Table of Contents (Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File Number 0-7406 PrimeEnergy Resources Corporation Delaware 84-0637348 (State or ...

Part I—Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2022 financials show a significant turnaround to a net income of $11.1 million from a prior-year loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to $205.5 million while total equity increased to $109.4 million due to debt reduction Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $24,999 | $25,328 | | **Total Assets** | **$205,487** | **$210,914** | | **Total Current Liabilities** | $30,189 | $21,720 | | **Long-Term Bank Debt** | $9,000 | $36,000 | | **Total Liabilities** | **$96,087** | **$111,823** | | **Total Equity** | **$109,400** | **$99,091** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net income of $11.1 million in Q1 2022, a reversal from a $1.5 million loss in Q1 2021 Q1 Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenues | $26,213 | $13,004 | | Total Costs and Expenses | $25,571 | $14,398 | | Gain on Sale of Assets | $13,991 | $— | | Income (Loss) from Operations | $14,633 | $(1,394) | | **Net Income (Loss)** | **$11,142** | **$(1,457)** | | **Basic EPS** | **$5.62** | **$(0.73)** | | **Diluted EPS** | **$4.07** | **$(0.73)** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow nearly doubled to $9.4 million, while financing activities used $27.8 million for debt repayment Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $9,355 | $4,732 | | Net Cash from Investing Activities | $12,207 | $(660) | | Net Cash from Financing Activities | $(27,833) | $(1,050) | | **Net (Decrease) Increase in Cash** | **$(6,271)** | **$3,022** | | **Cash at End of Period** | **$4,076** | **$4,018** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail a $14.0 million asset sale, credit facility status, and a significant increase in derivative liabilities - In Q1 2022, the company sold 1,809 net leasehold acres in Reagan and Midland Counties, Texas, for **gross proceeds of $14.0 million**[22](index=22&type=chunk) - As of March 31, 2022, the company had **$9 million outstanding** on its revolving credit facility at a weighted-average interest rate of 6.74%, with **$41 million available** for future borrowings[26](index=26&type=chunk)[27](index=27&type=chunk) Fair Value of Derivative Instruments (in thousands) | Type | Balance Sheet Location | March 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Asset Derivatives | Derivative asset short-term | $36 | $— | | Liability Derivatives | Derivative liability short/long-term | $(12,761) | $(5,585) | | **Total Net Derivative Instruments** | | **$(12,725)** | **$(5,585)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operation) Higher production and commodity prices drove a 167% increase in oil and gas sales, funding a $76 million drilling program [Overview and Strategy](index=15&type=section&id=Overview%20and%20Strategy) The company focuses on developing long-lived oil and gas reserves in Texas and Oklahoma through horizontal drilling - The company is engaged in acquiring, developing, and producing oil and natural gas, with properties primarily in **Texas and Oklahoma**[51](index=51&type=chunk) - The company's strategy is to build stockholder value by **growing its oil and gas reserve base cost-efficiently**, assuming the role of operator where possible[52](index=52&type=chunk) - Acreage in the Permian Basin and Oklahoma holds significant potential for horizontal drilling, with plans for up to **250 additional wells in Texas** and **5 in Oklahoma**[56](index=56&type=chunk) [District and Reserve Information](index=16&type=section&id=District%20and%20Reserve%20Information) Total proved reserves were 12,252 MBoe as of year-end 2021, with the West Texas region accounting for 73% Proved Reserves by Region (as of Dec 31, 2021) | Region | Proved Reserves (MBoe) | % of Total | Average Net Daily Production (Boe/day) | | :--- | :--- | :--- | :--- | | Gulf Coast | 906 | 7% | 336 | | Mid-Continent | 2,383 | 20% | 747 | | West Texas | 8,957 | 73% | 2,878 | | **Total** | **12,252** | **100%** | **3,964** | Total Proved Reserves (MBoe) | Year-End | Proved Developed | Proved Undeveloped | Total | | :--- | :--- | :--- | :--- | | 2019 | 10,268 | 3,608 | 14,235 | | 2020 | 7,214 | 3,221 | 10,435 | | 2021 | 12,252 | — | 12,252 | Standardized Measure of Discounted Cash Flow (in thousands) | As of December 31, | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Standardized Measure | $135,806 | $41,619 | $81,612 | [Recent Activities and Drilling Program](index=19&type=section&id=Recent%20Activities%20and%20Drilling%20Program) The 2022 drilling program includes 31 horizontal wells across Texas and Oklahoma with various partners - The company's strategy is to develop its extensive oil and gas reserves primarily through **horizontal drilling**[84](index=84&type=chunk) - To date in 2022, the company has participated in drilling **eight horizontal wells** (four in Texas, four in Oklahoma), with an additional **23 wells planned** for the second half of 2022[88](index=88&type=chunk) - The company is developing a 3,260-acre block in Upton County, Texas, with partner Apache Corporation, with potential for up to **54 additional horizontal wells**[89](index=89&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q1 2022 net income reached $11.1 million, driven by a 167% increase in oil and gas sales Q1 Production Volumes and Average Sales Prices | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Barrels of Oil Produced (thousands) | 273 | 163 | 67.5% | | Average Oil Price Received | $96.36 | $56.87 | 69.4% | | Mcf of Gas Sold (thousands) | 777 | 665 | 16.8% | | Average Gas Price Received | $4.82 | $2.49 | 93.4% | | **Total Oil & Gas Revenue (in 000's)** | **$33,902** | **$12,673** | **167.5%** | - The company recorded total **derivative losses of $11.0 million** in Q1 2022, consisting of $7.1 million in unrealized losses and $3.8 million in realized losses[100](index=100&type=chunk)[101](index=101&type=chunk) - General and administrative expense **increased 235% to $6.7 million** in Q1 2022 from $2.0 million in Q1 2021, primarily due to increased employee compensation and benefits[106](index=106&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by operating cash flow, asset sales, and a $50 million credit facility - Primary sources of liquidity are cash from operations, field services, and sales of acreage, providing **$23.3 million in Q1 2022**[109](index=109&type=chunk) - The company maintains a credit agreement with a current **borrowing base of $50 million**, which is expected to increase by ~50% in the June 2022 review[115](index=115&type=chunk) - The company plans to invest approximately **$76 million in 31 horizontal wells** in 2022 and repurchased **$833 thousand of its stock** in Q1 2022[114](index=114&type=chunk)[118](index=118&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, no disclosure is required for this item - The Company is a **smaller reporting company** and no response is required pursuant to this Item[119](index=119&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures are effective with no material changes - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures are **effective**[120](index=120&type=chunk) - **No material changes** occurred in the Company's internal control over financial reporting during the first three months of 2022[121](index=121&type=chunk) Part II - Other Information [Item 1. Legal Proceedings & Item 1A. Risk Factors](index=24&type=section&id=Item%201.%20Legal%20Proceedings%20%26%20Item%201A.%20Risk%20Factors) The company reports no legal proceedings and is exempt from providing risk factor disclosures - There are **no legal proceedings** to report[124](index=124&type=chunk) - As a **smaller reporting company**, no response is required for Risk Factors[125](index=125&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 11,188 shares for approximately $833,000 in Q1 2022 under its buyback program Q1 2022 Stock Repurchase Activity | Month (2022) | Number of Shares | Average Price Paid per share | | :--- | :--- | :--- | | January | 2,981 | $76.21 | | February | 5,948 | $73.26 | | March | 2,259 | $75.36 | | **Total/Average** | **11,188** | **$74.48** | - Through March 31, 2022, a total of **3,565,567 shares have been repurchased** under the program for **$75.9 million** at an average price of $21.29 per share[127](index=127&type=chunk) [Other Items (3, 4, 5, 6)](index=24&type=section&id=Other%20Items%20(3,%204,%205,%206)) No defaults upon senior securities were reported, and exhibits filed with the report are listed - There were **no defaults upon senior securities** or other information to report[128](index=128&type=chunk) - Item 6 lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and officer certifications[129](index=129&type=chunk)

