US ENERGY CORP
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
BSIN$1.33+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-26.
0001437749-24-009440
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001437749-25-007375
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 63 previous paragraphs and 94 current paragraphs.
29 unchanged; 24 reworded; 41 added; 10 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (41)
Current report
Acquisition of Properties
Current report
Wavetech
Current report
On June 26, 2024, we entered into and closed the transactions contemplated by, a purchase and sale agreement with Wavetech Helium (“Wavetech” and the “Purchase Agreement”). Pursuant to the Purchase Agreement, effective June 1, 2024, we acquired 82.5% of Wavetech's rights under a farmout agreement for approximately 144,000 net acres located across the Kevin Dome Structure in Toole County, Montana (“the Assigned Rights”). The Assigned Rights vest upon the drilling of two wells on the property. In consideration for the Assigned Rights, the Company paid Wavetech $2.0 million in cash and 2.6 million shares of restricted common stock, which were valued at $2.7 million on June 26, 2024. In addition, prior to the closing of the Purchase Agreement, the Company incurred $0.4 million of transaction costs related to the acquisition of the Assigned Rights. Additionally, we agreed to be responsible for 100% of capital costs, including costs related to project exploration, appraisal, development drilling and completion until $20 million has been incurred related to Wavetech's 17.5% interest. The Company accounted for the acquisition of the Assigned Rights as an asset acquisition. As of March 10, 2025, we had drilled one of the two wells required to vest the Assigned Rights, and we expect this to be completed in the first half of 2025.
Current report
Synergy
Current report
On January 7, 2025, we entered and simultaneously closed the transactions contemplated by, a purchase and sale agreement, with Synergy Offshore LLC (“Synergy”). Synergy is controlled by Mr. Duane H. King, a member of the Board of Directors of the Company, who serves as the Chief Executive Officer and Manager of Synergy, and John A. Weinzierl, the Company’s Chairman, who is an approximate sixty percent beneficial owner of Synergy.
Current report
We acquired approximately 24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana, including all leases, wells, rights and interests in, under or derived from the acquired acreage subject to Synergy retaining an undivided twenty percent (20%) of Synergy’s right title and interest in the property.
Current report
Consideration for the transaction consisted of the following: (a) $2.0 million in cash, subject to customary adjustments; (b) 1,400,000 shares of the Company’s common stock; (c) a carried working interest whereby the Company agreed to cover and pay for 100% of Synergy’s costs attributable to the Synergy acreage, until the earlier of (i) 78 months from the closing date; or (ii) the date the total costs associated therewith total $20 million; (d) our agreement to pay Synergy 18% of the cash amounts we actually realize from any law or regulation from our sequestration of carbon oxides or similar substances derived directly from an agreed area of mutual interest including Synergy’s acreage; and (e) our agreement to pay Synergy 18% of the gain we may receive in connection with the sale of the future, first, gas processing plant located on Synergy’s acreage.
Current report
Divestiture of Properties
Current report
During the year ended December 31, 2024, the Company closed on a series of individual divestitures for a total of $14.0 million in net proceeds before transaction costs of $0.4 million. The Company was also relieved of associated asset retirement obligations of $5.4 million. The divestitures included primarily operated properties in Texas and Mid-Continent ("Mid-con") and encompassed 408 gross wells, with two prior dispositions, one relating to our South Texas properties and one relating to our East Texas properties, each discussed in greater detail below, accounting for the majority of the proceeds.
Current report
In South Texas, the Company divested its assets in Karnes County, Texas, for approximately $5.2 million in net cash proceeds after customary purchase price adjustments, effective April 1, 2024, with the transaction closing on July 31, 2024. These primarily operated properties, consisting of 8 gross wells, which averaged 155 barrels of oil equivalent per day (85% oil) during the first quarter of 2024, representing 13% of our total production over that period.
Current report
In East Texas, the Company sold the majority of its assets across Anderson, Chambers, Henderson, and Liberty Counties, Texas, for $6.8 million in net cash proceeds, effective November 1, 2024, with the transaction closing on December 31, 2024. This package, comprising 122 gross wells, averaged approximately 1.1 million cubic feet per day of natural gas and 168 barrels of oil per day (48% oil) for the quarter ending September 30, 2024.
Current report
In the Mid-con region, the Company divested all of its operated properties in the state of Kansas and Kay County, Oklahoma, for $1.2 million in net cash proceeds, effective November 1, 2024, with the transaction closing on October 31, 2024. This package comprised 21 gross wells.
Current report
Properties divested during 2024 represented 42% of the beginning of the year reserve volumes. The Company recognized a $5.0 million loss on the sale of its East Texas properties in the fourth quarter of 2024. The Company considered this a significant divestment that would significantly alter the relationship between capitalized costs and proved reserves as the divestiture represented 36% of our reserve volumes and 30% of our reserve value at the date of the divestiture.
