Note 19 - Supplemental Financial Data - Oil and Gas Producing Activities (unaudited)

Estimated Proved Oil, Natural Gas, and Natural Gas Liquid Reserves

The reserve estimates as of December 31, 2018 and 2017 presented herein were made in accordance with oil and gas reserve estimation and disclosure authoritative accounting guidance.

Proved oil, natural gas, and natural gas liquid reserves as of December 31, 2018 and 2017 were calculated based on the prices for oil, natural gas, and natural gas liquids during the twelve-month period before the reporting date, determined as an un-weighted arithmetic average of the first-day-of-the month price for each month within such period. This average price is also used in calculating the aggregate amount and changes in future cash inflows related to the standardized measure of discounted future cash flows. Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. SEC rules dictate the types of technologies that a company may use to establish reserve estimates, including the extraction of non-traditional resources, such as bitumen extracted from oil sands as well as oil and gas extracted from shales.

Our estimates of our net proved, net proved developed, and net proved undeveloped oil, gas and natural gas liquids reserves and changes in our net proved oil, natural gas, and natural gas liquid reserves for 2018 and 2017 are presented in the table below. Proved oil, natural gas, and natural gas liquid reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Existing economic conditions include the average prices for oil and gas during the twelve-month period prior to the reporting date of December 31, 2018 and 2017 unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. Prices do not include the effects of commodity derivatives. The independent engineering firm, Cawley, Gillespie & Associates, Inc. (“CGA”) evaluated and prepared independent estimated proved reserves quantities and related pre-tax future cash flows as of December 31, 2018 and 2017. To facilitate the preparation of an independent reserve study, we provided CGA our reserve database and related supporting technical, economic, production and ownership information. Estimated reserves and related pre-tax future cash flows for the non-controlling interests of the consolidated partnerships included in our consolidated financial statements were based on CGA’s estimated reserves and related pre-tax future cash flows for the specific properties in the partnerships and have been added to CGA’s reserve estimates for December 31, 2018 and 2017 (see Note 3).

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

A summary of the changes in quantities of proved oil, natural gas, and natural gas liquid reserves for the years ended December 31, 2018 and 2017 are as follows (in thousands):

	2018												2017
	Oil			Natural Gas			NGL			Total			Oil			Natural Gas			NGL		Total
	MBbls			MMcf			MBbls			MMcfe			MBbls			MMcf			MBbls		MMcfe
Proved reserves, beginning of year		919			81,702			-			87,216			882			74,265			-		79,557
Revisions of previous estimates		(2,803	)		1,832			(1,147	)		(21,868	)		107			12,199			-		12,841
Extensions and discoveries		-			-			-			-			16			136			-		232
Production		(451	)		(4,798	)		(33	)		(7,702	)		(86	)		(4,898	)		-		(5,414	)
Purchases of reserves in-place		21,233			376,664			3,103			522,680			-			-			-		-
Sales of reserves in-place		-			-			-			-			-			-			-		-
Proved reserves, end of year		18,898			455,400			1,923			580,326			919			81,702			-		87,216

Proved developed reserves at:
End of year		14,336			450,424			1,472			545,272			903			81,702			-		87,216
Proved undeveloped reserves at:
End of year		4,562			4,976			451			35,054			16			-			-		96

The estimated proved reserves for December 31, 2018 and 2017 includes approximately 3.3 Bcfe and 3.0 Bcfe, respectively, attributed to non-controlling interests of consolidated partnerships.

