The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
N
OTES
TO
C
ONDENSED
C
ONSOLIDATED
F
INANCIAL
S
TATEMENTS
March 31, 2018
(Unaudited)
(1) Basis of Presentation:
The accompanying condensed consolidated financial statements of PrimeEnergy Corporation (PrimeEnergy or the Company)
have not been audited by independent public accountants. Pursuant to applicable Securities and Exchange Commission (SEC) rules and regulations, the accompanying interim financial statements do not include all disclosures presented in
annual financial statements and the reader should refer to the Companys Form
10-K
for the year ended December 31, 2017. In the opinion of management, the accompanying interim condensed consolidated
financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Companys condensed consolidated balance sheets as of March 31, 2018 and December 31,
2017, the condensed consolidated results of operations, cash flows and equity for the three months ended March 31, 2018 and 2017.
As
of March 31, 2018, PrimeEnergys significant accounting policies are consistent with those discussed in Note 1Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in
PrimeEnergys Annual Report on Form
10-K
for the fiscal year ended December 31, 2017, with the exception of Accounting Standards Update (ASU)
2014-09,
Revenue from Contracts with Customers (Topic 606) discussed below. Certain amounts presented in prior period financial statements have been reclassified for consistency with current period presentation. The results for interim periods
are not necessarily indicative of annual results. For purposes of disclosure in the condensed consolidated financial statements, subsequent events have been evaluated through the date the statements were issued.
Recently Adopted Accounting Pronouncements
On January 1, 2018, PrimeEnergy adopted ASU
2014-09,
Revenue from Contracts with Customers
(ASC 606), using the modified retrospective method. The Company elected to evaluate all contracts at the date of initial application. While there was no impact to the opening balance of retained earnings as a result of the adoption, certain
items previously netted in revenue are now recognized as lease operating expense in the Companys statement of consolidated operations. The amounts are immaterial to the financial statements, and prior comparative periods have not been restated
and continue to be reported under the accounting standards in effect for those periods. Adoption of the new standard is not anticipated to have a material impact on the Companys net earnings on an ongoing basis.
The Company applies the provisions of ASC 606 for revenue recognition to contracts with customers. Sales of crude oil, natural gas, and
natural gas liquids (NGLs) are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of oil, gas, or NGLs at a
delivery point, as negotiated within each contract. Each barrel of oil, million Btu (MMBtu) of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is
allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including
but not limited to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Companys right to payment, and transfer of legal title. In each case, the term between delivery and when
payments are due is not significant.
PrimeEnergy records trade accounts receivable for its unconditional rights to consideration arising under sales
contracts with customers. The carrying value of such receivables, net of the allowance for doubtful accounts, represents estimated net realizable value. The Company routinely assesses the collectability of all material trade and other receivables.
The Company accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. PrimeEnergy has concluded that the
disaggregation of revenue by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Practical Expedients and Exemptions
PrimeEnergy does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or
less or contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation.
7
PrimeEnergy will utilize the practical expedient to expense incremental costs of obtaining a
contract if the expected amortization period is one year or less. Costs to obtain a contract with expected amortization periods of greater than one year will be recorded as an asset and will be recognized in accordance with ASC 340, Other
Assets and Deferred Costs. Currently, the Company does not have contract assets related to incremental costs to obtain a contract.
In November 2016, the Financial Accounting Standards Board (FASB) issued ASU
2016-18,
Statement
of Cash Flows (Topic 230): Restricted Cash. ASU
2016-18
requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling
the total beginning and ending amounts for the periods shown on the statement of cash flows. The guidance is effective for annual and interim periods beginning after December 15, 2017, and is required to be adopted using a retrospective
approach, with early adoption permitted. The Company adopted ASU
2016-18
in the first quarter of 2018, and it did not have an impact on the Companys consolidated financial statements. As of March
31, 2018 and December 31, 2017, the Company had no restricted cash.
