TXO Partners, L.P.

Previous wording

We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional and unconventional 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 the Williston Basin of Montana and North Dakota.

Current wording

We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of 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 the Williston Basin of Montana and North Dakota.

Previous wording

In March 2026, we announced that Cross Timbers Energy executed three purchase and sale agreements with multiple private buyers to sell oil and gas properties for gross aggregate consideration of approximately $200 million, including a purchase and sale agreement with CTOC for approximately $123.5 million in gross aggregate consideration.

Current wording

In March 2026, we announced that Cross Timbers Energy executed three purchase and sale agreements with multiple private buyers to sell oil and gas properties for gross aggregate consideration of approximately $200.0 million, including a purchase and sale agreement with CTOC for approximately $123.5 million in gross aggregate consideration.

Previous wording

On April 1, 2026, the first Cross Timbers Transaction closed resulting in net proceeds of approximately $8.2 million, subject to customary purchase price adjustments. The preliminary allocation of the proceeds included $8.3 million to proved properties and $0.1 million to other current liabilities.

Current wording

On April 1, 2026, the first Cross Timbers Transaction closed resulting in net proceeds of approximately $8.2 million, subject to customary purchase price adjustments.

Previous wording

On April 30, 2026, the second Cross Timbers Transaction closed resulting in net proceeds of approximately $30.8 million, subject to customary purchase price adjustments, of which all was allocated to proved properties.

Current wording

On April 30, 2026, the second Cross Timbers Transaction closed resulting in net proceeds of approximately $30.8 million, subject to customary purchase price adjustments.

Previous wording

We expect to receive approximately $100.0 million in net proceeds from the Cross Timbers Transactions, subject to customary purchase price adjustments. We intend to use a portion of the net proceeds to pay the $70.0 million deferred payment for our 2025 purchase of assets from White Rock Energy, LLC, due on July 31, 2026.

Current wording

As of June 30, 2026, we had not received our share of the proceeds from the Cross Timbers Transactions. Instead, the proceeds were held as cash at Cross Timbers Energy and our share is included as cash and cash equivalents on the June 30, 2026, balance sheet. However, in July 2026, we began the process of winding down Cross Timbers Energy. As part of the initial wind down, we received an initial distribution from Cross Timbers Energy of $95.0 million. We used a portion of the net proceeds to pay the $70.0 million deferred payment for our 2025 purchase of assets from White Rock Energy, LLC, due on July 31, 2026. The remainder of the initial distribution was used to pay down debt under our Credit Facility.

Previous wording

The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2025 through March 31, 2026, NYMEX prices for crude oil and natural gas reached a high of $102.88 per Bbl and $7.46 per MMBtu, respectively, and a low of $55.27 per Bbl and $2.70 per MMBtu, respectively. Oil prices increased in the first quarter of 2026 due to hostilities in the Middle East which led to unexpected production cuts and supply constraints. These increases began to moderate in April 2026 due to the cease fire announcement, however, oil prices remain volatile.

Current wording

The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2025 through June 30, 2026, NYMEX prices for crude oil and natural gas reached a high of $112.95 per Bbl and $7.46 per MMBtu, respectively, and a low of $55.27 per Bbl and $2.52 per MMBtu, respectively. Oil prices increased in the first half of 2026 due to hostilities in the Middle East which led to unexpected production cuts and supply constraints. These increases began to moderate in April 2026 due to the cease fire announcement, however, oil prices are increasing again with the resumption of hostilities, and oil prices remain volatile.

Previous wording

With our anticipated cash flows from our long-lived property base, we intend to provide dynamic allocation of funds to prudently meet our goals. These goals include the highest projected economic returns on our capital budget, acquisition opportunities that fulfill our strategy, and cash distributions for the life of our legacy assets. From time to time, we may choose to prioritize the repayment of debt incurred in acquisitions to support the longer-term financial stewardship of our business. At other times, given fluctuations in industry costs and commodity prices, we may modify our capital budget or cash balances to shift funds towards cash distributions. We will use all of these tools to support our underlying strategy as a “production and distribution” enterprise.

