Phoenix Energy One, LLC

Note 1 – Business

Phoenix Energy One, LLC (“Phoenix Energy”), formerly known as Phoenix Capital Group Holdings, LLC (“Phoenix Capital”), is a Delaware limited liability company focused on oil and gas acquisitions and operations primarily in the Williston Basin, North Dakota/Montana, the Uinta Basin, Utah, the Permian Basin, Texas, the Denver-Julesburg Basin, Colorado/Wyoming and the Powder River Basin, Wyoming. The Company was formed in April 2019 and changed its name from Phoenix Capital Group Holdings, LLC to Phoenix Energy One, LLC in January 2025. As used in these condensed consolidated financial statements, unless the context otherwise requires, references to the “Company,” “we,” “us,” and “our” refer to Phoenix Energy and its consolidated subsidiaries.

The Company’s strategy involves the acquisition of royalty assets,

non-operated

working interests, and operated leaseholds for the purpose of exploration, development, production, and sale of crude oil, natural gas, natural gas liquids, and other byproducts conducted through its wholly-owned subsidiaries, Phoenix Operating LLC (“PhoenixOp”), Firebird Services, LLC (“Firebird Services”) and Firebird Marketing, LLC (“Firebird Marketing”). PhoenixOp is a Delaware limited liability company formed in January 2022 to drill, complete and operate wells in the United States. Firebird Services is a Delaware limited liability company formed in October 2023 to perform saltwater disposal services on wells operated by PhoenixOp. Firebird Marketing is a Delaware limited liability company formed in March 2025 to market and sell the Company’s operated production beginning April 2025.

Interim financial presentation

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for fair presentation, have been included. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2024 (the “2024 annual financial statements”).

Note 2 – Significant Accounting Policies

Basis of preparation and principles of consolidation

The condensed consolidated financial statements include the accounts of Phoenix Energy and its wholly-owned subsidiaries. All intercompany accounts and transactions with and between Phoenix Energy and its wholly-owned subsidiaries have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on the Company’s previously reported results of operations or accumulated deficit.

Liquidity risk and management’s plans

Liquidity risk is the risk that the Company’s cash flows from operations will not be sufficient for the Company to continue operating and discharge its liabilities in the normal course of operations. The Company is exposed to liquidity risk as its continued operation is dependent upon its ability to continue to obtain financing, either in the form of debt or equity, or by continuing to achieve profitable operations in order to satisfy its liabilities as they come due.

As of September 30, 2025, the Company had negative working capital of approximately $222.0 million. The Company expects to repay its financial liabilities in the normal course of operations and to fund future operational and capital requirements through operating cash flows and through issuances of additional debt or equity. Since the balance sheet date and through the date of the filing of these condensed consolidated financial statements, the Company had raised an additional $54.2 million of notes through its investor program (see

and

Note 16 – Subsequent Events

). Management believes its capital raises through its bond offerings will continue at or above this current pace.

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the applicable reporting period of such statements. Accordingly, actual results could differ materially from these estimates.

The accompanying condensed consolidated financial statements are based on a number of significant estimates including quantities of oil, natural gas and natural gas liquids (“NGL”) reserves that are the basis for the calculations of depreciation, depletion, amortization, and determinations of impairment of oil and natural gas properties. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas and there are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment along with estimated selling prices. As a result, reserve estimates may materially differ from the quantities of oil and natural gas that are ultimately recovered.

Revenue from contracts with customers

The Company recognizes its revenues following Accounting Standards Codification (“ASC”) Topic 606,

Revenue from Contracts with Customers

, (“ASC 606”). The Company’s revenues are predominantly derived from contracts for the sale of crude oil, natural gas and NGLs. For crude oil, natural gas and NGLs produced by PhoenixOp, each delivery order is treated as a separate performance obligation that is satisfied at the point in time control of the product transfers to the customer. Revenue is measured as the amount the Company expects to receive in exchange for transferring commodities to the customer. The Company’s commodity sales are typically based on prevailing market-based prices. When deliveries contain multiple products, an observable standalone selling price is generally used to measure revenue for each product. Revenues from product sales are presented separately from post-production expenses, including transportation costs, as the Company controls the operated production prior to its transfer to customers.