Current report
The net proceeds from these divestitures were used to repay the outstanding balance on our credit facility, bringing the balance as of December 31, 2024 to $0.0 million. We also used part of the proceeds to fund the continued development of the Company's industrial gas project in Montana. These divestitures reflect the Company's strategic portfolio management, exiting non-core geographic regions to enhance liquidity, strengthen the balance sheet, and redirect capital toward high-growth opportunities.
Current report
On September 10, 2024, the Company settled all of its then outstanding commodity derivative contracts for 2024 and 2025 production receiving $1.8 million. As of December 31, 2024, the Company no longer has any commodity derivative contracts outstanding.
Current report
Underwritten Offering
Current report
On January 22, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC (the “Representative”), as representative of the several underwriters named in the Underwriting Agreement (the “Underwriters”), relating to an underwritten offering of 4,236,000 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”), at a price to the public of $2.65 per share (such offering, the “Offering”).
Current report
Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to 635,400 additional shares of Common Stock (the “Option”), which was exercised in full on January 25, 2025.
Current report
The sale of 4,871,400 shares of Common Stock (including the full 635,400 Option) in connection with the Offering, closed on January 23, 2025. The Company intends to use the approximately $12.1 million of net proceeds from the Offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, for the development of its recent acquisition in Montana, general corporate purposes, and working capital, or for other purposes that our board of directors, in their good faith, deems to be in the best interest of the Company. Additionally, management had the ability, pursuant to the terms of the Underwriting Agreement, to use up to the entire amount of proceeds from the Option exercise to purchase shares of Common Stock from Sage Road Capital, LLC (a current shareholder of the Company whose co-manager is Joshua L. Batchelor, a member of the Board of Directors of the Company) or its affiliates at a price up to the public offering price of the Offering, less underwriting discounts, which sale took place in January 2025, as discussed below.
Current report
Under the terms of the Underwriting Agreement, the Company and the Company’s directors and executive officers and their affiliates, also agreed not to sell or transfer any Common Stock without first obtaining the written consent of the Representative, subject to certain exceptions (including the Sage Road Purchase, discussed below), for 60 days after January 22, 2025, the date of the final prospectus supplement relating to the Offering.
Current report
Related Party Share Repurchase
Current report
On January 27, 2025, the Company entered into a Share Repurchase Agreement with Banner Oil & Gas, LLC (“Banner”), Woodford Petroleum, LLC (“Woodford”), and Sage Road Energy II, LP, (“Sage Road”, and together with Banner and Woodford, the “Selling Stockholders”). In his capacity as co-Managing Partner of Sage Road Capital, LLC, which indirectly controls and manages certain funds which own a majority interest in Banner, Woodford and Sage Road, Joshua L. Batchelor, a member of the Board of Directors of the Company, may be deemed to beneficially own the shares of Common Stock held by the Selling Stockholders.
Current report
Pursuant to the Share Repurchase Agreement, the Company, in a private transaction, outside of, and separate from the Company’s previously disclosed share repurchase program, on January 27, 2025, repurchased (a) 534,020 shares of Common Stock held by Banner, (b) 41,229 shares of Common Stock held by Woodford, and (c) 60,151 shares of Common Stock held by Sage Road, for an aggregate of $1,574,362 or $2.47775 per share, which is the price per share of the 4,871,400 shares of Common Stock which we sold in our underwritten public offering which closed on January 23, 2025, less underwriting discounts and commissions, and which represented an 8.2% premium to the closing sales price of the Company’s Common Stock on January 27, 2025.
Current report
The Share Repurchase Agreement contains customary representations, warranties and covenants of the parties. The share repurchase was approved by the disinterested members of the Board of Directors of the Company, as well as the Company’s Audit Committee, comprised solely of independent directors not affiliated with Mr. Batchelor or the Selling Stockholders.
Current report
In 2025 and beyond, we intend to seek additional opportunities in the oil, natural gas and industrial gas sectors, including but not limited to further acquisition of assets, participation with industry partners in exploration and development projects, acquisition of existing companies, and the purchase of other industrial gas assets. We will continue to monetize legacy assets and redeploy capital into our core focus areas. During the first half of 2025 we intend to complete two wells and drill two additional new wells targeting a industrial gas zone. Share repurchases under our approved share repurchase program continued in 2024, and the Board of Directors has extended share repurchase program until June 30, 2026. These repurchases may resume so long as share prices remain attractive and repurchases remain in the best interests of both the Company and its stockholders.
