RESERVE PETROLEUM CO

Previous wording

Please refer to the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows in this Form 10-Q to supplement the following discussion. In the first nine months of 2025, the Company continued to fund its business activity using internal sources of cash. The Company had net cash provided by operating activities of $7,380,584 in the nine months ended September 30, 2025. The Company had sales of equity securities of $1,400,709, cash provided by property dispositions of $3,200,752, distributions from other investments of $466,000, for total cash provided by investing activities of $5,703,893. The Company utilized cash for the purchase of property of $8,084,208, the purchase of equity securities of $1,773,954, purchase of investments of $727,605, for cash applied to investing activities of $10,585,767. The Company paid $1,517,794 in stockholder dividends, $51,626 for the purchase of treasury stock, and $110,232 in payments on the Grand Woods note payable, for total cash applied to financing activities of $1,679,652. Cash provided by financing activities included Grand Woods Class C non-controlling interest contributions of $48,824. Cash and cash equivalents increased $867,882 (22%) to $4,791,704 at September 30, 2025, from $3,923,822 at December 31, 2024.

Current wording

Please refer to the consolidated balance sheets and the consolidated statements of cash flows in this Form 10-Q to supplement the following discussion. In the first three months of 2026, we continued to fund our business activity using internal sources of cash. We had net cash provided by operating activities of $2,731,218 in the three months ended March 31, 2026. Our cash provided by investing activities for the three months ended March 31, 2026 was $117,342 and consisted of proceeds from disposal of property, plant and equipment of $16,740 and sales of equity securities of $100,602. Our cash applied to investing activities for the three months ended March 31, 2026 was $2,120,856 and consisted of cash for the purchase of property, plant and equipment of $1,565,418, cash for the purchase of equity securities of $202,038, and cash for the purchase of equity method and other investments of $353,400. Ourcash applied to financing activities forthe three months ended March 31, 2026 was $38,118, which consisted solely of payments on the Grand Woods note payable. Cash provided by financing activities included Grand Woods Class C non-controlling interest contributions of $19,009. Cash and cash equivalents increased $708,595 (35%) to $2,759,925 at March 31, 2026, from $2,051,330 at December 31, 2025.

Previous wording

Equity securities increased $399,878 (16%) to $2,901,072 as of September 30, 2025, from $2,501,194 at December 31, 2024. The increase resulted from $373,245 in net purchases and a $26,633 net increase in market value.

Current wording

Equity securities decreased $300,432 (7%) to $4,215,983 as of March 31, 2026, from $4,516,415 at December 31, 2025. The decrease was the result of $101,436 in net purchases and a $401,868 net decrease in market value.

Previous wording

Discussion of Significant Changes in the Consolidated Statements of Cash Flows. As noted in the first paragraph above, net cash provided by operating activities was $7,380,584 in the nine months ended September 30, 2025, an increase of $1,859,125 (34%) from cash provided by operations in the comparable period in 2024 of $5,521,459. For more information see “Operating Revenues” and “Other Income/(Loss), Net” below.

Current wording

Discussion of Significant Changes in the Consolidated Statements of Cash Flows. Net cash provided by operating activities was $2,731,218 in the three months ended March 31, 2026, an increase of $824,328 (43%) from cash provided by operations in the comparable period in 2025 of $1,906,890. For more information see “Operating Revenues” and “Other Income” below.

Previous wording

Cash applied to the purchase of property, plant and equipment in the nine months ended September 30, 2025, was $8,084,208, an increase of $923,703 (13%) from cash applied to the purchase of property, plant and equipment in the comparable period in 2024 of $7,160,505.

Current wording

Cash applied to the purchase of property, plant and equipment in the three months ended March 31, 2026, was $1,565,418, a decrease of $771,730 (33%) from cash applied to the purchase of property, plant and equipment in the comparable period in 2025 of $2,337,148. Unproved oil and gas properties account for approximately 60% of purchases, with proved oil and gas properties making up approximately 40%. Cash provided by the disposal of oil and gas properties was $16,740.

