TXO Partners LP
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
TXO$13.13+3.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001559432-24-000020
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001559432-24-000045
Item 2. 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 109 previous paragraphs and 144 current paragraphs.
75 unchanged; 30 reworded; 36 added; 4 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 5 previous and 7 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 (36)
Current report
•risks related to the Williston Acquisitions, including the risk that we may fail to complete the EMEP Acquisition on the terms and timing currently contemplated or at all, and/or to realize the expected benefits of the Williston Acquisitions;
Current report
Recent Developments
Current report
Williston Basin Acquisitions
Current report
In June 2024, we entered into a purchase agreement to purchase certain oil and gas assets from Eagle Mountain Energy Partners, which are located in the Elm Coulee field in Montana and the Russian Creek field in North Dakota, for cash consideration of $225.0 million and 2.5 million common units of TXO, subject to customary purchase price adjustments. In connection with entering into the purchase agreement, we paid a deposit of $27.6 million. The EMEP Acquisition is expected to close during the third quarter of 2024 and is expected to be funded by a combination of cash on hand from the Offering and borrowings under our Credit Facility.
Current report
Additionally, in June 2024, we entered into a purchase agreement to purchase certain oil and gas assets from Kaiser-Francis Oil Company in the Russian Creek field in North Dakota for cash consideration of $18.2 million. In connection with entering into the purchase agreement, we paid a deposit of $1.8 million. The KFOC Acquisition closed August 1, 2024. The KFOC Acquisition was funded by cash on hand from the Offering.
Current report
Equity Offering
Current report
On June 28, 2024, we completed the Offering for the sale of 6.5 million common units at a price of $20.00 per common unit, which resulted in estimated proceeds of $122.5 million net of estimated underwriting discounts, commissions and other costs. On July 2, 2024, we completed the sale of an additional 975,000 common units at a price of $20.00 per common unit pursuant to the underwriter’s exercise in full of its option to purchase additional common units in the Offering, resulting in additional proceeds of approximately $18.5 million net of estimated underwriting discounts, commissions and other costs. We intend to use the net proceeds from the Offering to fund a portion of the cash consideration for the Williston Acquisitions. Pending the closing of the Williston Acquisitions, we used a portion of these proceeds to repay all outstanding borrowings under the Credit Facility.
Current report
Assuming the EMEP Acquisition is consummated in the third quarter of 2024 and the EMEP planned capital program is successfully completed, we expect the average daily production on the Williston assets to increase to an estimated 4,955 BOE/day, consisting of approximately 78% oil, 12% NGLs and 10% gas. The EMEP capital program, totaling $30 million to $35 million, is for the completion of one new operated horizontal well, nine operated refracs and four non-operated new horizontal wells. We expect to hedge a portion of the underlying production to protect our distributions and the balance sheet. The combined reserves from the Williston Acquisitions, after giving effect to EMEP’s 2024 development program, are expected to have a three-year average annual decline rate of approximately 14%.
Current report
We expect that approximately $120.0 million of the funds to close the EMEP Acquisition will be borrowings under our Credit Facility, which is expected to increase ournet-debt-to-Adjusted EBITDAX ratio to approximately one times.
Current report
As a result of the Williston Acquisitions (assuming the EMEP Acquisition closes), we expect to increase our total leasehold and mineral acreage from approximately 846,000 gross (372,000 net) to approximately 1,120,000 gross (550,000 net).
Current report
(3)Natural gas prices include both realized gains and unrealized losses from derivatives. Unrealized losses were $5.5 million for the three months ended June 30, 2024 and $12.1 million for the three months ended June 30, 2023. Realized gains were $5.6 million for the three months ended June 30, 2024 and $2.7 million for the three months ended June 30, 2023.
Current report
Revenues decreased $3.2 million, or 5%, from $60.5 million for the three months ended June 30, 2023 to $57.3 million for the three months ended June 30, 2024. Revenue decreased $8.2 million due to a decrease in production of 170 MBoe primarily as a result of natural production declines and downtime and decreased $7.2 million as a result of a decrease in the average selling price, excluding the effects of derivatives, on natural gas of 47%. These decreases were partially offset by gains on our hedging activity of $7.1 million, of which $6.7 million were unrealized gains and $0.4 million were realized gains. Additionally, an increase in the average selling price, excluding the effects of derivatives, on oil of 10% resulted in an increase in revenue of $4.5 million and on NGLs of 9% resulted in an increase in revenue of $0.6 million.
