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TXO Partners(TXO) - 2022 Q4 - Annual Report
TXOTXO Partners(TXO)2023-03-31 20:05

Company Operations and Strategy - The company focuses on the acquisition, development, optimization, and exploitation of conventional oil, natural gas, and natural gas liquid reserves in North America, primarily in the Permian Basin and San Juan Basin[32]. - The management team has an average of 32 years of experience in the oil and gas industry, successfully completing acquisitions totaling over 15billion[35].−Thecompanyaimstomaintainaflattolowgrowthproductionprofile,offsettingnaturaldeclinesthroughacquisitionsanddrilling[34].−Thecompanyemphasizesmaximizinghydrocarbonrecoverythroughenhancedproductiontechniquesandexpandinggeologicinvestigations[38].−Thecompanyplanstofocusonenhancingexistingproductionin2023,expectingtofundcapitaldevelopmentprogramsfromcashflowfromoperations[49].−Thecompanyexpectstodrillorparticipateinthedrillingofapproximately22grosswellsinthePermianBasinand14grosswellsintheSanJuanBasinin2023[41][45].−Thecompanydrilledorparticipatedinthedrillingofapproximately6grosswellsinthePermianBasinduring2022,withanexpectationtodrillapproximately22grosswellsin2023[62].−Thecompanyproducedanaverageofapproximately23,195barrelsofoilequivalentperday(Boe/d)in2022,with7015 billion[35]. - The company aims to maintain a flat to low growth production profile, offsetting natural declines through acquisitions and drilling[34]. - The company emphasizes maximizing hydrocarbon recovery through enhanced production techniques and expanding geologic investigations[38]. - The company plans to focus on enhancing existing production in 2023, expecting to fund capital development programs from cash flow from operations[49]. - The company expects to drill or participate in the drilling of approximately 22 gross wells in the Permian Basin and 14 gross wells in the San Juan Basin in 2023[41][45]. - The company drilled or participated in the drilling of approximately 6 gross wells in the Permian Basin during 2022, with an expectation to drill approximately 22 gross wells in 2023[62]. - The company produced an average of approximately 23,195 barrels of oil equivalent per day (Boe/d) in 2022, with 70% of production from assets operated by the company[40]. - The company incurred 29.8 million in development capital in 2022 and expects to incur approximately 30.0−30.0 - 35.0 million for development in 2023[47]. - The company spent approximately 25.6milliontodrill24grosswellsin2022,with25.6 million to drill 24 gross wells in 2022, with 18.9 million allocated to the Permian Basin and 10.9milliontotheSanJuanBasin[48].FinancialPerformanceandProjections−Thedevelopmentbudgetfor2023isapproximately10.9 million to the San Juan Basin[48]. Financial Performance and Projections - The development budget for 2023 is approximately 30.0 - 35.0million,withfundingprimarilyfromoperatingcashflowandpotentialborrowingsundertheCreditFacilityforacquisitions[34].−FortheyearendedDecember31,2022,consolidatedrevenueswerederived4835.0 million, with funding primarily from operating cash flow and potential borrowings under the Credit Facility for acquisitions[34]. - For the year ended December 31, 2022, consolidated revenues were derived 48% from oil, 40% from natural gas, and 12% from NGL revenues, with total average production being approximately 23,195 Boe/d[46]. - The company’s PV-10 value as of December 31, 2022, was approximately 2.01 billion, reflecting the present value of estimated future cash inflows from proved oil and gas reserves[53]. - The company has a strong liquidity profile with little to no debt, allowing for effective capital allocation and growth in reserves and production[39]. - The company expects future development costs for PUDs to total 154.6millionfrom2023to2027[63].ReservesandProduction−AsofDecember31,2022,thecompanyhadtotalestimatedprovedreservesofapproximately143millionbarrelsofoilequivalent(MMBoe),with53154.6 million from 2023 to 2027[63]. Reserves and Production - As of December 31, 2022, the company had total estimated proved reserves of approximately 143 million barrels of oil equivalent (MMBoe), with 53% being liquids and 83% proved developed[40]. - As of December 31, 2022, the company reported proved undeveloped reserves of 18,837.2 MBbls of oil, 1,208.8 MBbls of NGLs, and 22,688.6 MMcf of natural gas, totaling 23,827.4 MBoe[59]. - The company converted 483.5 MBoe of proved undeveloped reserves into proved developed reserves in 2022, with development costs incurred amounting to 29.8 million[61]. - Total production in 2022 was 8,466 MBoe, an increase from 7,220 MBoe in 2021[65]. - The company owned interests in 18,269 productive wells as of December 31, 2022, with 4,528 gross wells in total[68]. Regulatory and Compliance Risks - The company is subject to risks including commodity price volatility, regulatory changes, and environmental matters that could materially affect operations and financial results[18][23]. - The company is required to hedge at least 75% of projected production for the 12-month period following January 1, 2022, under its Credit Facility[87]. - The company is subject to various federal, state, and local laws and regulations that can increase operational costs and affect profitability[98]. - The company faces increasing regulatory burdens that may restrict oil and natural gas production rates, potentially affecting profitability[115]. - The company is required to comply with anti-market manipulation laws, with civil penalties for violations potentially reaching up to approximately 1,496,035perviolationperday[104][112].−Thecompanyissubjecttopotentialprojectdelaysandadditionalcompliancecostsduetouncertaintiessurroundingtheimplementationoftherevised"watersoftheUnitedStates"(WOTUS)rule,whichmayimposenewpermittingobligations[124].EnvironmentalandClimateChangeConsiderations−TheBidenAdministration′sclimatechangeinitiativesmayleadtoincreasedcostsforoilandnaturalgasproduction,witharoadmapestablishedfornet−zeroemissionsby2050[117].−TheInflationReductionActimposesafeeonGHGemissionsstartingat1,496,035 per violation per day[104][112]. - The company is subject to potential project delays and additional compliance costs due to uncertainties surrounding the implementation of the revised "waters of the United States" (WOTUS) rule, which may impose new permitting obligations[124]. Environmental and Climate Change Considerations - The Biden Administration's climate change initiatives may lead to increased costs for oil and natural gas production, with a roadmap established for net-zero emissions by 2050[117]. - The Inflation Reduction Act imposes a fee on GHG emissions starting at 900 per ton in 2024, increasing to $1,500 per ton in 2026, which may affect capital attraction for the oil and gas industry[135]. - The company may incur costs to comply with new GHG emissions regulations, which could delay operations and negatively impact competitive advantage[137]. - The company is facing increased litigation risks related to seismic events associated with underground injection wells, which could lead to additional costs[127]. - Increased concentrations of greenhouse gases (GHGs) may lead to significant physical effects, including more frequent and severe storms, which could adversely affect exploration and production operations[139]. Employee Relations and Workforce - As of December 31, 2022, the company had 191 total employees, with 180 being full-time[151]. - The company has no collective bargaining agreements and has not experienced any strikes or work stoppages, indicating satisfactory employee relations[151]. - The company is focused on attracting and retaining top talent, providing a welcoming and inclusive environment for its workforce[152].