Vitesse Energy, Inc.

Previous wording

As further described in Note 3 (“Oil and Gas Properties”) to the Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, we completed the Lucero Acquisition on March 7, 2025. The financial information presented herein (i) excludes the results of Lucero and its subsidiaries for periods prior to March 7, 2025 and (ii) includes the results Lucero and its subsidiaries for periods on or after March 7, 2025.

Current wording

As further described in Note 3 (“Oil and Gas Properties”) to the Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, we completed the Lucero Acquisition on March 7, 2025. The financial information presented herein (i) excludes the results of Lucero and its subsidiaries for periods prior to March 7, 2025 and (ii) includes the results of Lucero and its subsidiaries for periods on or after March 7, 2025.

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 that provide an attractive return on invested capital, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in 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, 2025, we had a working interest in 6,186 gross (221.5 net) productive wells and 246 gross (9.5 net) wells that were being drilled or completed, and an additional 377 gross (15.5 net) wells that had been permitted for development by our operators. In addition, we had a royalty only interest in 1,211 gross (3.0 net) productive wells.

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 that provide an attractive return on invested capital, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in 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, 2025, we had a working interest in 6,267 gross (223.2 net) productive wells and 245 gross (7.9 net) wells that were being drilled or completed, and an additional 382 gross (15.1 net) wells that had been permitted for development by our operators. In addition, we had a royalty only interest in 1,240 gross (3.0 net) productive wells.

Previous wording

■Production of 14,971 Boe/d with 68% of production from oil.

Current wording

■Production of 18,950 BOE/day with 65% of production from oil.

Previous wording

■Invested $30.4 million in capital development and acquisitions.

Current wording

■Invested $35.7 million in capital development and acquisitions.

Previous wording

As a result of such commodity price volatility, which we expect to continue throughout 2025, our earnings and operating cash flows can vary substantially. While we do hedge a substantial portion of our production, we are still significantly subject to movements in commodity prices. Such volatility can make it difficult to predict future effects on our financial results and the decisions of our operators. Factors that we expect will continue to impact commodity prices include product demand connected with global economic conditions, inflationary factors, industry production and inventory levels, the United States Department of Energy’s planned repurchases (or possible releases) of oil from the strategic petroleum reserve, technology advancements, production quotas or other actions imposed by OPEC and other oil-producing countries, the imposition of tariffs and other controls on imports and exports and resulting consequences of such, actions of regulators, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of the foregoing can have a substantial impact on the prices of oil and natural gas, which in turn impacts our decisions and the decision of our operators to drill and extract resources.

Current wording

As a result of such commodity price volatility, which we expect to continue throughout 2025, our earnings and operating cash flows can vary substantially. While we do hedge a substantial portion of our production, we are still significantly subject to movements in commodity prices. Such volatility can make it difficult to predict future effects on our financial results and the decisions of our operators. Factors that we expect will continue to impact commodity prices include product demand connected with global economic conditions, inflationary factors, industry production and inventory levels, the United States Department of Energy’s planned repurchases (or possible releases) of oil from the strategic petroleum reserve, technology advancements, production quotas or other actions imposed by OPEC and other oil-producing countries, the imposition of and changes in tariffs and other controls on imports and exports and resulting consequences of such, actions of regulators, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of the foregoing can have a substantial impact on the prices of oil and natural gas, which in turn impacts our decisions and the decision of our operators to drill and extract resources.

Previous wording

General and administrative expenses. General and administrative expenses include overhead, including payroll and benefits for our 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, 2025, general and administrative expenses included non-recurring costs related to the Lucero Acquisition.

Current wording

General and administrative expenses. General and administrative expenses include overhead, including payroll and benefits for our 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 six months ended June 30, 2025, general and administrative expenses included non-recurring costs related to the Lucero Acquisition and an offset for reimbursement of past legal expenses as a result of the settlement discussed in Note 9 (“Commitments and Contingencies”) to the Condensed Consolidated Financial Statements.

