Vitesse Energy Inc

Previous wording

Our business strategy is focused on creating long-term stockholder value through the profitable acquisition, development and production of oil and natural gas assets at attractive rates of return, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in non-operated minority working and mineral interests in oil and natural gas properties with our core area of focus currently in the Bakken and Three Forks formations of the Williston Basin of North Dakota and Montana. We also have interests in wells in the Denver-Julesburg Basin located in Colorado and Wyoming and the Powder River Basin located in Wyoming. As of March 31, 2024, we had a working interest in 5,789 gross (159.2 net) productive wells and 230 gross (5.9 net) wells that were being drilled or completed, and an additional 353 gross (10.6 net) wells that had been permitted for development by our operators. During the three months ended March 31, 2024, our average production was 12,557 Boe per day and was 71% oil.

Current wording

Our business strategy is focused on creating long-term stockholder value through the profitable acquisition, development and production of oil and natural gas assets at attractive rates of return, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in non-operated minority working and mineral interests in oil and natural gas properties with our core area of focus currently in the Bakken and Three Forks formations of the Williston Basin of North Dakota and Montana. We also have interests in wells in the Denver-Julesburg Basin located in Colorado and Wyoming and the Powder River Basin located in Wyoming. As of June 30, 2024, we had a working interest in 5,864 gross (162.7 net) productive wells and 263 gross (11.1 net) wells that were being drilled or completed, and an additional 319 gross (8.7 net) wells that had been permitted for development by our operators.

Previous wording

■Paid quarterly dividend of $0.50 per share to our common stockholders.

Current wording

■Paid quarterly dividend of $0.525 per share to our common stockholders.

Previous wording

■Invested $32.2 million in capital development and acquisitions.

Current wording

■Invested $37.6 million in capital development and acquisitions.

Previous wording

Commodity derivative (loss) gain, net. We utilize commodity derivative financial instruments to reduce our exposure to fluctuations in the prices of oil and gas. Gain (loss) on commodity derivatives, net is comprised of (1) cash gains and losses we recognize on settled commodity derivatives during the period, and (2) non-cash mark-to-market gains and losses we incur on commodity derivative instruments outstanding at period-end.

Current wording

Commodity derivative gain (loss), net. We utilize commodity derivative financial instruments to reduce our exposure to fluctuations in the prices of oil and gas. Gain (loss) on commodity derivatives, net is comprised of (1) cash gains and losses we recognize on settled commodity derivatives during the period, and (2) non-cash mark-to-market gains and losses we incur on commodity derivative instruments outstanding at period-end.

Previous wording

General and administrative expenses. General and administrative expenses include overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our acquisition and development operations, franchise taxes, audit and other professional fees and legal compliance. During the three months ended March 31, 2023, general and administrative expenses included non-recurring costs related to the Spin-Off.

Current wording

General and administrative expenses. General and administrative expenses include overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our acquisition and development operations, franchise taxes, audit and other professional fees and legal compliance.

Previous wording

(1)Based on average daily NYMEX WTI and Henry Hub Spot closing prices reported by the EIA.

Current wording

(1)Based on average daily NYMEX WTI and Henry Hub Spot closing prices reported by FactSet and the EIA, respectively.

Previous wording

The average first quarter 2024 oil price was $76.95 per barrel or 1% higher than the average oil price per barrel in the first quarter of 2023. Our settled derivatives increased our realized oil price per barrel by $1.03 and $1.07 in the first quarter of 2024 and 2023, respectively. Our average first quarter 2024 realized oil price per barrel after reflecting settled derivatives was $71.65 compared to $74.02 during the same period in 2023. The average first quarter 2024 NYMEX natural gas price was $2.15 per MMBtu, or 19% lower than the average NYMEX price per MMBtu in the first quarter of 2023. In the first quarter of 2024 and 2023, we had no natural gas price derivatives in place and our realized natural gas price was $1.93 per Mcf and $3.61 per Mcf, respectively.