Current report
Production expenses decreased $2.9 million, or 7%, from $39.4 million for the three months ended June 30, 2023 to $36.4 million for the three months ended June 30, 2024. The decrease is primarily due to decreased maintenance and energy costs.
Current report
On a per unit basis, production expenses increased from $18.47 per Boe sold for the three months ended June 30, 2023 to $18.59 per Boe sold for the three months ended June 30, 2024. The increase is primarily related to a decrease in production of 170 MBoe partially offset by decreased maintenance and energy costs.
Current report
Taxes, transportation, and other decreased $1.9 million, or 13%, from $15.1 million for the three months ended June 30, 2023 to $13.2 million for the three months ended June 30, 2024. The decrease is primarily attributable to the decrease in production and lower natural gas prices partially offset by increased oil and NGL prices.
Current report
Depreciation, depletion, and amortization decreased $1.2 million, or 10%, from $11.5 million for the three months ended June 30, 2023 to $10.3 million for the three months ended June 30, 2024. The decrease is primarily attributable to the decreased production and a lower rate due to changes in production mix.
Current report
On a per unit basis, depreciation, depletion, and amortization decreased from $5.42 per Boe sold for the three months ended June 30, 2023 to $5.27 per Boe sold for the three months ended June 30, 2024. The decrease is primarily related to changes in production mix.
Current report
Interest expense increased $0.4 million, or 70%, from $0.6 million for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024. The increase is primarily attributable to a higher interest rate and increased borrowings.
Current report
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Current report
(1)Oil and condensate prices include both realized losses and unrealized gains from derivatives. Unrealized gains were $3.2 million for the six months ended June 30, 2024 and $9.9 million for the six months ended June 30, 2023. Realized losses were $5.6 million for the six months ended June 30, 2024 and $2.1 million for the six months ended June 30, 2023.
Current report
(2)Natural gas liquids prices include both realized gains and unrealized gains and losses from derivatives. Unrealized losses were $0.5 million for the six months ended June 30, 2024 and unrealized gains were $0.6 million for the six months ended June 30, 2023. Realized gains were $0.5 million for the six months ended June 30, 2024 and $0.4 million for the six months ended June 30, 2023.
Current report
(3)Natural gas prices include both realized and unrealized gains and losses from derivatives. Unrealized losses were $5.7 million for the six months ended June 30, 2024 and unrealized gains were $75.9 million for the six months ended June 30, 2023. Realized gains were $7.4 million for the six months ended June 30, 2024 and realized losses were $76.5 million for the six months ended June 30, 2023.
Current report
Revenues
Current report
Production expenses
Current report
Taxes, transportation, and other
Current report
On a per unit basis, taxes, transportation, and other decreased from $10.59 per Boe sold for the six months ended June 30, 2023 to $7.18 per Boe sold for the six months ended June 30, 2024. The decrease is primarily related to the lower natural gas and NGLs prices partially offset by higher oil prices.
Current report
Depreciation, depletion, and amortization
Current report
Depreciation, depletion, and amortization decreased $1.6 million, or 7%, from $22.5 million for the six months ended June 30, 2023 to $20.8 million for the six months ended June 30, 2024. The decrease is primarily attributable to decreased production and a lower rate due to changes in production mix.
Current report
General and administrative
Current report
General and administrative (“G&A”) expenses increased $3.9 million, or 119%, from $3.3 million for the six months ended June 30, 2023 to $7.2 million for the six months ended June 30, 2024. The increase is primarily attributable to higher personnel costs of $3.3 million due in part to amortization of unit awards and additional expenses related to being a public company.
Current report
On a per unit basis, G&A expense increased from $0.80 per Boe sold for the six months ended June 30, 2023 to $1.81 per Boe sold for the six months ended June 30, 2024. The increase is primarily related to increased costs and decreased production.
