UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
| FORM |
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
| GOODRICH PETROLEUM CORPORATION (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code): (
Securities registered pursuant to Section 12(b) of the Act:
| |
| Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
|
|
|
|
|
|
| | ☐ |
| Smaller reporting company | |
|
|
|
|
|
|
|
|
|
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
The Registrant had
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1—Financial Statements
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
| June 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, trade and other, net of allowance | ||||||||
| Accrued oil and natural gas revenue | ||||||||
| Fair value of oil and natural gas derivatives | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT: | ||||||||
| Unevaluated properties | ||||||||
| Oil and natural gas properties (full cost method) | ||||||||
| Furniture, fixtures and equipment and other capital assets | ||||||||
| Less: Accumulated depletion, depreciation and amortization | ( | ) | ( | ) | ||||
| Net property and equipment | ||||||||
| Other | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Fair value of oil and natural gas derivatives | ||||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Long term debt, net | ||||||||
| Accrued abandonment cost | ||||||||
| Fair value of oil and natural gas derivatives | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 9) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock: shares par value authorized, and issued and outstanding | ||||||||
| Common stock: par value, shares authorized, and and shares issued as of June 30, 2021 and issued and outstanding as of December 31, 2020, respectively | ||||||||
| Treasury stock ( and shares, respectively) | ( | ) | ||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Three Months Ended June 30, |
Six Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| Oil and natural gas revenues |
$ | $ | $ | $ | ||||||||||||
| Other |
||||||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Lease operating expense |
||||||||||||||||
| Production and other taxes |
||||||||||||||||
| Transportation and processing |
||||||||||||||||
| Depreciation, depletion and amortization |
||||||||||||||||
| General and administrative |
||||||||||||||||
| Impairment of oil and natural gas properties |
||||||||||||||||
| Other |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Operating income (loss) |
( |
) | ( |
) | ||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income and other expense |
||||||||||||||||
| Gain (loss) on commodity derivatives not designated as hedges |
( |
) | ( |
) | ( |
) | ||||||||||
| Loss on early extinguishment of debt |
( |
) | ||||||||||||||
| ( |
) | ( |
) | ( |
) | |||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense |
||||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| PER COMMON SHARE |
||||||||||||||||
| Net loss per common share - basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share - diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average shares of common stock outstanding - basic |
||||||||||||||||
| Weighted average shares of common stock outstanding - diluted |
||||||||||||||||
See accompanying notes to consolidated financial statements.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depletion, depreciation and amortization | ||||||||
| Impairment of oil and natural gas properties | ||||||||
| Right of use asset depreciation | ||||||||
| (Gain) loss on commodity derivatives not designated as hedges | ( | ) | ||||||
| Net cash received (paid) for settlement of derivative instruments | ( | ) | ||||||
| Share-based compensation (non-cash) | ||||||||
| Loss on early extinguishment of debt | ||||||||
| Amortization of finance cost, debt discount, paid in-kind interest and accretion | ||||||||
| Other | ( | ) | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable, trade and other, net of allowance | ( | ) | ( | ) | ||||
| Accrued oil and natural gas revenue | ( | ) | ||||||
| Prepaid expenses and other | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Principal payments of bank borrowings | ( | ) | ||||||
| Proceeds from bank borrowings | ||||||||
| Proceeds from 2023 Second Lien Notes | ||||||||
| Debt issuance costs | ( | ) | ||||||
| Purchase of treasury stock | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Increase (decrease) in non-cash capital expenditures | $ | $ | ( | ) | ||||
See accompanying notes to consolidated financial statements.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| Preferred Stock |
Common Stock |
Additional Paid-in |
Treasury Stock |
Accumulated Earnings |
Total Stockholders’ |
|||||||||||||||||||||||||||||||
| Shares |
Value |
Shares |
Value |
Capital |
Shares |
Value |
(Deficit) |
Equity |
||||||||||||||||||||||||||||
| Balance at December 31, 2019 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Net income |
- | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation |
- | 1 | - | |||||||||||||||||||||||||||||||||
| Treasury stock activity |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Share-based compensation |
- | - | - | |||||||||||||||||||||||||||||||||
| Discount from 2021/2022 Second Lien Notes Modification (See Note 4) |
- | - | - | |||||||||||||||||||||||||||||||||
| Treasury stock activity |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||
| Balance at December 31, 2020 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Net income |
- | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation |
- | (1 | ) | - | ( |
) | ||||||||||||||||||||||||||||||
| UCC warrant exchange |
- | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Discount from 2023 Second Lien Notes (See Note 4) |
- | - | - | |||||||||||||||||||||||||||||||||
| Treasury stock activity |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Share-based compensation |
- | - | - | |||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—Description of Business and Significant Accounting Policies
Goodrich Petroleum Corporation (“Goodrich” and, together with its subsidiary, Goodrich Petroleum Company, L.L.C. (the “Subsidiary”), “we,” “our,” the “Company,” or the “Registrant”) is an independent oil and natural gas company engaged in the exploration, development and production of oil and natural gas on properties primarily in (i) Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend, (ii) Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend (“TMS”), and (iii) South Texas, which includes the Eagle Ford Shale Trend.
Basis of Presentation
The consolidated financial statements of the Company included in this Quarterly Report on Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the SEC”) and accordingly, certain information normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) has been condensed or omitted. This information should be read in conjunction with our consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year or for any interim period.
During the first half of 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded, although the impact of the COVID-19 pandemic and related economic, business and market disruptions remain uncertain.
The primary impact of COVID-19 experienced by the Company was a severe decline in the demand and price of crude oil. Because we predominately produce natural gas and natural gas demand and prices were not impacted by the same market forces as crude oil, we have experienced less of an impact from COVID-19 than many of our peers. However, the scope and length of the COVID-19 pandemic and the ultimate effect on the price of natural gas and oil cannot be determined, and we could be adversely affected in future periods. Management is actively monitoring the impact on the Company’s results of operations, financial position, and liquidity in fiscal year 2021.
Principles of Consolidation—The consolidated financial statements include the financial statements of the Company and the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. Certain data in prior periods’ financial statements have been adjusted to conform to the presentation of the current period. We have evaluated subsequent events through the date of this filing.
Use of Estimates— Our management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with US GAAP.
Cash and Cash Equivalents—Cash and cash equivalents includes cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at the date of purchase.
Accounts Payable—Accounts payable consisted of the following amounts as of June 30, 2021 and December 31, 2020:
| (In thousands) | June 30, 2021 | December 31, 2020 | ||||||
| Trade payables | $ | $ | ||||||
| Revenue payables | ||||||||
| Prepayments from partners | ||||||||
| Miscellaneous payables | ||||||||
| Total Accounts payable | $ | $ | ||||||
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Accrued Liabilities—Accrued liabilities consisted of the following amounts as of June 30, 2021 and December 31, 2020:
| (In thousands) | June 30, 2021 | December 31, 2020 | ||||||
| Accrued capital expenditures | $ | $ | ||||||
| Accrued lease operating expense | ||||||||
| Accrued production and other taxes | ||||||||
| Accrued transportation and gathering | ||||||||
| Accrued performance bonus | ||||||||
| Accrued interest | ||||||||
| Accrued office lease | ||||||||
| Accrued general and administrative expense and other | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
Inventory –Inventory consists of equipment, casing and tubulars that are expected to be used in our capital drilling program. Inventory is carried on the Consolidated Balance Sheets at the lower of cost or market.
Property and Equipment—Under US GAAP, two acceptable methods of accounting for oil and natural gas properties are allowed. These are the Successful Efforts Method and the Full Cost Method. Entities engaged in the production of oil and natural gas have the option of selecting either method for application in the accounting for their properties. The principle differences between the two methods are in the treatment of exploration costs, the computation of depreciation, depletion and amortization (“DD&A”) expense and the assessment of impairment of oil and natural gas properties. We have elected to adopt the Full Cost Method of accounting. We believe that the true cost of developing a “portfolio” of reserves should reflect both successful and unsuccessful attempts at exploration and development. We believe application of the Full Cost Method better reflects the true economics of exploring for and developing our oil and natural gas reserves.
Under the Full Cost Method, we capitalize all costs associated with acquisitions, exploration, development and estimated abandonment costs into a single full cost pool. We capitalize internal costs that can be directly identified with the acquisition of leasehold, as well as drilling and completion activities, but do not include any costs related to production, general corporate overhead or similar activities. Unevaluated property costs are excluded from the amortization base until we make a determination as to the existence of proved reserves on the respective property or impairment. We review our unevaluated properties at the end of each quarter to determine whether the costs should be reclassified to proved oil and natural gas properties and thereby subject to DD&A and the full cost ceiling test. For the three months ended June 30, 2021 and 2020, we transferred $
Under the Full Cost Method, we amortize our investment in oil and natural gas properties through DD&A expense using the units of production method. An amortization rate is calculated based on total proved reserves converted to thousand cubic feet equivalent of natural gas (“Mcfe”) as the denominator and the net book value of evaluated oil and natural gas asset together with the estimated future development cost of the proved reserves as the numerator. The rate calculated per Mcfe is applied against the period's production also converted to Mcfe to arrive at the period's DD&A expense.
Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements, is computed using the straight-line method over their estimated useful lives, which vary from to years.
Full Cost Ceiling Test—The Full Cost Method requires that at the conclusion of each financial reporting period, the present value of estimated future net cash flows from proved reserves discounted at 10%, excluding cash flows related to estimated abandonment costs already recorded, net of deferred taxes (the “Ceiling”), be compared to the net capitalized costs of proved oil and natural gas properties, net of related deferred taxes. This comparison is referred to as a “ceiling test.” If the net capitalized costs of proved oil and natural gas properties net of deferred taxes exceed the Ceiling, we are required to write-down the value of our oil and natural gas properties to the value of the Ceiling. Estimated future net cash flows from proved reserves are calculated based on a trailing 12-month average pricing assumption.
The Full Cost Ceiling Test performed as of June 30, 2021 and 2020 resulted in and $
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurement—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, our credit risk.
We use various methods, including the income approach and market approach, to determine the fair values of our financial instruments that are measured at fair value on a recurring basis, which depend on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of these instruments. We separate our financial instruments into three levels (levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the fair value of our instruments. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between levels.
Each of these levels and our corresponding instruments classified by level are further described below:
| • | Level 1 Inputs— unadjusted quoted market prices in active markets for identical assets or liabilities. We have no Level 1 instruments; |
| • | Level 2 Inputs— quotes that are derived principally from or corroborated by observable market data. Included in this level are our senior credit facilities, second lien notes and commodity derivatives whose fair values are based on third-party quotes or available interest rate information and commodity pricing data obtained from third party pricing sources and our creditworthiness or that of our counter-parties; and |
| • | Level 3 Inputs— unobservable inputs for the asset or liability, such as discounted cash flow models or valuations, based on our various assumptions and future commodity prices. Included in this level would be our initial measurement of asset retirement obligations and the equity component determined as a result of fair valuing debt instruments that include a conversion feature. |
As of June 30, 2021 and December 31, 2020, the carrying amounts of our cash and cash equivalents, trade receivables and payables represented fair value because of the short-term nature of these instruments.
Asset Retirement Obligations—Asset retirement obligations are related to the abandonment and site restoration requirements that result from the exploration and development of our oil and natural gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense is included in “Depreciation, depletion and amortization” on our Consolidated Statements of Operations. See Note 3.
The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state, to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the initial measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.
Revenue Recognition—Oil and natural gas revenues are generally recognized upon delivery of our produced oil and natural gas volumes to our customers. We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil and natural gas sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. As of June 30, 2021and December 31, 2020, the net liability for natural gas balancing was immaterial. Differences between actual production and net working interest volumes are routinely adjusted. See Note 2.
Derivative Instruments—We use derivative instruments such as futures, forwards, swaps, collars, and options for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and hedging our exposure to changing interest rates. Accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet. We offset the fair value of our asset and liability positions with the same counter-party for each commodity type. Changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met. All of our realized gain or losses on our derivative contracts are the result of cash settlements. We have not designated any of our derivative contracts as hedges for accounting purposes; accordingly, changes in fair value are reflected in earnings. See Note 8.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes—We account for income taxes during interim periods based on annual projections of our effective tax rate.
We account for income taxes on an annual basis, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We recognize, as required, the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. See Note 7.
Net Income or Net Loss Per Common Share—Basic net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted-average shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted average shares of common stock outstanding during the period, plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion or exercise of other securities, such as warrants and convertible notes, into shares of our common stock. See Note 6.
Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, when probable of realization, are separately recorded and are not offset against the related environmental liability. See Note 9.
Share-Based Compensation—We account for our share-based transactions using the fair value as of the grant date and recognize compensation expense on a straight-line basis over the requisite service period.
Guarantee—As of June 30, 2021, our Subsidiary was the Subsidiary Guarantor of our 2023 Second Lien Notes (as defined below). Goodrich has no independent assets or operations, the guarantee is full and unconditional and Goodrich has no subsidiaries other than the Subsidiary.
Debt Issuance Cost—The Company records debt issuance costs associated with its 2023 Second Lien Notes (and previously with its 2021/2022 Second Lien Notes), (both as defined below) as a contra balance to long term debt, net in our Consolidated Balance Sheets, which is amortized straight-line over the life of the respective notes as this method is not materially different from the effective interest method. Debt issuance costs associated with our revolving credit facility debt are recorded in other assets in our Consolidated Balance Sheets, which are amortized straight-line over the life of such debt.
New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are evaluating the expected impact these amendments and reference rate reform will have on our consolidated financial statements and various contracts.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 primarily affect convertible instruments issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements of ASU 2020-06. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. Also affected is the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in ASU 2020-06 affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB has also decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact of these amendments on our accounting for, and disclosure of, our convertible notes.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2—Revenue Recognition
In accordance with Accounting Standards Codification (“ASC”) Topic 606, revenue is generally recognized upon delivery of our produced oil and natural gas volumes to our customers. Our customer sales contracts include oil and natural gas sales. Under Topic 606, each unit (Mcf or barrel) of commodity product represents a separate performance obligation which is sold at variable prices, determinable on a monthly basis. The pricing provisions of our contracts are primarily tied to a market index with certain adjustments based on factors such as delivery, product quality and prevailing supply and demand conditions in the geographic areas in which we operate. We allocate the transaction price to each performance obligation and recognize revenue upon delivery of the commodity product when the customer obtains control. Control of our produced natural gas volumes passes to our customers at specific metered points indicated in our natural gas contracts. Similarly, control of our produced oil volumes passes to our customers when the oil is measured either by a trucking oil ticket or by a meter when entering an oil pipeline. The Company has no control over the commodities after those points and the measurement at those points dictates the amount on which the customer's payment is based. Our oil and natural gas revenue streams include volumes burdened by royalty and non-operated working interests. Our revenues are recorded and presented on our financial statements net of the royalty and non-operated working interests. Our revenue stream does not include any payments for services or ancillary items other than sale of oil and natural gas.
We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil and natural gas sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized. As of June 30, 2021 and December 31, 2020, receivables from contracts with customers were $
The following table presents our oil and natural gas revenues disaggregated by revenue source and by operated and non-operated properties for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||
| (In thousands) | Oil Revenue | Gas Revenue | NGL Revenue | Total Oil and Natural Gas Revenues | Oil Revenue | Gas Revenue | NGL Revenue | Total Oil and Natural Gas Revenues | ||||||||||||||||||||||||
| Operated | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-operated | ||||||||||||||||||||||||||||||||
| Total oil and natural gas revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||
| (In thousands) | Oil Revenue | Gas Revenue | NGL Revenue | Total Oil and Natural Gas Revenues | Oil Revenue | Gas Revenue | NGL Revenue | Total Oil and Natural Gas Revenues | ||||||||||||||||||||||||
| Operated | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-operated | ||||||||||||||||||||||||||||||||
| Total oil and natural gas revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3—Asset Retirement Obligations
The reconciliation of the beginning and ending asset retirement obligations for the six months ended June 30, 2021 is as follows (in thousands):
| Six Months Ended June 30, 2021 |
||||
| Beginning balance at December 31, 2020 |
$ | |||
| Liabilities incurred |
||||
| Accretion expense |
||||
| Ending balance at June 30, 2021 |
$ | |||
| Current liability |
||||
| Long term liability |
$ | |||
NOTE 4—Debt
Debt consisted of the following balances as of June 30, 2021 and December 31, 2020 (in thousands):
| June 30, 2021 | December 31, 2020 | |||||||||||||||
| Principal | Carrying Amount | Principal | Carrying Amount | |||||||||||||
| 2019 Senior Credit Facility (1) | $ | $ | $ | $ | ||||||||||||
| 2021/2022 Second Lien Notes (2) | ||||||||||||||||
| 2023 Second Lien Notes (3) | ||||||||||||||||
| Total debt | $ | $ | $ | $ | ||||||||||||
(1) The carrying amount for the 2019 Senior Credit Facility represents fair value as its variable interest rate approximates market rates.