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) PrimeEnergy is an independent oil and gas company focused on acquiring, developing, and producing resources in Texas and Oklahoma [General](index=4&type=section&id=General) - PrimeEnergy Resources Corporation was incorporated in Delaware in March 1973 as an independent oil and gas company[15](index=15&type=chunk) - The company's principal business is the acquisition, development, and production of oil and gas resources, with assets in Texas and Oklahoma[16](index=16&type=chunk) - Through its subsidiaries, the company provides operational and well servicing support for its own and third-party onshore oil and gas wells[16](index=16&type=chunk) [Exploration, Development and Recent Activities](index=4&type=section&id=Exploration%2C%20Development%20and%20Recent%20Activities) - The company's strategy is to develop its extensive oil and gas reserves through horizontal drilling, targeting reservoirs with high initial production and cash flow[17](index=17&type=chunk) - In 2022, the company will continue to focus on maintaining financial flexibility and sufficient liquidity, with a capital budget based on expected cash flow[18](index=18&type=chunk) 2021 Completed Horizontal Wells | Location | Operator | Wells | Company Interest | | :--- | :--- | :--- | :--- | | Upton County, TX | Apache | 9 | Average 47.5% | | Canadian County, OK | Ovintiv Mid-Continent Inc. | 3 | 11.25% | - Since initiating its West Texas horizontal drilling program in 2015, the company has participated in **77 horizontal wells** in the Permian Basin with a total investment of approximately **$129 million** as of Q4 2021[20](index=20&type=chunk) - The company plans to develop up to **54 additional horizontal wells** on its 3,260-acre block in Upton County, Texas, with an estimated company share cost of approximately **$170.8 million**[21](index=21&type=chunk) - In Oklahoma's Scoop/Stack Play, the company holds approximately 6,200 net leasehold acres, which could support up to **54 new horizontal wells** with a company share capital expenditure of about **$36 million**[25](index=25&type=chunk)[26](index=26&type=chunk) [Significant Activity](index=6&type=section&id=Significant%20Activity) Key Oil and Gas Asset Data for 2021 | Metric | Amount/Quantity | | :--- | :--- | | Net Capitalized Cost of Proved Oil and Gas Properties | $179.7 million | | Total 2021 Expenditures for Acquisition, Exploration, and Development | $18.7 million | | Proved Reserves at December 31, 2021 | 12.5 MMBOE (100% developed) | | Horizontal Wells Participated in Drilling in 2021 | 7 (Gross) | | Horizontal Wells Completed in 2021 | 12 (Gross) | - In 2021, the company sold 116 net acres in Martin County, Texas, for total proceeds of approximately **$1.45 million**[30](index=30&type=chunk) - In Q1 2022, the company sold 1,809 net leasehold acres in Reagan and Midland Counties, Texas, for **$14.1 million**, reducing bank debt to **$9 million**[31](index=31&type=chunk) - The company aims to be the operator in all producing property acquisitions and actively seeks to acquire income-producing properties to grow its net asset and reserve base[33](index=33&type=chunk) [Well Operations](index=7&type=section&id=Well%20Operations) - The company currently operates **710 wells**, including producing, saltwater disposal, injection, and water supply wells, managed primarily from its Houston, Midland, and Oklahoma City offices[38](index=38&type=chunk) - As an operator, the company receives monthly fees and reimbursements for well operating expenses under operating agreements[39](index=39&type=chunk) [The Partnerships, Trusts and Joint Ventures](index=7&type=section&id=The%20Partnerships%2C%20Trusts%20and%20Joint%20Ventures) - As of 2021, all of the company's remaining partnerships and trusts have been liquidated[40](index=40&type=chunk) [Regulation](index=7&type=section&id=Regulation) - The company's operations are heavily impacted by federal, state, and local laws, with non-compliance potentially leading to substantial penalties and increased operating costs[41](index=41&type=chunk) - Oil and gas production is subject to regulations governing price controls, taxes, drilling permits, well spacing, drilling methods, water use, and well abandonment[42](index=42&type=chunk) - Commodity sales prices are currently unregulated, but transportation prices and conditions are extensively regulated by FERC and state authorities[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Operations must comply with strict environmental, emissions, and occupational safety laws, which may require permits, limit discharges, and impose liability for pollution[58](index=58&type=chunk) - Hydraulic fracturing activities face increasing federal and state regulatory scrutiny, which could lead to increased costs, operational restrictions, or drilling delays[75](index=75&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - Regulation of greenhouse gas (GHG) emissions could result in increased operating costs, reduced demand for oil and gas, and limited access to financing[71](index=71&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Competition and Markets](index=16&type=section&id=Competition%20and%20Markets) - The business of acquiring oil and gas properties and leases is highly competitive, with many competitors possessing greater financial and personnel resources[86](index=86&type=chunk) - Market prices for oil and gas are volatile, influenced by supply and demand, domestic production, imports, pipeline availability, and global economic conditions[87](index=87&type=chunk)[88](index=88&type=chunk) - The company uses a hedging program to mitigate cash flow risk, which may also limit potential gains from rising oil and gas prices[89](index=89&type=chunk) [Major Customers](index=17&type=section&id=Major%20Customers) Major Oil and Gas Purchasers in 2021 | Purchaser | Share of 2021 Oil Sales | Share of 2021 Gas Sales | | :--- | :--- | :--- | | Apache Corporation | 48% | 52% | | Plains All American Inc. | 18% | - | | Targa Pipeline Mid-Continent West Tex, LLC | - | 19% | - Despite having no long-term purchase agreements, the company believes these purchasers will continue to buy its products and can be replaced by others if necessary[91](index=91&type=chunk) [Employees](index=17&type=section&id=Employees) - As of December 31, 2021, the company had **113 full-time employees**, with 31 in corporate offices and 82 in field operations[92](index=92&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from commodity price volatility, operational hazards, regulatory changes, and market competition - **Highly volatile oil and gas prices** significantly impact revenue, operating results, and financing capabilities, with sustained declines potentially leading to reserve write-downs[93](index=93&type=chunk)[94](index=94&type=chunk)[98](index=98&type=chunk) - Global economic uncertainty, energy costs, geopolitical issues, and inflation could adversely affect the company's operating results, liquidity, and financial condition[99](index=99&type=chunk) - Drilling oil and gas wells is a **high-risk activity** that may result in non-commercial reservoirs and can be delayed or canceled due to uncontrollable factors[107](index=107&type=chunk)[108](index=108&type=chunk][109](index=109&type=chunk) - **Reserve estimates are subjective and uncertain**, and significant inaccuracies could lead to an overstatement of reserve quantities and their net present value[112](index=112&type=chunk)[115](index=115&type=chunk) - The company has substantial capital requirements and may be unable to obtain necessary financing on satisfactory terms, potentially limiting liquidity[121](index=121&type=chunk)[123](index=123&type=chunk) - **Negative public perception** regarding hydraulic fracturing, oil spills, and GHG emissions may lead to increased regulatory scrutiny, operational delays, and litigation risk[126](index=126&type=chunk) - Operations are subject to stringent environmental, oil and gas, and occupational health and safety laws, which can cause delays, restrictions, and significant costs[138](index=138&type=chunk)[142](index=142&type=chunk) - **Climate change risks**, including regulatory, political, and financial factors, could increase operating costs, limit production areas, and reduce demand for oil and gas[147](index=147&type=chunk)[152](index=152&type=chunk) - The company has limited control over non-operated properties, and operator failures could reduce production and revenue[157](index=157&type=chunk) - The industry is **highly competitive**, with many rivals possessing superior financial and technical resources that could adversely affect the company's competitive position[160](index=160&type=chunk) - **Technology system failures or cyber-attacks** could severely impact operations by delaying transactions, compromising confidential data, or damaging the company's reputation[166](index=166&type=chunk)[167](index=167&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) As a smaller reporting company, no response is required for this item - The company is a smaller reporting company and is therefore not required to respond to this item[168](index=168&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) The company holds oil and gas assets in Texas and Oklahoma, with detailed disclosures on drilling, production, and reserves [Exploratory and Development Drilling Experience](index=32&type=section&id=Exploratory%20and%20Development%20Drilling%20Experience) Exploratory and Development Drilling Activity 2019-2021 (Gross and Net Wells) | Category | 2021 Gross Wells | 2021 Net Wells | 2020 Gross Wells | 2020 Net Wells | 2019 Gross Wells | 2019 Net Wells | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Exploratory: Oil | — | — | — | — | — | — | | Exploratory: Gas | — | — | — | — | — | — | | Exploratory: Dry | — | — | — | — | — | — | | Development: Oil | 12 | 4.61 | 1 | 0.1 | 18 | 1.6 | | Development: Gas | — | — | — | — | — | — | | Development: Dry | — | — | — | — | — | — | | **Total** | **12** | **4.61** | **1** | **0.1** | **18** | **1.6** | [Oil and Gas Production](index=32&type=section&id=Oil%20and%20Gas%20Production) Productive Well Ownership at December 31, 2021 | Well Type | Gross Wells | Net Wells | | :--- | :--- | :--- | | Oil Wells | 926 | 498 | | Gas Wells | 281 | 66 | Net Production of Oil, NGLs, and Natural Gas 2019-2021 | Product | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Oil (Bbls) | 738,000 | 726,996 | 1,242,000 | | NGLs (Bbls) | 416,000 | 435,260 | 574,000 | | Natural Gas (Mcf) | 