Aggregate Capitalized Costs

The aggregate capitalized costs relating to oil and gas producing activities at the end of each of the years indicated were as follows:

(in thousands)	2018			2017

Oil and gas properties:
Proved oil and gas properties	$	347,059		$	114,893
Unproved properties not subject to depletion		5,416			1,947
Accumulated depreciation, depletion, amortization and impairment		(98,604	)		(80,715	)
Total	$	253,871		$	36,125

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

The following costs were incurred in oil and gas property acquisition, exploration, and development activities during the years ended December 31, 2018 and 2017:

(in thousands)	2018		2017

Property acquisition costs:
Unevaluated properties	$	3,464	$	1
Proved properties and gathering facilities		63,517		289
Development costs		2,074		952
Gathering facilities		460		43
Asset retirement obligation		14,085		2,309
Total	$	83,600	$	3,594

Our investment in unproved properties as of December 31, 2018, by the year in which such costs were incurred is set forth in the table below:

	2018		2017		2016 and Prior
(in thousands)
Acquisition costs	$	3,464	$	1	$	1,946

Results of Operations from Oil and Gas Producing Activities

Results of operations from oil and gas producing activities for the years ended December 31, 2018 and 2017 are presented below:

(in thousands)
	2018		2017

Revenues:
Oil and gas sales, including commodity derivative gains and losses	$	52,946	$	22,439

Expenses:
Production expenses		22,226		9,589
Depletion expense		7,305		2,157
Accretion of asset retirement obligations		868		307
Total expenses		30,399		12,053

Results of operations from oil and gas producing activities	$	22,547	$	10,386

Depletion rate per Mcfe	$	0.89	$	0.40

Standardized Measure of Discounted Future Net Cash Flows

Future oil and gas sales are calculated applying the prices used in estimating our proved oil and gas reserves to the year-end quantities of those reserves. Future price changes were considered only to the extent provided by contractual arrangements in existence at each year-end. Future production and development costs, which include costs related to plugging of wells, removal of facilities and equipment, and site restoration, are calculated by estimating the expenditures to be incurred in producing and developing the proved oil and gas reserves at the end of each year, based on year-end costs and assuming continuation of existing economic conditions. Future income tax expenses are computed by applying the appropriate year-end statutory tax rates to the estimated future pretax net cash flows relating to proved oil and gas reserves, less the tax basis of the properties involved. The future income tax expenses give effect to tax deductions, credits, and allowances relating to the proved oil and gas reserves. All cash flow amounts, including income taxes, are discounted at 10%.

Changes in the demand for oil and natural gas, inflation, and other factors make such estimates inherently imprecise and subject to substantial revision. This table should not be construed to be an estimate of the current market value of our proved reserves. Management does not rely upon the information that follows in making investment decisions.

(in thousands)	December 31,
	2018			2017


Future cash inflows	$	2,878,392		$	283,664
Future production costs		(1,538,870	)		(119,501	)
Future development costs		(76,852	)		(210	)
Future income taxes		(258,277	)		(35,482	)
Future net cash flows		1,004,393			128,471
10% annual discount		(612,325	)		(71,389	)
Standardized measure of discounted future net cash flows	$	392,068		$	57,082

Changes in the Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

An analysis of the changes in the standardized measure of discounted future net cash flows during each of the last two years is as follows:

	December 31,
	2018			2017
(in thousands)

Standardized measure of discounted future net cash flows, beginning of period	$	57,082		$	44,711
Sales of oil and gas, net of production costs and taxes		(25,681	)		(10,038	)
Price revisions		133,789			17,588
Extensions, discoveries and improved recovery, less related costs		-			298
Changes in estimated future development costs		(32,711	)		(324	)
Development costs incurred during the period		926			804
Quantity revisions		(23,484	)		11,196
Accretion of discount		5,708			4,471
Net changes in future income taxes		(89,117	)		(7,425	)
Purchases of reserves-in-place		391,877			-
Sales of reserves-in-place		-			-
Changes in production rate timing and other		(26,321	)		(4,199	)

Standardized measure of discounted future net cash flows, end of period	$	392,068		$	57,082

The twelve-month weighted averaged adjusted prices in effect at December 31, 2018 and 2017 were as follows:

	2018		2017
Oil (per Bbl)	$	65.56	$	51.34
Natural Gas (per Mcf)	$	3.10	$	2.98