Current report
*Industrial Gas Properties.*The Company capitalizes all costs associated with the acquisition, exploration and development of industrial gas reserves. The acquisition of leases, cost of acquiring drilling permits, drilling, development and asset retirement costs are capitalized as exploration and unevaluated assets. When commercially viable quantities of industrial gas reserves are discovered, the associated costs are reclassified to evaluated assets. The Company will periodically assess exploration and unevaluated assets, and upon evaluation, will reclass the assets to evaluated. Any additional costs to develop the asset or to construct infrastructure to produce and process industrial gases, including processing plant construction costs, will also be capitalized as evaluated. Interest expense, if any, is capitalized on qualifying expenditures. Evaluated industrial gas assets are subject to depreciation, depletion and amortization once production commences utilizing the units of production method. Evaluated industrial gas assets are stated at cost, less accumulated depletion, depreciation and amortization.
Current report
The carrying value of evaluated assets is reviewed for impairment when there are indications that the asset may not be recoverable due to significant and prolonged declines in prices, significant reductions in estimated resources, changes in the Company’s plans or other significant events that indicate that an impairment may exist. If any such indication of impairment exists and the sum of the undiscounted cash flows is less than the carrying value of the evaluated property, the carrying value is reduced to estimated fair value and reported as an impairment charge in the period with a reduction in the associated carrying cost. Individual evaluated properties are grouped for impairment purposes at the lowest level for which there are identifiable cash flows. The fair value of impaired assets is typically determined based on the present value of expected future cash flows using discount rates believed to be consistent with market participants. The impairment test incorporates several assumptions involving expectations of future cash flows which can change significantly over time. These assumptions include estimates of future production, future contracted industrial gas prices, estimates of future operating and development costs.
Current report
Recent Accounting Standards
Current report
Gathering, transportation, and treating costs decreased $352 thousand or 63%, for the year ended December 31, 2024 compared to 2023. The decrease was attributable to the divestitures of operated properties in 2024 and the sale of substantially all of our non-operating properties in the fourth quarter of 2023.
Current report
*Loss on sale of assets.*During the year ended December 31, 2024 we recognized a $5.0 million loss on the sale of our East Texas properties. The Company considered this a significant divestment that would significantly alter the relationship between capitalized costs and proved reserves as the divestiture represented 36% of our reserve volumes and 30% of our reserve value at the date of the divestiture.
Current report
Over the next year, we anticipate our industrial gas development to cost between $4.0 and $6.5 million on drilling and completing 2 – 4 industrial gas wells, acreage extension payments as well as site and preliminary design for our anticipated industrial gas processing plant and related infrastructure. The total costs depend primarily on the number of industrial gas wells drilled and the timing of construction on an industrial gas processing plant. In addition, depending on timing, regulatory requirements and weather, we plan to incur costs for plugging and abandonment of oil and natural gas wells of approximately $1.0 million. We view much of these capital activities as discretionary for which we can control both the timing and amount of the expenditures. Other activities, such as some repairs and maintenance may be required from time to time by regulatory bodies. We anticipate our expenditures will be funded primarily by cash on hand, operating cash flows, proceeds from divestitures of oil and gas properties, and if necessary, borrowings under our credit facility. In the event that readily available sources of cash flow are insufficient to fund our capital needs, we may utilize equity and credit markets as a funding mechanism. In the event we sell equity, such sales may cause dilution to existing stockholders.
Current report
Sources of Cash
Current report
For the year ended December 31, 2024, we funded our capital expenditures with cash on hand, cash flows from operating activities, proceeds from the divestitures of oil and gas producing properties and borrowings under our credit facility. In January 2025, we raised $12.1 million ($10.5 million after the Related Party Share Repurchase – seeNote 16 Subsequent Events) in an underwritten offering of 4,236,000 shares of our common stock. In future quarters, if cash flows are not sufficient to fund our capital expenditures and operations, we may raise funds through additional equity offerings or from other sources of financing. We also may re-evaluate our capital spend program as economic conditions warrant. Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain development programs. All of our sources of liquidity can be affected by the changes in economic conditions, rising interest rates, changes in debt and equity markets, force majeure events, fluctuations in commodity prices, operating costs, tax law changes, and volumes produced, all of which would affect us and our industry.
Current report
Credit Agreement
Current report
On January 5, 2022, we entered into a four-year credit agreement with FirstBank Southwest as administrative agent, which provides for a revolving line of credit with a borrowing base of $20 million, and a maximum credit amount of $100 million. Under the Credit Agreement, revolving loans may be borrowed, repaid and re-borrowed until January 5, 2026, when all outstanding amounts must be repaid. The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries. In addition, the Credit Agreement contains financial covenants, tested quarterly, that limit our ratio of total debt to EBITDAX (as defined in the Credit Agreement) to 3:1 and require our ratio of consolidated current assets to consolidated current liabilities (as each is described in the Credit Agreement) to remain at 1:1 or higher. We were in compliance with all financial covenants as of December 31, 2024.