(2) The debt discount was being amortized using the effective interest rate method based upon a maturity date of May 31, 2022. The principal included $
(3) The debt discount is being amortized using the effective interest rate method based upon a maturity date of May 31, 2023. The principal includes $
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the total interest expense (contractual interest expense, amortization of debt discount, accretion and financing costs) and the effective interest rate on the liability component of debt for the three and six months ended June 30, 2021 and 2020 (amounts in thousands, except effective interest rates):
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||
| Interest Expense | Effective Interest Rate | Interest Expense | Effective Interest Rate | Interest Expense | Effective Interest Rate | Interest Expense | Effective Interest Rate | |||||||||||||||||||||||||
| 2019 Senior Credit Facility | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| 2021/2022 Second Lien Notes (1) | % | % | % | % | ||||||||||||||||||||||||||||
| 2023 Second Lien Notes (2) | % | % | % | % | ||||||||||||||||||||||||||||
| Total interest expense | $ | $ | $ | $ | ||||||||||||||||||||||||||||
(1) The 2021/2022 Second Lien Notes had a coupon interest rate of however, the discount recorded due to the convertibility of the notes increased the effective interest rate to
(2) The 2023 Second Lien Notes have a coupon interest rate of however, the discount recorded due to the convertibility of the notes increased the effective interest rate to
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2019 Senior Credit Facility
On May 14, 2019, the Company entered into a Second Amended and Restated Senior Secured Revolving Credit Agreement (the “2019 Credit Agreement”) among the Company, the Subsidiary, as borrower (in such capacity, the “Borrower”), Truist Bank, as administrative agent (the “Administrative Agent”), and certain lenders that are party thereto, which provides for revolving loans of up to the borrowing base then in effect (the “2019 Senior Credit Facility”).
The 2019 Senior Credit Facility matures on (a) May 14, 2024 or (b) December 2, 2022, if the 2023 Second Lien Notes (as defined below) have not been voluntarily redeemed, repurchased, refinanced or otherwise retired by December 2, 2022, which is the date that is 180 days prior to the May 31, 2023 “Maturity Date” of the 2023 Second Lien Notes. The 2019 Senior Credit Facility provides for a maximum credit amount of $
All amounts outstanding under the 2019 Senior Credit Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) the alternative base rate plus an applicable margin ranging from
The 2019 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the 2019 Senior Credit Facility to be immediately due and payable.
The 2019 Credit Agreement also contains certain financial covenants, including the maintenance of (i) a ratio of net funded debt to EBITDAX not to exceed
As of June 30, 2021, the Company had a borrowing base of $
As of June 30, 2021, the Company was in compliance with all covenants within the 2019 Senior Credit Facility.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Convertible Second Lien Notes
In October 2016, the Company issued $
The 2019 Second Lien Notes were scheduled to mature on August 30, 2019 or six months after the maturity of our current revolving credit facility but in no event later than March 30, 2020. The 2019 Second Lien Notes bore interest at the rate of
Upon issuance of the 2019 Second Lien Notes in October 2016, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion as well as warrants on the debt instrument, we recorded a debt discount of $
On May 14, 2019, the Company and the Subsidiary entered into a purchase agreement with certain purchasers pursuant to which the Company issued to such purchasers $
Upon issuance of the 2021/2022 Second Lien Notes on May 31, 2019, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion, we recorded a debt discount of $
On March 9, 2021, the Company and the Subsidiary entered into a note purchase and exchange agreement (“the Note Purchase and Exchange Agreement”) with certain purchasers (each such purchaser, together with its successors and assigns, a “2023 Second Lien Notes Purchaser”) pursuant to which the Company issued to the 2023 Second Lien Notes Purchasers (A) $
The 2023 Second Lien Notes, as set forth in the indenture governing the 2023 Second Lien Notes (the “2023 Second Lien Notes Indenture”), are scheduled to mature on May 31, 2023. The 2023 Second Lien Notes bear interest at the rate of 13.50% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The Company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the 2023 Second Lien Notes by increasing the principal amount of the outstanding 2023 Second Lien Notes.
The 2023 Second Lien Notes Indenture contains certain covenants pertaining to us and our Subsidiary, including delivery of financial reports; environmental matters; conduct of business; use of proceeds; operation and maintenance of properties; collateral and guarantee requirements; indebtedness; liens; dividends and
distributions; limits on sales of assets and stock; business activities; transactions with affiliates; and changes of control. The 2023 Second Lien Notes Indenture also contains a financial covenant that requires the maintenance of a ratio of Total Proved PV-10 attributable to the Company's and Subsidiary's Proved Reserves (as defined in the 2023 Second Lien Notes Indenture) to Total Secured Debt (net of any Unrestricted Cash not to exceed $
The 2023 Second Lien Notes are convertible into the Company’s common stock at the conversion rate, which is the sum of the outstanding principal amount of 2023 Second Lien Notes to be converted, including any accrued and unpaid interest, divided by the conversion price, which shall initially be $
Upon issuance of the 2023 Second Lien Notes on March 9, 2021, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion, we recorded a debt discount of $
As of June 30, 2021, $
As of June 30, 2021, the Company was in compliance with all covenants with respect to the 2023 Second Lien Notes Indenture.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5—Equity
During the three and six months ended June 30, 2021 the Company did not have any material activity related to its share-based compensation units. During the three and six months ended June 30, 2020, the Company had vestings of its share-based compensation units upon the retirement of certain employees which resulted in the issuance of approximately
In connection with the issuance of the 2023 Second Lien Notes, we recorded an equity component of $
NOTE 6—Net Income (Loss) Per Common Share
Net loss applicable to common stock was used as the numerator in computing basic and diluted net loss per common share for the three and six months ended June 30, 2021 and 2020. The Company used the treasury stock method in determining the effects of potentially dilutive restricted stock. The following table sets forth information related to the computations of basic and diluted net loss per common share:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| Basic net loss per common share: | ||||||||||||||||
| Net loss applicable to common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares of common stock outstanding | ||||||||||||||||
| Basic net loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted net loss per common share: | ||||||||||||||||
| Net loss applicable to common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted weighted average shares of common stock outstanding | ||||||||||||||||
| Diluted net loss per common share (1) (2) (3) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) Common shares issuable upon conversion of the 2023 Second Lien Notes and 2021/2022 Second Lien Notes, respectively, not included in the computation of diluted net loss per common share since their inclusion would have been anti-dilutive for the three and six months ended June 30, 2021 and June 30, 2020. | ||||||||||||||||
| (2) Common shares issuable upon conversion of the unsecured claims warrants not included in the computation of diluted net loss per common share since their inclusion would have been anti-dilutive for the three and six months ended June 30, 2021 and June 30, 2020. | ||||||||||||||||
| (3) Common shares issuable upon vesting of the restricted stock not included in the computation of diluted net loss per common share since their inclusion would have been anti-dilutive for the three and six months ended June 30, 2021 and June 30, 2020. ** | ||||||||||||||||
** Common shares issuable on assumed vesting of share-based compensation assumes a payout of the Company's performance share awards at 100% of the initial units granted (or a ratio of one unit to one common share). The range of common stock shares which may be earned ranges from to
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7—Income Taxes
We recorded
As of June 30, 2021, we have
NOTE 8—Commodity Derivative Activities
We use commodity and financial derivative contracts to manage fluctuations in commodity prices. We are currently not designating our derivative contracts for hedge accounting. All derivative gains and losses are from our oil and natural gas derivative contracts and have been recognized in “Other income (expense)” on our Consolidated Statements of Operations.
The following table summarizes gains and losses we recognized on our oil and natural gas derivatives for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||
| Oil and Natural Gas Derivatives (in thousands) | ||||||||||||||||
| Gain (loss) on commodity derivatives not designated as hedges, settled | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Loss on commodity derivatives not designated as hedges, not settled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total gain (loss) on commodity derivatives not designated as hedges | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
Commodity Derivative Activity
We enter into swap contracts, costless collars or other derivative agreements from time to time to manage commodity price risk for a portion of our production. Our policy is that all derivatives are approved by the Hedging Committee of our Board, and reviewed periodically by the Board.
Despite the measures taken by us to attempt to control price risk, we remain subject to price fluctuations for natural gas and crude oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond our control. Decreases in domestic crude oil and natural gas spot prices will have a material adverse effect on our financial position, results of operations and quantities of reserves recoverable on an economic basis. We routinely exercise our contractual right to net realized gains against realized losses when settling with our financial counter-parties. Neither our counter-parties nor we require any collateral upon entering into derivative contracts. As we were in a net liability position with all of our counter-parties, we would not have been at risk of loss had our counter-parties been unable to fulfill their obligations as of June 30, 2021.
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2021, the open positions on our outstanding commodity derivative contracts, all of which were with Truist Bank, RBC Capital Markets, ARM Energy and Citizens Commercial Banking were as follows:
| Contract Type | Average Daily Volume | Total Volume | Weighted Average Fixed Price | Fair Value at June 30, 2021 (In thousands) | |||||||||||
| Natural Gas swaps (MMBtu) | |||||||||||||||
| 2021 |
| $ | ( | ) | |||||||||||
| 2022 (through March 31, 2022) |
| ( | ) | ||||||||||||
| Natural Gas collars (MMBtu) | |||||||||||||||
| 2021 | 0 -50 | ( | ) | ||||||||||||
| 2022 | 8 -40 | ( | ) | ||||||||||||
| 2023 (through March 31, 2023) | 5 -51 | ( | ) | ||||||||||||
| Natural Gas basis swaps (MMBtu) | |||||||||||||||
| 2021 |
| ||||||||||||||
| 2022 |
| ( | ) | ||||||||||||
| 2023 |
| ( | ) | ||||||||||||
| 2024 |
| ( | ) | ||||||||||||
| Total natural gas | $ | ( | ) | ||||||||||||
| Contract Type | Daily Volume | Weighted Average Fixed Price | Contract Start Date | Contract Termination | ||||
| Natural gas swap (MMBtu) | $ | June 1, 2021 | December 31, 2021 | |||||
| Natural gas collar (MMBtu) | | 2.655 -3.5151 | April 1, 2022 | March 31, 2023 | ||||
| Natural gas collar (MMBtu) | | 2.755 -3.3030 | January 1, 2022 | December 31, 2022 |
Subsequent to June 30, 2021, we entered into additional natural gas derivative contracts as detailed in Note 11—“Subsequent Events”.
The following table summarizes the fair values of our derivative financial instruments that are recorded at fair value classified in each Level as of June 30, 2021 (in thousands). We measure the fair value of our commodity derivative contracts by applying the income approach. See Note 1—“Description of Business and Significant Accounting Policies” for our discussion regarding fair value, including inputs used and valuation techniques for determining fair values.
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Fair value of oil and natural gas derivatives - Current Assets | $ | $ | $ | $ | ||||||||||||
| Fair value of oil and natural gas derivatives - Non-current Assets | ||||||||||||||||
| Fair value of oil and natural gas derivatives - Current Liabilities | ( | ) | ( | ) | ||||||||||||
| Fair value of oil and natural gas derivatives - Non-current Liabilities | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
We enter into commodity derivative contracts under which we have netting arrangements with each counter-party. The following table discloses and reconciles the gross amounts to the amounts as presented on the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Fair Value of Oil and Natural Gas Derivatives | Gross | Amount | As | Gross | Amount | As | ||||||||||||||||||
| (in thousands) | Amount | Offset | Presented | Amount | Offset | Presented | ||||||||||||||||||
| Fair value of oil and natural gas derivatives - Current Assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of oil and natural gas derivatives - Non-current Assets | ( | ) | ( | ) | ||||||||||||||||||||
| Fair value of oil and natural gas derivatives - Current Liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Fair value of oil and natural gas derivatives - Non-current Liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Total | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9—Commitments and Contingencies
We are party to various lawsuits from time to time arising in the normal course of business, including, but not limited to, royalty, contract, personal injury, and environmental claims. We have established reserves as appropriate for all such proceedings and intend to vigorously defend these actions. Management believes, based on currently available information, that adverse results or judgments from such actions, if any, would not have been material to our consolidated financial position, results of operations or liquidity for the three and six months ended June 30, 2021 and 2020.
NOTE 10—Leases
We determine if an arrangement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets. We lease our corporate office building in Houston, Texas. We recognize lease expense for this lease on a straight-line basis over the lease term. This operating lease is included in furniture, fixtures and equipment and other capital assets, accrued liabilities and other non-current liabilities on our Consolidated Balance Sheets. The operating lease asset and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As this lease did not provide an implicit rate, we used a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. The operating lease asset includes any lease payments made but excludes annual operating charges. Operating lease expense is recognized on a straight-line basis over the lease term and reported in general and administrative operating expense on our Consolidated Statements of Operations. We have also entered into leases for other equipment which are immaterial to our financial statements and/or have lease terms less than 12 months and have therefore not been recorded on our Consolidated Balance Sheets.
The lease cost components for the three and six months ended June 30, 2021 and 2020 are classified as follows:
| (in thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Consolidated Statements of Operations Classification | ||||||||||||
| Building lease cost | $ | $ | $ | $ | General and administrative expense | ||||||||||||
| Variable lease cost (1) | General and administrative expense | ||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
(1) Includes building operating expenses.
The following are additional details related to our lease portfolio as of June 30, 2021 and December 31, 2020:
| (in thousands) | June 30, 2021 | December 31, 2020 | Consolidated Balance Sheets Classification | ||||||
| Lease asset, gross | $ | $ | Furniture, fixtures and equipment and other capital assets | ||||||
| Accumulated depreciation | ( | ) | ( | ) | Accumulated depletion, depreciation and amortization | ||||
| Lease asset, net | $ | $ | |||||||
| Current lease liability | $ | $ | Accrued liabilities | ||||||
| Non-current lease liability | Other non-current liabilities | ||||||||
| Total lease liabilities | $ | $ | |||||||
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents operating lease liability maturities as of June 30, 2021:
| (in thousands) | June 30, 2021 | |||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total lease payments | $ | |||
| Less imputed interest | ||||
| Present value of lease liabilities | $ | |||
As of June 30, 2021, our office building operating lease has a weighted-average remaining lease term of
NOTE 11—Subsequent Events
Subsequent to June 30, 2021, the Company entered into the following derivative contracts with Truist Bank, RBC Capital Markets, and Citizens Commercial Banking:
| Contract Type | Daily Volume | Weighted Average Fixed Price | Contract Start Date | Contract Termination | |||||
| Natural gas swap (MMBtu) | $ | August 1, 2021 | December 31, 2021 | ||||||
| Natural gas swap (MMBtu) | $ | January 1, 2022 | March 31, 2022 | ||||||
| Natural gas swap (MMBtu) | $ | April 1, 2022 | September 30, 2022 |
On July 14, 2021, all outstanding unsecured claims warrants of the Company became exercisable when the required equity strike price (as defined per the warrant agreement) of $
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
We have made in this report, and may from time to time otherwise make in other public filings, press releases and discussions with our management, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), concerning our operations, economic performance and financial condition. These forward-looking statements include information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and natural gas properties, marketing and midstream activities, and also include those statements accompanied by or that otherwise include the words “may,” “could,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “predicts,” “target,” “goal,” “plans,” “objective,” “potential,” “should,” or similar expressions or variations on such expressions that convey the uncertainty of future events or outcomes. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and assumptions about future events. These statements are based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this report, or if earlier, as of the date they were made; we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
These forward-looking statements involve risk and uncertainties. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:
| • | public health crises, such as the Coronavirus Disease 2019 (“COVID-19”) outbreak in 2020 and 2021; | |
| • |
the market prices of oil and natural gas; |
| • |
volatility in the commodity-futures market; |
| • |
financial market conditions and availability of capital; |
| • |
future cash flows, credit availability and borrowings; |
| • |
sources of funding for exploration and development; |
| • |
our financial condition; |
| • |
our ability to repay our debt; |
| • |
the securities, capital or credit markets; |
| • |
planned capital expenditures; |
| • |
future drilling activity; |
| • |
uncertainties about the estimated quantities of our oil and natural gas reserves and production from our wells; |
| • |
the creditworthiness of our hedging counter-parties and the effect of our hedging arrangements; |
| • |
litigation matters; |
| • |
pursuit of potential future acquisition opportunities; |
| • |
general economic conditions, either nationally or in the jurisdictions in which we are doing business; |
| • |
legislative or regulatory changes, including retroactive royalty or production tax regimes, hydraulic-fracturing regulation, drilling and permitting regulations, derivatives reform, changes in state and federal corporate taxes, environmental regulation, environmental risks and liability under federal, state and foreign and local environmental laws and regulations; |
| • |
the creditworthiness of our financial counter-parties and operation partners; and |
| • |
other factors discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our other public filings, press releases and discussions with our management. |
For additional information regarding known material factors that could cause our actual results to differ from projected results please read the rest of this Quarterly Report on Form 10-Q and Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
Goodrich Petroleum Corporation (“Goodrich” and, together with its subsidiary, Goodrich Petroleum Company, L.L.C. (the “Subsidiary”), “we,” “our,” or the “Company”) is an independent oil and natural gas company engaged in the exploration, development and production of oil and natural gas on properties primarily in (i) Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend, (ii) Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend (“TMS”), and (iii) South Texas, which includes the Eagle Ford Shale Trend.