Current report
Other income
Current report
Interest expense
Current report
On June 28, 2024, we completed the Offering, which resulted in estimated proceeds of $122.5 million net of estimated underwriting discounts, commissions and other costs. On July 2, 2024, we completed the sale of an additional 975,000 common units at a price of $20.00 per common unit pursuant to the underwriter’s exercise in full of its option to purchase additional common units in the Offering, resulting in additional proceeds of approximately $18.5 million net of estimated underwriting discounts, commissions and other costs. We intend to use the net proceeds from the Offering to fund a portion of the cash consideration for the Williston Acquisitions. Pending the closing of the Williston Acquisitions, we used a portion of these proceeds to repay all outstanding borrowings under the Credit Facility.
Current report
As of June 30, 2024 we haveno outstanding borrowings under our Credit Facility and cash on hand of $76.0 million. We expect that approximately$120.0 million of the funds to close the EMEP Acquisition will be borrowings under our Credit Facility, which is expected to increase our net-debt-to-EBITDAX ratio to approximately one times. After closing the EMEP Acquisition, we expect to carry a prudent level of debt moving forward.
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Removed paragraphs (4)
Previous report
We are taking actions to mitigate inflationary pressures. We are working closely with other suppliers and contractors to ensure availability of supplies on site, especially fuel, steel and chemical supplies which are critical to many of our operations. However, these mitigation efforts may not succeed or be insufficient.
Previous report
(3)Natural gas prices include both realized losses and unrealized gains and losses from derivatives. The unrealized losses were $0.2 million for the three months ended March 31, 2024 and the unrealized gains were $88.0 million for the three months ended March 31, 2023. The realized gains were $1.9 million for the three months ended March 31, 2024 and the realized losses were $79.2 million for the three months ended March 31, 2023.
Previous report
Depreciation, depletion, and amortization decreased $0.4 million, or 4%, from $10.9 million for thethree months ended March 31, 2023 to $10.5 million for thethree months ended March 31, 2024. The decrease is primarily attributable to changes in production mix.
Previous report
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Reworded paragraphs (30)
Previous wording
•the concentration of our operations in the Permian Basin and the San Juan Basin;
Current wording
•the concentration of our operations in the Permian Basin, the San Juan Basin and, following completion of the Williston Acquisitions, the Williston Basin;
Previous wording
We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America. Our properties are predominately located in the Permian Basin of New Mexico and Texas and the San Juan Basin of New Mexico and Colorado.
Current wording
We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America. Our properties are predominately located in the Permian Basin of New Mexico and Texas, the San Juan Basin of New Mexico and Colorado and, following completion of the Williston Acquisitions, the Williston Basin;.
Previous wording
The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2023 through March 31, 2024, NYMEX prices for crude oil and natural gas reached a high of $93.68 per Bbl and $4.17 per MMBtu, respectively, and a low of $66.74 per Bbl and $1.58 per MMBtu, respectively. Oil prices were relatively stable over the first half of 2023 before initially increasing in the second half of 2023 as a result of expected supply constraints and hostilities in the Middle East. Since these concerns did not materialize, oil prices declined in the last month of 2023 but continuing hostilities and higher global consumption have pushed prices higher in the first quarter of 2024. WTI crude oil prices have been volatile reaching a high of $93.68 per Bbl in September 2023 before declining to $86.91 per Bbl as of April 5, 2024. Natural gas prices reached a high of $4.17 per MMbtu on January 1, 2023 before declining to $1.79 per MMbtu as of April 5, 2024.
Current wording
The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2023 through June 30, 2024, NYMEX prices for crude oil and natural gas reached a high of $93.68 per Bbl and $4.17 per MMBtu, respectively, and a low of $66.74 per Bbl and $1.58 per MMBtu, respectively. Oil prices were relatively stable over the first half of 2023 before initially increasing in the second half of 2023 as a result of expected supply constraints and hostilities in the Middle East. Since these concerns did not materialize, oil prices declined in the last month of 2023 but continuing hostilities and higher global consumption have pushed prices higher in the first half of 2024. WTI crude oil prices have been volatile reaching a high of $93.68 per Bbl in September 2023 before declining to $82.77 per Bbl as of July 18, 2024. Natural gas prices reached a high of $4.17 per MMbtu in January 2023 before declining to $2.07 per MMbtu as of July 18, 2024.