Current wording

The average second quarter 2024 oil price was $80.55 per barrel or 9% higher than the average oil price per barrel in the second quarter of 2023. Our settled derivatives decreased our realized oil price per barrel by $1.21 in the second quarter of 2024 and increased our realized oil price per barrel by $2.28 during the second quarter of 2023. Our average second quarter 2024 realized oil price per barrel after reflecting settled derivatives was $73.42 compared to $72.18 during the same period in 2023. The average second quarter 2024 NYMEX natural gas price was $2.07 per MMBtu, or 4% lower than the average NYMEX price per MMBtu in the second quarter of 2023. In the second quarter 2024 and 2023, we had no natural gas price derivatives in place and our realized natural gas price was $1.11 per Mcf and $1.41 per Mcf, respectively.

Previous wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $61.2 million for the three months ended March 31, 2024 from $58.0 million for the three months ended March 31, 2023. The increase in oil and natural gas revenue was due to a 10% increase in production volumes, driven by acquisition and development activity, which was partially offset by a 4% decrease in the average realized prices per Boe before hedging for the three months ended March 31, 2024. The increase in production volumes increased oil and natural gas revenue by approximately $5.6 million, while the decrease in average realized prices per Boe before hedging decreased oil and natural gas revenue by approximately $2.4 million.

Current wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $66.6 million for the three months ended June 30, 2024 from $51.6 million for the three months ended June 30, 2023. The increase in oil and natural gas revenue was due to a 19% increase in production volumes, driven by acquisition and development activity, and a 9% increase in the average realized prices per Boe before hedging for the three months ended June 30, 2024. The increase in production volumes and average realized prices per Boe before hedging increased oil and natural gas revenue by approximately $10.6 million and $4.4 million, respectively.

Previous wording

98% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $3.61 per Mcf during the three months ended March 31, 2023, representing a 134% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Current wording

Our oil price differential to the weighted average benchmark price during the three months ended June 30, 2024 was negative $5.90 per barrel, as compared to a negative $3.78 per barrel during the three months ended June 30, 2023, primarily due to less favorable local market pricing as compared to the benchmark price due to regional supply and demand imbalances. Our net realized natural gas price during the three months ended June 30, 2024 was $1.11 per Mcf, representing a 52% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $1.41 per Mcf during the three months ended June 30, 2023, representing a 65% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Previous wording

Production Tax Expense. Total production taxes increased to $5.8 million for the three months ended March 31, 2024 from $5.3 million for the three months ended March 31, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 9.5% and 9.1% for the three months ended March 31, 2024 and 2023, respectively. The increase in the production tax rate for the three months ended March 31, 2024 was due to a higher ratio of oil revenue to total revenue, since oil revenue is typically taxed at a higher rate than gas revenue.

Current wording

Production Tax Expense. Total production taxes increased to $5.4 million for the three months ended June 30, 2024 from $4.9 million for the three months ended June 30, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 8.1% and 9.5% for the three months ended June 30, 2024 and 2023, respectively. The decrease in the production tax rate for the three months ended June 30, 2024 was due to operators correcting withholding based on recent actual tax filings.

Previous wording

DD&A. DD&A increased to $23.5 million for the three months ended March 31, 2024 compared with $18.5 million for the three months ended March 31, 2023. The increase of $5.1 million, or 27% was the result of a 10% increase in production and a $2.80/Boe increase in the DD&A rate for the three months ended March 31, 2024 compared with the three months ended March 31, 2023. The higher DD&A rate was driven by lower reserves due to lower oil and gas prices and higher acquisition and development costs in 2024. The increase in production accounted for a $2.2 million increase in DD&A expense while the increase in the DD&A rate accounted for a $2.9 million increase in DD&A expense.

Current wording

DD&A. DD&A increased to $25.3 million for the three months ended June 30, 2024 compared with $18.7 million for the three months ended June 30, 2023. The increase was the result of a 19% increase in production and a $2.46 per Boe increase in the DD&A rate for the three months ended June 30, 2024 compared with the three months ended June 30, 2023. The higher DD&A rate was driven by changes to reserves due to declining oil and gas prices and higher acquisition and development costs in 2024. The increase in production accounted for a $4.0 million increase in DD&A expense while the increase in the DD&A rate accounted for a $2.5 million increase in DD&A expense.

Previous wording

For the three months ended March 31, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.44 per Boe compared with $17.65 per Boe for the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.45 per Boe compared with $17.98 per Boe for the three months ended June 30, 2023.