Previous wording

Impairment expense. Under the successful efforts method of accounting, we review our oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Whenever we conclude the carrying value may not be recoverable, we estimate the expected undiscounted future net cash flows of our oil and natural gas properties using proved and risked probable and possible reserves based on our development plans and best estimate of future production, commodity pricing, reserve risking, gathering, processing and transportation deductions, production tax rates, lease operating expenses and future development costs. We compare such undiscounted future net cash flows to the carrying amount of the oil and natural gas properties in each depletion pool to determine if the carrying amount is recoverable. If the undiscounted future net cash flows exceed the carrying amount of the aggregated oil and natural gas properties, no impairment is recorded. If the carrying amount of the oil and natural gas properties exceeds the undiscounted future net cash flows, we will record an impairment expense to reduce the carrying value to fair value as of the balance sheet date. The factors used to determine fair value may include, but are not limited to, recent sales prices of comparable properties, indications from marketing activities, the present value of future revenues, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the projected cash flows. There were no proved oil and gas property impairments during the three months ended March 31, 2025 and 2024.

Current wording

Impairment expense. Under the successful efforts method of accounting, we review our oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Whenever we conclude the carrying value may not be recoverable, we estimate the expected undiscounted future net cash flows of our oil and natural gas properties using proved and risked probable and possible reserves based on our development plans and best estimate of future production, commodity pricing, reserve risking, gathering, processing and transportation deductions, production tax rates, lease operating expenses and future development costs. We compare such undiscounted future net cash flows to the carrying amount of the oil and natural gas properties in each depletion pool to determine if the carrying amount is recoverable. If the undiscounted future net cash flows exceed the carrying amount of the aggregated oil and natural gas properties, no impairment is recorded. If the carrying amount of the oil and natural gas properties exceeds the undiscounted future net cash flows, we will record an impairment expense to reduce the carrying value to fair value as of the balance sheet date. The factors used to determine fair value may include, but are not limited to, recent sales prices of comparable properties, indications from marketing activities, the present value of future revenues, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the projected cash flows. There were no proved oil and gas property impairments during the three and six months ended June 30, 2025 and 2024.

Previous wording

■changes in the fair value of the derivative instruments;

Current wording

■changes in the fair value of our derivative instruments;

Previous wording

■our ability to continue to identify and acquire high-quality acreage and drilling opportunities; and

Current wording

■our ability to continue to identify and acquire producing properties, high-quality acreage and drilling opportunities; and

Previous wording

The average first quarter 2025 NYMEX oil price was $71.34 per barrel or 7% lower than the average NYMEX oil price per barrel in the first quarter of 2024. Our settled derivatives increased our realized oil price per barrel by $0.75 and $1.03 in the first quarter of 2025 and 2024, respectively. Our average first quarter 2025 realized oil price per barrel after reflecting settled derivatives was $64.93 compared to $71.65 during the same period in 2024. The average first quarter 2025 NYMEX natural gas price was $4.14 per MMBtu, or 93% higher than the average NYMEX price per MMBtu in the first quarter of 2024. In the first quarter of 2025 and 2024, we had no realized natural gas derivative settlements and our realized natural gas price was $2.81 per Mcf and $1.93 per Mcf, respectively.

Current wording

The average second quarter 2025 oil price was $63.55 per barrel or 21% lower than the average oil price per barrel in the second quarter of 2024. Our settled derivatives increased our realized oil price per barrel by $4.71 in the second quarter of 2025 and decreased our realized oil price per barrel by $1.21 during the second quarter of 2024. Our average second quarter 2025 realized oil price per barrel after reflecting settled derivatives was $64.21 compared to $73.42 during the same period in 2024. The average second quarter 2025 NYMEX natural gas price was $3.19 per MMBtu, or 54% higher than the average NYMEX price per MMBtu in the second quarter of 2024. In the second quarter 2025 and 2024, we had no material natural gas price derivatives in place and our realized natural gas price was $4.17 per Mcf and $1.11 per Mcf, respectively.

Previous wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $66.2 million for the three months ended March 31, 2025 from $61.2 million for the three months ended March 31, 2024. The increase in oil and natural gas revenue was due to a 18% increase in production volumes, driven by acquisition and development activity (including the Lucero Acquisition), which was partially offset by a 8% decrease in the average realized prices per Boe before hedging for the three months ended March 31, 2025. The increase in production volumes increased oil and natural gas revenue by approximately $10.1 million, while the decrease in average realized prices per Boe before hedging decreased oil and natural gas revenue by approximately $5.1 million.