Previous wording
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy. We expect relatively higher inflation to continue in 2024 resulting in higher costs. Though we incorporated inflationary factors into our 2024 business plan, inflation may outpace those assumptions. We continue to undertake actions and implement plans to strengthen our supply chain to address these pressures and protect the requisite access to commodities and services. Nevertheless, we expect for the foreseeable future to experience supply chain constraints and inflationary pressure on our cost structure. Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. While prices appear to have stopped increasing as rapidly, we do not expect these cost increases to reverse in the short term. Typically, as prices for oil and natural gas increase, so do associated costs. Conversely, in a period of declining prices, associated cost declines are likely to lag and may not adjust downward in proportion to prices. We cannot predict the future inflation rate but to the extent these higher costs do not begin to reverse or start to increase again, we may experience a higher cost environment going forward. If we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted.
Current wording
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. During the year ended December 31, 2022, the U.S. economy experienced the highest rate of inflation in the past 40 years. Rising inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, and energy. While we expect inflation to moderate in 2024, inflation continues to run higher than the Federal Reserve target, resulting in higher costs. We continue to undertake actions and implement plans to address these pressures and protect the requisite access to commodities and services, however, these mitigation efforts may not succeed or be insufficient. Nevertheless, we expect for the foreseeable future to experience inflationary pressure on our cost structure. Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. While prices appear to have stopped increasing as rapidly, we do not expect these cost increases to reverse in the short term. Typically, as prices for oil and natural gas increase, so do associated costs. Conversely, in a period of declining prices, associated cost declines are likely to lag and may not adjust downward in proportion to prices. We cannot predict the future inflation rate but to the extent these higher costs do not begin to reverse or start to increase again, we may experience a higher cost environment going forward. If we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted.
Previous wording
(1)Oil and condensate prices include both realized losses and unrealized gains and losses from derivatives. The unrealized losses were $0.3 million for the three months ended March 31, 2024 and the unrealized gains were $6.2 million for the three months ended March 31, 2023. The realized losses were $2.5 million for the three months ended March 31, 2024 and $1.3 million for the three months ended March 31, 2023.
Current wording
(1)Oil and condensate prices include both realized losses and unrealized gains from derivatives. Unrealized gains were $3.4 million for the three months ended June 30, 2024 and $3.7 million for the three months ended June 30, 2023. Realized losses were $3.1 million for the three months ended June 30, 2024 and $0.7 million for the three months ended June 30, 2023.
Previous wording
(2)Natural gas liquids prices include both realized and unrealized gains and losses from derivatives. The unrealized losses were $0.2 million for the three months ended March 31, 2024 and the unrealized gains were $1.2 million for the three months ended March 31, 2023. The realized gains were $0.2 million for the three months ended March 31, 2024 and $0.1 million for the three months ended March 31, 2023.
Current wording
(2)Natural gas liquids prices include both realized gains and unrealized losses from derivatives. Unrealized losses were $0.3 million for the three months ended June 30, 2024 and $0.6 million for the three months ended June 30, 2023. Realized gains were $0.2 million for the three months ended June 30, 2024 and $0.3 million for the three months ended June 30, 2023.
Previous wording
On a per unit basis, taxes, transportation, and other decreased from $14.29 per Boe sold for thethree months ended March 31, 2023 to $7.61 per Boe sold for thethree months ended March 31, 2024. The decrease is primarily related to the lower natural gas prices and change in production mix.
Current wording
On a per unit basis, taxes, transportation, and other decreased from $7.08 per Boe sold for the three months ended June 30, 2023 to $6.73 per Boe sold for the three months ended June 30, 2024. The decrease is primarily related to the lower natural gas prices.
Previous wording
General and administrative (“G&A”) expenses increased $0.4 million, or 19%, from $2.2 million for thethree months ended March 31, 2023 to $2.7 million for thethree months ended March 31, 2024. The increase is primarily attributable to higher personnel costs of $0.8 million due in part to amortization of unit awards.