New Pronouncements Issued But Not Yet Adopted
In February 2016, the Financial Accounting Standards Board (FASB) issued ASU
2016-02,
Leases
(Topic 842), requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous GAAP. The guidance is effective for fiscal years beginning after December 15, 2018. Early
adoption is permitted; however, the Company does not intend to early adopt. In January 2018, the FASB issued a proposed ASU update that would add a transition option permitting entities to apply the provisions of the new standard at its adoption
date instead of the earliest comparative period presented in the consolidated financial statements. If finalized, comparative reporting would not be required and the provisions of the standard would be applied prospectively to leases in effect
at the date of adoption. In the normal course of business, the Company enters into various lease agreements for office space and equipment related to its exploration and development activities that are currently accounted for as operating
leases. At this time, the Company cannot reasonably estimate the financial impact this will have on its consolidated financial statements; however, the Company believes adoption and implementation of this ASU will not significantly impact its
balance sheet.
(2) Acquisitions and Dispositions:
Historically the Company has repurchased the interests of the partners and trust unit holders in the oil and gas limited partnerships (the
Partnerships) and the asset and business income trusts (the Trusts) managed by the Company as general partner and as managing trustee, respectively. The Company purchased interests in totaling $60,000 for the three months
ended March 31, 2017. No such repurchases took place during the three months ended March 31, 2018.
During the first quarter of
2018 and 2017, the Company sold or farmed out interests in certain
non-core
oil and natural gas properties and undeveloped acreage through a number of separate, individually negotiated transactions in exchange
for cash or cash and a royalty or working interest in Texas, Oklahoma, Kansas and Colorado. Proceeds under these agreements were $2.8 million and $46.4 million, respectively.
During the first quarter of 2018, the Company completed two transactions acquiring 464 net mineral acres, 53 oil and gas wells with working interests ranging
from 16.6% to 33.4% and one commercial salt water disposal well operated by the Company, all located in Reagan County, Texas, for $6,080,000
(3)
Additional Balance Sheet Information:
Certain balance sheet amounts are comprised of the following:
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Accounts Receivable
:
|
|
|
|
|
|
|
|
|
Joint interest billing
|
|
$
|
2,305
|
|
|
$
|
3,173
|
|
Trade receivables
|
|
|
1,310
|
|
|
|
941
|
|
Oil and gas sales
|
|
|
9,098
|
|
|
|
12,941
|
|
Other
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,716
|
|
|
|
17,059
|
|
Less: Allowance for doubtful accounts
|
|
|
(98
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,618
|
|
|
$
|
16,961
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Accounts Payable:
|
|
|
|
|
|
|
|
|
Trade
|
|
$
|
2,815
|
|
|
$
|
14,317
|
|
Royalty and other owners
|
|
|
5,062
|
|
|
|
7,073
|
|
Partner advances
|
|
|
1,180
|
|
|
|
1,268
|
|
Prepaid drilling deposits
|
|
|
59
|
|
|
|
67
|
|
Other
|
|
|
1,962
|
|
|
|
1,890
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,078
|
|
|
$
|
24,615
|
|
|
|
|
|
|
|
|
|
|
Accrued Liabilities
:
|
|
|
|
|
|
|
|
|
Compensation and related expenses
|
|
$
|
2,370
|
|
|
$
|
2,449
|
|
Property costs
|
|
|
4,790
|
|
|
|
9,141
|
|
Income Tax
|
|
|
4,378
|
|
|
|
4,180
|
|
Other
|
|
|
492
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,030
|
|
|
$
|
16,294
|
|
|
|
|
|
|
|
|
|
|
(4) Property and Equipment:
Property and equipment at March 31, 2018 and December 31, 2017 consisted of the following:
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Proved oil and gas properties, at cost
|
|
$
|
483,488
|
|
|
$
|
476,570
|
|
Less: Accumulated depletion and depreciation
|
|
|
(267,377
|
)
|
|
|
(263,569
|
)
|
|
|
|
|
|
|
|
|
|
Oil and Gas Properties, Net
|
|
$
|
216,111
|
|
|
$
|
213,001
|
|
|
|
|
|
|
|
|
|
|
Field and office equipment
|
|
$
|
26,188
|
|
|
$
|
26,241
|
|
Less: Accumulated depreciation
|
|
|
(19,417
|
)
|
|
|
(19,267
|
)
|
|
|
|
|
|
|
|
|
|
Field and Office Equipment, Net
|
|
$
|
6,771
|
|
|
$
|
6,974
|
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment, Net
|
|
$
|
222,882
|
|
|
$
|
219,975
|
|
|
|
|
|
|
|
|
|
|
9
(5) Long-Term Debt:
Bank Debt:
On
February 15, 2017, the Company and its lenders entered into a Third Amended and Restated Credit Agreement (the 2017 Credit Agreement) with a maturity date of February 15, 2021. The Second Amended and Restated Credit Agreement
and subsequent amendments were amended and restated by the 2017 Credit Agreement. Pursuant to the terms and conditions of the 2017 Credit Agreement, the Company has a revolving line of credit and letter of credit facility of up to $300 million
subject to a borrowing base that is determined semi-annually by the lenders based upon the Companys financial statements and the estimated value of the Companys oil and gas properties, in accordance with the Lenders customary
practices for oil and gas loans. The credit facility is secured by substantially all of the Companys oil and gas properties. The 2017 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio,
total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and exploration costs) ratio and interest coverage ratio, as defined, and restrictions are placed on the payment of dividends, the amount
of treasury stock the Company may purchase, commodity hedge agreements, and loans and investments in its consolidated subsidiaries and limited partnerships.