Previous wording

Off-Balance Sheet Arrangements. The Company is a guarantor of 15% of a $620,000 development loan that matures July 15, 2028, held by QSN Office Park, LLC. The Company is committed to a $250,000 investment in VCC Venture Fund I, LP, of which $187,500 (75%) is invested at September 30, 2025. The Company is committed to a $1,000,000 investment in Cortado Ventures Fund II-A, of which $850,000 (85%) is invested at September 30, 2025. For more information about these entities and the related off-balance sheet arrangements, see Note 5 and Note 6 to the accompanying consolidated financial statements.

Current wording

Off-Balance Sheet Arrangements. We are a guarantor of 20% of a $620,000 development loan that matures July 15, 2028, held by QSN Office Park, LLC. We are committed to a $250,000 investment in VCC Venture Fund I, LP, of which $218,750 (87.50%) is invested at March 31, 2026. We are committed to a$400,000 investment in 14501 N Rockwell LLC, of which$116,570 (29%) is invested at March 31, 2026. For more information about these entities and the related off-balance sheet arrangements, see Note 5 to the accompanying consolidated financial statements.

Previous wording

Conclusion. Management is unaware of any additional material trends, demands, commitments, events or uncertainties, which would impact liquidity and capital resources to the extent that the discussion presented in the 2024 Form 10-K would not be representative of the Company’s current position.

Current wording

Conclusion. Management is unaware of any additional material trends, demands, commitments, events or uncertainties, which would impact liquidity and capital resources to the extent that the discussion presented in the 2025 Form 10-K would not be representative of our current position.

Previous wording

Net income attributable to common stockholders increased $807,405 (23%) to $4,343,257 in the nine months ended September 30, 2025, from $3,535,852 in the comparable period in 2024. Net income per share attributable to common stockholders, basic, increased $5.73 to $28.62 in the nine months ended September 30, 2025, from $22.89 in the comparable period in 2024. A discussion of revenue from oil and natural gas sales and other significant line items in the Consolidated Statements of Income follows.

Current wording

Net income decreased $771,667 (44%) to $996,418 in the three months ended March 31, 2026, from $1,768,085 in the comparable period in 2025. Net income per share attributable to common stockholders, basic, decreased $5.07 to $6.64 in the three months ended March 31, 2026, from $11.71 in the comparable period in 2025. A discussion of revenue from oil and natural gas sales and other significant line items in the consolidated statements of income follows.

Previous wording

Operating Revenues. Revenues from oil and gas sales increased $592,029 (15%) to $4,466,825 in the three months ended September 30, 2025, from $3,874,796 in the comparable period in 2024. The increase is due to an increase in oil sales of $79,585, an increase in natural gas sales of $583,728, and a decrease in miscellaneous oil and gas product sales of $71,284.

Current wording

Operating Revenues. Revenues from oil and natural gas sales increased $1,691,590 (44%) to $5,543,055 in the three months ended March 31, 2026, from $3,851,465 in the comparable period in 2025. The increase is due to an increase in oil sales of $1,108,064, an increase in natural gas sales of $628,289, and a decrease in miscellaneous oil and natural gas product sales of $44,763.

Previous wording

The $79,585 (3%) increase in oil sales to $3,233,521 in the three months ended September 30, 2025, from $3,153,936 in the comparable period in 2024 was the result of an increase in the volume sold and a decrease in the average price per barrel (Bbl). The volume of oil sold increased 6,840 Bbls to 52,358 Bbls in the three months ended September 30, 2025, resulting in a positive volume variance of $473,944. The average price per Bbl decreased $7.53 to $61.76 per Bbl in the three months ended September 30, 2025, from $69.29 per Bbl in the comparable period in 2024, resulting in a negative price variance of $394,359.