We seek to increase shareholder value by growing our oil and natural gas reserves, production, revenues and cash flow from operating activities (“operating cash flow”). In our opinion, on a long term basis, growth in oil and natural gas reserves, cash flow and production on a cost-effective basis are the most important indicators of performance success for an independent oil and natural gas company.
Management strives to increase our oil and natural gas reserves, production and cash flow through exploration and development activities. We develop an annual capital expenditure budget, which is reviewed and approved by our Board of Directors (the “Board”) on a quarterly basis and revised throughout the year as circumstances warrant. When establishing our capital expenditure budget, we take into consideration our projected operating cash flow, commodity prices for oil and natural gas and externally available sources of financing, such as bank debt, asset divestitures, issuance of debt and equity securities and strategic joint-ventures.
Our revenues and operating cash flow depend on the successful development of our inventory of capital projects with available capital, the volume and timing of our production, as well as commodity prices for oil and natural gas. The prices we receive for our production are largely beyond our control. We have historically been able to hedge our natural gas production at prices that are higher than current strip prices in an attempt to minimize the volatility of short term commodity price fluctuations on our earnings and operating cash flow. However, depending on volatility in the commodity price environment, our ability to enter into comparable derivative arrangements may be more limited.
The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty and turmoil in the oil and gas industry. Throughout 2020, the effect of COVID-19 significantly lowered the demand for and prices of crude oil which resulted in an oversupply of crude oil with significant downward pressure on commodity prices for much of the year. During the first half of 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded. However, the effect of the COVID-19 pandemic and related economic, business and market disruptions remain uncertain. The most direct and immediate impact that the Company experienced from the COVID-19 pandemic was decreased demand for and prices of crude oil. While the prices of and demand for crude oil have recovered from the lows seen in the initial stages of the pandemic, further outbreaks or the emergence of new strains of the virus could result in the reimposition of federal, state and local regulations directing individuals to stay at home, limiting travel, requiring facility closures and imposing similar measures. Widespread reimposition of these or similar restrictions could result in reductions in the prices of and demand for crude oil, as well as logistic constraints, increases in our costs, workforce shortages and unavailability of raw materials. Because we predominately produce natural gas, and natural gas has not been impacted by the same market forces as crude oil, we have experienced less of an impact from COVID-19 than many of our peers. However, the scope and length of the COVID-19 pandemic and the ultimate effect on the price of natural gas cannot be determined, and we could be adversely affected in future periods.
To mitigate the effects of the downturn in commodity prices due to the effects of COVID-19, we initiated a company-wide cost reduction program eliminating outside services that are not core to our business, on which we continue to focus. We also reduced our general and administrative costs by reducing employee headcount year over year. Additionally, we have substantial volumes of our production favorably hedged through the first quarter of 2022, and to a lesser extent, volumes hedged through the first quarter of 2023.
As a result of the steps we have taken to enhance our liquidity, we anticipate our cash on hand, cash from operations and our available borrowing capacity under our 2019 Senior Credit Facility will be sufficient to meet our investing, financing, and working capital requirements into 2022.
We remain committed to the following priorities while navigating through the COVID-19 pandemic:
| • |
Ensuring the health and safety of our employees and the contractors that provide services to us; |
| • |
Continuing to monitor the impact the COVID-19 pandemic has on demand for our products in addition to related commodity price impacts in order to adjust our business accordingly; and |
| • |
Ensuring we emerge from the COVID-19 pandemic in as strong of a position as possible as we continue to move forward with our long-term strategies. |
While the COVID-19 pandemic may potentially adversely affect our operations or employees’ health in the future, as of the date of this filing, we have not experienced a significant disruption to our operations and we have implemented a contingency plan, with employees working remotely where possible and in compliance with governmental orders and Centers for Disease Control and Prevention recommendations.
Primary Operating Areas
Haynesville Shale Trend
We have acquired or farmed-in leases totaling approximately 50,000 gross (27,500 net) acres as of June 30, 2021 in the Haynesville Shale Trend. We completed and produced 3 gross (2.8 net) new wells in the second quarter of 2021 and had 6 gross (1.4 net) wells in the drilling or completions phase as of June 30, 2021. Our Haynesville Shale Trend drilling activities are currently located in leasehold areas in Caddo, DeSoto and Red River parishes, Louisiana. Our net production volumes from our Haynesville Shale Trend wells represented approximately 99% of our total equivalent production on a Mcfe basis and substantially all of our natural gas production for the second quarter of 2021. We are focusing on increasing our natural gas production volumes through increased drilling in the Haynesville Shale Trend, where we plan to focus all of our 2021 drilling efforts.
Tuscaloosa Marine Shale Trend
As of June 30, 2021, we own approximately 48,000 gross (34,000 net) lease acres in the TMS, an oil shale play in Southwest Mississippi and Southwest Louisiana, which is predominately held by production. We have 2 gross (1.7 net) TMS wells drilled and awaiting completion. Our net production volumes from our TMS wells represented approximately 1% of our total equivalent production on a Mcfe basis and 98% of our total oil production for the second quarter of 2021. Despite no capital expenditures, we are seeking to maintain production through strategic expense workover operations in the TMS.
Eagle Ford Shale Trend
We have retained approximately 4,300 net acres of undeveloped leasehold in the Eagle Ford Shale Trend in Frio County, Texas as of June 30, 2021.
Results of Operations
The items that had the most material financial effect on our net loss of $11.6 million and $7.1 million for the three and six months ended June 30, 2021, compared to prior year respective periods, were increased oil and natural gas revenues due to increased natural gas and oil prices and higher production from new wells brought online, lower transportation rates, and lower general and administrative costs. Offsetting these were higher losses on derivatives not designated as hedges of $22.5 million and $25.7 million, respectively, for the three and six months ended June 30, 2021.
The items that had the most material financial effect on our net loss of $22.9 million and $19.9 million for the three and six months ended June 30, 2020, compared to prior respective periods, were the decrease in revenues as a result of a substantial drop in oil and natural gas prices in addition to a mark-to-market loss on unsettled derivative contracts and an impairment expense.
The following table reflects our summary operating information for the periods presented (in thousands, except for price and volume data). Because of normal production declines, increased or decreased drilling activity and the effects of acquisitions or divestitures, the historical information presented below should not be interpreted as indicative of future results.
Revenues from Operations
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| (In thousands, except for price and average daily production data) |
2021 |
2020 |
Variance |
2021 |
2020 |
Variance |
||||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||||||||||
| Natural gas |
$ | 36,075 | $ | 19,034 | $ | 17,041 | 90 | % | $ | 66,093 | $ | 40,203 | $ | 25,890 | 64 | % | ||||||||||||||||
| Oil and condensate |
2,028 | 1,437 | 591 | 41 | % | 3,882 | 3,251 | 631 | 19 | % | ||||||||||||||||||||||
| Natural gas, oil and condensate |
38,103 | 20,471 | 17,632 | 86 | % | 69,975 | 43,454 | 26,521 | 61 | % | ||||||||||||||||||||||
| Net Production: |
||||||||||||||||||||||||||||||||
| Natural gas (Mmcf) |
13,960 | 12,349 | 1,611 | 13 | % | 25,005 | 24,591 | 414 | 2 | % | ||||||||||||||||||||||
| Oil and condensate (MBbls) |
31 | 36 | (5 | ) | (14 | )% | 63 | 74 | (11 | ) | (15 | )% | ||||||||||||||||||||
| Total (Mmcfe) |
14,143 | 12,562 | 1,581 | 13 | % | 25,380 | 25,033 | 347 | 1 | % | ||||||||||||||||||||||
| Average daily production (Mcfe/d) |
155,421 | 138,046 | 17,375 | 13 | % | 140,223 | 137,544 | 2,679 | 2 | % | ||||||||||||||||||||||
| Average realized sales price per unit: |
||||||||||||||||||||||||||||||||
| Natural gas (per Mcf) |
$ | 2.58 | $ | 1.54 | $ | 1.04 | 68 | % | $ | 2.64 | $ | 1.63 | $ | 1.01 | 62 | % | ||||||||||||||||
| Natural gas (per Mcf) including the effect of realized gains/losses on derivatives |
$ | 2.49 | $ | 2.08 | $ | 0.41 | 20 | % | $ | 2.56 | $ | 2.14 | $ | 0.42 | 20 | % | ||||||||||||||||
| Oil and condensate (per Bbl) |
$ | 66.36 | $ | 40.41 | $ | 25.95 | 64 | % | $ | 62.03 | $ | 44.15 | $ | 17.88 | 40 | % | ||||||||||||||||
| Oil and condensate (per Bbl) including the effect of realized gains/losses on derivatives |
$ | 66.36 | $ | 58.55 | $ | 7.81 | 13 | % | $ | 61.67 | $ | 57.35 | $ | 4.32 | 8 | % | ||||||||||||||||
| Average realized price (per Mcfe) |
$ | 2.69 | $ | 1.63 | $ | 1.06 | 65 | % | $ | 2.76 | $ | 1.74 | $ | 1.02 | 59 | % | ||||||||||||||||
Natural gas, oil and condensate revenues increased by $17.6 million and $26.5 million, respectively, for the three and six months ended June 30, 2021 compared to the same period in 2020. The increase was primarily driven by higher realized oil and natural gas prices coupled with increased natural gas production volumes. The rise in oil and natural gas prices increased revenues by $13.4 million and $25.6 million, respectively, for the three and six months ended June 30, 2021, and higher natural gas volumes had a $4.2 million and $0.9 million impact on revenues, respectively, for the three and six months ended June 30, 2021.
Operating Expenses
As described below, total operating expenses decreased $14.9 million and $20.9 million for the three and six months ended June 30, 2021, respectively, compared to the same periods in 2020. The decrease in total operating expenses for the three and six months ended June 30, 2021 was due to lower production and other taxes, transportation and processing and general and administrative expenses as well as no impairment expense in 2021, partially offset by higher depletion and amortization expense and lease operating expenses. The higher depletion and amortization expense, as well as higher lease operating expenses, were primarily due to higher production volumes in the three and six months ended June 30, 2021. The year over year comparisons for operating expenses are discussed further below.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| Operating Expenses (in thousands) |
2021 |
2020 |
Variance |
2021 |
2020 |
Variance |
||||||||||||||||||||||||||
| Lease operating expenses |
$ | 3,970 | $ | 3,225 | $ | 745 | 23 | % | $ | 7,152 | $ | 6,553 | $ | 599 | 9 | % | ||||||||||||||||
| Production and other taxes |
822 | 907 | (85 | ) | (9 | )% | 1,465 | 1,770 | (305 | ) | (17 | )% | ||||||||||||||||||||
| Transportation and processing |
4,641 | 5,375 | (734 | ) | (14 | )% | 8,646 | 10,250 | (1,604 | ) | (16 | )% | ||||||||||||||||||||
| Operating Expenses per Mcfe |
||||||||||||||||||||||||||||||||
| Lease operating expenses |
$ | 0.28 | $ | 0.26 | $ | 0.02 | 8 | % | $ | 0.28 | $ | 0.26 | $ | 0.02 | 8 | % | ||||||||||||||||
| Production and other taxes |
$ | 0.06 | $ | 0.07 | $ | (0.01 | ) | (14 | )% | $ | 0.06 | $ | 0.07 | $ | (0.01 | ) | (14 | )% | ||||||||||||||
| Transportation and processing |
$ | 0.33 | $ | 0.43 | $ | (0.10 | ) | (23 | )% | $ | 0.35 | $ | 0.42 | $ | (0.07 | ) | (17 | )% | ||||||||||||||
Lease Operating Expense
Lease operating expense (“LOE”) increased $0.7 million and $0.6 million, respectively, for the three and six months ended June 30, 2021 compared to the same periods in 2020. The increase in LOE is primarily attributed to an increase in the number of wells in 2021 versus 2020 and additional workover expense. Per unit operating cost was $0.28 per Mcfe for the three and six months ended June 30, 2021 of which $0.08 per Mcfe was attributed to the $1.0 million in workover expense incurred in the three months ended June 30, 2021 and $0.06 per Mcfe was attributed to the $1.5 million in workover expense incurred in the six months ended June 30, 2021.
Production and Other Taxes
Production and other taxes includes severance and ad valorem taxes. Severance taxes for the three and six months ended June 30, 2021 were $0.6 million and $1.0 million, respectively, and ad valorem taxes were $0.2 million and $0.5 million for the three and six months ended June 30, 2021, respectively.
Severance taxes remained flat for the three months ended June 30, 2021 and decreased $0.1 million for the six months ended June 30, 2021 as compared with the same periods in 2020. The decrease is primarily due to a lower severance tax rate in Louisiana partially offset by the higher production volumes upon which the volumetric tax is based. The State of Louisiana has enacted an exemption from the existing 12.5% severance tax on oil and from the $0.125 per Mcf (from July 1, 2019 through June 30, 2020) and $0.0934 per Mcf (from July 1, 2020 to June 30, 2021) severance tax on natural gas for horizontal wells with production commencing after July 31, 1994. The exemption is applicable until the earlier of (i) 24 months from the date of first sale of production or (ii) payout of the well. All of our recently drilled, operated Haynesville Shale Trend wells in Northwest Louisiana are benefiting from this exemption.
Ad valorem tax decreased $0.1 million and $0.2 million for the three and six months ended June 30, 2021, respectively, as compared with the same periods in 2020, due to more favorable tax calculation methodologies on certain of our properties with respective taxing agencies.
Transportation and Processing
Our natural gas production incurs substantially all of our transportation and processing expense. Transportation and processing expense for the three and six months ended June 30, 2021 decreased $0.7 million and $1.6 million, respectively, compared to the same periods in 2020 despite an increase in production volumes. This is because we have increased production from our operated Haynesville Shale Trend wells for which we have contracted more favorable rates than those of our non-operated properties. Our natural gas volumes, particularly from our recent operated wells brought online, generally carry less transportation cost than those from wells we do not operate.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| Operating Expenses (in thousands): |
2021 |
2020 |
Variance |
2021 |
2020 |
Variance |
||||||||||||||||||||||||||
| Depreciation, depletion and amortization |
$ | 12,222 | $ | 11,876 | $ | 346 | 3 | % | $ | 22,282 | $ | 25,143 | $ | (2,861 | ) | (11 | )% | |||||||||||||||
| General and administrative |
3,428 | 4,522 | (1,094 | ) | (24 | )% | 6,973 | 9,436 | (2,463 | ) | (26 | )% | ||||||||||||||||||||
| Impairment of oil and natural gas properties |
- | 14,130 | (14,130 | ) | (100 | )% | - | 14,130 | (14,130 | ) | (100 | )% | ||||||||||||||||||||
| Other |
(1 | ) | (10 | ) | 9 | (90 | )% | (187 | ) | (2 | ) | (185 | ) | 9250 | % | |||||||||||||||||
| Operating Expenses per Mcfe |
||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization |
$ | 0.86 | $ | 0.95 | $ | (0.09 | ) | (9 | )% | $ | 0.88 | $ | 1.00 | $ | (0.12 | ) | (12 | )% | ||||||||||||||
| General and administrative |
$ | 0.24 | $ | 0.36 | $ | (0.12 | ) | (33 | )% | $ | 0.27 | $ | 0.38 | $ | (0.11 | ) | (29 | )% | ||||||||||||||
| Impairment of oil and natural gas properties |
$ | - | $ | 1.12 | $ | (1.12 | ) | (100 | )% | $ | - | $ | 0.56 | $ | (0.56 | ) | (100 | )% | ||||||||||||||
| Other |
$ | - | $ | - | $ | - | — | % | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | — | % | ||||||||||||||
Depreciation, Depletion and Amortization (“DD&A”)
The increase in DD&A expense for the three months ended June 30, 2021 as compared to the prior year period was attributed to increased production volumes, partially offset by a lower per unit cost discussed below. The decrease in DD&A expense for the six months ended June 30, 2021 as compared to the prior year period was attributed primarily to a lower per unit cost based on the year-end 2020 and mid-year 2021 reserve reports, largely as a result of recognizing impairment expense of $36.1 million in the prior year.
Impairment Expense
The Full Cost Method ceiling test performed as of June 30, 2021 resulted in no impairment of oil and natural gas properties compared to the impairment expense of $14.1 million recognized in the prior year period.
General and Administrative (“G&A”)
The Company recorded $3.4 million and $7.0 million in G&A expense for the three and six months ended June 30, 2021, respectively, which included non-cash expenses for share-based compensation of $0.3 million and $0.7 million, respectively. G&A expense decreased for the three and six months ended June 30, 2021 by $1.1 million and $2.5 million, respectively, compared to the same periods in 2020 primarily due to reduced employee expenses including salaries and stock compensation expense as well as decreased rent expense, partially offset by higher bonus accrual related to a cash-based long term incentive plan granted at the end of 2020.
The Company recorded $4.5 million and $9.4 million in G&A expense for the three and six months ended June 30, 2020, respectively, which included non-cash expenses of $1.4 million and $2.5 million, respectively, for share-based compensation.
