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MORGAN EP, LLC

12 Months Ended

Dec. 31, 2024

(9) MORGAN E&P, LLC

Morgan E&P, LLC (“Morgan”) was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund. During 2023, Morgan acquired 5,897 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota, and acquired approximately 810 additional net acres during the second quarter of 2024. The acreage and associated mineral rights were acquired from Pro Energy I LLC (“Pro Energy”) who received a carried working interest of 20% in the acquired acreage.

In May 2023, we entered into an agreement with Morgan to provide it up to $10.0 million in senior debt financing, subject to a schedule of disbursements and draws that we determine. This amount was subsequently amended in 2024 to $10.5 million. As of December 31, 2024, Morgan had drawn the full $10.5 million under this facility.

During the fourth quarter of 2024, Morgan entered into an agreement to acquire the carried working interest held by Pro Energy in exchange for a payment of

$2.4 million in cash.

Below is summarized audited condensed consolidated financial information for Morgan E&P, LLC as of December 31, 2024 and 2023 and for the year ended December 31, 2024 and the period from inception (April 3, 2023) through December 31, 2023, respectively, (in thousands):

Morgan E&P, LLC

Condensed Balance Sheets

	December 31, 2024			December 31, 2023
Assets:
Cash	$	15		$	2,441
Revenue receivables		343			464
Joint interest billing receivables		1,738			1,391
Other receivables		2			—
Prepaids and other current assets		35			133
Current assets		2,133			4,429

Property, plant and equipment
Oil and gas properties, net - full cost method		6,959			10,326
Other property, plant and equipment, net		34			46
Total property, plant and equipment - net		6,993			10,372

Other noncurrent assets
Operating lease right-of-use assets, net		227			270
Total noncurrent assets		227			270
Total assets	$	9,353		$	15,071

Liabilities and Member's Deficit:

Current liabilities
Accounts payable	$	6,656		$	2,372
Revenue payable		319			221
Prepayments from working interest owners		—			122
Current portion of operating lease liabilities		47			28
Due to parent		550			13
Accrued liabilities		3,162			5,383
Total current liabilities		10,734			8,139

Long-term liabilities
Asset retirement obligations		4			4
Long-term operating lease liabilities		207			254
Note payable - Due to parent		10,500			8,253
Long-term accrued liabilities - Due to parent		1,471			225
Total long-term liabilities		12,182			8,736

Commitments and contingencies (Note 10)

Member's deficit		(13,563	)		(1,804	)

Total liabilities and member's deficit	$	9,353		$	15,071

Morgan E&P, LLC

Condensed Statements of Operations


	Year Ended December 31,			Period from inception (April 3, 2023) through December 31,
	2024			2023
Revenues
Oil, natural gas and natural gas liquid revenues	$	2,710		$	270
Expenses
Lease operating		2,694			268
Production and other taxes		261			27
Marketing, transportation and gathering expense		85			—
Depreciation, depletion and amortization		1,467			61
Accretion		1			—
Impairment of oil and gas properties		6,678			—
General and administrative		2,042			1,510
Total expenses		13,228			1,865
Other income (expense)
Interest income		6			16
Interest expense		(1,247	)		(225	)
Total other expense, net		(1,241	)		(209	)
Net loss	$	(11,759	)	$	(1,804	)

Morgan E&P, LLC

Condensed Statements of Cash Flows

	Year Ended December 31,2024			Period from inception (April 3, 2023) through December 31, 2023
Cash flows from operating activities
Net loss	$	(11,759	)	$	(1,804	)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities
Depreciation, depletion, and amortization		1,467			61
Amortization of right-of-use asset		43			12
Accretion		1			—
Impairment of oil and gas properties		6,678			—
Changes in operating assets and liabilities
Accounts receivable – oil and natural gas sales		121			(464	)
Accounts receivable – joint interest billings		(1,508	)		(291	)
Other receivables		(2	)		—
Prepaids and other current assets		98			(133	)
Accounts payable		4,284			85
Revenue payable		518			221
Prepayments from owners		—			1,701
Due to parent		537			13
Current portion of operating lease liabilities		(28	)		—
Accrued liabilities		(3,772	)		810
Long-term accrued liabilities - due to parent		1,246			225
Net cash provided (used in) by operating activities		(2,076	)		436
Cash flows from investing activities
Capital expenditures		(2,597	)		(5,700	)
Acquisition of oil and gas properties		—			(500	)
Additions to other property, plant and equipment		—			(48	)
Net cash used in investing activities		(2,597	)		(6,248	)
Cash flows from financing activities
Proceeds from note payable - affiliate		2,247			8,253
Net cash provided by financing activities		2,247			8,253
Net change in cash		(2,426	)		2,441
Beginning of period		2,441			—
End of period	$	15		$	2,441
Supplemental disclosure for noncash financing and investing activities
Operating lease right-of-use assets additions	$	—		$	(282	)
Acquisition of oil and natural gas working interests funded by accrued liabilities	$	(3,019	)	$	—
Change in capital accounts payable and capital accruals		849			(4,181	)
Prepayments applied to joint interest receivables		122			1,579
Change in asset retirement costs		(1	)		4