On December 22, 2017, the Company and its lenders entered into a First Amendment to the Third Amended and Restated Credit Agreement. The
credit agreement includes the addition of a new lender and retains all other aspects of the original credit agreement. As of the effective date of this amendment the Companys borrowing base was increased to $85 million.
At March 31, 2018, the Company had a total of $62.5 million of borrowings outstanding under its revolving credit facility at a
weighted-average interest rate of 5.25% and $22.5 million available for future borrowings. The combined weighted average interest rate paid on outstanding bank borrowings subject to base rate and LIBO interest was 5.25% for the quarter ended
March 31, 2018 as compared to 5.32% for quarter ended March 31, 2017. The Companys borrowings under this credit facility approximates fair value because the interest rates are variable and reflective of market rates.
Equipment Loans:
On July 31, 2013, the Company entered into a $10.0 million Loan and Security Agreement with JP Morgan Chase Bank (Equipment
Loan). The Equipment Loan is secured by a portion of the Companys field service equipment, carries an interest rate of 3.95% per annum, requires monthly payments (principal and interest) of $184,000, and has a final maturity date of
July 31, 2018. As of March 31, 2018 the Company had a total of $726 thousand outstanding on this Equipment Loan.
On
July 29, 2014, the Company entered into additional equipment financing facilities (Additional Equipment Loans) totaling $6.0 million with JP Morgan Chase Bank. In August 2014, the Company drew down $4.8 million of this
facility that is secured by field service equipment, carries an interest rate of 3.40% per annum, requires monthly payments (principal and interest) of $87,800, and has a final maturity date of July 31, 2019. The remaining
$1.2 million under the Additional Equipment Loans was available for interim draws to finance the acquisition of any future field service equipment. In December 2014, the Company made an interim draw of an additional $0.5 million on this
facility that is secured by recently purchased field service equipment. Interim draws on this facility carried a floating interest rate; payable monthly at the LIBO published rate plus 2.50% and on June 26, 2015 converted into a fixed term
loan, with a rate of 3.50% and requiring monthly payments (principal and interest) of $8,700 with a final maturity date of June 26, 2020. As of March 31, 2018, the Company had a total of $1.577 million outstanding on the Additional
Equipment Loans.
On January 12, 2018, the Company made a principal payment towards the third interim loan in the amount of $20,858.
Effective with the payment due of January 26, 2018 the required monthly payments (principal and interest) on this loan changed to $7,986 with a continuing effective rate of 3.50% and a final maturity of June 26, 2020.
The Company determined these loans are Level 3 liabilities in the fair-value hierarchy and estimated their fair value as
$2.097 million and $5.5 million at March 31, 2018 and 2017, respectively, using a discounted cash flow model.
10
(6) Other Long-Term Obligations and Commitments:
Operating Leases:
The Company has several
non-cancelable
operating leases, primarily for rental of office space, that
have a term of more than one year. The future minimum lease payments for the rest of fiscal 2018 and thereafter for the operating leases are as follows:
|
|
|
|
|
(Thousands of dollars)
|
|
Operating
Leases
|
|
2018
|
|
$
|
354
|
|
2019
|
|
|
172
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
526
|
|
|
|
|
|
|
Rent expense for office space for the three months ended March 31, 2018 and 2017 was $147,000 and
$181,000, respectively.