Current report
The borrowing base is subject to redetermination semi-annually, commencing on or about April 1 and October 1 of each year during the four-year term of the Credit Agreement. Our borrowing base can be adjusted as a result of changes in commodity prices, acquisitions or divestitures of proved properties, or financing activities, all as provided for in the Credit Agreement. We are currently in talks with our bank to renew and extend the Credit Agreement and anticipate that process to be complete in the second quarter of 2025.
Current report
Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving Credit Agreement. The amount outstanding on the Credit Agreement as of December 31, 2024, was $0.0 million.
Current report
Uses of Cash
Current report
We use cash for the acquisition and development of our industrial gas properties, capital expenditures, workovers and operating costs related to our oil and gas properties, and general and administrative costs, settlements of commodity derivative contracts, debt obligations including interest, and share repurchases. During the year ended December 31, 2024, we spent approximately $6.5 million on the acquisition and development of our industrial gas properties.
Current report
The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, and the number and size of acquisitions that we complete. In addition, the impact of industrial gas, oil and natural gas prices on investment opportunities, the availability of capital, tax law changes, and the timing and results of our development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, and other factors. We will continue to monitor the economic environment through the remainder of the year and adjust our activity level as warranted.
Showing the first 40 of 41 passages. Open the source sections for the rest.
Removed paragraphs (10)
Previous report
During the year ended December 31, 2023, the Company closed on a series of individual divestitures for a total of $7.0 million in net proceeds before transaction costs of $0.4 million. The divestitures included the Company’s non-operated interests in 152 wells across North Dakota, New Mexico, and Texas, and overriding royalty interests in seven wells in Karnes County, Texas. These divestitures did not have a significant impact to reserves volumes or the full cost pool depletion rate. As such, the Company recorded the proceeds, net of transaction costs and purchase price adjustments, to the full cost pool, with no gain or loss recognized. Relief of associated asset retirement obligations of $0.5 million was also recorded to the full cost pool.
Previous report
On September 12, 2023, the Company entered into crude oil swap agreements with EDF Trading, agreeing to pay the monthly average NYMEX WTI prices and receive fixed prices for the month of settlement. The contracts were for a total of 187,620 barrels of oil, extending from October 2023 through December 2024 with weighted average prices of $86.64 for the 2023 swaps and $81.16 for the 2024 swaps.
Previous report
Volatility in Commodity Prices
Previous report
Commodity prices remained steady during the fourth quarter of 2022 as demand has continued to outpace relative supply. While recessionary concerns have placed some downward pressure on commodity prices, causing oil and gas prices to decline in 2023 from their earlier highs in 2022, worldwide commodity demand continues to exceed pre COVID-19 pandemic levels. Although supply has increased, it has been constrained and pricing has been affected, in part by the impact of the Russian-Ukrainian military conflict on global commodity and financial markets, and the associated effect of trade sanctions on imports of oil and natural gas from Russia. Additionally, the ongoing conflict in the Middle East and attacks on commercial shipping in the Red Sea increase risk to the global commodities market. Because the factors mentioned above could suddenly change or reverse, global commodity and financial markets remain subject to heightened levels of uncertainty and volatility, and future disruptions could result in industry-specific impacts.
Previous report
Rising Inflation and Interest Rates
Previous report
Reversing a trend experienced in 2020 in connection with the impact of COVID-19 and historically low crude oil prices, the cost of oilfield services, equipment and materials began to rise in 2021 and continued to rise through 2022 in conjunction with the significant increase in commodity prices, labor tightening and supply chain disruptions caused by the COVID-19 pandemic. While commodity prices decreased in 2023, the impacts of inflationary factors on the costs of oilfield services, equipment, and materials did not decrease along with them. In addition to the inflationary pressures on our operating and capital costs, rising interest rates as a result of the Federal Reserve tightening monetary policy have increased our borrowing costs on debt under our credit agreement and may limit our ability to access debt capital markets. Additional increases in interest rates have the potential to increase our cost of borrowing even more.
Previous report
In 2024 and beyond, we intend to seek additional opportunities in the oil and natural gas sector, including but not limited to workover and stimulating inactive wells, further acquisition of assets, participation with current and new industry partners in their exploration and development projects, acquisition of existing companies, and the purchase of oil and natural gas producing assets. In addition, we plan to grow production by performing workovers on operated idle wells acquired in 2022 to return them to production.
Previous report
Recently Issued Accounting Standards
Previous report
Gathering, transportation, and treating costs remained relatively consistent year over year, with a decrease of $16 thousand, or 3%, for the year ended December 31, 2023, compared to 2022.
Previous report
We have derivative contracts, with a fair value asset position of $1.8 million at December 31, 2023. The derivative contracts will be settled monthly in 2024.
Reworded paragraphs (24)
Previous wording
During the year ended December 31, 2023, the Company repaid $7.5 million on its credit facility, bringing the outstanding balance as of December 31, 2023 to $5.0 million. The repayments were primarily funded by the net proceeds from divestitures discussed above.