In circumstances where the Company is the

non-operator

or mineral rights owner, the Company derives revenue from its interests in the sale of oil and natural gas production and does not consider itself to have control of the product, resulting in the recognition of revenues net of post-production expenses. Oil, natural gas, and NGL sales revenues are generally recognized when control of the product is transferred to the customer, the performance obligations under the terms of the contracts with customers are satisfied and collectability is reasonably assured. Given the inherent time lag between when oil, natural gas, NGL production and sales occur, and when operators or purchasers often make disbursements to royalty interest owners and due to the large potential fluctuations of both production and sale price, a significant portion of the Company’s revenue may represent accrued revenue based on estimated net sales volumes and estimated selling prices of the commodities.

Effective April 2025, the Company began conducting marketing activities through its newly established subsidiary, Firebird Marketing. These activities include the purchase of crude oil from working interest owners and royalty interest holders in properties operated by PhoenixOp, and the subsequent sale of the crude oil to customers. The revenues and expenses from these sales and purchases are recognized on a gross basis as the Company acts as a principal in these transactions by assuming control of the purchased crude oil before it is transferred to the customer.

The Company, through Firebird Services, provides water disposal services to PhoenixOp and third parties with respect to oil and gas production from wells in which it is the operator. Pricing for such services represents a fixed rate fee based on the quantity of water volume processed. Intercompany charges associated with PhoenixOp’s net interests are eliminated upon consolidation. The proportionate share of fees allocable to third-party working interest owners are recognized as revenues over the course of time, as services are performed. Revenues from water services are recognized only when it is probable the Company will collect the consideration it is entitled to in exchange for the services transferred to the customer.

Impairment of long-lived assets

The Company follows the provisions of ASC 360, Property, Plant, and Equipment (“ASC 360”). ASC 360 requires that long-lived assets be assessed for potential impairment of their carrying values whenever events or changes in circumstances indicate such impairment may have occurred. Proved oil and natural gas properties are evaluated by geologic basin for potential impairment. In accordance with the successful efforts method of accounting, impairment on proved properties is recognized when the estimated undiscounted projected future net cash flows, or evaluation value using expected future prices of a geologic basin are less than its carrying value. If impairment occurs, the carrying value of the impaired geologic basin is reduced to its estimated fair value.

Unproved oil and natural gas properties do not have producing properties and are valued on acquisition by management, with the assistance of an independent expert when necessary. The valuation of unproved oil and gas properties is subjective and requires management to make estimates and assumptions that, with the passage of time, may prove to be materially different from actual results. The unproved basis is periodically evaluated by management to assess whether the value of a property has diminished. Management considers, (i) estimated potential reserves and future net revenues from an independent expert, (ii) its history in exploring the area, (iii) its future drilling plans per its capital drilling program prepared by its reservoir engineers and operations management, and (iv) other factors associated with the area. As reserves are proved through the successful completion of exploratory wells, the cost is transferred to proved properties. If it is determined that it is unlikely for an unproved property to be successfully developed prior to the lease expiration or extension, an impairment of the respective unproved property is recognized in the period in which that determination is made.

Preferred equity

The Company accounts for preferred equity in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). The Series A Preferred Shares (as defined in

Note 9 – Preferred Equity

)

are not subject to any mandatory redemption and, accordingly, have been classified as permanent equity on the Company’s condensed consolidated balance sheets. Distributions are accrued as contractually obligated and are paid quarterly in arrears, when, as and if declared by the Company’s Board of Directors. The discount associated with the increasing-rate distributions is amortized using the effective interest method over the period preceding the commencement of the perpetual distribution rate. The accretion is recorded as an imputed distribution, recognized through retained earnings, with a corresponding increase to the carrying amount of the preferred equity.

Recently adopted accounting standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 is intended to clarify or improve disclosure and presentation requirements of a variety of topics, which would allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC’s regulations. The amendments in this ASU will be effective for public business entities on the effective date of the SEC’s removal of the related disclosures from Regulation S-X or Regulation S-K, and should be applied prospectively. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the amendments will not become effective for any entity. The Company adopted the provisions of ASU 2023-06 on July 1, 2025, and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recent accounting standards not yet adopted

In November 2024, the FASB issued ASU

2024-03,

Income Statement—Expense Disaggregation Disclosures (Subtopic

220-40):

Disaggregation of Income Statement Expenses

(“ASU

2024-03”).

