ote

Business Segments, Risks and Major Customers

The Company operates exclusively in Ohio and Pennsylvania of the United States in the acquisition, exploration, development and production of oil and gas.

The Company operates in an environment with many financial risks, including, but

not

limited to, the ability to acquire additional economically recoverable oil and gas reserves, the inherent risks of the search for, development of and production of oil and gas, the ability to sell oil and gas at prices which will provide attractive rates of return, the volatility and seasonality of oil and gas production and prices, and the highly competitive and, at times, seasonal nature of the industry and worldwide economic conditions. The Company's ability to expand its reserve base and diversify its operations is also dependent upon the Company's ability to obtain the necessary capital through operating cash flow, borrowings or equity offerings. Various federal, state and governmental agencies are considering, and some have adopted, laws and regulations regarding environmental protection which could adversely affect the proposed business activities of the Company. The Company cannot predict what effect, if any, current and future regulations

may

have on the operations of the Company.

Management of the Company continually evaluates whether the Company can develop oil and gas properties at historical levels given current industry and market conditions. If the Company is unable to do so, it could be determined that it is in the best interests of the Company and its Unitholders to reorganize, liquidate or sell the Company. However, management cannot predict whether any sale transaction will be a viable alternative for the Company in the immediate future.

Natural gas sales accounted for

69%

and

66%

of total crude oil and natural gas sales in

2019

and

2018,

respectively. Approximately

79%

and

71%

of total crude oil and natural gas sales were derived from operated wells in

2019

and

2018,

respectively. The Company had

one

significant purchaser of natural gas production from operated wells for the years ended

December 31, 2019

and

2018

(the “Major Gas Purchaser”). Natural gas sales to the Major Gas Purchaser as a percentage of consolidated crude oil and natural gas sales were

50%

and

43%

2019

and

2018,

respectively.

As of

December 31, 2019,

natural gas purchased by the Major Gas Purchaser covers production from approximately

590

gross operated wells. Production purchased by the Major Gas Purchaser from operated wells comprised approximately

71%

and

65%

of the Company's consolidated natural gas sales in

2019

and

2018,

respectively.

The Company sells substantially all its crude oil production from operated wells to

one

purchaser (the “Major Oil Purchaser”).

The Company's production accounts receivable result from sales of natural gas and crude oil. A significant portion of the Company's production accounts receivable is due from the Company's major customers. The Company does

not

view such concentration as an unusual credit risk. However, the Company does

not

require collateral from its customers and could incur losses if its customers fail to pay. As a result of management's review of current and historical credit losses and economic activity, a valuation allowance was

not

deemed necessary at

December 31, 2019

and

2018.

The Company expects that the Major Gas Purchaser and Major Oil Purchaser will continue to be the only major customers for natural gas and crude oil production from its operated wells in

2020.

Historically, the Company has

not

tracked the purchasers of natural gas and crude oil derived from

third

party operated wells which

may

have the same customers.