Current wording

The $1,108,064 (42%) increase in oil sales to $3,750,765 in the three months ended March 31, 2026, from $2,642,701 in the comparable period in 2025 was the result of an increase in the volume sold and an increase in the average price per barrel (Bbl). The volume of oil sold increased 13,446 Bbls to 53,350 Bbls in the three months ended March 31, 2026, from 39,904 Bbls in the comparable period in 2025, resulting in a positive volume variance of $890,529. The average price per Bbl increased $4.07 to $70.30 per Bbl in the three months ended March 31, 2026, from $66.23 per Bbl in the comparable period in 2025, resulting in a positive price variance of $217,535.

Previous wording

The $583,728 (102%) increase in natural gas sales to $1,156,512 in the three months ended September 30, 2025, from $572,784 in the comparable period in 2024 was the result of an increase in the volume sold and an increase in the average price per MCF. The volume of natural gas sold increased 74,079 MCF to 360,875 MCF in the three months ended September 30, 2025, from 286,796 MCF in the comparable period in 2024, resulting in a positive volume variance of $148,158. The average price per MCF increased $1.20 to $3.20 per MCF in the three months ended September 30, 2025, from $2.00 per MCF in the comparable period in 2024, resulting in a positive price variance of $435,570.

Current wording

The $628,289 (56%) increase in natural gas sales to $1,752,004 in the three months ended March 31, 2026, from $1,123,715 in the comparable period in 2025 was the result of an increase in the volume sold and an increase in the average price per thousand cubic feet ("MCF"). The volume of natural gas sold increased 120,078 MCF to 384,014 MCF in the three months ended March 31, 2026, from 263,936 MCF in the comparable period in 2025, resulting in a positive volume variance of $511,532. The average price per MCF increased $0.30 to $4.56 per MCF in the three months ended March 31, 2026, from $4.26 per MCF in the comparable period in 2025, resulting in a positive price variance of $116,757.

Previous wording

For both oil and natural gas sales, the price change was mostly the result of a change in the spot market prices upon which most of the Company’s oil and natural gas sales are based. These spot market prices have had significant fluctuations in the past and these fluctuations are expected to continue.

Current wording

For both oil and natural gas sales, the price change was mostly the result of a change in the spot market prices upon which most of our oil and natural gas sales are based. These spot market prices have had significant fluctuations in the past and these fluctuations are expected to continue.

Previous wording

Sales of miscellaneous oil and natural gas products were $253,899 in the nine months ended September 30, 2025, compared to $264,400 in the comparable period in 2024.

Current wording

Sales of miscellaneous oil and natural gas products were $40,286 in the three months ended March 31, 2026, compared to $85,049 in the comparable period in 2025, primarily due to decreased product sales in assets held in Ohio.

Previous wording

Operating Costs and Expenses. Operating costs and expenses increased $21,497 (1%) to $2,656,170 in the three months ended September 30, 2025, from $2,634,673 in the comparable period in 2024.

Current wording

Operating Costs and Expenses. Operating costs and expenses increased $1,674,853 (73%) to $3,958,081 in the three months ended March 31, 2026, from $2,283,228 in the comparable period of 2025. See below for analysis of changes.

Previous wording

Production Costs. Production costs increased $167,707 (16%) to $1,209,401 in the three months ended September 30, 2025, from $1,041,694 in the comparable period in 2024. Lease operating expenses increased $150,321 (23%), gas deductions and other costs decreased by $76,491 (29%), and gross production taxes increased $93,877 (73%).

Current wording

Production Costs. Production costs increased $183,475 (18%) to $1,231,836 in the three months ended March 31, 2026, from $1,048,361 in the comparable period in 2025. Lease operating expenses increased $73,786 (11%). Gas deductions and other costs increased $19,968 (14%). Gross production taxes increased $89,721 (43%).

Previous wording

Exploration Costs. Exploration costs decreased $75,613 (20%) to $295,197 in the nine months ended September 30, 2025, from $370,810 in the comparable period in 2024, due to an increase of $22,511 in geological and geophysical and other expenses and an increase in $58,996 in leasehold impairments, offset by a decrease in $157,120 in dry hole and plugging costs.