ASU

2024-03

requires companies to provide more detailed disclosures about the disaggregation of income statement expenses. The ASU aims to enhance the transparency and usefulness of financial statements by providing better insight into the components of expense line items, and becomes effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of the standard on its financial statements and disclosures.

Accounting pronouncements not listed above were assessed and determined to not have a material impact on the Company’s condensed consolidated financial statements.

Note 3 – Oil and Gas Properties

Oil and gas properties, net consist of the following:

The Company uses the successful efforts method of accounting for its oil and gas properties. Property acquisition costs are depleted on a

basis over total proved reserves, while costs of wells and related equipment and facilities are depleted on a

basis over proved developed reserves. Depletion on oil and gas properties was $

45.5

15.5

million for the three months ended September 30, 2025 and 2024, respectively, and $

113.3

52.7

million for the nine months ended September 30, 2025 and 2024, respectively.

Depreciation expense on the Company’s equipment and other property was less than $

0.1

million for both the three months ended September 30, 2025 and 2024 and less than $

0.1

million for both the nine months ended September 30, 2025 and 2024.

Impairment expense on the Company’s oil and gas properties was $

2.0

0.5

million for the three months ended September 30, 2025 and 2024, respectively, and $

2.5

0.5

million for the nine months ended September 30, 2025 and 2024, respectively, related to lease expirations and title defects on the Company’s oil and gas properties.

Note 4 – Revenue

The following tables present the Company’s revenues disaggregated by product type and by segment for the periods presented:

Note 5 – Other Current Assets

The following table summarizes the Company’s other current assets for the periods presented:

Note 6 – Derivatives

The Company periodically enters into commodity derivative contracts to manage its exposure to crude oil price risk. Additionally, the Company is required to hedge a portion of anticipated crude oil production for future periods pursuant to its debt covenants under the Fortress Credit Agreement, as further described in

. The Company does not enter into derivative contracts for speculative trading purposes.

When the Company utilizes crude oil commodity derivative contracts, it expects to enter into put/call collars, fixed swaps or put options to hedge a portion of its anticipated future production. A collar contract establishes a floor and ceiling price on contracted volumes and provides payment to the Company if the index price falls below the floor or requires payment by the Company if the index price rises above the ceiling. A fixed swap contract sets a fixed price and provides payment to the Company if the index price is below the fixed price or requires payment by the Company if the index price is above the fixed price. A put arrangement gives the Company the right to sell the underlying crude oil commodity at a strike price and provides payment to the Company if the index price falls below the strike price. For put arrangements, no payment or receipt occurs if the index price is higher than the strike price. As of September 30, 2025, the Company’s derivatives were comprised of crude oil commodity derivative contracts indexed to the U.S. New York Mercantile Exchange West Texas Intermediate (“NYMEX WTI”). The Company has not designated its derivative contracts for hedge accounting and, as a result, records the net change in the

mark-to-market

valuation of the derivative contracts and all payments and receipts on settled derivative contracts in its condensed consolidated statements of operations. All derivative contracts are recorded at fair market value and included in the condensed consolidated balance sheets as assets or liabilities. Derivative assets and liabilities are presented net on the condensed consolidated balance sheets when a legally enforceable master netting arrangement exists with the counterparty.

As of September 30, 2025, the Company’s open crude oil derivative contracts consisted of the following:

The following table summarizes the gains and losses on derivative instruments included on the condensed consolidated statements of operations and the net cash payments related thereto for the periods presented. Cash flows associated with these

non-hedge

designated derivatives are reported within operating activities in the condensed consolidated statements of cash flows.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

Certain assets and liabilities are reported at fair value on a recurring basis, including the Company’s derivative instruments. The fair values of the Company’s derivative contracts are measured internally using established commodity futures price strips for the underlying commodity provided by a reputable third party, the contracted notional volumes, and time to maturity. These valuations are Level 2 inputs.

The following tables provide (i) fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis, (ii) the gross amounts of recognized derivative assets and liabilities, (iii) the amounts offset under master netting arrangements with counterparties, and (iv) the resulting net amounts presented in the Company’s condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024. The net amounts are classified as current or noncurrent based on their anticipated settlement dates.