Other Operating Expenses
Other operating expense credits of $0.2 million for the six months ended June 30, 2021 was attributed primarily to the receipt of ad valorem tax credits from a vendor related to prior periods.
Other Income (Expense)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| Other income (expense) (in thousands): |
2021 |
2020 |
Variance |
2021 |
2020 |
Variance |
||||||||||||||||||||||||||
| Interest expense |
$ | (2,107 | ) | $ | (1,725 | ) | $ | 382 | 22 | % | $ | (4,023 | ) | $ | (3,677 | ) | $ | 346 | 9 | % | ||||||||||||
| Interest income and other |
- | 23 | (23 | ) | (100 | )% | - | 142 | (142 | ) | (100 | )% | ||||||||||||||||||||
| Gain (loss) on commodity derivatives not designated as hedges |
(22,473 | ) | (1,688 | ) | (20,785 | ) | (1231 | )% | (25,742 | ) | 7,450 | (33,192 | ) | (446 | )% | |||||||||||||||||
| Loss on early extinguishment of debt |
- | - | - | — | % | (935 | ) | - | (935 | ) | 100 | % | ||||||||||||||||||||
| Average funded borrowings adjusted for debt discount |
$ | 118,540 | $ | 105,027 | $ | 13,513 | 13 | % | $ | 116,356 | $ | 103,741 | $ | 12,615 | 12 | % | ||||||||||||||||
| Average funded borrowings |
$ | 121,526 | $ | 108,421 | $ | 13,105 | 12 | % | $ | 119,273 | $ | 107,220 | $ | 12,053 | 11 | % | ||||||||||||||||
Interest Expense
The Company's interest expense for the three months ended June 30, 2021 included $0.9 million incurred on the 2019 Senior Credit Facility (as defined below) and $1.2 million incurred on the Company's 13.50% Convertible Second Lien Senior Secured Notes due 2023 (the “2023 Second Lien Notes”). Interest expense for the six months ended June 30, 2021 included $2.0 million incurred on the 2019 Senior Credit Facility, $1.5 million incurred on the Company's 2023 Second Lien Notes and $0.5 million incurred on the Company's 13.50% Convertible Second Lien Senior Secured Notes due 2022 (the “2021/2022 Second Lien Notes”) until exchanged on March 9, 2021. The interest on the 2021/2022 Second Lien Notes and 2023 Second Lien Notes was all non-cash consisting of paid in-kind interest of $1.0 million, amortization of debt discount of $0.1 million and amortization of debt issuance costs of less than $0.1 million for the three months ended June 30, 2021 and paid in-kind interest of $1.6 million, amortization of debt discount of $0.3 million and amortization of debt issuance costs of $0.1 million for the six months ended June 30, 2021. The interest on the 2019 Senior Credit Facility for the three and six months ended June 30, 2021 included $0.8 million and $1.7 million of interest payable in cash, respectively, and $0.1 million and $0.3 million of non-cash amortization of debt issuance costs for the three and six months ended June 30, 2021, respectively.
The Company's interest expense for the three and six months ended June 30, 2020 reflected interest payable in cash of $1.0 million and $2.2 million, respectively, incurred on the 2019 Senior Credit Facility and non-cash interest of $0.7 million and $1.5 million, respectively, incurred primarily on the Company's 2021/2022 Second Lien Notes which included $0.4 million of paid in-kind interest and $0.3 million of amortization of debt discount and issuance costs for the three months ended June 30, 2020 and $0.9 million of paid in-kind interest and $0.6 million of amortization of debt discount and debt issuance costs for the six months ended June 30, 2020.
Gain (Loss) on Commodity Derivatives Not Designated as Hedges
We produce and sell oil and natural gas into a market where prices are historically volatile. We enter into swap contracts, collars or other derivative agreements from time to time to manage our exposure to commodity price risk for a portion of our production. We do not designate our derivative contracts as hedges for accounting purposes. Consequently, the changes in our mark-to-market valuations are recorded directly to income or loss on our financial statements.
The loss on commodity derivatives not designated as hedges of $22.5 million for the three months ended June 30, 2021 was comprised of a mark-to-market loss of $21.2 million, representing the change of fair value on our open natural gas and oil derivative contracts, and a $1.3 million loss on net cash settlements of natural gas and oil derivative contracts. The loss on commodity derivatives not designated as hedges of $25.7 million for the six months ended June 30, 2021 was comprised of a mark-to-market loss of $23.7 million, representing the change of fair value on our open natural gas and oil derivative contracts, and a $2.0 million loss on net cash settlements of natural gas and oil derivative contracts. Volatility in the commodity futures market is quite high and since we do not apply hedge accounting on our derivatives contracts there can be large swings in our reported gain or losses between periods.
The loss on commodity derivatives not designated as hedges of $1.7 million for the three months ended June 30, 2020 was comprised of a $9.0 million mark-to-market loss, representing the change in fair value of our open natural gas and oil derivatives, offset by a $7.3 million net gain on cash settlement of natural gas and oil derivative contracts. The gain on commodity derivatives not designated as hedges of $7.5 million for the six months ended June 30, 2020 was comprised of a $13.3 million net gain on cash settlement of natural gas and oil derivative contracts offset by a mark-to-market loss of $5.8 million, representing the change of the fair value of our open natural gas and oil derivative contracts.
Income Tax Benefit
We recorded no income tax expense or benefit for the three and six months ended June 30, 2021 and 2020. We maintained a valuation allowance at June 30, 2021, which resulted in no net deferred tax asset or liability appearing on our statement of financial position. We recorded this valuation allowance after an evaluation of all available evidence (including commodity prices and our recent history of tax NOLs in 2019 and prior years) led to a conclusion that based upon the more-likely-than-not standard of the accounting literature our deferred tax assets were unrecoverable.
The loss on early extinguishment of debt for the six months ended June 30, 2021 was recorded as a result of the Company exchanging the 2021/2022 Second Lien Notes for the 2023 Second Lien Notes on March 9, 2021. The $0.9 million loss was comprised of the remaining unamortized debt discount of $0.8 million and remaining unamortized debt issuance costs of $0.1 million on the 2021/2022 Second Lien Notes.
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-United States Generally Accepted Accounting Principle (“US GAAP”) financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income and similar tax, DD&A, share-based compensation expense and impairment of oil and natural gas properties (if any). In calculating Adjusted EBITDA, mark-to-market gains/losses on commodity derivatives not designated as hedges are also excluded. Other excluded items include adjustments resulting from the accounting for operating leases under Accounting Standards Codification (“ASC”) Topic 842 in accordance with our 2019 Senior Credit Facility, interest income and any extraordinary non-cash gains or losses. Adjusted EBITDA is not a measure of net income (loss) as determined by US GAAP. Adjusted EBITDA should not be considered an alternative to net income (loss), as defined by US GAAP.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Net loss (US GAAP) |
$ | (11,559 | ) | $ | (22,941 | ) | $ | (7,056 | ) | $ | (19,905 | ) | ||||
| Interest expense |
2,107 | 1,725 | 4,023 | 3,677 | ||||||||||||
| Depreciation, depletion and amortization |
12,222 | 11,876 | 22,282 | 25,143 | ||||||||||||
| Impairment of oil and natural gas properties |
- | 14,130 | - | 14,130 | ||||||||||||
| Share-based compensation expense (non-cash) |
351 | 1,374 | 690 | 2,529 | ||||||||||||
| Loss on commodity derivatives not designated as hedges, not settled |
21,149 | 9,027 | 23,725 | 5,858 | ||||||||||||
| Loss on early extinguishment of debt |
- | - | 935 | - | ||||||||||||
| Other items (1) |
104 | 254 | 69 | 418 | ||||||||||||
| Adjusted EBITDA |
$ | 24,374 | $ | 15,445 | $ | 44,668 | $ | 31,850 | ||||||||
| (1) |
Other items included $0.1 million, $0.3 million, $0.1 million and $0.4 million, respectively, from the impact of accounting for operating leases under ASC Topic 842 as well as interest income for the three and six months ended June 30, 2021 and 2020, respectively. |
Management believes that this non-US GAAP financial measure provides useful information to investors because it is monitored and used by our management and widely used by professional research analysts in the valuation and investment recommendations of companies within the oil and natural gas exploration and production industry.
Liquidity and Capital Resources
Overview
Our primary sources of cash during the first six months of 2021 were cash on hand, cash from operating activities and borrowings under our 2019 Senior Credit Facility. We used cash primarily to fund capital expenditures. We currently plan to fund our operations and capital expenditures for the remainder of 2021 through a combination of cash on hand, cash from operating activities and borrowing under our revolving credit facility, although we may from time to time consider the funding alternatives described below.
On May 14, 2019, the Company entered into a Second Amended and Restated Senior Secured Revolving Credit Agreement (the “2019 Credit Agreement”) among the Company, the Subsidiary, as borrower (in such capacity, the “Borrower”), Truist Bank, as administrative agent (the “Administrative Agent”), and certain lenders that are party thereto, which provides for revolving loans of up to the borrowing base then in effect (the “2019 Senior Credit Facility”).
The 2019 Senior Credit Facility matures on (a) May 14, 2024 or (b) December 2, 2022, if the 2023 Second Lien Notes (as defined below) have not been voluntarily redeemed, repurchased, refinanced or otherwise retired by December 2, 2022, which is the date that is 180 days prior to the May 31, 2023 “Maturity Date” of the 2023 Second Lien Notes. The 2019 Senior Credit Facility provides for a maximum credit amount of $500 million subject to a borrowing base limitation, which was $120.0 million as of March 31, 2021 and reaffirmed during the Spring 2021 borrowing base redetermination. The borrowing base is scheduled to be redetermined in March and September of each calendar year, and is subject to additional adjustments from time to time, including for asset sales, elimination or reduction of hedge positions and incurrence of other debt. Additionally, each of the Borrower and the Administrative Agent may request one unscheduled redetermination of the borrowing base between scheduled redeterminations. The amount of the borrowing base is determined by the lenders in their sole discretion and consistent with their oil and gas lending criteria at the time of the relevant redetermination. The Borrower may also request the issuance of letters of credit under the 2019 Credit Agreement in an aggregate amount up to $10 million, which reduce the amount of available borrowings under the borrowing base in the amount of such issued and outstanding letters of credit.
On March 9, 2021, the Company and the Subsidiary entered into a purchase and exchange agreement with certain purchasers (each such purchaser, together with its successors and assigns, a “2023 Second Lien Notes Purchaser”) pursuant to which the Company issued to the 2023 Second Lien Notes Purchasers (A) $15.2 million aggregate principal amount of the Company’s 13.50% Convertible Second Lien Senior Secured Notes due 2023 (the “2023 Second Lien Notes”) in exchange for an equal amount of 2021/2022 Second Lien Notes and (B) $15.0 million of the 2023 Second Lien Notes in exchange for cash. Proceeds from the sale of the 2023 Second Lien Notes were used to pay down outstanding borrowings under the 2019 Senior Credit Facility. In connection with the purchase and exchange agreement, we recorded a $0.9 million loss on early extinguishment of debt related to the remaining unamortized debt discount and debt issuance costs from the 2021/2022 Second Lien Notes.
The 2023 Second Lien Notes, as set forth in the indenture governing the 2023 Second Lien Notes (the “2023 Second Lien Notes Indenture”), are scheduled to mature on May 31, 2023. The 2023 Second Lien Notes bear interest at the rate of 13.50% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The Company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the 2023 Second Lien Notes by increasing the principal amount of the outstanding 2023 Second Lien Notes.
The 2023 Second Lien Notes are convertible into the Company’s common stock at the conversion rate, which is the sum of the outstanding principal amount of 2023 Second Lien Notes to be converted, including any accrued and unpaid interest, divided by the conversion price, which shall initially be $21.33, subject to certain adjustments as described in the 2023 Second Lien Notes Indenture. Upon conversion, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the 2023 Second Lien Notes Indenture, (2) cash or (3) a combination of shares of its common stock and cash; however, the Company’s ability to redeem the 2023 Second Lien Notes with cash is subject to the terms of the 2019 Senior Credit Agreement.
We exited the second quarter of 2021 with $0.8 million cash on hand and $90.4 million of outstanding borrowings with $29.6 million of availability under the 2019 Senior Credit Facility borrowing base of $120.0 million in effect as of June 30, 2021.
Outlook
Our total capital expenditures for 2021 are expected to be approximately $80 to $90 million with flexibility to increase or decrease this amount based on the movement of commodity prices. We plan to focus all of our capital on drilling and development of our Haynesville Shale Trend natural gas properties in North Louisiana, and we currently contemplate drilling and developing 22 gross (10.3 net) wells utilizing improved completion techniques during 2021.
We believe the results of the capital investments we made in prior years and the first half of 2021 will generate additional cash flows and additional value that will allow us to raise capital as needed to continue our capital development in the future.
We continuously monitor our leverage position and coordinate our capital program with our expected cash flows and repayment of our projected debt. We will continue to evaluate funding alternatives as needed.
Alternatives available to us include:
| • |
availability under the 2019 Senior Credit Facility; |
| • |
issuance of debt securities; |
|
| • | joint ventures in our TMS and/or Haynesville Shale Trend acreage; | |
| • | sale of non-core assets; and | |
| • | issuance of equity securities if favorable conditions exist. |
In addition, to support future cash flows and protect against a sharp drop in commodity prices, we enter into strategic derivative positions as reflected in Note 8—“Commodity Derivative Activities” and Note 11—“Subsequent Events” in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q.
We have had an on-going company-wide cost reduction program eliminating outside services that are not core to our business, which we continue to focus on. We also reduced our general and administrative costs by reducing employee headcount year over year.
As a result of the steps we have taken to enhance our liquidity, we anticipate our cash on hand, cash from operations and our available borrowing capacity under our 2019 Senior Credit Facility will be sufficient to meet our investing, financing, and working capital requirements over the next year.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||
| Cash flow statement information: |
||||||||||||||||
| Net cash: |
||||||||||||||||
| Provided by operating activities |
$ | 15,505 | $ | 16,230 | $ | 36,669 | $ | 31,080 | ||||||||
| Used in investing activities |
(18,873 | ) | (18,158 | ) | (46,020 | ) | (33,196 | ) | ||||||||
| Provided by financing activities |
2,972 | 2,230 | 8,773 | 2,228 | ||||||||||||
| Increase (decrease) in cash and cash equivalents |
$ | (396 | ) | $ | 302 | $ | (578 | ) | $ | 112 | ||||||
Operating activities: Production from our wells, the price of oil and natural gas and operating costs represent the main drivers behind our cash flow from operations for the three and six months ended June 30, 2021 and 2020. Changes in working capital and net cash settlements related to our derivative contracts also impact cash flows. Net cash provided by operating activities for the three months ended June 30, 2021 was $15.5 million including operating cash flows before negative working capital changes of $23.6 million including net cash payments of $1.3 million in settlement of derivative contracts. Net cash provided by operating activities for the six months ended June 30, 2021 was $36.7 million including operating cash flows before negative working capital changes of $43.1 million including net cash payments of $2.0 million in settlement of derivative contracts. The changes in cash provided by operating activities compared to prior year was primarily attributable to changes in oil and natural gas revenues driven by increased realized prices and increased production, offset by the use of cash based on timing of working capital expenditures.
Investing activities: Net cash used in investing activities was $18.9 million and $46.0 million for the three and six months ended June 30, 2021, respectively, which reflected cash expended on capital projects. We recorded $19.7 million in capital expenditures during the three months ended June 30, 2021. The difference in capital expenditures and cash expended on capital projects for the three months ended June 30, 2021 was primarily attributed to a net capital accrual increase of $0.9 million. We recorded $49.0 million in capital expenditures during the six months ended June 30, 2021. The difference in capital expenditures and cash expended on capital projects for the six months ended June 30, 2021 was attributed to a net capital accrual increase of $2.3 million and, utilization of $0.6 million in cash calls and the capitalization of $0.1 million of asset retirement and non-cash internal costs. During the six months ended June 30, 2021, we conducted drilling and completion operations on 18 gross (7.4 net) wells bringing 12 gross (6.0 net) wells on production with 6 gross (1.4 net) wells remaining in the drilling and completion process at June 30, 2021.
Financing activities: Net cash provided by financing activities for the three and six months ended June 30, 2021 primarily reflected net borrowings under our 2019 Senior Credit Facility and proceeds from the issuance of the 2023 Second Lien Notes, offset by debt issuance costs paid in connection with issuance of the 2023 Second Lien Notes and cash paid for treasury shares in connection with restricted stock vesting.
Debt consisted of the following balances as of the dates indicated (in thousands):
| June 30, 2021 |
December 31, 2020 |
|||||||||||||||
| Principal |
Carrying Amount |
Principal |
Carrying Amount |
|||||||||||||
| 2019 Senior Credit Facility (1) |
$ | 90,400 | $ | 90,400 | $ | 96,400 | $ | 96,400 | ||||||||
| 2021/2022 Second Lien Notes (2) |
- | - | 14,811 | 13,759 | ||||||||||||
| 2023 Second Lien Notes (3) |
31,473 | 30,188 | - | - | ||||||||||||
| Total debt |
$ | 121,873 | $ | 120,588 | $ | 111,211 | $ | 110,159 | ||||||||
(1) The carrying amount for the 2019 Senior Credit Facility represents fair value as its variable interest rate approximates market rates.