3,236,000 | 3,374,397 | 4,397,000 | Average Sales Prices and Production Costs 2019-2021 | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Average Oil Sales Price ($/Bbl) | $68.39 | $38.02 | $55.04 | | Average NGL Sales Price ($/Bbl) | $26.97 | $11.22 | $15.87 | | Average Gas Sales Price ($/Mcf) | $3.53 | $1.24 | $1.49 | | Average Production Cost ($/BOE) | $13.76 | $12.25 | $11.52 | Average Sales Prices Including Derivative Effects 2019-2021 | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Average Oil Sales Price ($/Bbl) | $64.04 | $45.79 | $53.58 | | Average NGL Sales Price ($/Bbl) | $26.97 | $11.22 | $16.49 | | Average Gas Sales Price ($/Mcf) | $2.97 | $1.38 | $1.51 | [Acreage](index=33&type=section&id=Acreage) Developed and Undeveloped Acreage at December 31, 2021 | Category | Gross Acres | Net Acres | | :--- | :--- | :--- | | Developed Leases | 90,933 | 25,358 | | Developed Mineral Interests | 1,640 | 117 | | Undeveloped Leases | — | — | | Undeveloped Mineral Interests | 19,257 | 417 | | **Total** | **111,830** | **25,892** | [Total Net Undeveloped Acreage Expiration](index=33&type=section&id=Total%20Net%20Undeveloped%20Acreage%20Expiration) - As of December 31, 2021, zero net undeveloped acres are set to expire in the next three years (2022-2024)[182](index=182&type=chunk) [Reserves](index=33&type=section&id=Reserves) - The company's proved developed and undeveloped oil and gas reserves are evaluated by Ryder Scott Company, L.P., and overseen by an internal team of experienced engineers and geologists[183](index=183&type=chunk)[184](index=184&type=chunk) Proved Reserves Summary 2019-2021 | Reserve Category | 2021 (MBOE) | 2020 (MBOE) | 2019 (MBOE) | | :--- | :--- | :--- | :--- | | Proved Developed | 12,252 | 7,214 | 10,268 | | Proved Undeveloped | — | 3,221 | 3,608 | | **Total** | **12,252** | **10,435** | **14,235** | - In 2021, the company drilled and completed 3 horizontal wells and completed 6 wells drilled in 2020 in partnership with Apache on the Kashmir block in Upton County, Texas, holding an average **47.8% interest** with an investment of approximately **$30 million**[188](index=188&type=chunk) - As of December 31, 2021, the company had **159 MBOE** of proved developed non-producing reserves, primarily from 3 horizontal wells in Canadian County, Oklahoma[193](index=193&type=chunk) PV-10 of Proved Reserves 2019-2021 | Metric | 2021 ($ thousands) | 2020 ($ thousands) | 2019 ($ thousands) | | :--- | :--- | :--- | :--- | | Future Net Revenues | 275,227 | 81,232 | 159,292 | | Present Value of Future Net Revenues at 10% (PV-10) | 171,906 | 56,539 | 100,031 | | Standardized Measure of Discounted Future Net Cash Flows | 135,806 | 41,619 | 81,612 | [District Information](index=36&type=section&id=District%20Information) Reserves and Well Information by District at December 31, 2021 | District | Proved Reserves (MBOE) | Avg. Daily Net Production (BOE/d) | Gross Producing Wells (WI and ORRI) | Net Producing Wells (WI only) | | :--- | :--- | :--- | :--- | :--- | | Gulf Coast | 906 | 336 | 207 | 105 | | Mid-Continent | 2,383 | 747 | 549 | 189 | | West Texas | 8,957 | 2,878 | 576 | 263 | | Other | 6 | 3 | 200 | 6 | | **Total** | **12,252** | **3,964** | **1,532** | **564** | - The Gulf Coast district is concentrated in southeast Texas, with over 11,500 gross acres (3,967 net acres) and operates a field service team[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - The Mid-Continent district is focused in central Oklahoma, with approximately 48,400 gross acres (10,802 net acres), and participates in third-party horizontal development[206](index=206&type=chunk) - The West Texas district is centered in the Permian Basin, with approximately 17,148 gross acres (10,639 net acres) and significant horizontal drilling potential for up to **180 additional wells**[208](index=208&type=chunk)[242](index=242&type=chunk) - As of March 31, 2022, the company plans to participate in drilling **4 horizontal wells** in the Mid-Continent district and **17 new horizontal wells** in the West Texas district[207](index=207&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company currently has no legal proceedings to disclose - The company currently has no legal proceedings to disclose[211](index=211&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[212](index=212&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "PNRG," with a stock repurchase program in place - The company's common stock is listed and traded on The Nasdaq Stock Market under the symbol "PNRG"[214](index=214&type=chunk) High and Low Prices for Common Stock 2020-2021 | Year | Quarter | High ($) | Low ($) | | :--- | :--- | :--- | :--- | | 2021 | First | 98.00 | 34.33 | | 2021 | Second | 53.72 | 39.89 | | 2021 | Third | 73.80 | 45.20 | | 2021 | Fourth | 71.71 | 58.50 | | 2020 | First | 154.38 | 47.68 | | 2020 | Second | 110.79 | 49.70 | | 2020 | Third | 79.13 | 62.60 | | 2020 | Fourth | 71.80 | 42.39 | - As of April 20, 2022, there were **224 registered holders** of the company's common stock[216](index=216&type=chunk) - The terms of the company's credit agreement restrict its ability to pay dividends[216](index=216&type=chunk) - The Board of Directors has authorized a stock repurchase program for a total of 3,700,000 shares; as of December 31, 2021, **3,554,379 shares** had been repurchased for **$75,079,717**[217](index=217&type=chunk) Issuer Purchases of Equity Securities in 2021 | Month | Shares Repurchased | Average Price per Share ($) | Shares Remaining in Plan | | :--- | :--- | :--- | :--- | | Jan-Nov | — | — | 147,721 | | Dec | 2,100 | 69.04 | 145,621 | | **Total/Average** | **2,100** | **69.04** | | [Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, no response is required for this item - The company is a smaller reporting company and is therefore not required to respond to this item[220](index=220&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company achieved profitability in 2021 due to higher commodity prices and actively manages liquidity to fund its capital programs [Overview](index=40&type=section&id=Overview) - The company is an independent oil and gas entity with producing and non-producing assets primarily in Texas and Oklahoma, along with substantial well servicing equipment[222](index=222&type=chunk) - The company aims to grow its oil and gas reserve base cost-effectively through the acquisition of income-producing properties to enhance shareholder value[223](index=223&type=chunk) - Cash flow is influenced by commodity prices, acquisition and drilling success, and operational performance, with derivative instruments used to manage price risk[224](index=224&type=chunk) [Market Conditions and Commodity Prices](index=41&type=section&id=Market%20Conditions%20and%20Commodity%20Prices) - The company's financial performance is primarily dependent on natural gas and crude oil prices and its ability to market production on economically favorable terms[226](index=226&type=chunk) - Commodity prices are affected by numerous external factors, and the company's realized prices are further influenced by derivative and hedging activities[226](index=226&type=chunk) [Critical Accounting Estimates](index=41&type=section&id=Critical%20Accounting%20Estimates) - Proved oil and gas reserves directly impact financial accounting estimates like DD&A, and their estimation is a complex and subjective process that may lead to material revisions[227](index=227&type=chunk) - Depreciation, depletion, and amortization (DD&A) of oil and gas properties are calculated using the units-of-production method, and revisions to reserve estimates will alter future expense rates[228](index=228&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's primary sources of liquidity are cash flows from operating activities, its well servicing business, and asset sales[229](index=229&type=chunk) Cash Flow from Operating Activities 2020-2021 | Metric | 2021 ($ millions) | 2020 ($ millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 28.6 | 16.4 | - Maintaining a strong balance sheet and ample liquidity is a key component of the company's business strategy, with the 2022 capital budget funded by expected cash flow[234](index=234&type=chunk) - The company's credit agreement, maturing February 11, 2023, provides a **$300 million** credit facility with a **$50 million** borrowing base; as of March 31, 2022, **$9 million** was outstanding[235](index=235&type=chunk) Commodity Swap Agreements 2022-2023 | Product | 2022 Volume | 2023 Volume | 2022 Price ($) | 2023 Price ($) | | :--- | :--- | :--- | :--- | :--- | | Natural Gas (MMBTU) | 1,528,000 | 377,000 | 3.15 | 3.87 | | Oil (Bbls) | 530,600 | 114,200 | 66.20 | 74.07 | - The company plans to develop up to **54 additional horizontal wells** in West Texas at a company share cost of approximately **$170 million** and drill multiple wells in other counties with a total investment of about **$57.85 million**[237](index=237&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - In 2021, the company generated approximately **$1.45 million** from leasehold sales; in Q1 2022, it sold 1,809 net leasehold acres for **$14.1 million**[245](index=245&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) - The company reported **net income of $2.1 million** ($1.05 per share) in 2021, compared to a net loss of $2.3 million ($1.16 per share) in 2020, primarily due to higher commodity prices[249](index=249&type=chunk) Oil, NGL, and Gas Sales and Price Changes 2020-2021 | Metric | 2021 | 2020 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Oil Sales ($ thousands) | 50,474 | 27,865 | 22,609 | 81.14% | | Gas Sales ($ thousands) | 11,432 | 4,202 | 7,230 | 172.06% | | NGL Sales ($ thousands) | 11,220 | 4,906 | 6,314 | 