PrimeEnergy(PNRG) - 2021 Q3 - Quarterly Report

Part I—Financial Information Financial Statements 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 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 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 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] Condensed Consolidated Statements of Cash Flows 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 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][29] - The company received $1.75 million in PPP loans in May 2020 and has submitted an application for forgiveness[30] - 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][50] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Primary sources of liquidity are cash from operations and a credit facility; the company uses derivative instruments to manage commodity price risk[55][56] District and Reserve Information 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 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] - 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][84][85][95] - 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][100] Liquidity and Capital Resources 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] - 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] - 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][94] Results of Operations 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - No material changes occurred in the Company's internal control over financial reporting during the first nine months of 2021[118] Part II—Other Information Legal Proceedings The company reported no legal proceedings during the period - None[120] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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][124] - 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] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[125] Other Information The company reported no other material information - None[125] Exhibits 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][128]