Current wording
General and administrative (“G&A”) expenses increased $3.5 million, or 324%, from $1.1 million for the three months ended June 30, 2023 to $4.6 million for the three months ended June 30, 2024. The increase is primarily attributable to higher personnel costs of $2.6 million due, in part, to amortization of unit awards and additional expenses related to being a public company.
Previous wording
On a per unit basis, G&A expense increased from $1.10 per Boe sold for thethree months ended March 31, 2023 to $1.30 per Boe sold for thethree months ended March 31, 2024. The increase is primarily related to increased personnel costs.
Current wording
On a per unit basis, G&A expense increased from $0.51 per Boe sold for the three months ended June 30, 2023 to $2.34 per Boe sold for the three months ended June 30, 2024. The increase is primarily related to increased costs and decreased production.
Previous wording
Revenues decreased $91.0 million, or 57%, from $158.4 million for thethree months ended March 31, 2023 to $67.4 million for thethree months ended March 31, 2024. The decrease was primarily attributable to a 78% decrease in the average selling price of natural gas, excluding the effects of derivatives, resulting in a decrease in revenue of $70.9 million and a decrease in the average selling price on NGLs of 22%, excluding the effects of derivatives, resulting in a decrease in revenue of $1.7 million. Additionally, net losses on our hedging activity of $16.1 million, of which $96.2 million were unrealized losses partially offset by $80.0 million of realized gains. Finally, revenue decreased $3.1 million in spite of an increase in production of 23 MBoe primarily as a result of declines in Permian Basin oil production being offset by increases in San Juan Basin NGL and natural gas production. These decreases were partially offset by an increase in the average selling price, excluding the effects of derivatives, on oil of 2% resulting in an increase in revenue of $0.8 million.
Current wording
Revenues decreased $94.1 million, or 43%, from $218.9 million for the six months ended June 30, 2023 to $124.7 million for the six months ended June 30, 2024. The decrease was primarily attributable to a 73% decrease in the average selling price of natural gas, excluding the effects of derivatives, resulted in a decrease in revenue of $77.5 million and on NGLs of 7% resulting in a decrease in revenue of $1.0 million. Additionally, revenue decreased $11.8 million due to a decrease in production of 145 MBoe primarily as a result of natural production declines and downtime. Finally, we incurred net losses on our hedging activity of $9.0 million, of which $89.4 million were unrealized losses and $80.5 million were realized gains. These declines were partially offset by an increase in the average selling price, excluding the effects of derivatives, on oil of 6% resulting in an increase in revenue of $5.2 million.
Previous wording
Production expenses decreased $2.2 million, or 6%, from $35.3 million for thethree months ended March 31, 2023 to $33.1 million for thethree months ended March 31, 2024. This decrease is primarily due to decreased maintenance and CO 2 costs.
Current wording
Production expenses decreased $5.2 million, or 7%, from $74.7 million for the six months ended June 30, 2023 to $69.5 million for the six months ended June 30, 2024. This decrease is primarily due to decreased maintenance and energy costs.
Previous wording
On a per unit basis, production expenses decreased from $17.47 per Boe sold for thethree months ended March 31, 2023 to $16.17 per Boe sold for thethree months ended March 31, 2024. The decrease is primarily related to lower maintenance and CO 2 costs.
Current wording
On a per unit basis, production expenses decreased from $17.99 per Boe sold for the six months ended June 30, 2023 to $17.35 per Boe sold for the six months ended June 30, 2024. The decrease is primarily related to decreased maintenance and energy costs partially offset by the decrease in production.
Previous wording
Taxes, transportation, and other decreased $13.3 million, or 46%, from $28.9 million for thethree months ended March 31, 2023 to $15.6 million for thethree months ended March 31, 2024. The decrease is primarily attributable to the decrease in natural gas and NGLs prices and oil production partially offset by increased oil prices and natural gas and NGLs production.
Current wording
Taxes, transportation, and other decreased $15.2 million, or 35%, from $44.0 million for the six months ended June 30, 2023 to $28.8 million for the six months ended June 30, 2024. The decrease is primarily attributable to the decrease in production and natural gas and NGLs prices partially offset by increased oil prices.