Previous wording

Interest Expense. Interest expense increased to $2.2 million for the three months ended March 31, 2024 from $1.2 million for the three months ended March 31, 2023. The increase for the three months ended March 31, 2024 was due to the debt balance increasing to $98.0 million from $45.0 million at March 31, 2023.

Current wording

Interest Expense. Interest expense increased to $2.6 million for the three months ended June 30, 2024 from $1.1 million for the three months ended June 30, 2023. The increase for the three months ended June 30, 2024 was due to the debt balance increasing to $115.0 million from $41.0 million at June 30, 2023.

Previous wording

(1)Realized and unrealized gains and losses on commodity derivatives are presented herein as separate line items but are combined for a total Commodity derivative (loss) gain, net in the statements of operations included in this Form 10-Q. Management believes the separate presentation of the realized and unrealized commodity derivative gains and losses is useful because the realized cash settlement portion provides a better understanding of our hedge position.

Current wording

(1)Realized and unrealized gains and losses on commodity derivatives are presented herein as separate line items but are combined for a total commodity derivative gain (loss) in the statements of operations included in this Form 10-Q. Management believes the separate presentation of the realized and unrealized commodity derivative gains and losses is useful because the realized cash settlement portion provides a better understanding of our hedge position.

Previous wording

In the three months ended March 31, 2024, approximately 50% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $0.8 million. In the three months ended March 31, 2023, approximately 50% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $0.7 million.

Current wording

In the three months ended June 30, 2024, approximately 62% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized loss on oil derivatives of $1.0 million. In the three months ended June 30, 2023, approximately 50% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $1.6 million.

Previous wording

At March 31, 2024, all of our derivative contracts were recorded at their fair value, which was a net liability of $3.5 million, a decrease in value of $14.6 million from the $11.1 million net asset recorded as of December 31, 2023. The decrease was primarily due to increases in forward commodity prices relative to prices on our open commodity derivative contracts.

Current wording

At June 30, 2024, all of our derivative contracts were recorded at their fair value, which was a net liability of $2.1 million, a decrease in value of $13.2 million from the $11.1 million net asset recorded as of December 31, 2023. The decrease was primarily due to increases in forward commodity prices relative to prices on our open commodity derivative contracts.

Previous wording

The provision for income taxes for the three months ended March 31, 2024 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to §162(m) limitations on certain covered employee compensation and state income taxes.

Current wording

The provision for income taxes for the three months ended June 30, 2024 and 2023 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to §162(m) limitations on certain covered employee compensation and state income taxes.

Previous wording

Lease Operating Expense. Lease operating expense increased to $10.32 per Boe for the three months ended March 31, 2024 from $8.75 per Boe for the three months ended March 31, 2023. The increase per Boe for the three months ended March 31, 2024 compared with the three months ended March 31, 2023 was related to increased workover operations and higher service costs throughout the three months ended March 31, 2024 and higher operating costs associated with inclement weather in January 2024. The increased workover costs were responsible for approximately $0.35/Boe of the increase and should result in increased production when these wells return to production.

Current wording

Lease Operating Expense. Lease operating expense increased to $10.15 per Boe for the six months ended June 30, 2024 from $8.88 per Boe for the six months ended June 30, 2023. The increase per Boe for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 was related to higher service costs throughout the six months ended June 30, 2024, due to higher operating costs associated with inclement weather in January 2024 and the blend of production with a higher percentage of production from older vintage wells with higher cost structures.

Previous wording

General and Administrative Expense. General and administrative expense decreased to $5.4 million for the three months ended March 31, 2024 from $10.9 million for the three months ended March 31, 2023. General and administrative expense on a per Boe basis decreased to $4.70 for the three months ended March 31, 2024 from $10.47 for the three months ended March 31, 2023. The decrease in general and administrative expense was primarily due to costs in the first quarter of 2023 related to the Spin-Off of $6.5 million. Excluding costs related to the Spin-Off the per Boe rate for the three months ended March 31, 2023 would have been $4.16. The increase in general and administrative expense per Boe, excluding the Spin-Off costs, was primarily due to higher costs associated with being a public company.