Current wording

With our anticipated cash flows from our long-lived property base, we intend to allocate funds to prudently meet our goals. These goals include the highest projected economic returns on our capital budget, acquisition opportunities that fulfill our strategy, and cash distributions. From time to time, we may choose to prioritize the repayment of debt incurred in acquisitions to support the longer-term financial stewardship of our business. At other times, we may modify our capital budget or cash distribution policy. We will use all of these tools to support our underlying strategy as a “production and distribution” enterprise.

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, war, geopolitical issues, inflation, tariffs, the availability and cost of credit and the United States financial markets and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. Rising inflation has been pervasive for the last several years, increasing the cost of salaries, wages, supplies, material, freight, and energy. While we have seen inflation moderate, 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. 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, war, geopolitical issues, inflation, tariffs, the availability and cost of credit and the United States financial markets and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. Rising inflation has been pervasive for the last several years, increasing the cost of salaries, wages, supplies, material, freight, and energy. While we have seen inflation moderate, 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, diesel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. 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

Oil and condensate prices include both realized and unrealized gains and losses from derivatives. Unrealized losses were $84.2 million for the three months ended March 31, 2026 and unrealized gains were $3.1 million for the three months ended March 31, 2025. Realized losses were $8.4 million for the three months ended March 31, 2026 and realized gains were $0.1 million for the three months ended March 31, 2025.

Current wording

Oil and condensate prices include both realized gains and losses and unrealized gains from derivatives. Unrealized gains were $41.9 million for the three months ended June 30, 2026 and $3.3 million for the three months ended June 30, 2025. Realized losses were $28.5 million for the three months ended June 30, 2026 and realized gains were $2.0 million for the three months ended June 30, 2025.

Previous wording

Natural gas liquids prices include unrealized gains and losses from derivatives. Unrealized gains were $23.0 thousand for the three months ended March 31, 2026 and unrealized losses were $13.0 thousand for the three months ended March 31, 2025. There were no realized gains or losses for either the three months ended March 31, 2026 or the three months ended March 31, 2025.

Current wording

Natural gas liquids prices include both realized gains and unrealized gains and losses from derivatives. Unrealized gains were $16.0 thousand for the three months ended June 30, 2026 and $12.0 thousand for the three months ended June 30, 2025. There were no realized gains for the three months ended June 30, 2026 and no realized gains for the three months ended June 30, 2025.

Previous wording

Production expenses increased $5.5 million, or 13%, from $42.3 million for the three months ended March 31, 2025 to $47.7 million for the three months ended March 31, 2026. This increase is primarily due to increased costs of $3.3 million related to the Williston Acquisition and increased maintenance and electricity costs on our historical properties.

Current wording

Production expenses decreased $1.9 million, or 4%, from $43.3 million for the three months ended June 30, 2025 to $41.5 million for the three months ended June 30, 2026. Of this decrease, $7.2 million is attributable to the sale of Cross Timbers Energy assets and decreased maintenance and electricity costs on our historical properties partially offset by an increase of $6.1 million attributable to production from the Williston Basin acquisitions.

Previous wording

On a per unit basis, production expenses decreased from $18.15 per Boe sold for the three months ended March 31, 2025 to $16.43 per Boe sold for the three months ended March 31, 2026. The decrease is primarily related to an increase in production of 577 MBoe partially offset by increased costs attributable to production from the Williston Acquisition.

Current wording

On a per unit basis, production expenses decreased from $18.30 per Boe sold for the three months ended June 30, 2025 to $15.97 per Boe sold for the three months ended June 30, 2026. The decrease is primarily related to decreased costs principally attributable to the Cross Timbers Energy sale and an increase in production of 228 MBoe.

Previous wording

On a per unit basis, taxes, transportation, and other decreased from $7.68 per Boe sold for the three months ended March 31, 2025 to $6.80 per Boe sold for the three months ended March 31, 2026. The decrease is primarily related to increased production partially offset by increased costs.