128.70% | | **Total Oil and Gas Sales ($ thousands)** | **73,126** | **36,973** | **36,153** | **97.78%** | | Average Oil Price ($/Bbl) | 68.39 | 38.02 | 30.38 | 79.91% | | Average Gas Price ($/Mcf) | 3.53 | 1.24 | 2.29 | 184.25% | | Average NGL Price ($/Bbl) | 26.97 | 11.22 | 15.75 | 140.36% | Gains and Losses on Derivative Instruments 2020-2021 | Derivative Type | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Oil Derivatives – Realized (Loss) Gain | (3,212) | 5,697 | | Oil Derivatives – Unrealized (Loss) Gain | (4,055) | 161 | | **Total Oil Derivative Loss (Gain)** | **(7,267)** | **5,858** | | Gas Derivatives – Realized (Loss) Gain | (1,833) | 476 | | Gas Derivatives – Unrealized (Loss) | (859) | (351) | | **Total Gas Derivative Loss (Gain)** | **(2,692)** | **125** | | **Total Oil and Gas Derivative Loss (Gain)** | **(9,959)** | **5,983** | - Field service revenues **increased 6.3% to $11.8 million** in 2021, driven by higher equipment utilization and rates due to improved commodity prices[255](index=255&type=chunk) - Lease operating expenses **increased 20.9% to $27.8 million** in 2021, mainly due to bringing higher-cost properties back online and increased production taxes[256](index=256&type=chunk) - General and administrative expenses **decreased 30.7% to $10.4 million** in 2021, reflecting cost-cutting measures implemented in 2020 in response to the commodity price downturn[259](index=259&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, no response is required for this item - The company is a smaller reporting company and is therefore not required to respond to this item[263](index=263&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements and supplementary information are included in this report, indexed on page F-1 - The consolidated financial statements and supplementary information can be found in the index on page F-1 of this report[264](index=264&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company has had no changes in or disagreements with its accountants - The company has had no changes in or disagreements with its accountants on accounting and financial disclosures[265](index=265&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021 - As of December 31, 2021, the company's CEO and CFO evaluated and concluded that its disclosure controls and procedures were effective[268](index=268&type=chunk) - Management is responsible for and has assessed the effectiveness of its internal control over financial reporting, concluding it was effective as of December 31, 2021[269](index=269&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) - This annual report does not include an attestation report from the company's registered public accounting firm regarding internal control over financial reporting[273](index=273&type=chunk) - There were no material changes in the company's internal control over financial reporting during the fourth fiscal quarter of 2021[274](index=274&type=chunk) [Other Information](index=47&type=section&id=Item%209B.%20Other%20Information) The company has no other information to disclose - The company has no other information to disclose[275](index=275&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=48&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors and executive officers is incorporated by reference from the company's proxy statement - Information concerning the company's directors, director nominees, and executive officers is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in June 2022[277](index=277&type=chunk) [Executive Compensation](index=48&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's proxy statement - Information concerning executive compensation is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in June 2022[278](index=278&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=48&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's proxy statement - Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in June 2022[279](index=279&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=48&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions is incorporated by reference from the company's proxy statement - Information concerning certain transactions with the company's directors and executive officers is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in June 2022[280](index=280&type=chunk) [Principal Accountant Fees and Services](index=48&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding accountant fees is incorporated by reference from the company's proxy statement - Information concerning principal accountant fees and services is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in June 2022[281](index=281&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=49&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the report, including financial statements, schedules, and various exhibits - This report includes financial statements, financial statement schedules, and numerous exhibits, such as articles of incorporation, credit agreements, codes of conduct, and executive certifications[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) [SIGNATURES](index=53&type=section&id=SIGNATURES) The report was duly signed on April 21, 2022, by authorized representatives of the company - This report has been signed by authorized representatives of the company on April 21, 2022[289](index=289&type=chunk) - Signatories include Charles E. Drimal, Jr., Chairman, CEO, and President, and Beverly A. Cummings, Director, Executive Vice President, and Treasurer, among other board members[290](index=290&type=chunk) [FINANCIAL STATEMENTS](index=54&type=section&id=FINANCIAL%20STATEMENTS) This section contains the consolidated financial statements for 2021 and 2020, accompanied by an unqualified audit opinion [Report of Independent Registered Public Accounting Firm](index=55&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Grassi & Co., CPAs, P.C. issued an **unqualified opinion** on the company's consolidated financial statements for the years ended December 31, 2021 and 2020, stating they are fairly presented in all material respects[294](index=294&type=chunk) - **Key audit matters** included depreciation, depletion, and amortization (DD&A), impairment of properties and equipment, and the accounting for asset retirement obligations, all involving significant management estimates[298](index=298&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) [Consolidated Balance Sheet](index=58&type=section&id=Consolidated%20Balance%20Sheet) Consolidated Balance Sheet Summary 2021 vs 2020 ($ thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 10,347 | 996 | | Accounts Receivable, net | 14,208 | 7,221 | | Total Current Assets | 25,328 | 8,911 | | Oil and Gas Properties, net | 179,742 | 185,098 | | Field and Office Equipment, net | 4,921 | 5,955 | | **Total Assets** | **210,914** | **200,484** | | Accounts Payable | 7,282 | 5,217 | | Accrued Liabilities | 7,821 | 6,787 | | Total Current Liabilities | 21,720 | 14,120 | | Long-term Bank Debt | 36,000 | 38,267 | | Asset Retirement Obligations | 13,222 | 12,891 | | Deferred Income Taxes | 38,743 | 36,367 | | **Total Liabilities** | **111,823** | **102,486** | | Stockholders' Equity Attributable to PrimeEnergy | 99,091 | 97,124 | | **Total Liabilities and Equity** | **210,914** | **200,484** | [Consolidated Statement of Operations](index=59&type=section&id=Consolidated%20Statement%20of%20Operations) Consolidated Statement of Operations Summary 2021 vs 2020 ($ thousands) | Metric | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Oil Sales | 50,474 | 27,865 | | Gas Sales | 11,432 | 4,202 | | Natural Gas Liquids Sales | 11,220 | 4,906 | | Net Realized Gain (Loss) on Derivative Instruments | (5,045) | 6,173 | | Field Service Revenues | 11,806 | 11,120 | | Unrealized Loss on Derivative Instruments | (4,914) | (190) | | **Total Revenues** | **79,613** | **58,421** | | Lease Operating Expenses | 27,804 | 23,028 | | Field Service Expenses | 11,580 | 9,006 | | DD&A and Accretion of Discounted Liabilities | 26,325 | 28,176 | | General and Administrative Expenses | 10,426 | 15,027 | | **Total Costs and Expenses** | **76,135** | **75,237** | | Gain on Sale and Exchange of Assets | 1,478 | 15,836 | | **Operating Income (Loss)** | **4,956** | **(980)** | | Interest Expense | (2,007) | (1,902) | | Forgiveness of PPP Loan | 1,693 | — | | **Income (Loss) Before Income Taxes** | **4,642** | **(2,880)** | | Income Tax Expense (Benefit) | 2,516 | (517) | | **Net Income (Loss)** | **2,126** | **(2,363)** | | Net Income (Loss) Attributable to PrimeEnergy | 2,098 | (2,316) | | Basic Earnings (Loss) Per Share | 1.05 | (1.16) | | Diluted Earnings (Loss) Per Share | 0.76 | (1.16) | [Consolidated Statement of Equity](index=60&type=section&id=Consolidated%20Statement%20of%20Equity) Consolidated Statement of Equity Summary 2021 vs 2020 ($ thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Common Stock | 281 | 281 | | Additional Paid-in Capital | 7,555 | 7,541 | | Retained Earnings | 128,902 | 126,804 | | Treasury Stock | (37,647) | (37,502) | | **Total Stockholders' Equity Attributable to PrimeEnergy** | **99,091** | **97,124** | | Non-controlling Interests | — | 874 | | **Total Equity** | **99,091** | **97,998** | - In 2021, the company repurchased 2,100 shares of common stock, increasing treasury stock by **$145,000**[313](index=313&type=chunk) - The company reported **net income of $2.098 million** in 2021, with $28,000 attributable to non-controlling interests[313](index=313&type=chunk) [Consolidated Statement of Cash Flows](index=61&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) Consolidated Statement of Cash Flows Summary 2021 vs 2020 ($ thousands) | Cash Flow