Current wording

General and Administrative Expense. General and administrative expense decreased to $10.1 million for the six months ended June 30, 2024 from $15.3 million for the six months ended June 30, 2023. General and administrative expense on a per Boe basis decreased to $4.26 for the six months ended June 30, 2024 from $7.40 for the six months ended June 30, 2023. The decrease in general and administrative expense was primarily due to costs in the first half of 2023 related to the Spin-Off of $6.8 million. Excluding costs related to the Spin-Off the per Boe rate for the six months ended June 30, 2023 would have been $4.11. The increase in per BOE cost is associated with becoming a public company.

Previous wording

Equity-Based Compensation. During the three months ended March 31, 2024, equity-based compensation expense decreased to $1.6 million from $28.0 million during the three months ended March 31, 2023. Equity-based compensation expense was primarily higher in 2023 due to retirement vesting provisions in some of the awards resulting in 1,863,000 restricted stock units being expensed upon award. The retirement vesting provisions were responsible for $26.8 million of expense during the three months ended March 31, 2023.

Current wording

Equity-Based Compensation. During the six months ended June 30, 2024, equity-based compensation expense decreased to $3.7 million from $29.4 million during the six months ended June 30, 2023. Equity-based compensation expense was primarily higher in 2023 due to retirement vesting provisions in some of the awards resulting in 1,863,000 restricted stock units being expensed upon award. The retirement vesting provisions were responsible for $26.8 million of expense during the six months ended June 30, 2023.

Previous wording

Commodity Derivative (Loss) Gain Net. The net commodity derivative loss was $13.8 million for the three months ended March 31, 2024 compared with a gain of $7.4 million for the three months ended March 31, 2023. (Loss) Gain on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Current wording

Commodity Derivative (Loss) Gain, Net. The commodity derivative loss was $13.4 million for the six months ended June 30, 2024 compared with a gain of $12.2 million for the six months ended June 30, 2023. (Loss) Gain on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Previous wording

The mark-to-market fair value of the unsettled commodity derivative instruments will generally be inversely related to the price movement of the underlying commodity. If commodity price trends reverse from period to period, prior unrealized gains may become unrealized losses and vice versa. These unrealized gains and losses will impact our net income in the period reported. The mark-to-market fair value can create non-cash volatility in our reported earnings during periods of commodity price volatility. We have experienced such volatility in the past and are likely to experience it in the future. Gains on our derivatives generally indicate lower oil revenues in the future while losses indicate higher future oil revenues. Oil prices rose during the three months ended March 31, 2024 as compared to oil price declines during the three months ended March 31, 2023.

Current wording

The mark-to-market fair value of the unsettled commodity derivative instruments will generally be inversely related to the price movement of the underlying commodity. If commodity price trends reverse from period to period, prior unrealized gains may become unrealized losses and vice versa. These unrealized gains and losses will impact our net income in the period reported. The mark-to-market fair value can create non-cash volatility in our reported earnings during periods of commodity price volatility. We have experienced such volatility in the past and are likely to experience it in the future. Gains on our derivatives generally indicate lower oil revenues in the future while losses indicate higher future oil revenues. Oil prices rose during the six months ended June 30, 2024 as compared to oil price declines during the six months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2024, we recorded an income tax benefit of $0.7 million related to federal and state income taxes.

Current wording

Income Tax Expense. During the six months ended June 30, 2024, we recorded an income tax expense of $2.9 million related to federal and state income taxes.

Previous wording

During the three months ended March 31, 2023, the Predecessor was contributed into Vitesse resulting in a change in tax status and the recording of a $44.1 million deferred tax liability related to the temporary difference between the tax and GAAP basis of the assets of the Predecessor and an offsetting charge to income tax expense. Additionally, we recorded an income tax benefit of $3.7 million for the three months ended March 31, 2023 related to federal and state income taxes.

Current wording

During the six months ended June 30, 2023, the Predecessor was contributed into Vitesse resulting in a change in tax status and the recording of a $44.1 million deferred tax liability related to the temporary difference between the tax and GAAP basis of the assets of the Predecessor and an offsetting charge to income tax expense. Additionally, we recorded an income tax expense of $3.1 million for the six months ended June 30, 2023 related to federal and state income taxes.