The following table summarizes the Company’s debt for the periods presented:

Fortress Credit Agreement

In April 2025, the Company amended the secured credit agreement with Fortress Credit Corp. (the “Fortress Credit Agreement”) and established a new tranche of term loans in an aggregate principal amount of $50.0 million (the “April Fortress Amendment”). The April Fortress Amendment was accounted for as a debt modification, with $25.0 million borrowed upon closing in April 2025 and $25.0 million borrowed in May 2025. In August 2025, the Fortress Credit Agreement was syndicated to include an additional institutional lender and further amended to establish a new tranche of term loans in an aggregate principal amount of $100.0 million (the “August Fortress Amendment”) that was borrowed in full upon closing. Additionally, the August Fortress Amendment established a $6.5 million tranche of loans which represents a contingent principal obligation that is only due and payable (together with accrued interest) upon certain conditions occurring, including payment defaults under the Fortress Credit Agreement or a bankruptcy filing. The August Fortress

Amendment

also revised

the

mandatory repayment schedule such that $200.0

million of the outstanding principal amount of the term loans under the Fortress Credit Agreement is due by

August 2027,

with the remainder due upon maturity in December 2027. The term loans under the Fortress Credit Agreement bear interest at a rate per annum equal to Term Secured Overnight Financing Rate (“SOFR”) plus a margin of

7.10%. Proceeds are to be used to finance the development of the Company’s oil and gas properties in accordance with the approved plan of development provided in the Fortress Credit Agreement.

The Company had an aggregate principal amount outstanding of $400.0 million and $250.0

million under the Fortress Credit Agreement as of September 30, 2025 and December 31, 2024, respectively. The

all-in

interest rate for the term loans under the Fortress Credit Agreement was

11.4

%

and 11.7

% at September 30, 2025 and December 31, 2024, respectively. The Fortress Credit Agreement contains various customary covenants, including financial covenants that require the Company to maintain ratios around its maximum total secured leverage, minimum asset coverage, and working capital as of the last day of each calendar month or fiscal quarter, as the case may be. On October 27, 2025, subsequent to the balance sheet date, the Company executed an amendment of the Fortress Credit Agreement, which provided a waiver of default on its current ratio as of September 30, 2025. The Company has also entered into hedges covering at least

75.0

% of the initially anticipated monthly production of crude oil from the Company’s proved developed reserves for a

36-month

period, pursuant to the terms of the Fortress Credit Agreement. See

Note 6 – Derivatives

.

Registered Notes

In October 2024, the Company filed a registration statement on Form

(the “Registration Statement”) with the SEC, which was declared effective in May 2025, with respect to the continuous offering of up to $750.0 million aggregate principal amount of the Company’s senior subordinated notes (the “Registered Notes”) with maturity dates ranging from three to eleven years from the issue date and interest rates ranging from 9.0% to 12.0% per annum.

The Registered Notes are contractually senior to bonds sold pursuant to offerings under Rule 506(c) of Regulation D under the Securities Act (the “Regulation D Bonds”) that commenced in December 2022 (the “December 2022 506(c) Bonds”) and August 2023 (the “August 2023 506(c) Bonds”), and subordinated to the term loans under the Fortress Credit Agreement, the Adamantium Securities and Regulation D Bonds whose offerings commenced in October 2020 and July 2022. The Registered Notes contain customary events of default and may be redeemed at the option of the Company at any time without premium or penalty. The holders of Registered Notes also have a right to request redemption of their notes in certain circumstances at a discount to par, subject to a limit of

10% of the then-outstanding principal amount of the applicable series in any given calendar year. As of September 30, 2025, the Company had $18.4 million of aggregate principal amount outstanding of the Registered Notes.

Unregistered Debt Offerings

Regulation D Bonds

In May 2025, the Company approved an increase to the maximum offering amount of the August 2023 506(c) Bonds from $750.0 million to $1,500.0 million. The August 2023 506(c) Bonds are unsecured bonds offered and sold pursuant to an offering under Rule 506(c) of Regulation D that commenced in August 2023 with maturity dates ranging from one to eleven years from the issue date and interest rates ranging from 9.0% to 14.0% per annum. As of September 30, 2025

and December 31, 2024

, the Company had $683.6 million

and $497.8 million

of aggregate principal amount outstanding of the Regulation D Bonds

, respectively

.