Current wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $81.8 million for the three months ended June 30, 2025 from $66.6 million for the three months ended June 30, 2024. The increase in oil and natural gas revenue was due to a 40% increase in production volumes, driven by acquisition and development activity (including the Lucero Acquisition), which was partially offset by a 13% decrease in the average realized prices per Boe before hedging for the three months ended June 30, 2025. The increase in production volumes increased oil and natural gas revenue by approximately $23.5 million, while the decrease in average realized prices per Boe before hedging decreased oil and natural gas revenue by approximately $8.3 million.

Previous wording

Our oil price differential to the weighted average benchmark price during the three months ended March 31, 2025 was negative $6.72 per barrel, as compared to a negative $6.47 per barrel during the three months ended March 31, 2024, primarily due to less favorable local market pricing as compared to the benchmark price. Our net realized natural gas price during the three months ended March 31, 2025 was $2.81 per Mcf, representing a 68% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $1.93 per Mcf during the three months ended March 31, 2024, representing a 98% 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

During the three months ended June 30, 2025, $3.3 million and $13.6 million of recoupments of oil and gas revenue, respectively, were recognized as part of the settlement discussed in Note 9 (“Commitments and Contingencies”) to the Condensed Consolidated Financial Statements. Our oil price differential to the weighted average benchmark price during the three months ended June 30, 2025 was negative $4.17 per barrel, as compared to a negative $5.90 per barrel during the three months ended June 30, 2024, primarily due to the legal settlement increasing realized price per Bbl in the period, partially offset by less favorable local market pricing as compared to the benchmark price. Our net realized natural gas price during the three months ended June 30, 2025 was $4.17 per Mcf, representing a 130% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $1.11 per Mcf during the three months ended June 30, 2024, representing a 52% realization relative to weighted average NYMEX natural gas price. The higher realized price was primarily due to the legal settlement increasing realized price per Mcf in the period. Fluctuations in our natural gas price differentials and realizations are generally 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 passes through these costs in a different manner.

Previous wording

Production Tax Expense. Total production taxes was $5.8 million for the three months ended March 31, 2025 and 2024. 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 8.7% and 9.5% for the three months ended March 31, 2025 and 2024, respectively. The decrease in the production tax rate for the three months ended March 31, 2025 was due to a lower 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 $6.2 million for the three months ended June 30, 2025 from $5.4 million for the three months ended June 30, 2024. 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 7.6% and 8.1% for the three months ended June 30, 2025 and 2024, respectively. The production tax rate was lower for the three months ended June 30, 2025 due to the legal settlement increasing revenue in the period.

Previous wording

General and Administrative Expense. General and administrative expense increased to $12.1 million for the three months ended March 31, 2025 from $5.4 million for the three months ended March 31, 2024. General and administrative expense on a per Boe basis increased to $9.00 for the three months ended March 31, 2025 from $4.70 for the three months ended March 31, 2024. The increase in general and administrative expense was primarily due to Lucero Acquisition transaction costs of $4.6 million. Excluding these costs the per Boe rate for the three months ended March 31, 2025 would have been $5.57.

Current wording

General and Administrative Expense. General and administrative expense decreased to $0.3 million for the three months ended June 30, 2025 from $4.7 million for the three months ended June 30, 2024. During the three months ended June 30, 2025, $7.1 million of litigation costs were reimbursed as a result of the settlement discussed in Note 9 (“Commitments and Contingencies”) to the Condensed Consolidated Financial Statements. Excluding net litigation costs and Lucero Acquisition transaction costs of $0.3 million, general and administrative expense on a per Boe basis decreased to $3.47 for the three months ended June 30, 2025 from $3.84 for the three months ended June 30, 2024. The decrease in per BOE cost is associated with a 40% increase in production between periods.

Previous wording

For the three months ended March 31, 2025, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $19.56 per Boe compared with $20.44 per Boe for the three months ended March 31, 2024.

