PrimeEnergy(PNRG) - 2022 Q1 - Quarterly Report

Part I—Financial Information Item 1. Financial Statements 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 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 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 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 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] - 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][27] 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 Higher production and commodity prices drove a 167% increase in oil and gas sales, funding a $76 million drilling program Overview and Strategy 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] - 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] - 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] District and Reserve Information 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 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] - 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] - 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] Results of Operations 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][101] - 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] Liquidity and Capital Resources 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] - 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] - 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][118] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes occurred in the Company's internal control over financial reporting during the first three months of 2022[121] Part II - Other Information Item 1. Legal Proceedings & Item 1A. Risk Factors The company reports no legal proceedings and is exempt from providing risk factor disclosures - There are no legal proceedings to report[124] - As a smaller reporting company, no response is required for Risk Factors[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Other Items (3, 4, 5, 6) 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] - Item 6 lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and officer certifications[129]