Current wording

On a per unit basis, taxes, transportation, and other increased from $6.43 per Boe sold for the three months ended June 30, 2025 to $7.59 per Boe sold for the three months ended June 30, 2026. The increase is primarily related to increased costs partially offset by increased production.

Previous wording

Depreciation, depletion, and amortization (“DD&A”) increased $7.4 million, or 35%, from $21.4 million for the three months ended March 31, 2025 to $28.8 million for the three months ended March 31, 2026. The increase is primarily attributable to the DD&A from increased production associated with the Williston Acquisition which has a higher rate than the historical properties partially offset by decreased production on our historical properties.

Current wording

Depreciation, depletion, and amortization (“DD&A”) increased $2.3 million, or 11%, from $21.7 million for the three months ended June 30, 2025 to $24.0 million for the three months ended June 30, 2026. The increase is primarily attributable to the DD&A from increased production associated with the Williston Basin acquisitions which has a higher rate than the historical properties partially offset by decreased production on our historical properties and the sale of Cross Timbers Energy.

Previous wording

On a per unit basis, depreciation, depletion, and amortization increased from $9.20 per Boe sold for the three months ended March 31, 2025 to $9.92 per Boe sold for the three months ended March 31, 2026. The increase is primarily related to the production associated with the Williston Acquisition, which has a higher rate than the historical properties.

Current wording

On a per unit basis, depreciation, depletion, and amortization increased from $9.16 per Boe sold for the three months ended June 30, 2025 to $9.23 per Boe sold for the three months ended June 30, 2026. The increase is primarily related to the production associated with the Williston Basin acquisitions, which has a higher rate than the historical properties.

Previous wording

General and administrative (“G&A”) expenses increased $2.4 million, or 97%, from $2.4 million for the three months ended March 31, 2025 to $4.8 million for the three months ended March 31, 2026. The increase is primarily attributable to higher personnel costs of $1.7 million, principally due to amortization of unit-based compensation.

Current wording

General and administrative (“G&A”) expenses decreased $4.7 million, or 50%, from $9.5 million for the three months ended June 30, 2025 to $4.8 million for the three months ended June 30, 2026. The decrease is primarily attributable to lower personnel costs of $4.0 million, principally due to decreased amortization of unit-based compensation.

Previous wording

On a per unit basis, G&A expense increased from $1.05 per Boe sold for the three months ended March 31, 2025 to $1.66 per Boe sold for the three months ended March 31, 2026. The increase is primarily related to increased costs partially offset by increased production.

Current wording

On a per unit basis, G&A expense decreased from $3.99 per Boe sold for the three months ended June 30, 2025 to $1.83 per Boe sold for the three months ended June 30, 2026. The decrease is primarily related to decreased costs and increased production.

Previous wording

Other income decreased $0.7 million, or 7%, from $9.5 million for the three months ended March 31, 2025 to $8.9 million for the three months ended March 31, 2026. The decrease is primarily attributable to lower CO 2 and plant income of $1.7 million and the absence of bonus payments from term leases of $1.2 million partially offset by increased marketing income of $1.5 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 $2.6 million, or 45%, from $5.9 million for the three months ended June 30, 2025 to $8.5 million for the three months ended June 30, 2026. The increase is primarily attributable to the gain on the Cross Timbers Energy asset sale of $1.6 million and bonus payments from term leases of $1.4 million partially offset by lower CO 2 and plant income of $0.5 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.

Previous wording

Interest expense increased $2.1 million, or 59%, from $3.6 million for the three months ended March 31, 2025 to $5.7 million for the three months ended March 31, 2026. The increase is primarily attributable to increased borrowings partially offset by a lower average interest rate.

Current wording

Interest expense increased $3.0 million, or 117%, from $2.6 million for the three months ended June 30, 2025 to $5.6 million for the three months ended June 30, 2026. The increase is primarily attributable to increased borrowings and amortization of capitalized debt costs partially offset by a lower average interest rate.

Previous wording

Natural gas prices include both realized gains and unrealized gains and losses from derivatives. Unrealized gains were $8.5 million for the three months ended March 31, 2026 and unrealized losses were $10.6 million for the three months ended March 31, 2025. Realized losses were $7.3 million for the three months ended March 31, 2026 and $2.0 million for the three months ended March 31, 2025.