Category | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 28,617 | 16,379 | | Net Cash Provided by (Used in) Investing Activities | (19,248) | 339 | | Net Cash (Used in) Financing Activities | (18) | (16,737) | | Net Increase (Decrease) in Cash and Cash Equivalents | 9,351 | (19) | | Cash and Cash Equivalents at Beginning of Period | 996 | 1,015 | | **Cash and Cash Equivalents at End of Period** | **10,347** | **996** | - In 2021, the company paid **$343,000** in income taxes and **$1.957 million** in interest[315](index=315&type=chunk) - Capital expenditures, including exploration costs, totaled **$20.726 million** in 2021, while proceeds from asset sales were **$1.478 million**[315](index=315&type=chunk) [Notes to Consolidated Financial Statements](index=62&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company uses the **"successful efforts" method** of accounting for its oil and gas properties, capitalizing acquisition and successful well costs while expensing dry hole and exploration costs[326](index=326&type=chunk) - Long-lived assets are reviewed for impairment, and a loss is recorded if the carrying amount is not expected to be recoverable through undiscounted cash flows[328](index=328&type=chunk) - **Asset retirement obligations** represent the present value of estimated future costs to plug, abandon, and remediate properties at the end of their productive lives[331](index=331&type=chunk) - The company accounts for income taxes using the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[332](index=332&type=chunk) - Derivative financial instruments are used to manage commodity price risk but are not designated as hedges for accounting purposes, with gains and losses recognized in current earnings[339](index=339&type=chunk)[379](index=379&type=chunk) - In 2021, the company repurchased non-controlling interests for **$44,000** and liquidated partnerships, paying out **$632,000** in cash[343](index=343&type=chunk)[344](index=344&type=chunk) - The company acquired 5.9 net acres in Midland County, Texas, and sold 116 net mineral acres in Martin County for a **gain of $1.45 million** in 2021[346](index=346&type=chunk) - The company's credit agreement matures on February 11, 2023, with a borrowing base of **$50 million**; as of December 31, 2021, **$36 million** was outstanding[352](index=352&type=chunk)[354](index=354&type=chunk) - PPP loans totaling **$1.693 million** received by the company's subsidiaries in 2020 were forgiven by the SBA in February and March 2022[356](index=356&type=chunk)[357](index=357&type=chunk) - As of December 31, 2021, the total asset retirement obligation was **$14.295 million**, based on significant assumptions about future costs and economic conditions[362](index=362&type=chunk) - The company reported **basic EPS of $1.05** and **diluted EPS of $0.76** for 2021, compared to a loss per share of $1.16 in 2020[384](index=384&type=chunk) [Supplementary Information](index=77&type=section&id=Supplementary%20Information) Capitalized Costs Relating to Oil and Gas Producing Activities 2021 vs 2020 ($ thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Proved Developed Oil and Gas Properties | 539,484 | 520,488 | | Proved Undeveloped Oil and Gas Properties | — | — | | **Total Capitalized Costs** | **539,484** | **520,488** | | Accumulated DD&A and Valuation Allowances | (359,742) | (335,390) | | **Net Capitalized Costs** | **179,742** | **185,098** | Costs Incurred in Oil and Gas Property Acquisition, Exploration, and Development Activities 2021 vs 2020 ($ thousands) | Category | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Development Costs | 18,678 | 9,339 | Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves 2021 vs 2020 ($ thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Future Cash Inflows | 501,431 | 221,090 | | Future Production Costs | (207,697) | (100,691) | | Future Development Costs | (18,507) | (39,167) | | Future Income Tax Expenses | (57,798) | (15,135) | | **Future Net Cash Flows** | **217,429** | **66,097** | | 10% Annual Discount | (81,623) | (24,479) | | **Standardized Measure of Discounted Future Net Cash Flows** | **135,806** | **41,619** | Principal Sources of Change in the Standardized Measure of Discounted Future Net Cash Flows 2021 vs 2020 ($ thousands) | Source of Change | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Sales of Oil and Gas Produced (less production costs) | (45,322) | (13,945) | | Net Change in Prices and Production Costs | 143,750 | (16,578) | | Revisions of Previous Quantity Estimates | 18,991 | (36,919) | | Accretion of Discount | 4,162 | 8,161 | | Net Change in Income Taxes | (21,180) | 5,386 | | **Net Change** | **94,187** | **(39,993)** | | **Standardized Measure at End of Year** | **135,806** | **41,619** | Reserve Quantity Information 2021 vs 2020 | Reserve Category | 2021 Oil (MBbls) | 2021 NGL (MBbls) | 2021 Gas (MMcf) | 2020 Oil (MBbls) | 2020 NGL (MBbls) | 2020 Gas (MMcf) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Proved Developed, Beginning of Year | 2,684 | 2,258 | 13,633 | 4,381 | 2,914 | 19,995 | | Extensions, Discoveries, and Improved Recovery | 69 | 1 | 628 | 11 | 7 | 36 | | Revisions of Previous Estimates | 133 | (29) | 5,312 | (995) | (239) | (1,721) | | Transferred from Undeveloped | 1,747 | 231 | 1,067 | 25 | 5 | 66 | | Production | 738 | 416 | 3,236 | (733) | (437) | (3,381) | | **Proved Developed, End of Year** | **5,386** | **2,882** | **23,902** | **2,684** | **2,258** | **13,633** | | Proved Undeveloped, Beginning of Year | 1,784 | 787 | 3,897 | 1,833 | 1,017 | 4,547 | | **Proved Undeveloped, End of Year** | **—** | **—** | **—** | **1,784** | **787** | **3,897** | | **Total Proved Reserves, End of Year** | **5,386** | **2,882** | **23,902** | **4,468** | **3,045** | **17,530** | Results of Operations for Oil and Gas Producing Activities 2021 vs 2020 ($ thousands) | Metric | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Oil and Gas Sales Revenue | 73,126 | 36,973 | | Lease Operating Expenses | 27,804 | 23,028 | | DD&A and Accretion | 26,325 | 25,921 | | Income Tax Expense | 3,989 | (2,515) | | **Results of Operations for Producing Activities** | **15,008** | **(9,461)** |

[Part I—Financial Information](index=4&type=section&id=Part%20I%E2%80%94Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for the period ended September 30, 2021, reflect increased total assets to $202.2 million, a net loss of $5.0 million primarily due to unrealized derivative losses, and stable operating cash flow of $18.8 million [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to $202.2 million, total liabilities rose to $109.2 million, and total equity decreased to $93.0 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $19,314 | $8,911 | | **Total Property and Equipment, Net** | $182,271 | $191,053 | | **Total Assets** | **$202,178** | **$200,484** | | **Total Current Liabilities** | $26,675 | $14,120 | | **Total Liabilities** | **$109,203** | **$102,486** | | **Total Equity** | **$92,975** | **$97,998** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the nine months ended September 30, 2021, the company reported a net loss of $5.02 million, or ($2.52) per share, primarily due to a $7.16 million unrealized loss on derivative instruments, despite a 75% increase in oil and gas sales revenue Statement of Operations Summary (in thousands, except per share amounts) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total Revenues | $47,670 | $45,178 | | Total Costs and Expenses | $53,029 | $61,227 | | Gain on Sale of Assets | $111 | $14,967 | | Net (Loss) Income | $(5,017) | $(46) | | Net (Loss) Income Attributable to PrimeEnergy | $(5,021) | $65 | | Basic (Loss) Income Per Share | $(2.52) | $0.03 | [Condensed Consolidated Statement of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) Total equity decreased by $5.0 million to $93.0 million as of September 30, 2021, primarily due to the net loss recorded during the period - Total equity decreased by **$5.0 million** during the first nine months of 2021, moving from **$98.0 million** to **$93.0 million**, mainly as a result of the period's net loss[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash provided by operating activities was $18.8 million, while investing activities used $11.2 million and financing activities used $5.0 million, resulting in a $2.6 million increase in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $18,824 | $17,889 | | Net Cash (Used in) Investing Activities | $(11,190) | $(2,365) | | Net Cash (Used in) Financing Activities | $(5,006) | $(12,453) | | **Net Increase in Cash** | **$2,628** | **$3,071** | | **Cash at End of Period** | **$3,624** | **$4,086** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide details on accounting policies, long-term debt including a $40 million credit facility and PPP loans, and derivative instruments, which resulted in a net liability of $7.8 million as of September 30, 2021 - On February 11, 2021, the company amended its credit agreement, setting the borrowing base at **$40 million** and extending the maturity to February 11, 2023; as of September 30, 2021, **$31.5 million** was outstanding[28](index=28&type=chunk)[29](index=29&type=chunk) - The company received **$1.75 million** in PPP loans in May 2020 and has submitted an application for forgiveness[30](index=30&type=chunk) - The fair value of commodity derivative contracts shifted from a net liability of **$671 thousand** at year-end 2020 to a net liability of **$7.83 million** at September 30, 2021[44](index=44&type=chunk)[50](index=50&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operation) Management discusses the company's financial performance, noting a net loss despite