Current wording

Exploration Costs. Exploration costs increased $370,106 (355%) to $474,385 in the three months ended March 31, 2026, from $104,279 in the comparable period in 2025, due to increases of $433,528 in dry hole and plugging costs, and $1,839 in geological and geophysical and other expenses, offset by a decrease of $65,261 in cancelled and expired leases.

Previous wording

Depreciation, Depletion, Amortization and Valuation Provision (DD&A). DD&A increased $862,495 (47%) to $2,687,400 in the nine months ended September 30, 2025, from $1,824,905 in the comparable period in 2024, primarily due to an increase in long-lived assets impairments of $279,859 and a $583,167 net increase in depletion, depreciation, and amortization due to an increase in completions and production.

Current wording

Depreciation, Depletion, Amortization and Valuation Provision (DD&A). DD&A increased $569,465 (63%) to $1,477,343 in the three months ended March 31, 2026, from $907,878 in the comparable period in 2025, primarily due to an increase in production from new wells.

Previous wording

Gain on Disposition of Oil and Gas Properties. We had a gain on the sale of unproved, non-producing leasehold of $149,430 in the three months ended September 30, 2025, with none in the the comparable period in 2024.

Current wording

Gain/(Loss) on Disposition of Oil and Gas Properties. We had a loss on the sale of unproved, non-producing leasehold of $97,206 in the three months ended March 31, 2026, with a gain on sale of $492,282 in the the comparable period in 2025.

Previous wording

Equity Income/(Loss) in Investees. Equity income/(loss) in investees decreased $18,934 (29%) to $45,757 in the nine months ended September 30, 2025, from $64,691 in the comparable period in 2024. Income in the nine months ended September 30, 2025, was made up of income of $17,947 in Broadway Sixty-Eight, LLC (“Broadway 68”), income of $49,973 in Broadway Seventy-Two, LLC (“Broadway 72”), income of $23,122 from Victorum BRH Investment, LLC, loss of $5,214 in QSN Office Park, LLC (“QSN”), and loss of $40,071 in Stott's Mill. See Note 5 to the accompanying financial statements for additional information on equity method investments.

Current wording

Equity Income in Investees. Equity income in investees increased $5,563 (14%) to $44,743 in the three months ended March 31, 2026, from $39,180 in the comparable period in 2025. Equity income was comprised of $23,339 in Broadway Sixty-Eight, LLC (“Broadway 68”), income of $16,441 in Broadway Seventy-Two, LLC (“Broadway 72”), and income of $8,137 in Victorum BRH Investment LLC, offset by a loss of $3,174 in QSN Office Park, LLC (“QSN”). See Note 5 to the accompanying financial statements for additional information on equity method investments.

Previous wording

Other Income/(Loss), Net. Other income/(Loss), net decreased $583,431 in the three months ended September 30, 2025, to a loss of $119,742 from income of $463,689 in the comparable period in 2024. See Note 4 to the accompanying consolidated financial statements for an analysis of the components of this item.

Current wording

Other Income/(Loss), Net. We had a loss of $362,324 in the three months ended March 31, 2026 and income of $267,703 in the comparable period in 2025. See Note 4 to the accompanying consolidated financial statements for an analysis of the components of this line item.

Previous wording

Income Tax Provision. Income tax provision increased $145,686 (15%) to $1,115,432 in the nine months ended September 30, 2025, from $969,746 in the comparable period in 2024. Of the 2025 tax provision, estimated current tax provision was $23,399 and estimated deferred tax provision was $1,092,033. Of the 2024 income tax provision, the estimated current tax benefit was $68,639 and the estimated deferred tax provision was $1,038,385.

Current wording

Income Tax Provision. Income tax provision decreased $281,368 (51%) to $266,168 in the three months ended March 31, 2026, from $547,536 in the comparable period in 2025. Of the 2026 tax provision, the estimated current tax benefit was $11,894 and the estimated deferred tax provision was $278,062. Of the 2025 income tax provision, the estimated current tax provision was $12,234 and the estimated deferred tax provision was $535,302.