Regulation A Bonds and Exchange Notes

In May 2025, the Company entered into an indenture to issue to holders of its unsecured three-year 9.0% bonds offered and sold pursuant to an offering under Regulation A promulgated under the Securities Act that commenced in December 2021 and terminated in December 2024 (the “Regulation A Bonds”), unsecured senior subordinated obligations in an offering exempt from registration under Section 3(a)(9) and/or 4(a)(2) of the Securities Act (the “Exchange Notes”). The Exchange Notes have maturities of three, five, seven, and/or eleven years and interest rates ranging from 9.0% to 12.0% per annum. As of September 30, 2025, $25.9 million aggregate principal amount of the Regulation A Bonds were exchanged to Exchange Notes

,

and $59.7 million of the Regulation A Bonds remained outstanding.

Adamantium Securities

In September 2023, the Company, through its wholly-owned subsidiary, Adamantium, commenced an offering of bonds exempt from registration pursuant to Rule 506(c) of Regulation D (the “Adamantium Bonds”). The Adamantium Bonds offer high net worth individuals a debt instrument that is unsecured but structurally senior to other bonds sold by the Company under Regulation A and Regulation D. The Adamantium Bonds have maturity terms that range from five to eleven years and bear interest ranging from 13.0% to 16.0% per annum. In November 2024, Adamantium issued a $7.0 million seven-year promissory note to an investor bearing interest at 16.5% per annum (the “Adamantium Secured Note” and, together with the Adamantium Bonds, “the Adamantium Securities”). The Adamantium Securities contain customary events of default and may be redeemed at the option of Adamantium at any time without premium or penalty. The holders of Adamantium Bonds also have a right to request redemption of their bonds in certain circumstances at a discount to par, subject to a limit of 10% of the then-outstanding principal amount of Adamantium Bonds in any given calendar year. The holder of the Adamantium Secured Note has the right to request redemption of its note at par, subject to a limit of $5.0 million in aggregate principal amount of the Adamantium Secured Note in any

12-month

period. As of September 30, 2025

and December 31, 2024

, the Company had $218.2 million

and $135.2 million

of aggregate principal amount outstanding of the Adamantium Securities

, respectively

.

Interest Expense on Debt

The following table summarizes the total interest costs incurred on the Company’s debt:

Note 8 – Other Current Liabilities

The following table summarizes the Company’s other current liabilities for the periods presented:

In circumstances where the Company serves as the operator, the Company receives production proceeds from purchasers and distributes revenue to royalty owners and working interest owners based on their ownership interests. Production proceeds that the Company has not yet distributed are reflected as revenue payable and classified as a component of other current liabilities in the condensed consolidated balance sheets. Production taxes payable represents production taxes assessed on the Company’s operated volumes that have been incurred but not yet remitted as of the balance sheet date. Additionally, working interest owners who participate in our wells may elect to prepay a portion of the estimated drilling and completion costs. For such advances, a liability is recorded and subsequently reduced as the associated work is performed and billed to the working interest owners.

Note 9 – Preferred Equity

In September 2025, the Company completed its offering of the Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Shares”) pursuant to Regulation A promulgated under the Securities Act of 1933

,

as amended

,

which shares were listed on the NYSE American under the ticker symbol PHXE.P and commenced trading on September 30, 2025.

The Company sold an aggregate of 2,704,023 Series A Preferred Shares at closing, which represented $67.6 million in initial liquidation preference at a public offering price of $20.00 per share for gross proceeds of $54.1 million. Offering costs of $6.2 million were recorded as a reduction of the gross proceeds.

Voting Rights

Holders of the Series A Preferred Shares generally have no voting rights. However, if the Company does not pay distributions on the Series A Preferred Shares for six or more quarterly distribution periods (whether or not consecutive), the holders of the Series A Preferred Shares will be entitled to vote for the election of two additional directors to serve on the Board of Directors until the Company pays, or declares and sets aside funds for the payment of, all distributions that the Company owes on the Series A Preferred Shares.

Dividend Rights

The Series A Preferred Shares rank senior to all classes of equity securities issued by the Company (including common equity) and are junior to all existing and future indebtedness of the Company. Holders of the Series A Preferred Shares are entitled to receive cumulative cash distributions based on the initial liquidation preference of $25.00 per share, accruing from the initial issuance date and, when, as and if declared by the Company’s Board of Directors, payable quarterly in arrears on January 15, April 15, July 15, and October 15 of each year, beginning on October 15, 2025. The annual distribution rate is 10.0% for the first three year-period,10.5% in the fourth year, and 11.0% in the fifth year and thereon. As of September 30, 2025, $0.3 million of Series

A Preferred distributions equal to $0.11111 per share had been declared and scheduled to be paid on October 15, 2025 to the holders on record as of October 1, 2025.

