PrimeEnergy(PNRG) - 2021 Q4 - Annual Report

PART I Business Overview PrimeEnergy is an independent oil and gas company focused on acquiring, developing, and producing resources in Texas and Oklahoma General - PrimeEnergy Resources Corporation was incorporated in Delaware in March 1973 as an independent oil and gas company[15] - The company's principal business is the acquisition, development, and production of oil and gas resources, with assets in Texas and Oklahoma[16] - Through its subsidiaries, the company provides operational and well servicing support for its own and third-party onshore oil and gas wells[16] Exploration, Development and Recent Activities - 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] - 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] 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] - 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] - 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][26] Significant Activity 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] - 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] - 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] Well Operations - 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] - As an operator, the company receives monthly fees and reimbursements for well operating expenses under operating agreements[39] The Partnerships, Trusts and Joint Ventures - As of 2021, all of the company's remaining partnerships and trusts have been liquidated[40] 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] - Oil and gas production is subject to regulations governing price controls, taxes, drilling permits, well spacing, drilling methods, water use, and well abandonment[42] - Commodity sales prices are currently unregulated, but transportation prices and conditions are extensively regulated by FERC and state authorities[45][46][47][52][53] - Operations must comply with strict environmental, emissions, and occupational safety laws, which may require permits, limit discharges, and impose liability for pollution[58] - Hydraulic fracturing activities face increasing federal and state regulatory scrutiny, which could lead to increased costs, operational restrictions, or drilling delays[75][77][78] - Regulation of greenhouse gas (GHG) emissions could result in increased operating costs, reduced demand for oil and gas, and limited access to financing[71][73][74] Competition and Markets - The business of acquiring oil and gas properties and leases is highly competitive, with many competitors possessing greater financial and personnel resources[86] - Market prices for oil and gas are volatile, influenced by supply and demand, domestic production, imports, pipeline availability, and global economic conditions[87][88] - The company uses a hedging program to mitigate cash flow risk, which may also limit potential gains from rising oil and gas prices[89] Major Customers 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] Employees - As of December 31, 2021, the company had 113 full-time employees, with 31 in corporate offices and 82 in field operations[92] Risk Factors 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][94][98] - Global economic uncertainty, energy costs, geopolitical issues, and inflation could adversely affect the company's operating results, liquidity, and financial condition[99] - 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][108](index=108&type=chunk][109] - Reserve estimates are subjective and uncertain, and significant inaccuracies could lead to an overstatement of reserve quantities and their net present value[112][115] - The company has substantial capital requirements and may be unable to obtain necessary financing on satisfactory terms, potentially limiting liquidity[121][123] - Negative public perception regarding hydraulic fracturing, oil spills, and GHG emissions may lead to increased regulatory scrutiny, operational delays, and litigation risk[126] - Operations are subject to stringent environmental, oil and gas, and occupational health and safety laws, which can cause delays, restrictions, and significant costs[138][142] - Climate change risks, including regulatory, political, and financial factors, could increase operating costs, limit production areas, and reduce demand for oil and gas[147][152] - The company has limited control over non-operated properties, and operator failures could reduce production and revenue[157] - The industry is highly competitive, with many rivals possessing superior financial and technical resources that could adversely affect the company's competitive position[160] - Technology system failures or cyber-attacks could severely impact operations by delaying transactions, compromising confidential data, or damaging the company's reputation[166][167] Unresolved Staff Comments 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] Properties The company holds oil and gas assets in Texas and Oklahoma, with detailed disclosures on drilling, production, and reserves Exploratory and Development Drilling Experience 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 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 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 - As of December 31, 2021, zero net undeveloped acres are set to expire in the next three years (2022-2024)[182] 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][184] 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 $30 million[188] - As of December 31, 2021, the company had 159 MBOE of proved developed non-producing reserves, primarily from 3 horizontal wells in Canadian County, Oklahoma[193] PV-10 of Proved Reserves 2019-2021 | Metric | 2021 ($ 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 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][204][205] - 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] - 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][242] - 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][209][210] Legal Proceedings The company currently has no legal proceedings to disclose - The company currently has no legal proceedings to disclose[211] Mine Safety Disclosures This item is not applicable - This item is not applicable[212] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] 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] - The terms of the company's credit agreement restrict its ability to pay dividends[216] - 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 $75,079,717[217] Issuer Purchases of Equity Securities in 2021 | Month | Shares Repurchased | Average Price per Share ($) | Shares Remaining in Plan | | :--- | :--- | :--- | :--- | | Jan-Nov | — | — | 147,721 | | Dec | 2,100 | 69.04 | 145,621 | | Total/Average | 2,100 | 69.04 | | Selected Financial Data 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] Management's Discussion and Analysis of Financial Condition and Results of Operations The company achieved profitability in 2021 due to higher commodity prices and actively manages liquidity to fund its capital programs 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] - 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] - Cash flow is influenced by commodity prices, acquisition and drilling success, and operational performance, with derivative instruments used to manage price risk[224] Market Conditions and Commodity Prices - 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] - Commodity prices are affected by numerous external factors, and the company's realized prices are further influenced by derivative and hedging activities[226] Critical Accounting Estimates - 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] - 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] Liquidity and Capital Resources - The company's primary sources of liquidity are cash flows from operating activities, its well servicing business, and asset sales[229] 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] - 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, $9 million was outstanding[235] Commodity Swap Agreements 2022-2023 | Product | 2022 Volume | 2023 Volume | 2022 Price ($) | 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][239][240][241] - 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] Results of Operations - The company reported net income of $2.1 million ($1.05 per share) in 2021, compared to a net loss of $2.3 million ($1.16 per share) in 2020, primarily due to higher commodity prices[249] Oil, NGL, and Gas Sales and Price Changes 2020-2021 | Metric | 2021 | 2020 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Oil Sales ($ 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] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Financial Statements and Supplementary Data 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] Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 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] Controls and Procedures 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] - 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][271][272] - This annual report does not include an attestation report from the company's registered public accounting firm regarding internal control over financial reporting[273] - There were no material changes in the company's internal control over financial reporting during the fourth fiscal quarter of 2021[274] Other Information The company has no other information to disclose - The company has no other information to disclose[275] PART III Directors, Executive Officers and Corporate Governance 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] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accountant Fees and Services 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] PART IV Exhibits and Financial Statement Schedules 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][284][285][286] 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] - 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] FINANCIAL STATEMENTS This section contains the consolidated financial statements for 2021 and 2020, accompanied by an unqualified audit opinion Report of Independent Registered Public Accounting Firm - 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] - 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][305][306] Consolidated Balance Sheet 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 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 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] - The company reported net income of $2.098 million in 2021, with $28,000 attributable to non-controlling interests[313] Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows Summary 2021 vs 2020 ($ 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] - Capital expenditures, including exploration costs, totaled $20.726 million in 2021, while proceeds from asset sales were $1.478 million[315] Notes to Consolidated Financial Statements - 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] - 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] - 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] - The company accounts for income taxes using the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[332] - 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][379] - In 2021, the company repurchased non-controlling interests for $44,000 and liquidated partnerships, paying out $632,000 in cash[343][344] - 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] - 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][354] - 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][357] - 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] - The company reported basic EPS of $1.05 and diluted EPS of $0.76 for 2021, compared to a loss per share of $1.16 in 2020[384] Supplementary Information Capitalized Costs Relating to Oil and Gas Producing Activities 2021 vs 2020 ($ 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) |