increased oil and gas sales due to derivative losses and the absence of prior-year asset sales, while focusing on Permian Basin development and managing liquidity through operating cash flow and a revolving credit facility [Overview and Strategy](index=15&type=section&id=Overview%20and%20Strategy) PrimeEnergy is an independent oil and gas company focused on acquiring, developing, and producing properties primarily in Texas and Oklahoma, managing a balanced portfolio, and using derivative instruments to mitigate commodity price risk - The company is an independent oil and natural gas company with properties primarily in Texas and Oklahoma[55](index=55&type=chunk) - Primary sources of liquidity are cash from operations and a credit facility; the company uses derivative instruments to manage commodity price risk[55](index=55&type=chunk)[56](index=56&type=chunk) [District and Reserve Information](index=16&type=section&id=District%20and%20Reserve%20Information) As of December 31, 2020, total proved reserves decreased to 10,435 MBoe, with West Texas holding 79% and proved undeveloped reserves at 3,221 MBoe, resulting in a standardized measure of discounted future net cash flows of $41.6 million Proved Reserves by Region (as of Dec 31, 2020) | Region | Total Proved Reserves (MBoe) | % of Total | | :--- | :--- | :--- | | West Texas | 8,242 | 79% | | Mid-Continent | 1,670 | 16% | | Gulf Coast | 517 | 5% | | Other | 6 | <1% | | **Total** | **10,435** | **100%** | Total Proved Reserves Trend (MBoe) | Year-End | Proved Developed | Proved Undeveloped | Total Proved | | :--- | :--- | :--- | :--- | | 2018 | 12,622 | 43 | 12,665 | | 2019 | 10,268 | 3,608 | 14,235 | | 2020 | 7,214 | 3,221 | 10,435 | [Recent Activities and Future Development](index=18&type=section&id=Recent%20Activities%20and%20Future%20Development) The company is actively developing its Permian Basin acreage, completing nine new horizontal wells in Upton County in Q3 2021, with extensive future drilling plans in West Texas and Oklahoma, potentially adding hundreds of new wells - In Q3 2021, **nine new horizontal wells** on the Kashmir tract in Upton County, TX, were completed and began production by October 4, 2021; the company's investment is approximately **$24 million** for a **47.5%** working interest[80](index=80&type=chunk) - The company has extensive future development plans in the Permian Basin, anticipating the drilling of **over 250 additional horizontal wells** across its acreage in Reagan, Upton, and Martin counties[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[95](index=95&type=chunk) - In Oklahoma, the company participated in drilling **four horizontal wells** in Q2 2021 and believes its acreage could support up to **49 new horizontal wells**[81](index=81&type=chunk)[100](index=100&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are operating cash flow, which was $18.8 million for the first nine months of 2021, and a revolving credit facility with a $40 million borrowing base, $8.5 million available, and an expected increase to $50 million - Net cash provided by operating activities was **$18.8 million** for the nine months ended September 30, 2021[88](index=88&type=chunk) - As of September 30, 2021, the company had **$31.5 million** in outstanding borrowings under its credit facility, with **$8.5 million** in availability; the borrowing base is expected to be increased to **$50 million**[92](index=92&type=chunk) - The company is required to hedge a portion of its production and has swap agreements in place for oil and natural gas through 2023[93](index=93&type=chunk)[94](index=94&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) For the first nine months of 2021, the company shifted from a $65 thousand income to a $5.0 million loss, despite a 75.2% increase in oil and gas revenue to $46.1 million, primarily due to unrealized derivative losses and the absence of a $15.0 million gain on asset sales from the prior year Production and Price Comparison (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Oil Production (MBbls) | 480 | 538 | (10.8)% | | Avg. Oil Price ($/Bbl) | $63.28 | $38.41 | +64.8% | | Gas Production (MMcf) | 2,395 | 2,038 | +17.5% | | Avg. Gas Price ($/Mcf) | $3.32 | $1.20 | +177.1% | | **Total Oil & Gas Revenue (in 000's)** | **$46,105** | **$26,316** | **+75.2%** | - General and administrative expenses for the nine months ended Sep 30, 2021, decreased by **42.0%** to **$7.5 million** from **$12.9 million** in the prior year, primarily due to lower employee wages and staff reductions in 2020[112](index=112&type=chunk) - A **$15.0 million** gain on the sale of assets in the first nine months of 2020, primarily from undeveloped acreage in West Texas, was not repeated in 2021[113](index=113&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide disclosures regarding market risk - As a smaller reporting company, no response is required for this item[116](index=116&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the first nine months of 2021 - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures are **effective**[117](index=117&type=chunk) - **No material changes** occurred in the Company's internal control over financial reporting during the first nine months of 2021[118](index=118&type=chunk) [Part II—Other Information](index=24&type=section&id=Part%20II%E2%80%94Other%20Information) [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[120](index=120&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company is not required to provide disclosures regarding risk factors - As a smaller reporting company, no response is required for this item[121](index=121&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any equity securities or repurchase shares under its authorized program during the nine months ended September 30, 2021, with 147,021 shares remaining available for repurchase - **No shares** of common stock were repurchased during the nine months ended September 30, 2021[123](index=123&type=chunk)[124](index=124&type=chunk) - The Board of Directors has authorized a total of **3,700,000 shares** for the stock repurchase program; through September 30, 2021, a total of **3,552,279 shares** have been repurchased[124](index=124&type=chunk) [Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[125](index=125&type=chunk) [Other Information](index=24&type=section&id=Item%205.%20Other%20Information) The company reported no other material information - None[125](index=125&type=chunk) [Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the 10-Q report, including corporate governance documents, credit agreements, officer certifications, and XBRL data files - The report includes various exhibits, such as amendments to the credit agreement, CEO/CFO certifications, and XBRL interactive data files[127](index=127&type=chunk)[128](index=128&type=chunk)

Part I [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) For the six months ended June 30, 2021, the company reported a net loss of $3.9 million, an improvement from a $6.4 million loss in the same period of 2020, with total assets slightly decreasing to $198.5 million and liabilities increasing to $104.4 million [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2021, total assets were $198.5 million, a slight decrease from $200.5 million at December 31, 2020, primarily due to a reduction in net property and equipment, while total liabilities increased to $104.4 million Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $15,673 | $8,911 | | **Total Property and Equipment, Net** | $182,394 | $191,053 | | **Total Assets** | **$198,505** | **$200,484** | | **Total Current Liabilities** | $20,666 | $14,120 | | **Total Liabilities** | **$104,376** | **$102,486** | | **Total Equity** | **$94,129** | **$97,998** | | **Total Liabilities and Equity** | **$198,505** | **$200,484** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $2.4 million for Q2 2021, a significant improvement from the $6.8 million loss in Q2 2020, driven by increased oil, gas, and NGL sales due to higher commodity prices Condensed Consolidated Statements of Operations (in thousands) | (In thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $13,663 | $7,278 | $28,635 | $33,386 | | **Total Costs and Expenses** | $16,751 | $17,625 | $33,117 | $43,447 | | **(Loss) from Operations** | $(2,982) | $(10,265) | $(4,376) | $(9,867) | | **Net (Loss)** | $(2,412) | $(6,786) | $(3,869) | $(6,990) | | **Net (Loss) Attributable to PrimeEnergy** | $(2,403) | $(6,266) | $(3,858) | $(6,436) | | **Basic (Loss) Per Common Share** | $(1.20) | $(3.14) | $(1.93) | $(3.23) | [Condensed Consolidated Statement of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) Total equity decreased from $98.0 million at the end of 2020 to $94.1 million as of June 30, 2021, primarily due to the net loss incurred during the first six months of the year - The company's total equity decreased by **$3.87 million** in the first six months of 2021, moving from **$97.998 million** at December 31, 2020, to **$94.129 million** at June 30, 2021, primarily driven by the net loss of **$3.869 million** during the period[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, net cash provided by operating activities was $11.4 million, an increase from $8.8 million in the prior-year period, with cash and cash equivalents increasing by $2.8 million to $3.8 million Condensed Consolidated Statements of Cash Flows (in thousands) | (In thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $11,424 | $8,803 | | **Net Cash (Used in) Investing Activities** | $(3,623) | $(5,852) | | **Net Cash (Used in) Provided by Financing Activities** | $(5,000) | $534 | | **Net Increase in Cash and Cash Equivalents** | $2,801 | $3,485 | | **Cash and Cash Equivalents at End of Period** | $3,797 | $4,500 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, debt structure, and derivative instruments, including a $40 million credit facility with $32 million outstanding and a significant increase in derivative liabilities to $6.6 million - The company's credit agreement was amended in February 2021, setting the borrowing base at **$40 million** and extending the maturity to February 11, 2023, with **$32 million** outstanding and **$8 million** available as of June 30, 2021[25](index=25&type=chunk)[26](index=26&type=chunk) - In May 2020, subsidiaries received PPP loans totaling **$1.75 million**, with proceeds used for qualifying expenses and an application for forgiveness submitted[27](index=27&type=chunk) - The fair value of commodity derivative contract liabilities increased significantly from **$0.768 million** at year-end 2020 to **$6.64 million** at June 30, 2021, with value changes recognized in earnings as these derivatives are not designated as hedges[42](index=42&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operation) Management attributes improved Q2 2021 results to higher commodity prices, which more than offset lower production volumes, with the company maintaining liquidity through cash from operations and its revolving credit facility [Overview](index=15&type=section&id=Overview) The company's strategy focuses on developing oil and gas reserves through horizontal drilling, primarily in the Permian Basin and Oklahoma, with financial results highly dependent on volatile commodity prices managed through derivative instruments - The company's core strategy is to develop its extensive oil and gas reserves through horizontal drilling[54](index=54&type=chunk) - Key acreage positions are in the Permian Basin (**12,460 net acres**) with potential for **250 additional horizontal wells**, and Oklahoma (**10,300 net acres**) with potential for **49 new horizontal wells**[58](index=58&type=chunk) [District Information](index=16&type=section&id=District%20Information) The company operates in three main regions: Gulf Coast, Mid-Continent, and West Texas, with West Texas being the most significant, accounting for 79% of total proved reserves and the majority of daily production as of year-end 2020 Proved Reserves and Production by Region | Region | Proved Reserves (MBoe) | % of Total | Avg. Daily Production (Boe/day) | | :--- | :--- | :--- | :--- | | West Texas | 8,242 | 79% | 3,178 | | Mid-Continent | 1,670 | 16% | 788 | | Gulf Coast | 517 | 5% | 297 | [Reserve Information](index=17&type=section&id=Reserve%20Information) As of December 31, 2020, total proved reserves were 10,435 MBoe, a decrease from 14,235 MBoe at year-end 2019, with the standardized measure of discounted future net cash flows significantly down to $41.6 million due to lower average commodity prices Proved Reserves and Standardized Measure | As of December 31, | Total Proved Reserves (MBoe) | Proved Undeveloped (MBoe) | Standardized Measure ($ thousands) | | :--- | :--- | :--- | :--- | | **2020** | 10,435 | 3,221 | $41,619 | | **2019** | 14,235 | 3,608 | $81,612 | | **2018** | 12,665 | 43 | $137,909 | - The average oil price used for 2020 reserve calculations was **$39.57 per barrel**, compared to **$55.69** in 2019, while the average natural gas price was **$1.985 per MMBtu**, down from **$2.58** in 2019[77](index=77&type=chunk) [Recent Activities](index=18&type=section&id=Recent%20Activities) The company is actively pursuing development through joint ventures, including completing nine horizontal wells in Upton County, TX, and establishing significant joint development agreements in Reagan County, TX, and Canadian County, OK - Participated with Apache Corporation in completing **nine horizontal wells** in Upton County, TX, with a total net investment of approximately **$27.8 million**, which are currently being placed on production as of August 23, 2021[66](index=66&type=chunk)[81](index=81&type=chunk) - Agreed to jointly develop approximately **3,680 gross acres** with Pioneer Natural Resources in Reagan County, TX, which could facilitate up to **108 horizontal laterals** with a net investment of approximately **$236 million**[83](index=83&type=chunk) - Participating in **four horizontal wells** in Canadian County, OK, operated by Ovintiv, with an **11.25% interest** and a net investment of approximately **$1.98 million**[85](index=85&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash from operations, which provided $11.4 million in the first half of 2021, and its revolving credit facility, which had $8 million in availability as of August 23, 2021 - Net cash provided by operating activities was **$11.4 million** for the six months ended June 30, 2021, compared to **$8.8 million** for the same period in 2020[88](index=88&type=chunk) - As of August 23, 2021, the company had **$32 million** in outstanding borrowings under its **$40 million** borrowing base, with **$8 million** in availability, and the credit facility matures in February 2023[92](index=92&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) For Q2 2021, oil, gas, and NGL sales increased by 230.3% to $15.4 million, driven by significantly higher average sales prices that offset production declines, contributing to a narrower net loss for the six-month period Oil, Gas, and NGL Revenue and Average Prices (in thousands) | Six Months Ended June 30, | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | **Oil Revenue (in 000's)** | $19,934 | $14,324 | 39.2% | | Average Oil Price | $60.77 | $37.89 | 60.4% | | **Gas Revenue (in 000's)** | $3,950 | $1,389 | 184.4% | | Average Gas Price | $2.73 | $0.77 | 254.5% | | **NGL Revenue (in 000's)** | $4,149 | $1,738 | 138.7% | | Average NGL Price | $21.28 | $8.16 | 160.7% | - Lease operating expense decreased by **15.9%** to **$10.6 million** for the six months ended June 30, 2021, due to the sale or shut-in of high-cost properties[108](index=108&type=chunk) - General and administrative expense decreased by **50.4%** to **$5.1 million** for the six months ended June 30, 2021, reflecting staff reductions and lower compensation[112](index=112&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, PrimeEnergy Resources Corporation is not required to provide a response for this item - The Company is a smaller reporting company and no response is required pursuant to this Item[115](index=115&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the reporting period, with no material changes to internal control over financial reporting during the first six months of 2021 - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective[116](index=116&type=chunk) - No changes in internal control over financial reporting occurred during the first six months of 2021 that have materially affected, or are reasonably likely to materially affect, these controls[117](index=117&type=chunk) Part II [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[120](index=120&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, PrimeEnergy Resources Corporation is not required to provide a response for this item - The Company is a smaller reporting company and no response is required pursuant to this Item[121](index=121&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any unregistered equity securities or repurchase any shares under its authorized stock repurchase program during the six months ended June 30, 2021, with 147,721 shares remaining available for purchase - There were no sales of equity securities by the Company during the period covered by this report[122](index=122&type=chunk) - No shares were repurchased during the six months ended June 30, 2021, and the company has **147,721 shares** remaining that may be purchased under its stock repurchase program[123](index=123&type=chunk) [Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[124](index=124&type=chunk) [Other Information](index=25&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[124](index=124&type=chunk) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report, including the Certificate of Incorporation, Bylaws, various credit agreements and amendments, and officer certifications as required by the Sarbanes-Oxley Act - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[128](index=128&type=chunk) - Exhibits filed include the Sixth Amendment to the Third Amended and Restated Credit Agreement, dated February 11, 2021[127](index=127&type=chunk)