(2) The debt discount was being amortized using the effective interest rate method based upon a maturity date of May 31, 2022. The principal included $2.8 million of paid in-kind interest as of December 31, 2020. The carrying value included $0.9 million of unamortized debt discount and $0.2 million of unamortized issuance cost as of December 31, 2020.
(3) The debt discount is being amortized using the effective interest rate method based upon a maturity date of May 31, 2023. The principal includes $1.3 million of paid in-kind interest as of June 30, 2021. The carrying value includes $1.0 million of unamortized debt discount and $0.3 million of unamortized issuance cost as of June 30, 2021.
For additional information on our financing activities, see Note 4—“Debt” in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements for any purpose.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on consolidated financial statements, which were prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We believe that certain accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. Our Annual Report on Form 10-K for the year ended December 31, 2020 includes a discussion of our critical accounting policies, and there have been no material changes to such policies during the six months ended June 30, 2021.
Item 3—Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item 3.
Item 4—Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2021. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the material weakness mentioned below was remediated during the second quarter and our disclosure controls and procedures were effective as of June 30, 2021.
Remediation of Previously Identified Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
As disclosed during the third and fourth quarters of fiscal year 2020 and the first quarter of fiscal year 2021, management, in connection with our independent auditors, identified a material weakness in our controls over the determination of the estimated PV-10 of our reserves. Specifically, we did not design and maintain effective controls to sufficiently review the completeness and accuracy of the future development costs component of the estimated PV-10 of our reserves and, thus, failed to identify the omission of capital expenditure costs from the future costs required to develop certain of our reserves. This material weakness resulted in an undiscovered $7.3 million error in the amount of impairment expense recorded in relation to our oil and natural gas properties for the three and six months ended June 30, 2020, which required the Company to restate its consolidated financial statements as of and for the three and six months ended June 30, 2020, and also resulted in corrected errors in the amount of impairment expense recorded in relation to our oil and natural gas properties in the consolidated financial statements of $1.0 million and $3.3 million as of and for the three and nine months ended September 30, 2020 and the three months and year ended December 31, 2020, respectively.
We have taken the necessary steps to enhance the underlying control activities, which now include updated policies and procedures related to our process of verifying the completeness and accuracy of data inputs into our reserves calculation. These actions were taken under the oversight of the Audit Committee of our Board to address deficiencies in the preparation of reserves estimates:
• implementation of a quarterly review by independent reserve engineers to verify the completeness and accuracy of data inputs into the reserves calculation;
• implementation of additional procedures to perform enhanced internal detailed reviews of reserves report components, including (but not necessarily limited to) future development costs; and
• revision and communication of the accounting controls, policies and procedures relating to identifying and assessing changes that could potentially impact the system of internal control governing the full cost ceiling test calculation.
Based on the results of management's evaluation, we have concluded that the controls are designed and operating effectively as of June 30, 2021 and, therefore, the previously disclosed material weakness has been remediated.
Changes in Internal Control over Financial Reporting
Except for changes we made in connection with the implementation of the remediation plan described above, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
A discussion of any current legal proceedings is set forth in Part I, Item 1 under Note 9—“Commitments and Contingencies” to the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
As of June 30, 2021, we did not have any material outstanding and pending litigation.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition or future results.
Potential future legislation or the imposition of new or increased taxes or fees may generally affect the taxation of natural gas and oil exploration and development companies and may adversely affect our operations on cash flows.
In past years, federal legislation has been proposed that would, if enacted into law, make significant changes to tax laws, including to certain key U.S. federal income tax provisions currently available to natural gas and oil exploration and development companies. For example, President Biden has set forth several tax proposals that would, if enacted into law, make significant changes to U.S. tax laws. Such proposals include, but are not limited to, (i) an increase in the U.S. income tax rate applicable to corporations and (ii) the elimination of tax subsidies for fossil fuels. Congress could consider some or all of these proposals in connection with tax reform to be undertaken by the Biden administration. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws or the imposition of new or increased taxes on natural gas and oil extraction could adversely affect our operations and cash flows.
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds
| 3.1 |
|||
| 3.2 |
|||
| 22 | Subsidiary Guarantors of Guaranteed Securities | ||
| Goodrich Petroleum Company L.L.C. - Organized in the State of Louisiana. | |||
| 31.1* |
|||
| 31.2* |
|||
| 32.1** |
|||
| 32.2** |
|||
| 101.INS* |
Inline XBRL Instance Document |
||
| 101.SCH* |
Inline XBRL Schema Document |
||
| 101.CAL* |
Inline XBRL Calculation Linkbase Document |
||
| 101.LAB* |
Inline XBRL Labels Linkbase Document |
||
| 101.PRE* |
Inline XBRL Presentation Linkbase Document |
||
| 101.DEF* |
Inline XBRL Definition Linkbase Document |
||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed herewith |
| ** |
Furnished herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
GOODRICH PETROLEUM CORPORATION (Registrant) |
|
|
|
|
|
| Date: August 5, 2021 |
By: |
/S/ Walter G. Goodrich |
|
|
|
Walter G. Goodrich |
|
|
|
Chairman & Chief Executive Officer |
|
|
|
|
| Date: August 5, 2021 |
By: |
/S/ Kristen McWatters |
|
|
|
Kristen McWatters |
|
|
|
Senior Vice President, Chief Financial Officer, and Chief Accounting Officer |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Walter G. Goodrich, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Goodrich Petroleum Corporation (the “Registrant”); |
|
2. |
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report; |
|
4. |
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
|
d) |
Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
|
5. |
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
|
Date: August 5, 2021 |
|
|
|
|
|
/s/ Walter G. Goodrich |
|
|
Walter G. Goodrich |
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Kristen McWatters, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Goodrich Petroleum Corporation (the “Registrant”); |
|
2. |
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
|
4. |
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
|
d) |
Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
|
5. |
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and Report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
|
Date: August 5, 2021 |
|
|
|
|
|
/s/ Kristen McWatters |
|
|
Kristen McWatters |
|
|
Senior Vice President, Chief Financial Officer, and Chief Accounting Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. § 1350
In connection with the Quarterly Report of Goodrich Petroleum Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Walter G. Goodrich, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ Walter G. Goodrich |
|
|
Walter G. Goodrich |
|
|
Chief Executive Officer |
|
|
August 5, 2021 |
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company or the certifying officer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. § 1350
In connection with the Quarterly Report of Goodrich Petroleum Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kristen McWatters, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ Kristen McWatters |
|
|
Kristen McWatters |
|
|
Senior Vice President, Chief Financial Officer, and Chief Accounting Officer |
|
|
August 5, 2021 |
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company or the certifying officer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Preferred Stock, Shares Issued (in shares) | 0 | 0 |
| Preferred Stock, Shares Outstanding (in shares) | 0 | 0 |
| Preferred Stock, Par Value (in dollars per share) | $ 1.00 | $ 1.00 |
| Preferred Stock, Shares Authorized (in shares) | 10,000,000 | 10,000,000 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
| Common stock, shares issued (in shares) | 13,401,895 | 13,392,625 |
| Common stock, shares outstanding (in shares) | 13,401,895 | 13,392,625 |
| Treasury stock, shares (in shares) | 2,635 | 0 |
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Treasury Stock [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2019 | 0 | 12,533 | 0 | |||
| Balance at Dec. 31, 2019 | $ 0 | $ 125,000 | $ 81,305,000 | $ 0 | $ 2,735,000 | $ 84,165,000 |
| Net income (loss) | 0 | 0 | 0 | 0 | 3,036,000 | 3,036,000 |
| Share-based compensation | $ 0 | $ 0 | 1,309,000 | $ 0 | 0 | 1,309,000 |
| Treasury stock activity (in shares) | 0 | 0 | 0 | |||
| Treasury stock activity | $ 0 | $ 0 | 0 | $ (2,000) | 0 | (2,000) |
| Treasury stock activity (in shares) | 0 | 0 | 0 | |||
| Treasury stock activity | $ (0) | $ (0) | (0) | $ 2,000 | (0) | 2,000 |
| Balance (in shares) at Mar. 31, 2020 | 0 | 12,534 | 0 | |||
| Balance at Mar. 31, 2020 | $ 0 | $ 125,000 | 82,614,000 | $ (2,000) | 5,771,000 | 88,508,000 |
| Balance (in shares) at Dec. 31, 2019 | 0 | 12,533 | 0 | |||
| Balance at Dec. 31, 2019 | $ 0 | $ 125,000 | 81,305,000 | $ 0 | 2,735,000 | 84,165,000 |
| Net income (loss) | (19,905,000) | |||||
| Balance (in shares) at Jun. 30, 2020 | 0 | 12,664 | (38) | |||
| Balance at Jun. 30, 2020 | $ 0 | $ 127,000 | 84,429,000 | $ (272,000) | (17,170,000) | 67,114,000 |
| Balance (in shares) at Mar. 31, 2020 | 0 | 12,534 | 0 | |||
| Balance at Mar. 31, 2020 | $ 0 | $ 125,000 | 82,614,000 | $ (2,000) | 5,771,000 | 88,508,000 |
| Net income (loss) | $ 0 | $ 0 | 0 | $ 0 | (22,941,000) | (22,941,000) |
| Treasury stock activity (in shares) | 0 | 130 | (38) | |||
| Treasury stock activity | $ 0 | $ 2,000 | 0 | $ (270,000) | 0 | (268,000) |
| Share-based compensation | 0 | 0 | 1,533,000 | 0 | 0 | 1,533,000 |
| Discount from 2021/2022 Second Lien Notes Modification (See Note 4) | $ 0 | $ 0 | 282,000 | $ 0 | 0 | 282,000 |
| Treasury stock activity (in shares) | 0 | 130 | (38) | |||
| Treasury stock activity | $ (0) | $ (2,000) | (0) | $ 270,000 | (0) | 268,000 |
| Balance (in shares) at Jun. 30, 2020 | 0 | 12,664 | (38) | |||
| Balance at Jun. 30, 2020 | $ 0 | $ 127,000 | 84,429,000 | $ (272,000) | (17,170,000) | 67,114,000 |
| Balance (in shares) at Dec. 31, 2020 | 0 | 13,393 | 0 | |||
| Balance at Dec. 31, 2020 | $ 0 | $ 134,000 | 82,842,000 | $ 0 | (41,406,000) | 41,570,000 |
| Net income (loss) | $ 0 | $ 0 | 0 | $ 0 | 4,503,000 | 4,503,000 |
| Treasury stock activity (in shares) | 0 | 0 | (3) | |||
| Treasury stock activity | $ 0 | $ 0 | 0 | $ 27,000 | 0 | 27,000 |
| Share-based compensation | 0 | 0 | 409,000 | (1,000) | 0 | 408,000 |
| Discount from 2021/2022 Second Lien Notes Modification (See Note 4) | $ 0 | $ 0 | 1,207,000 | $ 0 | 0 | 1,207,000 |
| UCC warrant exchange (in shares) | 0 | 10 | 0 | |||
| Treasury stock activity (in shares) | 0 | 0 | (3) | |||
| Treasury stock activity | $ 0 | $ 0 | 0 | $ (27,000) | 0 | (27,000) |
| Balance (in shares) at Mar. 31, 2021 | 0 | 13,402 | (3) | |||
| Balance at Mar. 31, 2021 | $ 0 | $ 134,000 | 84,458,000 | $ (28,000) | (36,903,000) | 47,661,000 |
| Balance (in shares) at Dec. 31, 2020 | 0 | 13,393 | 0 | |||
| Balance at Dec. 31, 2020 | $ 0 | $ 134,000 | 82,842,000 | $ 0 | (41,406,000) | 41,570,000 |
| Net income (loss) | (7,056,000) | |||||
| Share-based compensation | 130,000 | |||||
| Balance (in shares) at Jun. 30, 2021 | 0 | 13,402 | (3) | |||
| Balance at Jun. 30, 2021 | $ 0 | $ 134,000 | 84,883,000 | $ (28,000) | (48,462,000) | 36,527,000 |
| Balance (in shares) at Mar. 31, 2021 | 0 | 13,402 | (3) | |||
| Balance at Mar. 31, 2021 | $ 0 | $ 134,000 | 84,458,000 | $ (28,000) | (36,903,000) | 47,661,000 |
| Net income (loss) | 0 | 0 | 0 | 0 | (11,559,000) | (11,559,000) |
| Share-based compensation | $ 0 | $ 0 | 425,000 | $ 0 | 0 | 425,000 |
| Balance (in shares) at Jun. 30, 2021 | 0 | 13,402 | (3) | |||
| Balance at Jun. 30, 2021 | $ 0 | $ 134,000 | $ 84,883,000 | $ (28,000) | $ (48,462,000) | $ 36,527,000 |
Note 1 - Description of Business and Significant Accounting Policies |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] |
NOTE 1—Description of Business and Significant Accounting Policies
Goodrich Petroleum Corporation (“Goodrich” and, together with its subsidiary, Goodrich Petroleum Company, L.L.C. (the “Subsidiary”), “we,” “our,” the “Company,” or the “Registrant”) is an independent oil and natural gas company engaged in the exploration, development and production of oil and natural gas on properties primarily in (i) Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend, (ii) Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend (“TMS”), and (iii) South Texas, which includes the Eagle Ford Shale Trend.
Basis of Presentation
The consolidated financial statements of the Company included in this Quarterly Report on Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the SEC”) and accordingly, certain information normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) has been condensed or omitted. This information should be read in conjunction with our consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year or for any interim period.
During the first half of 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded, although the impact of the COVID-19 pandemic and related economic, business and market disruptions remain uncertain.
The primary impact of COVID-19 experienced by the Company was a severe decline in the demand and price of crude oil. Because we predominately produce natural gas and natural gas demand and prices were not impacted by the same market forces as crude oil, we have experienced less of an impact from COVID-19 than many of our peers. However, the scope and length of the COVID-19 pandemic and the ultimate effect on the price of natural gas and oil cannot be determined, and we could be adversely affected in future periods. Management is actively monitoring the impact on the Company’s results of operations, financial position, and liquidity in fiscal year 2021.
Principles of Consolidation—The consolidated financial statements include the financial statements of the Company and the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. Certain data in prior periods’ financial statements have been adjusted to conform to the presentation of the current period. We have evaluated subsequent events through the date of this filing.
Use of Estimates— Our management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with US GAAP.
Cash and Cash Equivalents—Cash and cash equivalents includes cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at the date of purchase.
Accounts Payable—Accounts payable consisted of the following amounts as of June 30, 2021 and December 31, 2020:
Accrued Liabilities—Accrued liabilities consisted of the following amounts as of June 30, 2021 and December 31, 2020:
Inventory –Inventory consists of equipment, casing and tubulars that are expected to be used in our capital drilling program. Inventory is carried on the Consolidated Balance Sheets at the lower of cost or market.
Property and Equipment—Under US GAAP, two acceptable methods of accounting for oil and natural gas properties are allowed. These are the Successful Efforts Method and the Full Cost Method. Entities engaged in the production of oil and natural gas have the option of selecting either method for application in the accounting for their properties. The principle differences between the two methods are in the treatment of exploration costs, the computation of depreciation, depletion and amortization (“DD&A”) expense and the assessment of impairment of oil and natural gas properties. We have elected to adopt the Full Cost Method of accounting. We believe that the true cost of developing a “portfolio” of reserves should reflect both successful and unsuccessful attempts at exploration and development. We believe application of the Full Cost Method better reflects the true economics of exploring for and developing our oil and natural gas reserves.
Under the Full Cost Method, we capitalize all costs associated with acquisitions, exploration, development and estimated abandonment costs into a single full cost pool. We capitalize internal costs that can be directly identified with the acquisition of leasehold, as well as drilling and completion activities, but do not include any costs related to production, general corporate overhead or similar activities. Unevaluated property costs are excluded from the amortization base until we make a determination as to the existence of proved reserves on the respective property or impairment. We review our unevaluated properties at the end of each quarter to determine whether the costs should be reclassified to proved oil and natural gas properties and thereby subject to DD&A and the full cost ceiling test. For the three months ended June 30, 2021 and 2020, we transferred $0.1 million and less than $0.1 million, respectively, from unevaluated properties to proved oil and natural gas properties. For the six months ended June 30, 2021 and 2020, we transferred $0.3 million and less than $0.1 million, respectively, from unevaluated properties to proved oil and natural gas properties. Our sales of oil and natural gas properties are accounted for as adjustments to net proved oil and natural gas properties with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves.
Under the Full Cost Method, we amortize our investment in oil and natural gas properties through DD&A expense using the units of production method. An amortization rate is calculated based on total proved reserves converted to thousand cubic feet equivalent of natural gas (“Mcfe”) as the denominator and the net book value of evaluated oil and natural gas asset together with the estimated future development cost of the proved reserves as the numerator. The rate calculated per Mcfe is applied against the period's production also converted to Mcfe to arrive at the period's DD&A expense.
Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements, is computed using the straight-line method over their estimated useful lives, which vary from to years.
Full Cost Ceiling Test—The Full Cost Method requires that at the conclusion of each financial reporting period, the present value of estimated future net cash flows from proved reserves discounted at 10%, excluding cash flows related to estimated abandonment costs already recorded, net of deferred taxes (the “Ceiling”), be compared to the net capitalized costs of proved oil and natural gas properties, net of related deferred taxes. This comparison is referred to as a “ceiling test.” If the net capitalized costs of proved oil and natural gas properties net of deferred taxes exceed the Ceiling, we are required to write-down the value of our oil and natural gas properties to the value of the Ceiling. Estimated future net cash flows from proved reserves are calculated based on a trailing 12-month average pricing assumption.
The Full Cost Ceiling Test performed as of June 30, 2021 and 2020 resulted in and $14.1 million write-down of the oil and natural gas properties, respectively.
Fair Value Measurement—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, our credit risk.
We use various methods, including the income approach and market approach, to determine the fair values of our financial instruments that are measured at fair value on a recurring basis, which depend on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of these instruments. We separate our financial instruments into three levels (levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the fair value of our instruments. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between levels.
Each of these levels and our corresponding instruments classified by level are further described below:
As of June 30, 2021 and December 31, 2020, the carrying amounts of our cash and cash equivalents, trade receivables and payables represented fair value because of the short-term nature of these instruments.
Asset Retirement Obligations—Asset retirement obligations are related to the abandonment and site restoration requirements that result from the exploration and development of our oil and natural gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense is included in “Depreciation, depletion and amortization” on our Consolidated Statements of Operations. See Note 3.
The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state, to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the initial measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.
Revenue Recognition—Oil and natural gas revenues are generally recognized upon delivery of our produced oil and natural gas volumes to our customers. We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil and natural gas sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. As of June 30, 2021and December 31, 2020, the net liability for natural gas balancing was immaterial. Differences between actual production and net working interest volumes are routinely adjusted. See Note 2.
Derivative Instruments—We use derivative instruments such as futures, forwards, swaps, collars, and options for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and hedging our exposure to changing interest rates. Accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet. We offset the fair value of our asset and liability positions with the same counter-party for each commodity type. Changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met. All of our realized gain or losses on our derivative contracts are the result of cash settlements. We have not designated any of our derivative contracts as hedges for accounting purposes; accordingly, changes in fair value are reflected in earnings. See Note 8.
Income Taxes—We account for income taxes during interim periods based on annual projections of our effective tax rate.
We account for income taxes on an annual basis, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We recognize, as required, the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. See Note 7.
Net Income or Net Loss Per Common Share—Basic net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted-average shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted average shares of common stock outstanding during the period, plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion or exercise of other securities, such as warrants and convertible notes, into shares of our common stock. See Note 6.
Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, when probable of realization, are separately recorded and are not offset against the related environmental liability. See Note 9.
Share-Based Compensation—We account for our share-based transactions using the fair value as of the grant date and recognize compensation expense on a straight-line basis over the requisite service period.
Guarantee—As of June 30, 2021, our Subsidiary was the Subsidiary Guarantor of our 2023 Second Lien Notes (as defined below). Goodrich has no independent assets or operations, the guarantee is full and unconditional and Goodrich has no subsidiaries other than the Subsidiary.
Debt Issuance Cost—The Company records debt issuance costs associated with its 2023 Second Lien Notes (and previously with its 2021/2022 Second Lien Notes), (both as defined below) as a contra balance to long term debt, net in our Consolidated Balance Sheets, which is amortized straight-line over the life of the respective notes as this method is not materially different from the effective interest method. Debt issuance costs associated with our revolving credit facility debt are recorded in other assets in our Consolidated Balance Sheets, which are amortized straight-line over the life of such debt.
New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are evaluating the expected impact these amendments and reference rate reform will have on our consolidated financial statements and various contracts.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 primarily affect convertible instruments issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements of ASU 2020-06. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. Also affected is the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in ASU 2020-06 affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB has also decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact of these amendments on our accounting for, and disclosure of, our convertible notes.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - Revenue Recognition |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Text Block] |
NOTE 2—Revenue Recognition
In accordance with Accounting Standards Codification (“ASC”) Topic 606, revenue is generally recognized upon delivery of our produced oil and natural gas volumes to our customers. Our customer sales contracts include oil and natural gas sales. Under Topic 606, each unit (Mcf or barrel) of commodity product represents a separate performance obligation which is sold at variable prices, determinable on a monthly basis. The pricing provisions of our contracts are primarily tied to a market index with certain adjustments based on factors such as delivery, product quality and prevailing supply and demand conditions in the geographic areas in which we operate. We allocate the transaction price to each performance obligation and recognize revenue upon delivery of the commodity product when the customer obtains control. Control of our produced natural gas volumes passes to our customers at specific metered points indicated in our natural gas contracts. Similarly, control of our produced oil volumes passes to our customers when the oil is measured either by a trucking oil ticket or by a meter when entering an oil pipeline. The Company has no control over the commodities after those points and the measurement at those points dictates the amount on which the customer's payment is based. Our oil and natural gas revenue streams include volumes burdened by royalty and non-operated working interests. Our revenues are recorded and presented on our financial statements net of the royalty and non-operated working interests. Our revenue stream does not include any payments for services or ancillary items other than sale of oil and natural gas.
We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil and natural gas sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized. As of June 30, 2021 and December 31, 2020, receivables from contracts with customers were $17.3 million and 2 million, respectively.
The following table presents our oil and natural gas revenues disaggregated by revenue source and by operated and non-operated properties for the three and six months ended June 30, 2021 and 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - Asset Retirement Obligations |
6 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||
| Asset Retirement Obligation Disclosure [Text Block] |
NOTE 3—Asset Retirement Obligations
The reconciliation of the beginning and ending asset retirement obligations for the six months ended June 30, 2021 is as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||
Note 4 - Debt |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
NOTE 4—Debt
Debt consisted of the following balances as of June 30, 2021 and December 31, 2020 (in thousands):
(1) The carrying amount for the 2019 Senior Credit Facility represents fair value as its variable interest rate approximates market rates. (2) The debt discount was being amortized using the effective interest rate method based upon a maturity date of May 31, 2022. The principal included $2.8 million of paid in-kind interest as of December 31, 2020. The carrying value included $0.9 million of unamortized debt discount and $0.2 million of unamortized issuance cost as of December 31, 2020. (3) The debt discount is being amortized using the effective interest rate method based upon a maturity date of May 31, 2023. The principal includes $1.3 million of paid in-kind interest as of June 30, 2021. The carrying value includes $1.0 million of unamortized debt discount and $0.3 million of unamortized issuance cost as of June 30, 2021.
The following table summarizes the total interest expense (contractual interest expense, amortization of debt discount, accretion and financing costs) and the effective interest rate on the liability component of debt for the three and six months ended June 30, 2021 and 2020 (amounts in thousands, except effective interest rates):
(1) The 2021/2022 Second Lien Notes had a coupon interest rate of however, the discount recorded due to the convertibility of the notes increased the effective interest rate to 20.0% and 21.0%, respectively, for the three and six months ended June 30, 2020 and 19.1% for the six months ended June 30, 2021 until exchanged on March 9, 2021. Interest expense for the three months ended June 30, 2020 included $0.1 million of debt discount amortization and $0.5 million of accrued interest to be paid in-kind, and interest expense for the six months ended June 30, 2020 included $0.3 million of debt discount amortization and $0.9 million of paid in-kind interest. Interest expense for the six months ended June 30, 2021 until exchanged on March 9, 2021 included $0.1 million of debt discount amortization and $0.4 million of paid in-kind interest. (2) The 2023 Second Lien Notes have a coupon interest rate of however, the discount recorded due to the convertibility of the notes increased the effective interest rate to 15.5% and 16.5%, respectively, for the three and six months ended June 30, 2021. Interest expense for the three months ended June 30, 2021 included $0.1 million of debt discount amortization and $1.1 million of accrued interest to be paid in-kind, and interest expense for the six months ended June 30, 2021 included $0.2 million of debt discount amortization and $1.3 million of accrued interest to be paid in-kind.
2019 Senior Credit Facility
On May 14, 2019, the Company entered into a Second Amended and Restated Senior Secured Revolving Credit Agreement (the “2019 Credit Agreement”) among the Company, the Subsidiary, as borrower (in such capacity, the “Borrower”), Truist Bank, as administrative agent (the “Administrative Agent”), and certain lenders that are party thereto, which provides for revolving loans of up to the borrowing base then in effect (the “2019 Senior Credit Facility”).
The 2019 Senior Credit Facility matures on (a) May 14, 2024 or (b) December 2, 2022, if the 2023 Second Lien Notes (as defined below) have not been voluntarily redeemed, repurchased, refinanced or otherwise retired by December 2, 2022, which is the date that is 180 days prior to the May 31, 2023 “Maturity Date” of the 2023 Second Lien Notes. The 2019 Senior Credit Facility provides for a maximum credit amount of $500 million subject to a borrowing base limitation, which was $120.0 million as of June 30, 2021. The borrowing base is scheduled to be redetermined in March and September of each calendar year, and is subject to additional adjustments from time to time, including for asset sales, elimination or reduction of hedge positions and incurrence of other debt. Additionally, each of the Borrower and the Administrative Agent may request one unscheduled redetermination of the borrowing base between scheduled redeterminations. The amount of the borrowing base is determined by the lenders in their sole discretion and consistent with their oil and gas lending criteria at the time of the relevant redetermination. The Borrower may also request the issuance of letters of credit under the 2019 Credit Agreement in an aggregate amount up to $10 million, which reduce the amount of available borrowings under the borrowing base in the amount of such issued and outstanding letters of credit.
All amounts outstanding under the 2019 Senior Credit Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) the alternative base rate plus an applicable margin ranging from 1.50% to 2.50%, depending on the percentage of the borrowing base that is utilized, or (ii) adjusted LIBOR plus an applicable margin from 2.50% to 3.50%, depending on the percentage of the borrowing base that is utilized. Undrawn amounts under the 2019 Senior Credit Facility are subject to a commitment fee ranging from 0.375% to 0.50%, depending on the percentage of the borrowing base that is utilized. To the extent that a payment default exists and is continuing, all amounts outstanding under the 2019 Senior Credit Facility will bear interest at 2.0% per annum above the rate and margin otherwise applicable thereto. As of June 30, 2021, the weighted average interest rate on the borrowings from the 2019 Senior Credit Facility was 3.39%. The obligations under the 2019 Credit Agreement are guaranteed by the Company and secured by a first lien security interest in substantially all of the assets of the Company and the Borrower.
The 2019 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the 2019 Senior Credit Facility to be immediately due and payable.
The 2019 Credit Agreement also contains certain financial covenants, including the maintenance of (i) a ratio of net funded debt to EBITDAX not to exceed 3.50 to 1.00 as of the last day of any fiscal quarter, (ii) a current ratio (based on the ratio of current assets to current liabilities as defined in the 2019 Credit Agreement) not to be less than 1.00 to 1.00 and (iii) until no 2023 Second Lien Notes remain outstanding, a ratio of total proved PV-10 attributable to the Company’s and the Borrower’s proved reserves to total secured debt (net of any unrestricted cash not to exceed $10 million) not to be less than 1.50 to 1.00 and minimum liquidity requirements. On March 9, 2021, we entered into a Fourth Amendment to Credit Agreement with the Subsidiary, the Administrative Agent and the lenders party thereto, pursuant to which, among other things, the lenders permitted the issuance of the 2023 Second Lien Notes and agreed to waive the default caused by our failure to comply with the current ratio financial covenant under the 2019 Senior Credit Facility as of the last day of the fiscal quarter ended December 31, 2020.
As of June 30, 2021, the Company had a borrowing base of $120.0 million with $90.4 million of borrowings outstanding and outstanding letters of credit. The Company also had $1.5 million of unamortized debt issuance costs recorded as of June 30, 2021 related to the 2019 Senior Credit Facility.
As of June 30, 2021, the Company was in compliance with all covenants within the 2019 Senior Credit Facility.
Convertible Second Lien Notes
In October 2016, the Company issued $40.0 million aggregate principal amount of the Company’s 13.50% Convertible Second Lien Senior Secured Notes due 2019 (the “2019 Second Lien Notes”) along with 10-year costless warrants to acquire 2.5 million shares of common stock. Holders of the 2019 Second Lien Notes had a second priority lien on all assets of the Company, and holders of such warrants had a right to appoint two members to our Board of Directors (the “Board”) as long as such warrants were outstanding.
The 2019 Second Lien Notes were scheduled to mature on August 30, 2019 or six months after the maturity of our current revolving credit facility but in no event later than March 30, 2020. The 2019 Second Lien Notes bore interest at the rate of 13.50% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The Company also had the option under certain circumstances to pay all or any portion of interest in-kind on the then outstanding principal amount of the 2019 Second Lien Notes by increasing the principal amount of the outstanding 2019 Second Lien Notes or by issuing additional second lien notes.
Upon issuance of the 2019 Second Lien Notes in October 2016, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion as well as warrants on the debt instrument, we recorded a debt discount of $11.0 million, thereby reducing the $40.0 million carrying value upon issuance to $29.0 million and recorded an equity component of $11.0 million. The debt discount was amortized using the effective interest rate method based upon an original term through August 30, 2019. The 2019 Second Lien Notes were redeemed in full on May 29, 2019 for $56.7 million, using borrowings under the 2019 Senior Credit Facility. In connection with the redemption of the 2019 Second Lien Notes, we recorded a $1.6 million loss on early extinguishment of debt related to the remaining unamortized debt discount and debt issuance costs.
On May 14, 2019, the Company and the Subsidiary entered into a purchase agreement with certain purchasers pursuant to which the Company issued to such purchasers $12.0 million aggregate principal amount of the Company’s 13.50% Convertible Second Lien Senior Secured Notes due 2021 (the “2021/2022 Second Lien Notes”). Proceeds from the sale of the 2021/2022 Second Lien Notes were primarily used to pay down outstanding borrowings under the 2019 Senior Credit Facility. In May 2020, the maturity date of the 2021/2022 Second Lien Notes was extended to May 31, 2022.
Upon issuance of the 2021/2022 Second Lien Notes on May 31, 2019, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion, we recorded a debt discount of $1.4 million, thereby reducing the $12.0 million carrying value upon issuance to $10.6 million and recorded an equity component of $1.4 million. The fair value of the debt instrument without the conversion feature and the resulting equity component was valued using a binomial lattice model. The debt discount was amortized using the effective interest rate method based upon an original term through May 31, 2021. Upon the maturity extension in May 2020, an additional $0.3 million of debt discount was recorded, and the debt discount began to be amortized using the effective interest rate method based upon the maturity date of May 31, 2022.
On March 9, 2021, the Company and the Subsidiary entered into a note purchase and exchange agreement (“the Note Purchase and Exchange Agreement”) with certain purchasers (each such purchaser, together with its successors and assigns, a “2023 Second Lien Notes Purchaser”) pursuant to which the Company issued to the 2023 Second Lien Notes Purchasers (A) $15.2 million aggregate principal amount of the Company’s 13.50% Convertible Second Lien Senior Secured Notes due 2023 (the “2023 Second Lien Notes”) in exchange for an equal amount of 2021/2022 Second Lien Notes and (B) $15.0 million of the 2023 Second Lien Notes in exchange for cash. Proceeds from the sale of the 2023 Second Lien Notes were used to pay down outstanding borrowings under the 2019 Senior Credit Facility. In connection with the Note Purchase and Exchange Agreement, we recorded a $0.9 million loss on early extinguishment of debt related to the remaining unamortized debt discount and debt issuance costs from the 2021/2022 Second Lien Notes.
The 2023 Second Lien Notes, as set forth in the indenture governing the 2023 Second Lien Notes (the “2023 Second Lien Notes Indenture”), are scheduled to mature on May 31, 2023. The 2023 Second Lien Notes bear interest at the rate of 13.50% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The Company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the 2023 Second Lien Notes by increasing the principal amount of the outstanding 2023 Second Lien Notes.
The 2023 Second Lien Notes Indenture contains certain covenants pertaining to us and our Subsidiary, including delivery of financial reports; environmental matters; conduct of business; use of proceeds; operation and maintenance of properties; collateral and guarantee requirements; indebtedness; liens; dividends and
The 2023 Second Lien Notes are convertible into the Company’s common stock at the conversion rate, which is the sum of the outstanding principal amount of 2023 Second Lien Notes to be converted, including any accrued and unpaid interest, divided by the conversion price, which shall initially be $21.33, subject to certain adjustments as described in the 2023 Second Lien Notes Indenture. Upon conversion, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the 2023 Second Lien Notes Indenture, (2) cash or (3) a combination of shares of its common stock and cash; however, the Company’s ability to redeem the 2023 Second Lien Notes with cash is subject to the terms of the 2019 Credit Agreement.