Current wording

For the three months ended June 30, 2025, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $19.88 per Boe compared with $20.45 per Boe for the three months ended June 30, 2024.

Previous wording

Equity-Based Compensation. During the three months ended March 31, 2025, equity-based compensation expense increased to $2.5 million from $1.6 million during the three months ended March 31, 2024. Equity-based compensation expense was higher in 2025 due to additional LTIP RSUs and PSUs awarded to employees and directors in 2024 and 2025 at higher grant date prices.

Current wording

Equity-Based Compensation. During the three months ended June 30, 2025, equity-based compensation expense increased to $2.4 million from $2.0 million during the three months ended June 30, 2024. Equity-based compensation expense was higher in 2025 due to additional LTIP RSUs and PSUs awarded to employees and directors at a higher grant date price.

Previous wording

Interest Expense. Interest expense increased to $2.9 million for the three months ended March 31, 2025 from $2.2 million for the three months ended March 31, 2024. The increase for the three months ended March 31, 2025 was primarily due to the debt balance increasing to $117.0 million from $98.0 million at March 31, 2024.

Current wording

Interest Expense. Interest expense decreased to $2.5 million for the three months ended June 30, 2025 from $2.6 million for the three months ended June 30, 2024. The decrease for the three months ended June 30, 2025 was due to the debt balance decreasing to $106.0 million from $115.0 million at June 30, 2024.

Previous wording

Commodity Derivative (Loss), Net. The net commodity derivative loss was $0.2 million for the three months ended March 31, 2025 compared with a loss of $13.8 million for the three months ended March 31, 2024. (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 Gain, Net. The commodity derivative gain was $18.5 million for the three months ended June 30, 2025 compared with a gain of $0.4 million for the three months ended June 30, 2024. Gain (Loss) 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 were relatively flat during the three months ended March 31, 2025 as compared to oil price increases during the three months ended March 31, 2024.

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.

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), 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, 2025, approximately 65% 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. 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.

Current wording

In the three months ended June 30, 2025, approximately 58% of our oil volumes and no material natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $5.3 million. 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.

Previous wording

At March 31, 2025, all of our derivative contracts were recorded at their fair value, which was a net asset of $2.7 million, a decrease in value of $1.0 million from the $3.7 million net asset recorded as of December 31, 2024.

Current wording

At June 30, 2025, all of our derivative contracts were recorded at their fair value, which was a net asset of $15.9 million, an increase in value of $13.2 million from the $2.7 million net asset recorded as of March 31, 2025. The increase was primarily due to decreases in forward commodity prices relative to prices on our open commodity derivative contracts.

Previous wording

During the three months ended March 31, 2025 and 2024, we recorded an income tax benefit of $0.2 million and $0.7 million, respectively, related to federal and state income taxes.

Current wording

Income Tax Expense. During the three months ended June 30, 2025, we recorded an income tax expense of $9.9 million related to federal and state income taxes compared to an income tax expense of $3.7 million for the three months ended June 30, 2024.

Previous wording

DD&A. DD&A increased to $26.6 million for the three months ended March 31, 2025 compared with $23.5 million for the three months ended March 31, 2024. The increase of $3.0 million, or 13%, was the result of an 18% increase in production partially offset by a $0.89 per Boe decrease in the DD&A rate for the three months ended March 31, 2025 compared with the three months ended March 31, 2024. The lower DD&A rate was driven by the properties acquired in the Lucero Acquisition in 2025. The increase in production accounted for a $4.0 million increase in DD&A expense while the decrease in the DD&A rate accounted for a $1.0 million decrease in DD&A expense.

Current wording

DD&A. DD&A increased to $61.1 million for the six months ended June 30, 2025 compared with $48.9 million for the six months ended June 30, 2024. The increase was the result of a 30% increase in production, partially offset by a $0.70 per Boe decrease in the DD&A rate for the six months ended June 30, 2025 compared with the six months ended June 30, 2024. The lower DD&A rate was driven by the properties acquired in the Lucero Acquisition in 2025. The increase in production accounted for a $14.0 million increase in DD&A expense while the decrease in the DD&A rate accounted for a $1.7 million decrease in DD&A expense.