Previous wording
On a per unit basis, depreciation, depletion, and amortization decreased from $5.41 per Boe sold for thethree months ended March 31, 2023 to $5.14 per Boe sold for thethree months ended March 31, 2024. The decrease is primarily related to changes in production mix.
Current wording
On a per unit basis, depreciation, depletion, and amortization decreased from $5.41 per Boe sold for the six months ended June 30, 2023 to $5.20 per Boe sold for the six months ended June 30, 2024. The decrease is primarily related to changes in production mix.
Previous wording
Other income increased $2.1 million, or 33%, from $6.3 million for thethree months ended March 31, 2023 to $8.4 million for thethree months ended March 31, 2024. The increase is primarily attributable to a $1.6 million bonus payment on a term assignment and a $0.9 million increase in marketing income partially offset by lower CO 2 and plant income of $0.3 million. The CO 2 and plant income is ancillary to the operations of the gas processing plant in the Permian Basin in New Mexico and CO 2 assets in Colorado.
Current wording
Other income increased $9.2 million, or 71%, from $13.0 million for the six months ended June 30, 2023 to $22.3 million for the six months ended June 30, 2024. The increase is primarily attributable to $7.0 million in bonus payments on term assignment of leases, higher CO 2 and plant income of $1.6 million and a $0.7 million increase in marketing income. The CO 2 and plant income is ancillary to the operations of the gas processing plant in the Permian Basin in New Mexico and CO 2 assets in Colorado.
Previous wording
Interest expense decreased $0.5 million, or 32%, from $1.4 million for thethree months ended March 31, 2023 to $1.0 million for thethree months ended March 31, 2024. The decrease is primarily attributable to the decreased borrowings due in part to the January 2023 initial public offering partially offset by a higher interest rate.
Current wording
Interest expense decreased 2%, from $2.1 million for the six months ended June 30, 2023 to $2.0 million for the six months ended June 30, 2024. The decrease is primarily attributable to the decreased borrowings partially offset by a higher interest rate.
Previous wording
Our primary sources of liquidity and capital will be cash flows generated by operating activities and borrowings under our Credit Facility. Outstanding borrowings under our Credit Facility were $19.0 million at March 31, 2024 and $21.0 million at December 31, 2023, and the remaining availability under our Credit Facility was $146.0 million at March 31, 2024 and$144.0 million at December 31, 2023. Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $12.9 million at March 31, 2024 and$14.1 million at December 31, 2023.
Current wording
Our primary sources of liquidity and capital will be cash flows generated by operating activities and borrowings under our Credit Facility. Outstanding borrowings under our Credit Facility were $0.0 million at June 30, 2024 and$21.0 million at December 31, 2023, and the remaining availability under our Credit Facility was $165.0 million at June 30, 2024 and $144.0 million at December 31, 2023. Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $82.2 million at June 30, 2024 and$14.1 million at December 31, 2023.
Previous wording
Our partnership agreement requires that we distribute all of our available cash (as defined in the partnership agreement) to our unitholders. Our quarterly cash distributions may vary from quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in the prices of oil and natural gas. Such variations may be significant and quarterly distributions paid to our unitholders may be zero. The first quarter distribution of $0.65 per unit with respect to cash available for distribution for the three months ended March 31, 2024, was declared on May 7, 2024 and will be paid May 29, 2024 to unitholders of record on May 20, 2024.
Current wording
Our partnership agreement requires that we distribute all of our available cash (as defined in the partnership agreement) to our unitholders. Our quarterly cash distributions may vary from quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in the prices of oil and natural gas. Such variations may be significant and quarterly distributions paid to our unitholders may be zero. Our second quarter distribution of $0.57 per unit with respect to cash available for distribution for the three months ended June 30, 2024, was declared on August 6, 2024 and will be paid on August 27, 2024 to unitholders of record on August 20, 2024.
Previous wording
Our acquisition and development expenditures consist of acquisitions of proved, unproved and other property and development expenditures. Our capital expenditures including acquisitions were $3.0 million for thethree months ended March 31, 2024 and $12.4 million for thethree months ended March 31, 2023.
Current wording
Our acquisition and development expenditures consist of acquisitions of proved, unproved and other property and development expenditures. Our capital expenditures including acquisitions were $38.5 million for the six months ended June 30, 2024 and $28.6 million for the six months ended June 30, 2023.