Upon issuance of the 2023 Second Lien Notes on March 9, 2021, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion, we recorded a debt discount of $1.2 million, thereby reducing the $30.2 million carrying value upon issuance to $29.0 million and recorded an equity component of $1.2 million. The fair value of the debt instrument without the conversion feature and the resulting equity component was valued using a binomial lattice model. The debt discount is amortized using the effective interest rate method based upon an original term through May 31, 2023. In connection with the extinguishment of the 2021/2022 Second Lien Notes, we recorded a loss on early extinguishment of debt of $0.9 million consisting of $0.8 million of remaining unamortized debt discount and $0.1 million of remaining unamortized debt issuance costs on the 2021/2022 Second Lien Notes.
As of June 30, 2021, $1.0 million of debt discount and $0.3 million of debt issuance costs remained to be amortized on the 2023 Second Lien Notes.
As of June 30, 2021, the Company was in compliance with all covenants with respect to the 2023 Second Lien Notes Indenture.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5 - Equity |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Notes to Financial Statements | |
| Stockholders' Equity Note Disclosure [Text Block] |
NOTE 5—Equity
During the three and six months ended June 30, 2021 the Company did not have any material activity related to its share-based compensation units. During the three and six months ended June 30, 2020, the Company had vestings of its share-based compensation units upon the retirement of certain employees which resulted in the issuance of approximately 130,000 common stock shares. The Company withheld shares for payment of $0.3 million in taxes due upon vesting resulting in approximately 38,000 shares held in treasury as of June 30, 2020.
In connection with the issuance of the 2023 Second Lien Notes, we recorded an equity component of $1.2 million in March 2021. The equity component recorded for the 2023 Second Lien Notes is not remeasured as long as it continues to meet the condition for equity classification. For further details, see Note 4.
|
Note 6 - Net Income (Loss) Per Common Share |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Text Block] |
NOTE 6—Net Income (Loss) Per Common Share
Net loss applicable to common stock was used as the numerator in computing basic and diluted net loss per common share for the three and six months ended June 30, 2021 and 2020. The Company used the treasury stock method in determining the effects of potentially dilutive restricted stock. The following table sets forth information related to the computations of basic and diluted net loss per common share:
** Common shares issuable on assumed vesting of share-based compensation assumes a payout of the Company's performance share awards at 100% of the initial units granted (or a ratio of one unit to one common share). The range of common stock shares which may be earned ranges from to 200% of the initial performance units granted.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 7 - Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
NOTE 7—Income Taxes
We recorded no income tax expense or benefit for the three and six months ended June 30, 2021 and 2020. We maintained a valuation allowance at June 30, 2021, which resulted in no net deferred tax asset or liability appearing on our consolidated balance sheets. We recorded this valuation allowance after an evaluation of all available evidence (including commodity prices and our recent history of tax net operating losses (“NOLs”) in 2019 and prior years) led to a conclusion that based upon the more-likely-than-not standard of the accounting literature our deferred tax assets were unrecoverable. The valuation allowance was $86.7 million as of December 31, 2020. The valuation allowance has no impact on our NOL position for tax purposes, and if we generate taxable income in future periods, we may be able to use our NOLs to offset taxable income at that time subject to any applicable tax limitations on the NOLs. Considering the Company’s taxable income forecasts, our assessment of the realization of our deferred tax assets has not changed, and we continue to maintain a full valuation allowance for our net deferred tax assets as of June 30, 2021.
As of June 30, 2021, we have no unrecognized tax benefits. There were no significant changes to our tax position since December 31, 2020.
|
Note 8 - Commodity Derivative Activities |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
NOTE 8—Commodity Derivative Activities
We use commodity and financial derivative contracts to manage fluctuations in commodity prices. We are currently not designating our derivative contracts for hedge accounting. All derivative gains and losses are from our oil and natural gas derivative contracts and have been recognized in “Other income (expense)” on our Consolidated Statements of Operations.
The following table summarizes gains and losses we recognized on our oil and natural gas derivatives for the three and six months ended June 30, 2021 and 2020:
Commodity Derivative Activity
We enter into swap contracts, costless collars or other derivative agreements from time to time to manage commodity price risk for a portion of our production. Our policy is that all derivatives are approved by the Hedging Committee of our Board, and reviewed periodically by the Board.
Despite the measures taken by us to attempt to control price risk, we remain subject to price fluctuations for natural gas and crude oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond our control. Decreases in domestic crude oil and natural gas spot prices will have a material adverse effect on our financial position, results of operations and quantities of reserves recoverable on an economic basis. We routinely exercise our contractual right to net realized gains against realized losses when settling with our financial counter-parties. Neither our counter-parties nor we require any collateral upon entering into derivative contracts. As we were in a net liability position with all of our counter-parties, we would not have been at risk of loss had our counter-parties been unable to fulfill their obligations as of June 30, 2021.
As of June 30, 2021, the open positions on our outstanding commodity derivative contracts, all of which were with Truist Bank, RBC Capital Markets, ARM Energy and Citizens Commercial Banking were as follows:
During the second quarter of 2021, we entered into the following contracts with Truist Bank, RBC Capital Markets, and Citizens Commercial Banking:
Subsequent to June 30, 2021, we entered into additional natural gas derivative contracts as detailed in Note 11—“Subsequent Events”.
The following table summarizes the fair values of our derivative financial instruments that are recorded at fair value classified in each Level as of June 30, 2021 (in thousands). We measure the fair value of our commodity derivative contracts by applying the income approach. See Note 1—“Description of Business and Significant Accounting Policies” for our discussion regarding fair value, including inputs used and valuation techniques for determining fair values.
We enter into commodity derivative contracts under which we have netting arrangements with each counter-party. The following table discloses and reconciles the gross amounts to the amounts as presented on the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 9 - Commitments and Contingencies |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
NOTE 9—Commitments and Contingencies
We are party to various lawsuits from time to time arising in the normal course of business, including, but not limited to, royalty, contract, personal injury, and environmental claims. We have established reserves as appropriate for all such proceedings and intend to vigorously defend these actions. Management believes, based on currently available information, that adverse results or judgments from such actions, if any, would not have been material to our consolidated financial position, results of operations or liquidity for the three and six months ended June 30, 2021 and 2020.
|
Note 10 - Leases |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Leases [Text Block] |
NOTE 10—Leases
We determine if an arrangement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets. We lease our corporate office building in Houston, Texas. We recognize lease expense for this lease on a straight-line basis over the lease term. This operating lease is included in furniture, fixtures and equipment and other capital assets, accrued liabilities and other non-current liabilities on our Consolidated Balance Sheets. The operating lease asset and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As this lease did not provide an implicit rate, we used a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. The operating lease asset includes any lease payments made but excludes annual operating charges. Operating lease expense is recognized on a straight-line basis over the lease term and reported in general and administrative operating expense on our Consolidated Statements of Operations. We have also entered into leases for other equipment which are immaterial to our financial statements and/or have lease terms less than 12 months and have therefore not been recorded on our Consolidated Balance Sheets.
The lease cost components for the three and six months ended June 30, 2021 and 2020 are classified as follows:
(1) Includes building operating expenses.
The following are additional details related to our lease portfolio as of June 30, 2021 and December 31, 2020:
The following table presents operating lease liability maturities as of June 30, 2021:
As of June 30, 2021, our office building operating lease has a weighted-average remaining lease term of 5.8 years and a weighted-average discount rate of 8.8 percent. We have the option to terminate our building operating lease effective May 1, 2024 upon prior written notice and the payment of $0.1 million as an early termination fee. Cash paid for amounts included in the measurement of operating lease liabilities was million and $0.6 million for the three and six months ended June 30, 2021, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was million and $0.8 million for the three and six months ended June 30, 2020, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 11 - Subsequent Events |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||
| Subsequent Events [Text Block] |
NOTE 11—Subsequent Events Subsequent to June 30, 2021, the Company entered into the following derivative contracts with Truist Bank, RBC Capital Markets, and Citizens Commercial Banking:
On July 14, 2021, all outstanding unsecured claims warrants of the Company became exercisable when the required equity strike price (as defined per the warrant agreement) of $230.0 million was achieved. On that date, we had 910,790 unsecured claims warrants outstanding which were exercisable into approximately 1.4 million shares of the Company’s common stock.
|
Significant Accounting Policies (Policies) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation
The consolidated financial statements of the Company included in this Quarterly Report on Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the SEC”) and accordingly, certain information normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) has been condensed or omitted. This information should be read in conjunction with our consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year or for any interim period.
During the first half of 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded, although the impact of the COVID-19 pandemic and related economic, business and market disruptions remain uncertain.
The primary impact of COVID-19 experienced by the Company was a severe decline in the demand and price of crude oil. Because we predominately produce natural gas and natural gas demand and prices were not impacted by the same market forces as crude oil, we have experienced less of an impact from COVID-19 than many of our peers. However, the scope and length of the COVID-19 pandemic and the ultimate effect on the price of natural gas and oil cannot be determined, and we could be adversely affected in future periods. Management is actively monitoring the impact on the Company’s results of operations, financial position, and liquidity in fiscal year 2021.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidation, Policy [Policy Text Block] | Principles of Consolidation—The consolidated financial statements include the financial statements of the Company and the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. Certain data in prior periods’ financial statements have been adjusted to conform to the presentation of the current period. We have evaluated subsequent events through the date of this filing.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates, Policy [Policy Text Block] | Use of Estimates— Our management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with US GAAP.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents—Cash and cash equivalents includes cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at the date of purchase.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable, Policy [Policy Text Block] | Accounts Payable—Accounts payable consisted of the following amounts as of June 30, 2021 and December 31, 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Liabilities, Policy [Policy Text Block] | Accrued Liabilities—Accrued liabilities consisted of the following amounts as of June 30, 2021 and December 31, 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory, Policy [Policy Text Block] | Inventory –Inventory consists of equipment, casing and tubulars that are expected to be used in our capital drilling program. Inventory is carried on the Consolidated Balance Sheets at the lower of cost or market.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment—Under US GAAP, two acceptable methods of accounting for oil and natural gas properties are allowed. These are the Successful Efforts Method and the Full Cost Method. Entities engaged in the production of oil and natural gas have the option of selecting either method for application in the accounting for their properties. The principle differences between the two methods are in the treatment of exploration costs, the computation of depreciation, depletion and amortization (“DD&A”) expense and the assessment of impairment of oil and natural gas properties. We have elected to adopt the Full Cost Method of accounting. We believe that the true cost of developing a “portfolio” of reserves should reflect both successful and unsuccessful attempts at exploration and development. We believe application of the Full Cost Method better reflects the true economics of exploring for and developing our oil and natural gas reserves.
Under the Full Cost Method, we capitalize all costs associated with acquisitions, exploration, development and estimated abandonment costs into a single full cost pool. We capitalize internal costs that can be directly identified with the acquisition of leasehold, as well as drilling and completion activities, but do not include any costs related to production, general corporate overhead or similar activities. Unevaluated property costs are excluded from the amortization base until we make a determination as to the existence of proved reserves on the respective property or impairment. We review our unevaluated properties at the end of each quarter to determine whether the costs should be reclassified to proved oil and natural gas properties and thereby subject to DD&A and the full cost ceiling test. For the three months ended June 30, 2021 and 2020, we transferred $0.1 million and less than $0.1 million, respectively, from unevaluated properties to proved oil and natural gas properties. For the six months ended June 30, 2021 and 2020, we transferred $0.3 million and less than $0.1 million, respectively, from unevaluated properties to proved oil and natural gas properties. Our sales of oil and natural gas properties are accounted for as adjustments to net proved oil and natural gas properties with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves.
Under the Full Cost Method, we amortize our investment in oil and natural gas properties through DD&A expense using the units of production method. An amortization rate is calculated based on total proved reserves converted to thousand cubic feet equivalent of natural gas (“Mcfe”) as the denominator and the net book value of evaluated oil and natural gas asset together with the estimated future development cost of the proved reserves as the numerator. The rate calculated per Mcfe is applied against the period's production also converted to Mcfe to arrive at the period's DD&A expense.
Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements, is computed using the straight-line method over their estimated useful lives, which vary from to years.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Full Cost or Successful Efforts, Policy [Policy Text Block] | Full Cost Ceiling Test—The Full Cost Method requires that at the conclusion of each financial reporting period, the present value of estimated future net cash flows from proved reserves discounted at 10%, excluding cash flows related to estimated abandonment costs already recorded, net of deferred taxes (the “Ceiling”), be compared to the net capitalized costs of proved oil and natural gas properties, net of related deferred taxes. This comparison is referred to as a “ceiling test.” If the net capitalized costs of proved oil and natural gas properties net of deferred taxes exceed the Ceiling, we are required to write-down the value of our oil and natural gas properties to the value of the Ceiling. Estimated future net cash flows from proved reserves are calculated based on a trailing 12-month average pricing assumption.
The Full Cost Ceiling Test performed as of June 30, 2021 and 2020 resulted in and $14.1 million write-down of the oil and natural gas properties, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value Measurement—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, our credit risk.
We use various methods, including the income approach and market approach, to determine the fair values of our financial instruments that are measured at fair value on a recurring basis, which depend on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of these instruments. We separate our financial instruments into three levels (levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the fair value of our instruments. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between levels.
Each of these levels and our corresponding instruments classified by level are further described below:
As of June 30, 2021 and December 31, 2020, the carrying amounts of our cash and cash equivalents, trade receivables and payables represented fair value because of the short-term nature of these instruments.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Retirement Obligation [Policy Text Block] | Asset Retirement Obligations—Asset retirement obligations are related to the abandonment and site restoration requirements that result from the exploration and development of our oil and natural gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense is included in “Depreciation, depletion and amortization” on our Consolidated Statements of Operations. See Note 3.
The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state, to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the initial measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Policy Text Block] | Revenue Recognition—Oil and natural gas revenues are generally recognized upon delivery of our produced oil and natural gas volumes to our customers. We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil and natural gas sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. As of June 30, 2021and December 31, 2020, the net liability for natural gas balancing was immaterial. Differences between actual production and net working interest volumes are routinely adjusted. See Note 2.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives, Policy [Policy Text Block] | Derivative Instruments—We use derivative instruments such as futures, forwards, swaps, collars, and options for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and hedging our exposure to changing interest rates. Accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet. We offset the fair value of our asset and liability positions with the same counter-party for each commodity type. Changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met. All of our realized gain or losses on our derivative contracts are the result of cash settlements. We have not designated any of our derivative contracts as hedges for accounting purposes; accordingly, changes in fair value are reflected in earnings. See Note 8.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax, Policy [Policy Text Block] | Income Taxes—We account for income taxes during interim periods based on annual projections of our effective tax rate.