Current wording
During the year ended December 31, 2024, the Company repaid $7.0 million on its credit facility, bringing the outstanding balance as of December 31, 2024 to $0.0 million. The repayments were primarily funded by the net proceeds from divestitures discussed above.
Previous wording
The preparation of our consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. A summary of our significant accounting policies is detailed in Note 1 – Organization, Operations and Significant Accounting Policies in Item 8 of this annual report on Form 10-K under “Financial Statements and Supplementary Data”. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment.
Current wording
The preparation of our consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. A summary of our significant accounting policies is detailed in Note 1 – Organization, Operations and Significant Accounting Policies of our consolidated financial statements. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment.
Previous wording
Revenue Recognition. We recognize revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606-*Revenue from Contracts with Customers. See Note 3- Revenue From Contracts With Customers *to our consolidated financial statements included in Item 8 of this report on Form 10-K under “Financial Statements and Supplementary Data”.
Current wording
Revenue Recognition. We recognize revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606-*Revenue from Contracts with Customers. See Note 3- Revenue From Contracts With Customers *to our consolidated financial statements.
Previous wording
Please refer to the section entitledRecent Accounting Pronouncements underNote 1–* Organization, Operations and Significant Accounting Policies* in Item 8 of this annual report on Form 10-K under “Financial Statements and Supplementary Data” for additional information on recently issued accounting standards and our plans for adoption of those standards.
Current wording
Please refer to the section entitledRecent Accounting Pronouncements underNote 1–* Organization, Operations and Significant Accounting Policies* to our consolidated financial statements, for additional information on recently issued accounting standards and our plans for adoption of those standards.
Previous wording
During the year ended December 31, 2023, we recorded a net loss of $32.4 million. This net loss is primarily due to $26.7 million of ceiling test write-downs of the Company's oil and gas properties as a result of lower crude oil and natural gas prices and other reserves revisions since December 31, 2022. Lower commodity prices also resulted in reduced revenue period for the period. During the year ended December 31, 2022 we recorded a net loss of $1.0 million.
Current wording
During the year ended December 31, 2024, we recorded a net loss of $25.8 million. The net loss is primarily due to a reduction in revenue of $11.7 million (discussed below), ceiling test write downs of $11.9 million of the Company's oil and gas properties as a result of divestments, lower crude oil and natural gas prices and other reserves revisions since December 31, 2023 and a loss on sale of our East Texas properties of $5.0 million. During the year ended December 31, 2023 we recorded a net loss of $32.4 million.
Previous wording
The decrease in our oil and gas revenue of $12.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a decrease in commodity prices. The realized price received for our oil production decreased 21% and the realized price received for our natural gas production decreased 54% for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Current wording
The decrease in our oil and gas revenue of $11.7 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was due to decreases in both production quantities and commodity prices. The realized price received for our oil production decreased 2% and the realized price received for our natural gas production decreased 10% for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Previous wording
For the year ended December 31, 2023, we produced 624,420 BOE, or an average of 1,711 BOE per day, as compared to 620,579 BOE or 1,700 BOE per day, during the comparable period in 2022. Our oil production decreased 1% and our natural gas production increased 4% compared to the prior year period. Production remained relatively consistent year over year as divestitures of non-operated assets and shut-ins due to lightning strikes and fires in the Mid-Continent region offset the increased production from workovers on assets acquired in 2022. During the year ended December 31, 2023, our BOE production mix was 63% oil and 37% natural gas and liquids, consistent with 64% oil and 36% natural gas and liquids in the comparable period of 2022.
Current wording
For the year ended December 31, 2024, we produced 415,887 BOE, or an average of 1,136 BOE per day, as compared to 624,420 BOE or 1,711 BOE per day, during the comparable period in 2023. Our oil production decreased 35% and our natural gas production decreased 31% compared to the prior year period. Production declines were primarily the result of property sales during 2024 and the sale of substantially all of our non-operated properties in the fourth quarter of 2023. In addition, we experienced temporary weather-related events, such as severe storms, flooding and winter weather at certain of our property locations in Texas and Montana. During the year ended December 31, 2024, our BOE production mix was 62% oil and 38% natural gas and liquids, consistent with 63% oil and 37% natural gas and liquids in the comparable period of 2023.
Previous wording
For the year ended December 31, 2023, lease operating expenses were $15.3 million or $24.43 per BOE, a decrease of $1.4 million when compared to the $16.7 million or $26.86 per BOE for the year ended December 31, 2022. The decrease in lease operating expense was due to lower workover activity and improved operating efficiencies from integrating and optimizing our oil and natural gas assets acquired in 2022.