Previous wording
We incurred costs of approximately $4.8 million for drilling, completion and recompletion activities and facilities costs in thethree months ended March 31, 2024 and we have budgeted approximately $20.0 - $28.0 million for such costs in 2024.
Current wording
We incurred costs of approximately $8.8 million for drilling, completion and recompletion activities and facilities costs in the six months ended June 30, 2024 and we have budgeted approximately $20.0 - $28.0 million for such costs in 2024.
Previous wording
Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our distributions, meet our debt obligations and fund our 2024 capital development programs from cash flow from operations and borrowings under our Credit Facility.
Current wording
Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our distributions, meet our debt obligations and fund our 2024 capital development program and acquisitions from cash flow from operations, the Offering and borrowings under our Credit Facility.
Previous wording
Net cash provided by operating activities increased $8.0 million for thethree months ended March 31, 2024 compared to thethree months ended March 31, 2023 due to a reversal of the effects of derivatives and decreased costs partially offset by a decline in operating results, excluding the effects of derivatives, primarily due to lower natural gas realizations.
Current wording
Net cash provided by operating activities increased $12.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to an increase in net cash received on our derivatives, partially offset by a decline in operating results, excluding the effects of derivatives, primarily due to lower production and lower natural gas and NGL realizations partially offset by improved oil realizations and decreased costs.
Previous wording
Net cash used by investing activities decreased $9.4 million for thethree months ended March 31, 2024 compared to thethree months ended March 31, 2023 due to a decrease in development costs of $8.4 million, proved property acquisitions of $0.2 million and other asset additions of $0.7 million.
Current wording
Net cash used by investing activities increased $9.9 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to an increase in proved property acquisitions of $23.3 million partially offset by decreased development costs of $13.0 million and other asset additions of $0.5 million.
Previous wording
Net cash used in financing activities increased $15.4 million for thethree months ended March 31, 2024 compared to thethree months ended March 31, 2023 due to the absence of proceeds from the initial public offering of $106.3 million, increased distributions of $19.5 million and net withholding tax payments on vesting of restricted units of $0.7 million partially offset by a decrease in net repayments under our credit facility of $111.0 million.
Current wording
Net cash provided by financing activities increased $73.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to increased net proceeds from public offering of $16.2 million and a decrease in net repayments under our Credit Facility of $78.0 million partially offset by increased distributions to unitholders of $20.7 million.
Previous wording
On November 1, 2021, we entered into a four-year, $165 million senior secured credit facility with certain commercial banks, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent. The facility has a maturity date of November 1, 2025 and as of October 25, 2023, the last date of redetermination, our borrowing base was $165 million.
Current wording
On November 1, 2021, we entered into a four-year, $165 million senior secured credit facility with certain commercial banks, as the lenders, and JPMorgan Chase Bank, N.A., as the administrative agent. The facility has a maturity date of November 1, 2025 and as of May 17, 2024, the last date of redetermination, our borrowing base was $165 million.
Previous wording
At our election, interest on borrowings under the credit facility is determined by reference to either the secured overnight financing rate (“SOFR”) plus an applicable margin between 3.00% and 4.00% per annum (depending on the then-current level of borrowings under the Credit Facility) or the alternate base rate (“ABR”) plus an applicable margin between 2.00% and 3.00% per annum (depending on the then-current level of borrowings under the Credit Facility). The weighted average interest rate on Credit Facility borrowings was 8.6% in thethree months ended March 31, 2024.
Current wording
At our election, interest on borrowings under the credit facility is determined by reference to either the secured overnight financing rate plus an applicable margin between 3.00% and 4.00% per annum (depending on the then-current level of borrowings under the Credit Facility) or the alternate base rate plus an applicable margin between 2.00% and 3.00% per annum (depending on the then-current level of borrowings under the Credit Facility). The weighted average interest rate on Credit Facility borrowings was 8.60% in the six months ended June 30, 2024.