We account for income taxes on an annual basis, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We recognize, as required, the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. See Note 7.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share, Policy [Policy Text Block] | Net Income or Net Loss Per Common Share—Basic net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted-average shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) applicable to common stock for each reporting period by the weighted average shares of common stock outstanding during the period, plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion or exercise of other securities, such as warrants and convertible notes, into shares of our common stock. See Note 6.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies, Policy [Policy Text Block] | Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, when probable of realization, are separately recorded and are not offset against the related environmental liability. See Note 9.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Policy Text Block] | Share-Based Compensation—We account for our share-based transactions using the fair value as of the grant date and recognize compensation expense on a straight-line basis over the requisite service period.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Guarantee, Policy [Policy Text Block] | Guarantee—As of June 30, 2021, our Subsidiary was the Subsidiary Guarantor of our 2023 Second Lien Notes (as defined below). Goodrich has no independent assets or operations, the guarantee is full and unconditional and Goodrich has no subsidiaries other than the Subsidiary.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt, Policy [Policy Text Block] | Debt Issuance Cost—The Company records debt issuance costs associated with its 2023 Second Lien Notes (and previously with its 2021/2022 Second Lien Notes), (both as defined below) as a contra balance to long term debt, net in our Consolidated Balance Sheets, which is amortized straight-line over the life of the respective notes as this method is not materially different from the effective interest method. Debt issuance costs associated with our revolving credit facility debt are recorded in other assets in our Consolidated Balance Sheets, which are amortized straight-line over the life of such debt.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New Accounting Pronouncements, Policy [Policy Text Block] | New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are evaluating the expected impact these amendments and reference rate reform will have on our consolidated financial statements and various contracts.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 primarily affect convertible instruments issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements of ASU 2020-06. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. Also affected is the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in ASU 2020-06 affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB has also decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact of these amendments on our accounting for, and disclosure of, our convertible notes.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 1 - Description of Business and Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - Revenue Recognition (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - Asset Retirement Obligations (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||
| Schedule of Asset Retirement Obligations [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||
Note 4 - Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-term Debt Instruments [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Interest Expense and Effective Interest on Liability Component [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Net Income (Loss) Per Common Share (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 8 - Commodity Derivative Activities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Realized and Unrealized Gains and Losses [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Price Risk Derivatives [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Offsetting Liabilities [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 10 - Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Lease, Assets and Liabilities [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 11 - Subsequent Events (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Price Risk Derivatives [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas Swap [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Price Risk Derivatives [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 1 - Description of Business and Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Oil and Gas Property Full Cost Method Period Increase (Decrease) | $ 100 | $ 300 | ||
| Unamortized Costs Capitalized Less Related Deferred Income Taxes Exceed Ceiling Limitations, Expense | $ 0 | $ 14,100 | ||
| Maximum [Member] | ||||
| Oil and Gas Property Full Cost Method Period Increase (Decrease) | $ 100 | $ 100 | ||
| Property, Plant and Equipment, Useful Life (Year) | 5 years | |||
| Minimum [Member] | ||||
| Property, Plant and Equipment, Useful Life (Year) | 3 years | |||
Note 1 - Description of Business and Significant Accounting Policies - Accounts Payable and Accrued Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Trade payables | $ 12,977 | $ 12,190 |
| Revenue payables | 15,704 | 14,413 |
| Prepayments from partners | 660 | 664 |
| Miscellaneous payables | 471 | 544 |
| Total Accounts payable | 29,812 | 27,811 |
| Accrued capital expenditures | 6,461 | 4,138 |
| Accrued lease operating expense | 1,034 | 971 |
| Accrued production and other taxes | 712 | 509 |
| Accrued transportation and gathering | 2,262 | 1,722 |
| Accrued performance bonus | 2,788 | 3,947 |
| Accrued interest | 147 | 166 |
| Accrued office lease | 388 | 962 |
| Accrued general and administrative expense and other | 632 | 451 |
| Total Accrued liabilities | $ 14,424 | $ 12,866 |
Note 2 - Revenue Recognition (Details Textual) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accrued Oil and Gas Revenue | $ 17,257 | $ 10,179 |
Note 3 - Asset Retirement Obligations - Schedule of Asset Retirement Obligations (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Balance | $ 4,716 | |
| Liabilities incurred | 143 | |
| Accretion expense | 169 | |
| Ending balance at June 30, 2021 | 5,028 | |
| Current liability | 0 | |
| Long term liability | $ 5,028 | $ 4,716 |
Note 4 - Debt - Components of Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Mar. 09, 2021 |
Dec. 31, 2020 |
May 31, 2019 |
May 30, 2019 |
May 14, 2019 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Principal | $ 121,873 | $ 111,211 | ||||||||||||
| Carrying amount | 120,588 | 110,159 | ||||||||||||
| The 2019 Senior Credit Facility [Member] | ||||||||||||||
| Principal | [1] | 90,400 | 96,400 | |||||||||||
| Carrying amount | [1] | 90,400 | 96,400 | |||||||||||
| Old 2L Notes [Member] | ||||||||||||||
| Principal | 0 | [2] | 14,811 | [2] | $ 12,000 | |||||||||
| Carrying amount | 0 | [2] | 13,759 | [2] | $ 10,600 | $ 12,000 | ||||||||
| The 2023 Second Lien Notes [Member] | ||||||||||||||
| Principal | [3] | 31,473 | 0 | |||||||||||
| Carrying amount | $ 30,188 | [3] | $ 30,200 | $ 0 | [3] | |||||||||
| ||||||||||||||
Note 4 - Debt - Components of Debt, Interest Expense and Effective Interest Rate (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|||||
| Interest Expense | $ 2,107 | $ 1,725 | $ 4,023 | $ 3,677 | ||||
| Effective Interest Rate | ||||||||
| The 2019 Senior Credit Facility [Member] | ||||||||
| Interest Expense | $ 950 | $ 1,106 | $ 1,991 | $ 2,405 | ||||
| Effective Interest Rate | 4.10% | 4.60% | 4.20% | 5.10% | ||||
| Old 2L Notes [Member] | ||||||||
| Interest Expense | [1] | $ 0 | $ 619 | $ 500 | $ 1,272 | |||
| Effective Interest Rate | [1] | 0.00% | 20.00% | 19.10% | 21.00% | |||
| The 2023 Second Lien Notes [Member] | ||||||||
| Interest Expense | [2] | $ 1,157 | $ 0 | $ 1,532 | $ 0 | |||
| Effective Interest Rate | [2] | 15.50% | 0.00% | 16.50% | 0.00% | |||
| ||||||||
Note 5 - Equity (Details Textual) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
|
| Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture, Total | $ 408,000 | $ 1,533,000 | $ 130,000 | |
| Share-based Payment Arrangement, Decrease for Tax Withholding Obligation | $ 300,000 | |||
| Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation (in shares) | 38,000 | |||
| Adjustments to Additional Paid in Capital, Convertible Debt with Conversion Feature | $ 1,207,000 | $ 282,000 | ||
Note 6 - Net Income (Loss) Per Common Share (Details Textual) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Minimum [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award, Performance Award of Initial Units Granted, Percent | 0.00% |
| Maximum [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award, Performance Award of Initial Units Granted, Percent | 200.00% |
Note 6 - Net Income (Loss) Per Common Share - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|||
| Net loss applicable to common stock | $ (11,559) | $ (22,941) | $ (7,056) | $ (19,905) | ||
| Weighted average shares of common stock outstanding - basic (in shares) | 13,402 | 12,540 | 13,401 | 12,536 | ||
| Net loss per common share - basic (in dollars per share) | $ (0.86) | $ (1.83) | $ (0.53) | $ (1.59) | ||
| Weighted average shares of common stock outstanding - diluted (in shares) | 13,402 | 12,540 | 13,401 | 12,536 | ||
| Net loss per common share - diluted (in dollars per share) | $ (0.86) | $ (1.83) | $ (0.53) | $ (1.59) | ||
| Convertible Debt Securities [Member] | ||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1,476 | 650 | 1,476 | 650 | ||
| Warrant [Member] | ||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1,355 | 1,328 | 1,355 | 1,328 | ||
| Restricted Stock [Member] | ||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | [1] | 113 | 273 | 100 | 136 | |
| ||||||
Note 7 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Income Tax Expense (Benefit), Total | $ 0 | $ 0 | $ 0 | $ 0 | |
| Deferred Tax Assets, Valuation Allowance, Total | $ 86,700 | ||||
| Unrecognized Tax Benefits, Ending Balance | $ 0 | $ 0 | |||
Note 8 - Commodity Derivative Activities - Summary of Gains and Losses on Derivatives (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Total gain (loss) on commodity derivatives not designated as hedges | $ (22,473) | $ (1,688) | $ (25,742) | $ 7,450 |
| Commodity Contract [Member] | ||||
| Gain (loss) on commodity derivatives not designated as hedges, settled | (1,324) | 7,339 | (2,017) | 13,308 |
| Loss on commodity derivatives not designated as hedges, not settled | (21,149) | (9,027) | (23,725) | (5,858) |
| Total gain (loss) on commodity derivatives not designated as hedges | $ (22,473) | $ (1,688) | $ (25,742) | $ 7,450 |
Note 8 - Commodity Derivative Activities - Outstanding Commodity (Details) - Not Designated as Hedging Instrument [Member] $ in Thousands |
3 Months Ended | 6 Months Ended |
|---|---|---|
|
Jun. 30, 2021
USD ($)
MMBTU
$ / item
$ / MMBTU
|
Jun. 30, 2021
USD ($)
MMBTU
Boe
$ / item
$ / MMBTU
|
|
| Fair value | $ | $ (28,726) | $ (28,726) |
| Natural Gas Swap With Truist Bank, RBC Capital Markets, and Citizens Commercial Banking Contracted June 2021 and Terminating December 31 2021 [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 30,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 3.19 | 3.19 |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted April 2022 And Terminating March 31 2023 [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 30,000 | |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted April 2022 And Terminating March 31 2023 [Member] | Minimum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 2.65 | 2.65 |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted April 2022 And Terminating March 31 2023 [Member] | Maximum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 3.51 | 3.51 |
| The 2021 Natural Gas Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 100,000 | |
| Total Volume (Millions of British Thermal Unit) | 18,400,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 2.74 | 2.74 |
| Fair value | $ | $ (16,417) | $ (16,417) |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted January 2022 And Terminating December 31 2022 [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 30,000 | |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted January 2022 And Terminating December 31 2022 [Member] | Minimum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 2.75 | 2.75 |
| Natural Gas Collar With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted January 2022 And Terminating December 31 2022 [Member] | Maximum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 3.30 | 3.30 |
| The 2022 Natural Gas Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 70,000 | |
| Total Volume (Millions of British Thermal Unit) | 6,300,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 2.53 | 2.53 |
| Fair value | $ | $ (6,730) | $ (6,730) |
| The 2021 Natural Gas Collar [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 30,000 | |
| Total Volume (Millions of British Thermal Unit) | 5,520,000 | |
| Fair value | $ | $ (1,718) | $ (1,718) |
| The 2021 Natural Gas Collar [Member] | Minimum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 2.50 | 2.50 |
| The 2021 Natural Gas Collar [Member] | Maximum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 3.50 | 3.50 |
| The 2022 Natural Gas Collars [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 60,000 | |
| Total Volume (Millions of British Thermal Unit) | 21,900,000 | |
| Fair value | $ | $ (3,386) | $ (3,386) |
| The 2022 Natural Gas Collars [Member] | Minimum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 2.68 | 2.68 |
| The 2022 Natural Gas Collars [Member] | Maximum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 3.40 | 3.40 |
| The 2023 Natural Gas Collars [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 30,000 | |
| Total Volume (Millions of British Thermal Unit) | 2,700,000 | |
| Fair value | $ | $ (412) | $ (412) |
| The 2023 Natural Gas Collars [Member] | Minimum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 2.65 | 2.65 |
| The 2023 Natural Gas Collars [Member] | Maximum [Member] | ||
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 3.51 | 3.51 |
| The 2021 Natural Gas Basis Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 50,000 | |
| Total Volume (Millions of British Thermal Unit) | 9,200,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 0.209 | 0.209 |
| Fair value | $ | $ 1,340 | $ 1,340 |
| The 2022 Natural Gas Basis Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | Boe | 50,000 | |
| Total Volume (Millions of British Thermal Unit) | Boe | 18,250,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 0.209 | 0.209 |
| Fair value | $ | $ (98) | $ (98) |
| The 2023 Natural Gas Basis Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 50,000 | |
| Total Volume (Millions of British Thermal Unit) | 18,250,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 0.209 | 0.209 |
| Fair value | $ | $ (429) | $ (429) |
| The 2024 Natural Gas Basis Swaps [Member] | ||
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | 50,000 | |
| Total Volume (Millions of British Thermal Unit) | 18,300,000 | |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / item | 0.209 | 0.209 |
| Fair value | $ | $ (876) | $ (876) |
Note 8 - Commodity Derivative Activities - Reconciliation of Gross Amounts to Amounts As Presented on Consolidated Balance Sheets (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Fair value of oil and natural gas derivatives - Current Assets | $ 1,325 | $ 143 |
| Fair value of oil and natural gas derivatives - Current Liabilities | (27,678) | (1,274) |
| Fair value of oil and natural gas derivatives - Non-current Liabilities | (2,373) | $ (3,871) |
| Not Designated as Hedging Instrument [Member] | ||
| Total | (28,726) | |
| Not Designated as Hedging Instrument [Member] | Commodity Contract [Member] | ||
| Fair value of oil and natural gas derivatives - Current Assets | 1,325 | |
| Fair value of oil and natural gas derivatives - Non-current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Current Liabilities | (27,678) | |
| Fair value of oil and natural gas derivatives - Non-current Liabilities | (2,373) | |
| Total | (28,726) | |
| Not Designated as Hedging Instrument [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Fair value of oil and natural gas derivatives - Current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Non-current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Current Liabilities | 0 | |
| Fair value of oil and natural gas derivatives - Non-current Liabilities | 0 | |
| Total | 0 | |
| Not Designated as Hedging Instrument [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Fair value of oil and natural gas derivatives - Current Assets | 1,325 | |
| Fair value of oil and natural gas derivatives - Non-current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Current Liabilities | (27,678) | |
| Fair value of oil and natural gas derivatives - Non-current Liabilities | (2,373) | |
| Total | (28,726) | |
| Not Designated as Hedging Instrument [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Fair value of oil and natural gas derivatives - Current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Non-current Assets | 0 | |
| Fair value of oil and natural gas derivatives - Current Liabilities | 0 | |
| Fair value of oil and natural gas derivatives - Non-current Liabilities | 0 | |
| Total | $ 0 |
Note 8 - Commodity Derivative Activities - Derivative Table, Fair Value with Netting (Details) - Not Designated as Hedging Instrument [Member] - Commodity Contract [Member] - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Derivative Asset, Gross Amount | $ (28,726) | $ (5,002) |
| Derivative Asset, Amount Offset | 0 | 0 |
| Derivative Asset, As Presented | (28,726) | (5,002) |
| Current Assets [Member] | ||
| Derivative Asset, Gross Amount | 3,003 | 3,193 |
| Derivative Asset, Amount Offset | (1,678) | (3,050) |
| Derivative Asset, As Presented | 1,325 | 143 |
| Non-current Assets [Member] | ||
| Derivative Asset, Gross Amount | 3,725 | 537 |
| Derivative Asset, Amount Offset | (3,725) | (537) |
| Derivative Asset, As Presented | 0 | 0 |
| Current Liabilities [Member] | ||
| Derivative Asset, Gross Amount | (29,356) | (4,324) |
| Derivative Asset, Amount Offset | 1,678 | 3,050 |
| Derivative Asset, As Presented | (27,678) | (1,274) |
| Non-current Liabilities [Member] | ||
| Derivative Asset, Gross Amount | (6,098) | (4,408) |
| Derivative Asset, Amount Offset | 3,725 | 537 |
| Derivative Asset, As Presented | $ (2,373) | $ (3,871) |
Note 10 - Leases (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
May 01, 2024 |
|
| Operating Lease, Weighted Average Remaining Lease Term (Year) | 5 years 9 months 18 days | 5 years 9 months 18 days | |||
| Operating Lease, Weighted Average Discount Rate, Percent | 8.80% | 8.80% | |||
| Operating Lease, Early Termination Fee | $ 0.1 | ||||
| Operating Lease, Payments | $ 0.2 | $ 0.4 | $ 0.6 | $ 0.8 | |
Note 10 - Leases - Lease Cost and Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|||
| Lease, Cost, Total | $ 76 | $ 391 | $ 110 | $ 795 | ||
| General and Administrative Expense [Member] | ||||||
| Building lease cost | 46 | 385 | 35 | 770 | ||
| Variable lease cost (1) | [1] | $ 30 | $ 6 | $ 75 | $ 25 | |
| ||||||
Note 10 - Leases - Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Lease asset, net | $ 3,156 | $ 3,426 |
| Total lease liabilities | 2,999 | |
| Furniture, Fixtures and Equipment and Other Capital Assets [Member] | ||
| Lease asset, gross | 5,871 | 5,871 |
| Accumulated Depletion, Depreciation, and Amortization [Member] | ||
| Accumulated depreciation | 2,715 | 2,445 |
| Accounts Payable and Accrued Liabilities [Member] | ||
| Current lease liability | 388 | 962 |
| Other Noncurrent Liabilities [Member] | ||
| Non-current lease liability | 2,611 | 2,810 |
| Furniture, Fixtures and Equipment and Other Capital Assets Accrued Liabilities and Other Noncurrent Liabilities [Member] | ||
| Total lease liabilities | $ 2,999 | $ 3,772 |
Note 10 - Leases - Lease Liability Maturities (Details) $ in Thousands |
Jun. 30, 2021
USD ($)
|
|---|---|
| 2021 | $ 318 |
| 2022 | 637 |
| 2023 | 653 |
| 2024 | 661 |
| 2025 | 678 |
| Thereafter | 914 |
| Total lease payments | 3,861 |
| Less imputed interest | 862 |
| Present value of lease liabilities | $ 2,999 |
Note 11 - Subsequent Events (Details Textual) - Unsecured Claims Warrants [Member] - Subsequent Event [Member] $ in Millions |
Jul. 14, 2021
USD ($)
shares
|
|---|---|
| Unaffiliated Market Capitalization That Needed to Be Achieved Before the Warrants Became Exercisable | $ | $ 230 |
| Class of Warrant or Right, Outstanding (in shares) | 910,790 |
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | 1,400,000 |
Note 11 - Subsequent Events - Derivative Schedule (Details) - Not Designated as Hedging Instrument [Member] - Subsequent Event [Member] |
Jul. 01, 2021
MMBTU
$ / MMBTU
|
|---|---|
| Natural Gas Swap With Truist Bank, RBC Capital Markets, and Citizens Commercial Banking Contracted August 2021 and Terminating December 31 2021 [Member] | |
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | MMBTU | 20,000 |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 3.75 |
| Natural Gas Swap With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted January 2022 And Terminating March 31 2022 [Member] | |
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | MMBTU | 20,000 |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 4.06 |
| Natural Gas Swap With Truist Bank, RBC Capital Markets, And Citizens Commercial Banking Contracted April 2022 And Terminating September 30 2022 [Member] | |
| Natural gas swap, Daily Volume (Millions of British Thermal Unit) | MMBTU | 30,000 |
| Natural gas swap, Weighted Average Fixed Price (in USD per Millions of British Thermal Unit) | $ / MMBTU | 2.97 |