Current wording
For the year ended December 31, 2024, lease operating expenses were $11.2 million or $26.83 per BOE, a decrease of $4.1 million when compared to the $15.3 million or $24.43 per BOE for the year ended December 31, 2023. The decrease in lease operating expense was due to the divesture of some lower cost properties during 2024 and the divestiture of substantially all of our non-operated properties in the fourth quarter of 2023. In addition, we had lower workover activity on our properties and improved operating efficiencies from integrating and optimizing our oil and natural gas assets acquired in 2022. The increase in lease operating expense on a per BOE basis is due to certain fixed cost components of our lease operating expense which remain for a period after divesting of a property.
Previous wording
For the year ended December 31, 2023, production taxes were $2.1 million, a decrease of $0.9 million, or 30%, compared to $3.0 million in the comparable period of 2022. This decrease was attributable to and consistent with the decreases in total revenues from oil and natural gas properties as discussed above. Production taxes remained flat at 7% of revenue.
Current wording
For the year ended December 31, 2024, production taxes were $1.3 million, a decrease of $0.8 million, or 39%, compared to $2.1 million in the comparable period of 2023. This decrease was attributable to and consistent with the decrease in total revenues of 36%from oil and natural gas properties as discussed above. Production taxes for our properties average 6% of revenue.
Previous wording
*Depreciation, Depletion, Accretion and Amortization.*Our depreciation, depletion, and amortization ("DD&A") includes depletion expense on our oil and gas properties, accretion expense from our asset retirement obligations, and depreciation expense on our fixed assets. Depletion expenses on our oil and gas properties is the primary driver of DD&A expense making up 87% and 89% of DD&A expense for the years ended December 31, 2023 and 2022, respectively. Our depletion rate for the year ended December 31, 2023, was $15.66 per BOE, compared to $13.75 per BOE for the year ended December 31, 2022. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated costs to drill and complete proved undeveloped reserves. DD&A was $11.2 million for the year ended December 31, 2023, compared to $9.6 million for the year ended December 31, 2022.
Current wording
*Depreciation, Depletion, Accretion and Amortization.*Our depreciation, depletion, and amortization ("DD&A") includes depletion expense on our oil and gas properties, accretion expense from our asset retirement obligations, and depreciation expense on our fixed assets. Depletion expenses on our oil and gas properties are the primary driver of DD&A expense making up 87% and 89% of DD&A expense for the years ended December 31, 2024 and 2023, respectively. Our depletion rate for the year ended December 31, 2024, was $19.64 per BOE, compared to $17.99 per BOE for the year ended December 31, 2023. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated costs to drill and complete proved undeveloped reserves. DD&A was $8.3 million for the year ended December 31, 2024, compared to $11.2 million for the year ended December 31, 2023.
Previous wording
Impairment of oil and natural gas properties. Impairment of $26.7 million during the year ended December 31, 2023 was driven by ceiling test write-downs of oil and gas properties as a result of a decrease in crude oil and natural gas prices and other reserves revisions since December 31, 2022 For the year ended December 31, 2022, the Company did not record ceiling test write-downs of its oil and natural gas properties.
Current wording
Impairment of oil and natural gas properties. Impairment of $11.9 million during the year ended December 31, 2024 was driven by ceiling test write-downs of oil and gas properties as a result of a decrease in crude oil and natural gas prices, divestments and other reserves revisions since December 31, 2023 For the year ended December 31, 2023, the Company recorded ceiling test write-downs of its oil and natural gas properties of $26.7 million as a result of a decrease in crude oil and natural gas prices, divestments and other reserves revisions since December 31, 2022.
Previous wording
General and administrative expenses increased by $0.4 million during the year ended December 31, 2023, as compared to the prior year period. Compensation and benefits increased $0.9 million due to increased headcount added in the last half of 2022 and first half of 2023. Stock-based compensation decreased $0.7 million primarily due to employee and director stock-based compensation awards from the January 2022 acquisitions being fully amortized. Professional fees, insurance and other expenses increased $0.2 million, primarily due to non-recurring accounting, audit, and recruiting fees recognized in 2023.
Current wording
General and administrative expenses decreased by $3.3 million during the year ended December 31, 2024, as compared to the prior year period. Compensation and benefits decreased $1.5 million due to decreased headcount related to the divestment of properties during 2024. Stock-based compensation decreased $1.0 million primarily due to a reduction in the value of employee and director stock-based compensation awards amortized during 2024, Professional fees, insurance and other expenses decreased $0.8 million, primarily due to non-recurring accounting, audit, and recruiting fees recognized in 2023.
Previous wording
Commodity derivative gain (loss), net is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. For the year ended December 31, 2023, we recognized gains of $2.9 million. Of this, $1.8 million of the gain relates to WTI fixed price swaps that we entered into in the third quarter of 2023 that settle in 2024.See“Note 7-Commodity Derivatives”* *in the notes to the consolidated financial statements.