Previous wording

The provision for income taxes for the three months ended March 31, 2023 differs from the amount that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book loss primarily due to (i) deferred tax expense reflected as a discrete item related to the change in tax status of Vitesse Energy from a partnership to a corporation as part of the Spin-Off, (ii) §162(m) limitations on certain covered employee compensation, and (iii) state income taxes.

Current wording

The provision for income taxes for the six months ended June 30, 2023 differs from the amount that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book loss primarily due to (i) deferred tax expense reflected as a discrete item related to the change in tax status of Vitesse Energy from a partnership to a corporation as part of the Spin-Off, (ii) §162(m) limitations on certain covered employee compensation, and (iii) state income taxes.

Previous wording

Overview. At March 31, 2024, we had $1.4 million of unrestricted cash on hand and $147.0 million available under the borrowing base in our Revolving Credit Facility. At December 31, 2023, we had $0.6 million of unrestricted cash on hand and $164.0 million available under the borrowing base in our Revolving Credit Facility. We expect that our liquidity going forward will be primarily derived from cash flows from our operations, cash on hand and availability under the Revolving Credit Facility and that these sources of liquidity will be sufficient to provide us the ability to fund our material cash requirements for the next twelve months, as described below, including our planned capital expenditures program, as well as dividends and our share repurchase program. We may need to fund acquisitions or other business opportunities that support our strategy through additional borrowings under our Revolving Credit Facility or the issuance of equity or debt. Our primary uses of capital have been for the acquisition and development of our oil and natural gas properties and dividend payments. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

Current wording

Overview. At June 30, 2024, we had $0.1 million of unrestricted cash on hand and $130.0 million available under the borrowing base in our Revolving Credit Facility. We expect that our liquidity going forward will be primarily derived from cash flows from our operations, cash on hand and availability under the Revolving Credit Facility and that these sources of liquidity will be sufficient to provide us the ability to fund our material cash requirements for the next twelve months, as described below, including our planned capital expenditures program, as well as dividends and our share repurchase program. We may need to fund acquisitions or other business opportunities that support our strategy through additional borrowings under our Revolving Credit Facility or the issuance of equity or debt. Our primary uses of capital have been for the acquisition and development of our oil and natural gas properties and dividend payments. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

Previous wording

At March 31, 2024, we had a working capital deficit of $6.5 million, compared to a deficit of $2.1 million at December 31, 2023. Current assets decreased by $12.5 million while current liabilities decreased by $8.0 million at March 31, 2024, compared to December 31, 2023. The decrease in current assets during the three months ended March 31, 2024 was primarily due to a decrease of $9.9 million in our current commodity derivative instruments due to the change in fair value and a decrease of $3.6 million in revenue receivable due to the timing of revenue receipts from operators, partially offset by a $0.8 million increase in cash balance. The change in current liabilities during the three months ended March 31, 2024 was mostly due to a decrease of $11.6 million in accounts payable and accrued liabilities as a result of paying accrued oil and gas development costs and accrued employee compensation, partially offset by an increase of $3.6 million in current derivative instrument liabilities as a result of forward oil price increases.

Current wording

At June 30, 2024, we had a working capital deficit of $10.2 million, compared to a deficit of $2.1 million at December 31, 2023. Current assets decreased by $9.4 million while current liabilities decreased by $1.2 million at June 30, 2024, compared to December 31, 2023. The decrease in current assets during the six months ended June 30, 2024 was primarily due to a decrease of $9.9 million in our current commodity derivative instruments due to the change in fair value. The decrease in current liabilities during the six months ended June 30, 2024 was mostly due to a decrease of $3.6 million in accounts payable and accrued liabilities as a result of paying accrued oil and gas development costs and accrued employee compensation, partially offset by an increase of $2.5 million in current derivative instrument liabilities as a result of forward oil price increases.

Previous wording

Cash Flows. Our cash flows for the three months ended March 31, 2024 and 2023 are presented below:

Current wording

Cash Flows. Our cash flows for the six months ended June 30, 2024 and 2023 are presented below:

Previous wording

During the three months ended March 31, 2024, we generated $39.4 million of cash from operating activities, a 1% increase from the three months ended March 31, 2023. Cash flows from operating activities are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and by changes in working capital. Any interim cash needs are funded by cash on hand, cash flows from operations or borrowings under our Revolving Credit Facility. We typically enter into commodity derivative transactions covering a substantial, but varying, portion of our anticipated future oil and gas production for the next 12 to 24 months. A minimum level of derivative coverage is required by certain debt covenants. See Part I, Item 3, “ Quantitative and Qualitative Disclosures about Market Risk.”