Previous wording

Overview. At March 31, 2025, we had $4.5 million of cash and cash equivalents on hand and $133.00 million available under the elected commitments in our Revolving Credit Facility. At December 31, 2024, we had $3.0 million of unrestricted cash on hand and $118.00 million available under the elected commitments 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 proceeds from equity or debt offerings 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, 2025, we had $2.0 million of unrestricted cash on hand and $144.0 million available under the elected commitments in our Revolving Credit Facility. At December 31, 2024, we had $3.0 million of unrestricted cash on hand and $118.0 million available under the elected commitments 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, availability under the Revolving Credit Facility and proceeds from equity or debt offerings 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, 2025, the working capital deficit of $26.2 million, narrowed from a deficit of $49.4 million at December 31, 2024. Current assets increased by $19.5 million while current liabilities decreased by $3.7 million at March 31, 2025, compared to December 31, 2024. The increase in current assets during the three months ended March 31, 2025 was primarily due to an increase of $16.8 million in revenue receivable due to an increase in revenue between periods and the timing of revenue receipts from operators. The change in current liabilities during the three months ended March 31, 2025 was mostly due to a decrease of $5.1 million in accounts payable and accrued liabilities as a result of paying down accrued oil and gas development costs and accrued employee compensation, partially offset by an increase of $1.3 million in current derivative instrument liabilities.

Current wording

At June 30, 2025, we had a working capital deficit of $3.8 million, compared to a deficit of $49.4 million at December 31, 2024. Current assets increased by $17.1 million while current liabilities decreased by $28.6 million at June 30, 2025, compared to December 31, 2024. The increase in current assets during the six months ended June 30, 2025 was primarily due to an increase of $10.4 million in our current commodity derivative instruments due to the change in fair value and a $7.2 million increase in revenue receivable due to increased production. The decrease in current liabilities during the six months ended June 30, 2025 was mostly due to a decrease of $28.5 million in accounts payable and accrued liabilities as a result of paying accrued oil and gas development costs and accrued employee compensation.

Previous wording

Cash Flows. Our cash flows for the three months ended March 31, 2025 and 2024 are presented below:

Current wording

Cash Flows. Our cash flows for the six months ended June 30, 2025 and 2024 are presented below:

Previous wording

During the three months ended March 31, 2025, we generated $17.5 million of cash from operating activities, a 56% decrease from the three months ended March 31, 2024. 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, 2025, we generated $83.5 million of cash from operations, a $8.9 million increase from the six months ended June 30, 2024. 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.

Previous wording

Cash used in investing activities during the three months ended March 31, 2025 was $30.4 million compared to $32.2 million during the three months ended March 31, 2024. The $1.8 million decrease was related to lower acquisition activity between periods, partially offset by higher development activity. Cash used in investing activities primarily relates to capital expenditures for acquisition and development costs. 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 $1.5 million and $6.8 million, during the three months ended March 31, 2025 and 2024, respectively, with the decrease attributed to lower activity levels in the lower commodity price environment.

Current wording

Cash used in investing activities during the six months ended June 30, 2025 was $66.1 million compared to $69.9 million during the six months ended June 30, 2024. The $3.8 million decrease was primarily related to lower acquisition activity between periods, partially offset by higher development activity. Cash used in investing activities primarily relates to capital expenditures for acquisition and development costs. 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 $1.6 million and $19.9 million, during the six months ended June 30, 2025 and 2024, respectively, with the decrease attributed to lower activity levels in the lower commodity price environment.

Previous wording

Cash provided by and used in financing activities was $14.4 million and $6.4 million during the three months ended March 31, 2025 and 2024, respectively. The cash provided by financing activities during the three months ended March 31, 2025 was related to $49.8 million in cash acquired in the Lucero Acquisition, partially offset by $26.0 million in dividends paid and the $9.2 million value of retained shares paid to fund employee tax withholding in connection with the vesting of restricted stock units. During the three months ended March 31, 2024, we had net borrowings of $17.0 million under our Revolving Credit Facility that was offset by $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.