Current wording

Natural gas prices include both realized gains and unrealized losses from derivatives. Unrealized gains were $6.2 million for the six months ended June 30, 2026 and unrealized losses were $6.5 million for the six months ended June 30, 2025. Realized losses were $2.0 million for the six months ended June 30, 2026 and realized gains were $3.4 million for the six months ended June 30, 2025.

Previous wording

Revenues decreased $56.0 million, or 66%, from $84.3 million for the three months ended March 31, 2025 to $28.3 million for the three months ended March 31, 2026. The decrease was primarily attributable to net losses on our hedging activity of $91.3 million for the three months ended March 31, 2026, compared to net hedging losses of $9.5 million for the three months ended March 31, 2025, resulting in a year-over-year increase in hedging losses of $81.8 million, of which $68.0 million were unrealized losses and $13.7 million were realized losses. Additionally, a 15% decrease in the average selling price of natural gas, excluding the effects of derivatives, resulted in a decrease in revenue of $3.6 million and a 25% decrease in the average selling price of NGLs, excluding the effects of derivatives, resulted in a decrease in revenue of $2.1 million. These decreases were partially offset by increases in production of 577 MBoe which resulted in increased revenue of $31.5 million primarily as a result of the acquisition of producing assets in the Williston Basin (the "Williston Acquisition") being offset by natural declines in the historical properties.

Current wording

Revenues increased $4.9 million, or 3%, from $174.2 million for the six months ended June 30, 2025 to $179.1 million for the six months ended June 30, 2026. The increase was primarily attributable to a 805 MBoe increase in production which resulted in a $63.5 million increase in revenue primarily as a result of the acquisition of producing assets in the Williston Basin of 1,058 MBoe partially offset by the decreased production due to the sale of Cross Timbers Energy assets of 201 MBoe and natural declines in San Juan Basin and Permian Basin. Additionally, a 27% increase in the average selling price of oil, excluding the effects of derivatives, resulted in an increase of revenue of $30.6 million. These increases were partially offset by net losses on our hedging activity of $80.2 million, of which $35.9 million were unrealized losses and $44.3 million were realized losses. Finally, a decrease in the average selling price, excluding the effects of derivatives, on gas of 24% resulted in a decrease in revenue of $9.0 million.

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 $270.0 million at March 31, 2026 and $284.0 million at December 31, 2025, and the remaining availability under our Credit Facility was $140.0 million at March 31, 2026 and $126.0 million at December 31, 2025. Additionally, we had negative net working capital (including cash and excluding the effects of derivative instruments) of $70.0 million at March 31, 2026 and negative net working capital of $71.8 million at December 31, 2025. The negative working capital of $70.0 million at March 31, 2026 and $71.8 million at December 31, 2025 is primarily related to the $70.0 million deferred payment on the Williston Acquisition that is due July 31, 2026.

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 $263.0 million at June 30, 2026 and $284.0 million at December 31, 2025, and the remaining availability under our Credit Facility was $147.0 million at June 30, 2026 and $126.0 million at December 31, 2025. Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $22.1 million at June 30, 2026 and negative net working capital of $71.8 million at December 31, 2025. The positive working capital of $22.1 million at June 30, 2026 is primarily related to the cash held at Cross Timbers Energy partially offset by the $70.0 million deferred payment on the Williston Acquisition that was due July 31, 2026. The negative working capital of $71.8 million at December 31, 2025 is primarily related to the $70.0 million deferred payment on the Williston Acquisition.

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. Our first quarter distribution of $0.36 per unit with respect to cash available for distribution for the three months ended March 31, 2026, was declared on May 4, 2026 and will be paid on May 22, 2026 to unitholders of record on May 15, 2026.

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 $0.40 per unit with respect to cash available for distribution for the three months ended June 30, 2026, was declared on August 4, 2026 and will be paid on August 21, 2026 to unitholders of record on August 14, 2026.