Liquidation Rights

In the event of the Company’s voluntary or involuntary liquidation, dissolution, or winding up, the holders of the Series A Preferred Shares will generally have the right to receive the initial liquidation preference of $25.00 per Series A Preferred Share, plus any accumulated and unpaid distributions.

Redemption Rights

The Series A Preferred Shares are not redeemable at the option of the holders. The Series A Preferred Shares, are, however, redeemable at the Company’s option, in whole or in part, at a cash redemption price of $27.50 per share, plus any accumulated and unpaid distributions.

Conversion

The Series A Preferred Shares are not convertible or exchangeable for any securities or property of the Company.

Note 10 – Equity-Based Compensation

The Company’s parent, Phoenix Equity Holdings, LLC (“Phoenix Equity”), has granted equity awards to employees of the Company under the 2024 Long-Term Incentive Plan (the “2024 Incentive Plan”). The 2024 Incentive Plan provides for the issuance of 900,000 Class A Units,2,813,900 Class B Units and 1,000,000 Phantom Units. As of September 30, 2025, Phoenix Equity had issued all authorized Class A Units and Class B Units and 30,500 Phantom Units under the 2024 Incentive Plan.

A summary of the activity under the 2024 Incentive Plan for the nine months ended September 30, 2025 is presented below.

During the nine months ended September 30, 2025, Phoenix Equity granted 30,500 Phantom Unit awards contingent on the achievement of a performance condition, all of which will vest only upon the Company undergoing a liquidity event (e.g., change in control). No compensation cost will be recognized for the Phantom Unit awards until a liquidity event occurs. The Company has elected to account for forfeitures as they occur.

As of September 30, 2025, there was $178.7 million of total unrecognized compensation cost related to nonvested equity awards granted under the 2024 Incentive Plan, measured based on the fair value of the awards; that cost is expected to be recognized at the time a liquidity event occurs.

The fair value of each unit granted under the 2024 Incentive Plan was valued on the date of grant under an independent third-party valuation, which included a combination of an income approach, based on the present value of estimated future cash flows, and a market approach based on market data of comparable businesses. The weighted average assumptions used in the valuation of performance unit awards granted for the nine months ended September 30, 2025, are presented in the table below:

Note 11 – Related Parties

Debt Offerings

Certain of the Company’s officers and their family members participate in the Company’s unregistered debt offerings. During the nine months ended September 30, 2025 and 2024, these officers and their family members purchased, in aggregate,1,104 and 4,208 of the combined Regulation A Bonds and Regulation D Bonds for a total purchase price of $1.1 million and $4.2 million, respectively. As of September 30, 2025 and December 31, 2024, there were 3,951 and 2,860 of bonds outstanding with carrying values of $4.0 million and $2.9 million, respectively. Interest expense attributable to these securities was $0.1 million for both the three months ended September 30, 2025 and 2024, and $0.4 million for both the nine months ended September 30, 2025 and 2024.

Lion of Judah

The Company paid interest expense to a financial institution on behalf of Lion of Judah related to a certain financing agreement between Lion of Judah and the financial institution of less than $0.1 million for both the three months ended September 30, 2025 and 2024, and less than $0.1

million and less than $

0.2

million for the nine months ended September 30, 2025 and 2024, respectively. Interest payments made by the Company on behalf of Lion of Judah are discretionary in nature.

Note 12 – Leases

The Company leases its office facilities primarily under noncancelable multi-year operating lease agreements.

The following table shows the line item classification of the Company’s

right-of-use

assets and lease liabilities on the Company’s condensed consolidated balance sheets:

Operating lease cost of $1.1 million and $0.6 million for the three months ended September 30, 2025 and 2024, respectively, and $2.3 million and $1.2 million for the nine months ended September 30, 2025 and 2024, respectively, was classified as a component of selling, general, and administrative expense on the condensed consolidated statements of operations.

Note 13 – Commitments and Contingencies

For a summary of the Company’s lease obligations, see

Note 12 – Leases

.