Current wording
Commodity derivative gain (loss), net is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. On September 10, 2024, the Company settled all of its then outstanding commodity derivative contracts and received proceeds of $1.8 million. For the year ended December 31, 2024, we recognized gains on the settlement of commodity derivative contracts of $0.5 million.
Previous wording
Interest expense, net, represents the interest related to our Credit Facility. The increase in interest expense, net is primarily driven by an increase in the interest rate on our credit facility. As of December 31, 2023, we had borrowed $5.0 million on the credit facility as compared to $12.0 million borrowed as of December 31, 2022. The average interest rate increased to 8.9% per annum for the year ended December 31, 2023, as compared to 6.6% per annum for the year ended December 31, 2022. The balance outstanding on the Credit Facility as of December 31, 2023 was $5.0 million.See“Note 6-Debt”* *in the notes to the consolidated financial statements.
Current wording
Interest expense, net, represents the interest related to our Credit Facility. The decrease in interest expense, net is primarily driven by a decrease in the outstanding principal balance on our credit facility as we have paid down the amount borrowed on the facility with proceeds from the divestments of properties. As of December 31, 2024, we had borrowed $0.0 million on the credit facility as compared to $5.0 million outstanding as of December 31, 2023. The average interest rate increased to 9.2% per annum for the year ended December 31, 2024, as compared to 8.9% per annum for the year ended December 31, 2023. The balance outstanding on the Credit Facility as of December 31, 2024 was $0.0 million.
Previous wording
Other income (expense), net is primarily impacted from changes in the fair value of our investment in Anfield Energy and held for sale losses on our real estate assets. We recognized a net gain of $25 thousand on these items for the year ended December 31, 2023, but recognized a loss of $168 thousand for the comparable period of 2022.
Current wording
Other income (expense), net is primarily impacted from changes in the fair value of our investment in Anfield Energy. We recognized a net gain of $33 thousand on these items for the year ended December 31, 2024, but recognized a loss of $25 thousand for the comparable period of 2023.
Previous wording
Income Tax Benefit (Expense). Income tax benefit decreased $1.0 million during the year ended December 31, 2023, as compared to December 31, 2022. This change is almost entirely related to a deferred tax benefit from the reduction of our net deferred tax liability. The change in our net deferred tax liability is primarily related to property and equipment deferred tax liabilities that decreased as a result of the $26.7 million in before tax ceiling test write-downs of our oil and gas properties recognized for the year ended December 31, 2023.
Current wording
Income Tax Benefit (Expense). Income tax benefit decreased $0.9 million during the year ended December 31, 2024, as compared to December 31, 2023. This change is almost entirely related to a deferred tax benefit from the reduction of our net deferred tax liability. The change in our net deferred tax liability is primarily related to property and equipment deferred tax liabilities that decreased as a result of the $11.9 million in before tax ceiling test write-downs of our oil and gas properties recognized for the year ended December 31, 2024.
Previous wording
Based on the current commodity price environment and the derivative contracts that we have entered into, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations for the next 12 months.
Current wording
Based on the current commodity price environment and our current working capital, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations. We continue to manage our commitments in order to maintain flexibility with regard to our activity level and capital expenditures.
Previous wording
As described above under “Item 1. Business-Recent Events” we closed on a series of individual divestitures for a total of $7.0 million in net proceeds before transaction costs of $0.4 million. The net proceeds from these divestitures were used to repay the outstanding balance on our credit facility, bringing the balance as of December 31, 2023 to $5.0 million. As of December 31, 2023, the Company was in compliance with all financial covenants related to the credit facility.
Current wording
As described above under “Item 1. Business-Recent Events”, during 2024 we closed on a series of individual divestitures for a total of $14.0 million in net proceeds before transaction costs of $0.4 million. The net proceeds from these divestitures were used to repay the outstanding balance on our credit facility, bringing the balance as of December 31, 2024 to $0.0 million. We also used a portion of the proceeds from the divestitures for the development of our industrial gas properties acquired during 2024. As of December 31, 2024, the Company was in compliance with all financial covenants related to the credit facility.
Previous wording
As of December 31, 2023, we had a working capital deficit of $2.7 million compared to a working capital deficit of $3.1 million as of December 31, 2022, an increase in working capital of $0.3 million. However, when including the available borrowing capacity under the credit facility of $15.0 million as of December 31, 2023, we have a working capital surplus of $12.3 million. The increase in working capital of $0.3 million is mainly due to our derivative contracts with a mark-to-market asset position of $1.8 million as of December 31, 2023, with other offsetting factors.