Previous wording

Our acquisition and development expenditures consist of acquisitions of proved, unproved and other property and development expenditures. Our capital expenditures including acquisitions and net of sales were $4.4 million for the three months ended March 31, 2026 and $6.8 million for the three months ended March 31, 2025 Included in the three months ended March 31, 2026, is $6.2 million related to TXO Partners' share of deposits related to the Cross Timbers Transactions.

Current wording

Our acquisition and development expenditures consist of acquisitions of proved, unproved and other property and development expenditures offset by sales of properties. Our capital expenditures including acquisitions and dispositions resulted in cash provided by investing activities of $73.1 million for the six months ended June 30, 2026 and used by investing activities of $49.6 million for the six months ended June 30, 2025. Included in investing activities in the six months ended June 30, 2026 are $100.3 million of proceeds from the sale of properties.

Previous wording

We incurred costs of approximately $8.7 million for drilling, completion and recompletion activities and facilities costs in the three months ended March 31, 2026 and we have budgeted approximately $70.0 million for such costs in 2026.

Current wording

We incurred costs of approximately $33.1 million for drilling, completion and recompletion activities and facilities costs in the six months ended June 30, 2026 and we expect to spend approximately $80 million for such costs in 2026.

Previous wording

Net cash provided by operating activities increased $2.8 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to increased production and improved operating results, excluding the effects of derivatives partially offset by higher expenses and lower oil, gas and NGL prices.

Current wording

Net cash provided by operating activities increased $25.0 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to increased production and improved operating results, excluding the effects of derivatives partially offset by increased costs and lower NGL and gas prices.

Previous wording

Net cash used by investing activities decreased $2.5 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to proceeds from sale of property and equipment of $6.3 million partially offset by an increase in proved property acquisitions of $2.5 million and development costs of $1.1 million.

Current wording

Net cash provided by investing activities increased $122.7 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to proceeds from the sale of the Cross Timbers Energy assets of $100.3 million and a decrease in proved property acquisitions of $33.1 million partially offset by increased development costs of $9.7 million.

Previous wording

Net cash used by financing activities increased $10.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to increased net repayments under our Credit Facility of $19.0 million partially offset by decreased distributions to unitholders of $8.7 million.

Current wording

Net cash used by financing activities increased $50.3 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to decreased proceeds from public offering of $189.5 million partially offset by net borrowings under our Credit Facility of $117.0 million and decreased distributions to unitholders of $21.1 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 7.4% in the three months ended March 31, 2026.

Current 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 7.4% in the six months ended June 30, 2026.

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. Under the terms of the Credit Facility, we were in compliance with all of our debt covenants as of March 31, 2026. Additionally, we believe we have adequate liquidity to continue as a going concern for at least the next twelve months from the date of this report.

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. Effective with the completion of the spring redetermination in June 2026, we received a waiver of all hedge requirements for months 19 through 24 for the quarters ended June 30, 2026 and September 30, 2026. Under the terms of the Credit Facility, we were in compliance with all of our debt covenants as of June 30, 2026. Additionally, we believe we have adequate liquidity to continue as a going concern for at least the next twelve months from the date of this report.

Previous wording

We had $270.0 million debt outstanding and $140.0 million available under our Credit Facility as of March 31, 2026.

Current wording

We had $263.0 million debt outstanding and $147.0 million available under our Credit Facility as of June 30, 2026.

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, 2026, the current liability related to such contracts was $56.0 million and the long-term liability related to such contracts was $8.5 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 10 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, 2026, the current liability related to such contracts was $21.3 million and the long-term liability related to such contracts was $5.6 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 10 in the financial statements included elsewhere in this Quarterly Report.

Previous wording

At March 31, 2026, we had asset retirement obligations of $225.0 million inclusive of a current portion of $3.5 million. For further information on asset retirement obligations, see Note 7 in the financial statements included elsewhere in this Quarterly Report.

Current wording

At June 30, 2026, we had asset retirement obligations of $158.8 million inclusive of a current portion of $2.0 million. For further information on asset retirement obligations, see Note 7 in the financial statements included elsewhere in this Quarterly Report.