PrimeEnergy(PNRG) - 2021 Q1 - Quarterly Report

Part I—Financial Information Financial Statements 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 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 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 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] Condensed Consolidated Statements of Cash Flows 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 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] - 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] - 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] 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 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 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] - 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][59] District and Reserve Information 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] Recent Activities 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] - 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] - 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] Results of Operations 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][97] - General and administrative expense decreased by $5.1 million (66%) YoY, primarily due to staff cutbacks implemented in late Q1 2020[102] Liquidity and Capital Resources 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] - 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] 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 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] Controls and Procedures 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] - No material changes were made to the company's internal control over financial reporting during Q1 2021[124] Part II - Other Information Legal Proceedings The company reported no legal proceedings during the period - None[126] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] - 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] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[130] Other Information The company reported no other information for this item - None[131] Exhibits 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][133]