Part I—Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) PrimeEnergy Resources Corporation reported a **$1.46 million** net loss for Q1 2021, with total assets slightly down and operating cash flow decreasing [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets slightly decreased to **$199.3 million**, total liabilities remained stable at **$102.8 million**, and total equity declined to **$96.5 million** due to the net loss Condensed Consolidated Balance Sheets (Unaudited) | (Thousands of dollars) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $ 12,978 | $ 8,911 | | **Total Property and Equipment, Net** | $ 185,356 | $ 191,053 | | **Total Assets** | **$ 199,338** | **$ 200,484** | | **Total Current Liabilities** | $ 15,690 | $ 14,120 | | **Total Liabilities** | **$ 102,797** | **$ 102,486** | | **Total Equity** | **$ 96,541** | **$ 97,998** | | **Total Liabilities and Equity** | **$ 199,338** | **$ 200,484** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2021, the company reported a net loss of **$1.46 million**, significantly higher than the **$0.20 million** loss in Q1 2020, primarily due to a **$7.5 million** swing in derivative instrument gains/losses Condensed Consolidated Statements of Operations (Unaudited) | (Thousands of dollars, except per share) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Total Revenues** | $ 14,972 | $ 26,108 | | **Total Costs and Expenses** | $ 16,366 | $ 25,822 | | **(Loss) Income from Operations** | $ (1,394) | $ 398 | | **Net (Loss)** | **$ (1,457)** | **$ (204)** | | **Net (Loss) Attributable to PrimeEnergy** | $ (1,455) | $ (170) | | **Basic & Diluted (Loss) Per Common Share** | **$ (0.73)** | **$ (0.09)** | [Condensed Consolidated Statement of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) Total equity decreased by **$1.46 million** during Q1 2021, from **$98.0 million** to **$96.5 million**, solely due to the net loss for the period - Total equity decreased by **$1.46 million** during Q1 2021, from **$98.0 million** to **$96.5 million**, entirely due to the net loss for the period[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$4.7 million** in Q1 2021 from **$7.4 million** in Q1 2020, with cash and cash equivalents increasing by **$3.0 million** to **$4.0 million** Condensed Consolidated Statements of Cash Flows (Unaudited) | (Thousands of dollars) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net Cash provided by Operating Activities** | $ 4,732 | $ 7,380 | | **Net Cash (Used in) Investing Activities** | $ (660) | $ (1,471) | | **Net Cash (Used in) Financing Activities** | $ (1,050) | $ (709) | | **Net Increase in Cash and Cash Equivalents** | $ 3,022 | $ 5,200 | | **Cash and Cash Equivalents at End of Period** | **$ 4,018** | **$ 6,215** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's **$40 million** credit facility with **$36.0 million** outstanding, **$1.76 million** in PPP loans, and a **$1.58 million** net liability from derivative instruments - On February 11, 2021, the company amended its credit agreement, establishing a borrowing base of **$40 million** and extending the maturity to February 11, 2023[26](index=26&type=chunk) - As of March 31, 2021, the company had **$36.0 million** of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of **5.31%**, with **$4.05 million** available for future borrowings[27](index=27&type=chunk) - The company's subsidiaries received PPP loans totaling **$1.75 million** in May 2020, which are accounted for as financial liabilities pending a forgiveness application[28](index=28&type=chunk) Fair Value of Derivative Instruments (March 31, 2021) | (Thousands of dollars) | Asset | Liability | | :--- | :--- | :--- | | **Commodity derivative contracts** | $ 94 | $ (1,676) | | **Total** | **$ 94** | **$ (1,676)** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operation) Management attributes the **$1.46 million** Q1 2021 net loss to unrealized derivative losses, despite higher commodity prices offsetting decreased production volumes, while focusing on Permian Basin development and financial flexibility [Overview and Strategy](index=14&type=section&id=Overview%20and%20Strategy) The company's strategy focuses on acquiring and operating producing properties for cost-efficient growth of its oil and gas reserve base, with significant horizontal drilling potential in its Permian Basin and Oklahoma acreage - The company's main objective is to acquire income-producing assets to build stockholder value through consistent, cost-efficient growth in its oil and gas reserve base[54](index=54&type=chunk) - The company believes its Permian Basin acreage could support up to **250** additional horizontal wells, and its Oklahoma acreage could support up to **52** new horizontal wells[58](index=58&type=chunk)[59](index=59&type=chunk) [District and Reserve Information](index=16&type=section&id=District%20and%20Reserve%20Information) As of December 31, 2020, total proved reserves decreased to **10,435 MBoe**, with **79%** in West Texas, and the standardized measure of discounted future net cash flows (PV-10) declined to **$41.6 million** Proved Reserves by Region (as of Dec 31, 2020) | (MBoe) | Gulf Coast | Mid Continent | West Texas | Total | | :--- | :--- | :--- | :--- | :--- | | **Developed** | 517 | 1,575 | 5,116 | 7,214 | | **Undeveloped** | — | 95 | 3,126 | 3,221 | | **Total** | **517** | **1,670** | **8,242** | **10,435** | Total Proved Reserves by Category (MBoe) | As of December 31, | 2019 | 2020 | | :--- | :--- | :--- | | **Proved Developed** | 10,268 | 7,214 | | **Proved Undeveloped** | 3,608 | 3,221 | | **Total Proved** | **14,235** | **10,435** | - The standardized measure of discounted future net cash flows from proved reserves decreased to **$41.6 million** at year-end 2020 from **$81.6 million** at year-end 2019[75](index=75&type=chunk) [Recent Activities](index=19&type=section&id=Recent%20Activities) The company continues horizontal drilling in the Permian Basin, investing approximately **$111.2 million** in 77 wells since 2015, with nine new wells in Upton County, Texas, costing an estimated **$26.7 million** slated for Q2 2021 completion - The company's strategy is to develop its reserves primarily through horizontal drilling, which it believes provides superior economic results compared to vertical development[81](index=81&type=chunk) - Nine horizontal wells in Upton County, TX are scheduled for completion by the end of Q2 2021, with the company's **47.5%** interest costing approximately **$26.7 million**[87](index=87&type=chunk) - In May 2021, the company agreed to participate in drilling four horizontal wells in Canadian County, OK, with an **11.25%** interest and an investment of approximately **$1.98 million**[90](index=90&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) The net loss increased to **$1.46 million** in Q1 2021 due to **$0.91 million** unrealized derivative losses, despite higher commodity prices offsetting **30%** production volume decreases, while operating expenses significantly declined due to staff reductions Production Volumes and Average Sales Prices (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | **Oil Produced (Bbls)** | 163,000 | 234,000 | (30.3)% | | **Avg. Oil Price ($/Bbl)** | $56.87 | $45.77 | +24.3% | | **Gas Sold (Mcf)** | 665,000 | 938,000 | (29.1)% | | **Avg. Gas Price ($/Mcf)** | $2.49 | $0.90 | +177.0% | | **NGLs Sold (Bbls)** | 86,000 | 127,000 | (32.3)% | | **Avg. NGL Price ($/Bbl)** | $20.29 | $9.79 | +107.3% | - Unrealized losses on derivative instruments were **$0.91 million** in Q1 2021, compared to unrealized gains of **$6.56 million** in Q1 2020, a major driver of the increased net loss[13](index=13&type=chunk)[97](index=97&type=chunk) - General and administrative expense decreased by **$5.1 million** (**66%**) YoY, primarily due to staff cutbacks implemented in late Q1 2020[102](index=102&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and a **$40 million** revolving credit facility with **$4.05 million** available, with future capital spending discretionary and dependent on cash flows and market conditions - Net cash from operations was **$4.7 million** for Q1 2021, down from **$7.4 million** in Q1 2020[106](index=106&type=chunk) - The company's credit facility has a borrowing base of **$40 million**, with **$4.05 million** in availability as of May 15, 2021, and the next borrowing base review is scheduled for July 2021[110](index=110&type=chunk) Commodity Hedging Swap Agreements (as of March 31, 2021) | Commodity | 2021 Volume | 2021 Avg. Price | 2022 Volume | 2022 Avg. Price | | :--- | :--- | :--- | :--- | :--- | | **Natural Gas** | 1,219,000 MMBTU | $2.48 | 928,000 MMBTU | $2.67 | | **Oil** | 157,500 barrels | $53.60 | 196,200 barrels | $51.99 | [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, PrimeEnergy is not required to provide a response to this item - As a smaller reporting company, no response is required for this item[122](index=122&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of the period end, with no material changes to internal control over financial reporting during Q1 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[123](index=123&type=chunk) - No material changes were made to the company's internal control over financial reporting during Q1 2021[124](index=124&type=chunk) Part II - Other Information [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[126](index=126&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, PrimeEnergy is not required to provide a response for this item - The Company is a smaller reporting company and no response is required pursuant to this Item[127](index=127&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any unregistered equity securities or repurchase shares during Q1 2021, with **147,721** shares remaining authorized for future repurchase - There were no purchases of equity securities by the company during the first quarter of 2021[128](index=128&type=chunk) - As of March 31, 2021, a total of **3,552,279** shares have been repurchased under the stock repurchase program for **$74.9 million**, at an average price of **$21.09** per share, with **147,721** shares remaining available for repurchase[129](index=129&type=chunk) [Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[130](index=130&type=chunk) [Other Information](index=24&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[131](index=131&type=chunk) [Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q report, including corporate governance documents, credit agreements, and officer certifications - Exhibits filed with the report include the Certificate of Incorporation, Bylaws, various amendments to the Credit Agreement, and certifications by the CEO and CFO[132](index=132&type=chunk)[133](index=133&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to . is Commission File Number 0-7406 PrimeEnergy Resources Corporation (Exact name of registrant as specified in its charter) Delaware 84-063734 ...