence at year-end.

Future production and development costs are computed by estimating the expenditures to be incurred in developing and producing the proved oil, NGLs, and natural gas reserves at the end of the year, based on continuation of existing economic conditions.

Future income tax expenses are computed by applying the appropriate year-end statutory tax rates to the future pretax net cash flows relating to proved oil, NGLs, and natural gas reserves less the tax basis of our properties. The future income tax expenses also give effect to permanent differences and tax credits and allowances relating to our proved oil, NGLs, and natural gas reserves.

Care should be exercised in the use and interpretation of the above data. As production occurs over the next several years, the results shown may be significantly different as changes in production performance, petroleum prices and costs are likely to occur.