Current wording

During the six months ended June 30, 2024, we generated $74.6 million of cash from operations, a $3.7 million decrease from the six months ended June 30, 2023. Cash flows from operating activities are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and by changes in working capital. Any interim cash needs are funded by cash on hand, cash flows from operations or borrowings under our Revolving Credit Facility. We typically enter into commodity derivative transactions covering a substantial, but varying, portion of our anticipated future oil production for the next 12 to 24 months. A minimum level of derivative coverage is required by certain debt covenants. See Part I, Item 3, “ Quantitative and Qualitative Disclosures about Market Risk.”

Previous wording

One of the primary sources of variability in our cash provided by operating activities is commodity price volatility, which we partially mitigate through the use of commodity derivative contracts. As of March 31, 2024, we had oil swaps covering 1,380,000 Bbls at a weighted average price of $77.98 per Bbl for the remainder of calendar 2024 and oil swaps covering 465,000 Bbls at a weighted average price of $73.77 per Bbl for calendar 2025. We continually evaluate opportunities to add beneficial commodity derivative contracts and subsequent to March 31, 2024 we have added contracts covering an additional 150,000 Bbls in calendar year 2024 and 450,000 Bbls in calendar year 2025. As of March 31, 2024, we had no natural gas derivative contracts. For more information on our outstanding derivatives, see Note 6 (“Derivative Instruments”) to the Condensed Consolidated Financial Statements.

Current wording

One of the primary sources of variability in our cash provided by operating activities is commodity price volatility, which we partially mitigate through the use of commodity derivative contracts. As of June 30, 2024, we had no natural gas derivative contracts. For more information on our outstanding derivatives, see Note 6 (“Derivative Instruments”) to the Condensed Consolidated Financial Statements.

Previous wording

Cash used in investing activities during the three months ended March 31, 2024 was $32.2 million compared to $22.7 million during the three months ended March 31, 2023. The $9.5 million increase was primarily related to increased development activity by our operators. Our cash used in investing activities reflects actual cash spending, which can lag several months from when the related costs were accrued. As a result, our actual cash spending is not always reflective of current levels of development activity. Acquisition and development activities are discretionary. We monitor our capital expenditures on a regular basis, adjusting the amount up or down, and between projects, depending on projected commodity prices, cash flows and financial returns. We supplement development activity on our asset base with opportunistic acquisitions of near-term drilling opportunities when development activity by our operators on our existing properties does not meet our development objectives. Our cash spending for acquisition activities was $6.8 million and $1.1 million, during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Cash used in investing activities during the six months ended June 30, 2024 was $69.9 million compared to $43.3 million during the six months ended June 30, 2023. The $26.6 million increase was primarily related to development activity by operators on near term development acquisitions made in the past year. Our cash used in investing activities reflects actual cash spending, which can lag several months from when the related costs were accrued. As a result, our actual cash spending is not always reflective of current levels of development activity. Acquisition and development activities are discretionary. We monitor our capital expenditures on a regular basis, adjusting the amount up or down, and between projects, depending on projected commodity prices, cash flows and financial returns. We supplement development activity on our asset base with opportunistic acquisitions of near-term drilling opportunities when development activity by our operators on our existing properties does not meet our development objectives. Our cash spending for acquisition activities was $19.9 million and $4.2 million, during the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Cash used in financing activities was $6.4 million and $23.1 million during the three months ended March 31, 2024 and 2023, respectively. The cash used in financing activities during the three months ended March 31, 2024 was related to $16.3 million in dividends paid and the $6.9 million value of retained shares paid to fund employee tax withholding in connection with the vesting of restricted stock units, which was partially offset by $17.0 million of net borrowings under our Revolving Credit Facility. During the three months ended March 31, 2023, we had net repayments of $8.0 million under our Revolving Credit Facility and $14.5 million in distributions to our equity holders.