Previous wording
We are required to maintain (i) a current ratio (the ratio of current assets to current liabilities) greater than 1.0 to 1.0, which for purposes of this definition includes availability under the Credit Facility but excludes the fair value of derivative instruments, and (ii) a ratio of total net debt-to-EBITDAX of not greater than 3.0 to 1.0. For purposes of the total net debt-to-EBITDAX ratio, total net debt is total debt for borrowed money (including capital leases and purchase money debt) minus unrestricted cash and cash equivalents on hand at such time (not exceeding $15.0 million in the aggregate), minus the unpaid balance of the FAM Loan. EBITDAX means the sum of (i) net income plus interest expense; income taxes paid; depreciation, depletion and amortization; exploration expenses, including workover expenses; non-cash charges including unrealized losses on derivative instruments; and, any extraordinary or non-recurring charges, minus (ii) any extraordinary or non-recurring income and any non-cash income including unrealized gains on derivative instruments.
Current wording
We are required to maintain (i) a current ratio (the ratio of current assets to current liabilities) greater than 1.0 to 1.0, which for purposes of this definition includes availability under the Credit Facility but excludes the fair value of derivative instruments, and (ii) a ratio of total net debt-to-EBITDAX of not greater than 3.0 to 1.0. For purposes of the total net debt-to-EBITDAX ratio, total net debt is total debt for borrowed money (including capital leases and purchase money debt) minus unrestricted cash and cash equivalents on hand at such time (not exceeding$15.0 million in the aggregate), minus the unpaid balance of the FAM Loan. EBITDAX means the sum of (i) net income plus interest expense; income taxes paid; depreciation, depletion and amortization; exploration expenses, including workover expenses; non-cash charges including unrealized losses on derivative instruments; and, any extraordinary or non-recurring charges, minus (ii) any extraordinary or non-recurring income and any non-cash income including unrealized gains on derivative instruments.
Previous wording
We had $19.0 million debt outstanding and $146.0 million available under our Credit Facility as of March 31, 2024.
Current wording
We had no debt outstanding and $165 million available under our Credit Facility as of June 30, 2024.
Previous wording
We have entered into derivative instruments to hedge our exposure to commodity price fluctuations. If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract counterparties. As of March 31, 2024, the current liability related to such contracts was $3.8 million. Such payments will generally be funded by higher prices received from the sale of oil, NGLs and natural gas. For further information on derivative contracts, see Note 9 in the financial statements included elsewhere in this Quarterly Report.
Current wording
We have entered into derivative instruments to hedge our exposure to commodity price fluctuations. If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract counterparties. As of June 30, 2024, the current liability related to such contracts was $1.0 million. Such payments will generally be funded by higher prices received from the sale of oil, NGLs and natural gas. For further information on derivative contracts, see Note 9 in the financial statements included elsewhere in this Quarterly Report.
Previous wording
At March 31, 2024, we had asset retirement obligations of $156.6 million inclusive of a current portion of $1.8 million. For further information on asset retirement obligations, see Note 6 in the financial statements included elsewhere in this Quarterly Report.
Current wording
At June 30, 2024, we had asset retirement obligations of $159.0 million inclusive of a current portion of $1.8 million. For further information on asset retirement obligations, see Note 7 in the financial statements included elsewhere in this Quarterly Report.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Other income increased $7.1 million, or 106%, from $6.7 million for the three months ended June 30, 2023 to $13.8 million for the three months ended June 30, 2024. The increase is primarily attributable to $5.4 million in bonus payments on term assignment of leases and higher CO 2 and plant income of $1.8 million. The CO 2 and plant income is ancillary to the operations of the gas processing plant in the Permian Basin in New Mexico and CO 2 assets in Colorado.
Current report — wording carried from elsewhere
The following table provides a summary of our sales volumes, average prices (both including and excluding the effects of derivatives) and operating expenses on a per Boe basis for the periods indicated:
Current report — wording carried from elsewhere
The fourth quarter distribution of $0.58 per unit with respect to cash available for distribution for the three months ended December 31, 2023, was declared on March 05, 2024 and was paid on March 28, 2024 to unitholders of record on March 15, 2024. The first quarter distribution of $0.65 per unit with respect to cash available for distribution for the three months ended March 31, 2024, was declared on May 7, 2024 and was paid May 29, 2024 to unitholders of record on May 20, 2024.