Current wording

Cash used in financing activities was $18.4 million and $5.1 million during the six months ended June 30, 2025 and 2024, respectively. The cash used in financing activities during the six months ended June 30, 2025 was related to $47.8 million in dividends paid, $11.0 million of net repayments under our Revolving Credit Facility and the $9.2 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 $49.8 million in cash acquired in the Lucero Acquisition. 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.

Previous wording

Our long-term material cash requirements from currently known obligations include settlements on our outstanding commodity derivative contracts, future obligations to plug, abandon and remediate our oil and gas properties at the end of their productive lives, and operating lease obligations. We cannot provide specific timing for repayments of outstanding borrowings on our Revolving Credit Facility, or the associated interest payments, as the timing and amount of borrowings and repayments cannot be forecasted with certainty and are based on working capital requirements, commodity prices and acquisition and divestiture activity, among other factors. We cannot provide specific timing for other current and long-term liability obligations where we cannot forecast with certainty the amount and timing of such payments, including asset retirement obligations, as the plugging and abandonment of wells is at ours and the discretion of the operators and any amounts we may be obligated to pay under our derivative contracts, as such payments are dependent on commodity prices in effect at the time of settlement. See Note 4 (“Fair Value Measurements”) to the Condensed Consolidated Financial Statements for further information on these contracts and their fair values as of March 31, 2025, which fair values represent the estimated cash settlement amount required to terminate such instruments based on forward price curves for commodities as of that date.

Current wording

Our long-term material cash requirements from currently known obligations include settlements on our outstanding commodity derivative contracts, future obligations to plug, abandon and remediate our oil and gas properties at the end of their productive lives, and operating lease obligations. We cannot provide specific timing for repayments of outstanding borrowings on our Revolving Credit Facility, or the associated interest payments, as the timing and amount of borrowings and repayments cannot be forecasted with certainty and are based on working capital requirements, commodity prices and acquisition and divestiture activity, among other factors. We cannot provide specific timing for other current and long-term liability obligations where we cannot forecast with certainty the amount and timing of such payments, including asset retirement obligations, as the plugging and abandonment of wells is at our discretion and the discretion of the operators and any amounts we may be obligated to pay under our derivative contracts, as such payments are dependent on commodity prices in effect at the time of settlement. See Note 4 (“Fair Value Measurements”) to the Condensed Consolidated Financial Statements for further information on these contracts and their fair values as of June 30, 2025, which fair values represent the estimated cash settlement amount required to terminate such instruments based on forward price curves for commodities as of that date.

Previous wording

Dividends. We paid cash dividends to our equity holders of $26.0 million during the three months ended March 31, 2025. While we believe that our future cash flows from operations will be able to sustain future 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 $47.8 million during the six months ended June 30, 2025. While we believe that our future cash flows from operations will be able to sustain future 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, 2025, total capital expenditures was $30.4 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 and which may be financed through equity consideration, like the Lucero Acquisition. 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, 2025, total capital expenditures was $66.1 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 and which may be financed through equity consideration, like the Lucero Acquisition. 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

The critical accounting policies and estimates used in preparing our interim condensed consolidated financial statements for the three months ended March 31, 2025 are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2024 except as follows.

Current wording

The critical accounting policies and estimates used in preparing our interim condensed consolidated financial statements for the three and six months ended June 30, 2025 are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2024 except as follows.

Previous wording

A description of our significant accounting policies and fair value measurements is included in Note 2 (“Significant Accounting Policies”) and Note 4 (“Fair Value Measurements”), respectively, to the Condensed Consolidated Financial Statements set forth in Part I, Item 1.

Current wording

A description of our significant accounting policies and fair value measurements is included in Note 2 (“Significant Accounting Policies”) and Note 4 (“Fair Value Measurements”), respectively, to the Condensed Consolidated Financial Statements set forth in Part I, Item 1 Financial Statements.

Previous wording

For discussion of recently issued or adopted accounting pronouncements, see Note 2 (“Significant Accounting Policies”) to the Condensed Consolidated Financial Statements set forth in Part I, Item 1.

Current wording

For discussion of recently issued or adopted accounting pronouncements, see Note 2 (“Significant Accounting Policies”) to the Condensed Consolidated Financial Statements set forth in Part I, Item 1 Financial Statements.