Current wording

Cash used in financing activities was $5.1 million and $41.6 million during the six months ended June 30, 2024 and 2023, respectively. The cash used in financing activities during the six months ended June 30, 2024 was related to $31.9 million in dividends paid and the $6.9 million value of retained shares paid to fund employee tax withholding in connection with the vesting of restricted stock units, which was partially offset by $34.0 million of net borrowings under our Revolving Credit Facility. During the six months ended June 30, 2023, we had net repayments of $12.0 million under our Revolving Credit Facility and $29.0 million in distributions to our equity holders.

Previous wording

Dividends. We paid cash dividends to our equity holders of $16.3 million during the three months ended March 31, 2024. While we believe that our future cash flows from operations will be able to sustain the current level of dividends, future dividends may change based on a variety of factors, including contractual restrictions, legal limitations (the most common of which are limitations set forth in a company’s organizational documents and insolvency), business developments and the judgment of our Board. Future cash dividends to equity holders are subject to the terms of the Revolving Credit Facility, as previously described. There can be no guarantee that we will be able to pay dividends at current levels or at all or otherwise return capital to our investors in the future.

Current wording

Dividends. We paid cash dividends to our equity holders of $31.9 million during the six months ended June 30, 2024. While we believe that our future cash flows from operations will be able to sustain the current level of dividends, future dividends may change based on a variety of factors, including contractual restrictions, legal limitations (the most common of which are limitations set forth in a company’s organizational documents and insolvency), business developments and the judgment of our Board. Future cash dividends to equity holders are subject to the terms of the Revolving Credit Facility, as previously described. There can be no guarantee that we will be able to pay dividends at current levels or at all or otherwise return capital to our investors in the future.

Previous wording

Capital Expenditures. For the three months ended March 31, 2024, total capital expenditures was $32.2 million, including development expenditures and our acquisition activity. We expect to fund future capital expenditures with cash generated from operations and, if required, borrowings under our Revolving Credit Facility. The foregoing excludes larger acquisitions, which are typically not included in our annual capital expenditures budget. With our cash on hand, cash flow from operations, and borrowing capacity under our Revolving Credit Facility, we believe that we will have sufficient cash flow and liquidity to fund our budgeted capital expenditures and operating expenses for at least the next twelve months. However, we may seek additional access to capital and liquidity including issuing equity or debt securities and extending maturities. We cannot assure you, however, that any additional capital will be available to us on favorable terms or at all. Our capital expenditures could be curtailed if our cash flows decline or we are otherwise unable to access capital or liquidity. Reductions of capital expenditures used to drill and complete new oil and natural gas wells would likely result in lower levels of oil and natural gas production in the future. Our future success in growing proved reserves and production may be dependent on our ability to access outside sources of capital.

Current wording

Capital Expenditures. For the six months ended June 30, 2024, total capital expenditures was $69.8 million, including development expenditures and our acquisition activity. We expect to fund future capital expenditures with cash generated from operations and, if required, borrowings under our Revolving Credit Facility. The foregoing excludes larger acquisitions, which are typically not included in our annual capital expenditures budget. With our cash on hand, cash flow from operations, and borrowing capacity under our Revolving Credit Facility, we believe that we will have sufficient cash flow and liquidity to fund our budgeted capital expenditures and operating expenses for at least the next twelve months. However, we may seek additional access to capital and liquidity including issuing equity or debt securities and extending maturities. We cannot assure you, however, that any additional capital will be available to us on favorable terms or at all. Our capital expenditures could be curtailed if our cash flows decline or we are otherwise unable to access capital or liquidity. Reductions of capital expenditures used to drill and complete new oil and natural gas wells would likely result in lower levels of oil and natural gas production in the future. Our future success in growing proved reserves and production may be dependent on our ability to access outside sources of capital.

Previous wording

Our critical accounting policies and estimates are described in “Critical Accounting Policies and Estimates” within Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023. The critical accounting policies and estimates used in preparing our interim condensed consolidated financial statements for the three months ended March 31, 2024 are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our critical accounting policies and estimates are described in “Critical Accounting Policies and Estimates” within Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023. The critical accounting policies and estimates used in preparing our interim condensed consolidated financial statements for the three and six months ended June 30, 2024 are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2023.