Current wording
As of December 31, 2024, we had a working capital deficit of $2.6 million compared to a working capital deficit of $2.7 million as of December 31, 2023, an increase in working capital deficit of $0.1 million. However, when including the available borrowing capacity under the credit facility of $20.0 million as of December 31, 2024, we have a working capital surplus of $17.4 million, not including the cash proceeds received from the equity offering noted above.
Previous wording
As of December 31, 2023, we had cash and cash equivalents of $3.4 million and accounts payable and accrued liabilities of $4.1 million. As of December 31, 2022, we had cash and cash equivalents of $4.4 million and accounts payable and accrued liabilities of approximately $4.3 million. Revenue and royalties payable increased by $1.4 million year over year.
Current wording
As of December 31, 2024, we had cash and cash equivalents of $7.7 million and accounts payable and accrued liabilities of $5.5 million. As of December 31, 2023, we had cash and cash equivalents of $3.4 million and accounts payable and accrued liabilities of approximately $4.1 million. Revenue and royalties payable were nearly unchanged year over year.
Previous wording
If we have needs for financing in 2024, alternatives that we will consider would potentially include borrowing amounts on our Credit Agreement, selling all or a partial interest in certain of our oil and natural gas assets, selling our marketable equity securities, issuing additional shares of our common stock for cash or as consideration for acquisitions in public or private offerings, which may result in significant dilution to existing stockholders, and other alternatives, as we determine how to best fund our capital programs and meet our financial obligations.
Current wording
If we have needs for financing in 2025, alternatives that we will consider would potentially include borrowing amounts on our Credit Agreement, selling all or a partial interest in certain of our oil and natural gas assets, selling our marketable equity securities, issuing additional shares of our common stock for cash or as consideration for acquisitions in public or private offerings, and other alternatives, as we determine how to best fund our capital programs and meet our financial obligations.
Previous wording
Operating Activities. Cash provided by operating activities for the year ended December 31, 2023, was $5.5 million as compared to cash provided by operating activities of $10.9 million for 2022, a decrease of $5.4 million. The decrease in cash provided by operating activities is mainly attributable to a reduction in cash receipts for revenues as a result of a decrease in prices we received for our oil and natural gas production partially offset by decreases in operating expenses.
Current wording
Operating Activities. Cash provided by operating activities for the year ended December 31, 2024, was $4.6 million as compared to cash provided by operating activities of $5.5 million for 2023, a decrease of $0.9 million. The decrease in cash provided by operating activities is mainly attributable to a reduction in cash receipts for revenues as a result of divestments and a decrease in prices we received for our oil and natural gas production partially offset by decreases in operating expenses.
Previous wording
Investing Activities. Cash provided by investing activities for the year ended December 31, 2023, was $2.8 million compared to cash used in investing activities of $17.0 million for 2022, an increase of $19.8 million. The increase of cash provided from our investing activities for the year ended December 31, 2023 was primarily due to $6.7 million of net proceeds from the sale of non-operated oil and natural gas properties, which were partially offset by capital expenditures related to oil and natural gas properties of $3.4 million. The comparable number in 2022 represents cash used by investing activities of $12.6 million for acquisitions of East Texas assets and Liberty County, Texas assets and $6.2 million of capital expenditures related to oil and natural gas properties.
Current wording
Investing Activities. Cash provided by investing activities for the year ended December 31, 2024, was $5.8 million compared to cash provided by investing activities of $2.8 million for 2023, an increase of $2.9 million. The increase of cash provided by our investing activities for the year ended December 31, 2024 was primarily due to $13.5 million of net proceeds from the sale of non-operated oil and natural gas properties, which were partially offset by capital expenditures related to oil and natural gas properties of $1.4 million. and acquisition and development of industrial gas properties of $6.8 million. The comparable number in 2023 represents cash provided by investing activities of $2.8 million which represented proceeds from the sale of substantially all of our non-operated properties of $6.7 million and $3.4 million of capital expenditures related to capital workovers on our oil and natural gas properties.
Previous wording
Financing Activities. Cash used in financing activities for the year ended December 31, 2023, was $9.4 million as compared to cash provided by financing activities of $6.0 million for the comparable period in 2022. The cash used in financing activities during the year ended December 31, 2023 was primarily attributable to net payments of debt under our credit facility of $7.0 million and dividends paid on our common stock of $1.2 million. The comparable number in 2022 represents net borrowings under our credit facility of $8.7 million, which were partially offset by dividends paid on our common stock of $1.7 million.
Current wording
Financing Activities. Cash used in financing activities for the year ended December 31, 2024, was $6.0 million as compared to cash used in financing activities of $9.4 million for the comparable period in 2023. The cash used in financing activities during the year ended December 31, 2024 was primarily attributable to net payments of debt under our credit facility of $5.0 million and amounts paid to repurchase our common stock of $0.8 million The comparable number in 2023 mainly represents net payments of borrowings on our credit facility of $7.0 million and dividends paid on our common stock of $1.2 million.