Litigation

From time to time, the Company may become involved in other legal proceedings or be subject to claims arising in the ordinary course of business. Although the results of ordinary course litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, financial condition, results of operations or cash flows. Regardless of the outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources and other factors.

Drilling Rig Contracts

The Company may enter into drilling rig contracts in the ordinary course of business to procure drilling services for wells operated by PhoenixOp. The contracts are short-term and provide a daily operating rate as consideration for services performed by the third-party provider. The contracts provide for termination at the election of the Company but may include an early termination payment if the contract is terminated prior to the expiration of the fixed term.

Natural Gas Processing Contracts

The Company has entered into contracts for mobile cryogenic gas processing units to process raw gas, produce and store NGLs, and compress residue natural gas at wells operated by PhoenixOp. The contracts range from 6 months to 36 months and provide monthly facility and service fees as consideration for services performed by the third-party provider. As of September 30, 2025, the Company was subject to $7.2 million of commitments under these contracts.

Note 14 – Supplemental Cash Flow Information

The following table summarizes supplemental information to the condensed consolidated statements of cash flows for the periods presented:

Note 15 – Segments

Segment operating profit is used as a performance metric by the Chief Operating Decision Maker (“CODM”) in determining how to allocate resources and assess performance as this measure provides insight into the segments’ operations and overall success of a segment for a given period. Segment operating profit is calculated as total segment revenue less operating costs attributable to the segment, which includes allocated corporate costs that are overhead in nature and not directly associated with the segments, such as certain general and administrative expenses, executive or shared-function payroll costs and certain limited marketing activities. Corporate costs are allocated to the segments based on usage and headcount, as appropriate. Segment operating profit excludes other income and expense, such as interest expense, interest income, gain on derivatives, loss on debt extinguishment, even though these amounts are allocated to the segments and provided to the CODM. Transactions between segments are accounted for on an accrual basis and are eliminated upon consolidation. Interest expense is allocated to the segments based on the carrying value of the oil and gas properties owned by the respective segment at the balance sheet date, and interest income and gain on derivatives are allocated using the same basis as corporate costs.

The following table summarizes segment operating profit and reconciliation to net income (loss) for the periods presented:

The following tables present financial information by segment for the three and nine months ended September 30, 2025 and 2024 and as of September 30, 2025 and December 31, 2024.

The following tables summarize the Company’s oil and natural properties by proved and unproved properties, location and by segment (before accumulated depletion):

Note 16 – Subsequent Events

In October 2025, the Company paid cash distributions totaling $0.3 million to holders of its Series A Preferred Shares, pursuant to distributions declared by the Company’s Board of Directors in September 2025.

In October 2025, the Company amended the Fortress Credit Agreement (the “Amendment”) and established a new tranche of term loans in an aggregate principal amount of $350.0 million, with $50.0 million borrowed upon closing

of the Amendment

and up to $300.0 million available to be funded on a discretionary basis

on a delayed draw term loan during a specific availability period as set forth in the Amendment. The Amendment changed the maturity date to October 27, 2028 and revised the mandatory repayment schedule such that $225.0 million plus 50% of the aggregate principal amount of the new $300.0 million delayed draw term loan borrowed is due October 31, 2027

. The Amendment also revised certain covenants contained in the Fortress Credit Agreement and added a $5.0

million quarterly limit on the amount of Series A Preferred Shares that the Company may redeem, which may be reduced by the amount of cash payments made during such quarter to the extent related to refinancing transactions on the Company’s outstanding bonds as described in the Amendment. Proceeds will be used to finance the development of the Company’s oil and gas properties in accordance with the approved plan of development provided in the Fortress Credit Agreement.

In October and November 2025, the Company entered into additional fixed swap contracts for a total notional volume of 3.0 million Bbls at a weighted average contract price of $59.86 with settlement dates through September 2028. The notional volumes are scheduled to settle as follows:0.3 million Bbls in 2025,1.0 million Bbls in 2026,0.6 million Bbls in 2027 and 1.1 million Bbls in 2028. These commodity derivative contracts were executed pursuant to the Company’s debt covenant requirements under the amended Fortress Credit Agreement.

The Company is continuing to raise debt capital under its exempt and registered debt offerings. Since the balance sheet date and through the date of filing of these condensed consolidated financial statements, the Company issued approximately $54.2 million of debt securities under these offerings.