Asset Retirement Obligation:
A reconciliation of the liability for plugging and abandonment costs for the three months ended March 31, 2018 is as follows:
|
|
|
|
|
(Thousands of dollars)
|
|
|
|
Asset retirement obligation December 31, 2017
|
|
$
|
23,578
|
|
Liabilities incurred
|
|
|
|
|
Liabilities settled
|
|
|
(947
|
)
|
Accretion expense
|
|
|
280
|
|
|
|
|
|
|
Asset retirement obligation March 31, 2018
|
|
$
|
22,911
|
|
|
|
|
|
|
The Companys liability is determined using significant assumptions, including current estimates of
plugging and abandonment costs, annual inflation of these costs, the productive life of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation.
Revisions to the asset retirement obligation are recorded with an offsetting change to producing properties, resulting in prospective changes to depreciation, depletion and amortization expense and accretion of discount. Because of the subjectivity
of assumptions and the relatively long life of most of the Companys wells, the costs to ultimately retire the wells may vary significantly from previous estimates.
(7) Contingent Liabilities:
The Company,
as managing general partner of the affiliated Partnerships, is responsible for all Partnership activities, including the drilling of development wells and the production and sale of oil and gas from productive wells. The Company also provides the
administration, accounting and tax preparation work for the Partnerships, and is liable for all debts and liabilities of the affiliated Partnerships, to the extent that the assets of a given limited Partnership are not sufficient to satisfy its
obligations.
The Company is subject to environmental laws and regulations. Management believes that future expenses, before recoveries
from third parties, if any, will not have a material effect on the Companys financial condition. This opinion is based on expenses incurred to date for remediation and compliance with laws and regulations, which have not been material to the
Companys results of operations.
From time to time, the Company is party to certain legal actions arising in the ordinary course of
business. While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.
(8) Stock Options and Other Compensation:
In May 1989,
non-statutory
stock options were granted by the Company to four key executive officers for
the purchase of shares of common stock. At March 31, 2018 and 2017, remaining options held by two key executive officers on 767,500 shares were outstanding and exercisable at prices ranging from $1.00 to $1.25. According to their terms, the
options have no expiration date.
11
(9) Related Party Transactions:
The Company, as managing general partner or managing trustee, makes an annual offer to repurchase the interests of the partners and trust unit
holders in certain of the Partnerships or Trusts. The Company purchased interests totaling $60,000 for the three months ended March 31, 2017. No such repurchases took place during the three months ended March 31, 2018.
Receivables from related parties consist of reimbursable general and administrative costs, lease operating expenses and reimbursement for
property development and related costs. These receivables are due from joint venture partners, which may include members of the Companys Board of Directors.
Payables owed to related parties primarily represent receipts collected by the Company as agent for the joint venture partners, which may
include members of the Companys Board of Directors, for oil and gas sales net of expenses.
(10) Financial Instruments
Fair Value Measurements:
Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the
related disclosure requirements. The Company follows a three-level hierarchy, prioritizing and defining the types of inputs used to measure fair value. The fair values of the natural gas, crude oil price swaps and natural gas liquid swaps are
designated as Level 3. The following fair value hierarchy table presents information about the Companys assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
Quoted Prices in
Active Markets
For Identical
Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
Balance at
March 31,
2018
|
|
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
456
|
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
|
|
|
$
|
456
|
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(5,312
|
)
|
|
$
|
(5,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(5,312
|
)
|
|
$
|
(5,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Quoted Prices in
Active Markets
For Identical
Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
Balance at
December 31,
2017
|
|
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
388
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
|
|
|
$
|
|
|
|
$
|
388
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contract
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(3,422
|
)
|
|
$
|
(3,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(3,422
|
)
|
|
$
|
(3,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The derivative contracts were measured based on quotes from the Companys counterparties. Such quotes
have been derived using valuation models that consider various inputs including current market and contractual prices for the underlying instruments, quoted forward prices for natural gas , crude oil, natural gas liquids, volatility factors and
interest rates, such as a LIBOR curve for a similar length of time as the derivative contract term as applicable. These estimates are verified using comparable NYMEX futures contracts or are compared to multiple quotes obtained from counterparties
for reasonableness.
The significant unobservable inputs for Level 3 derivative contracts include basis differentials and volatility
factors. An increase (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively. The Company does not have access to the specific assumptions used in its counterparties valuation models.
Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.
12
The following table sets forth a reconciliation of changes in the fair value of financial assets
and liabilities classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2018.
|
|
|
|
|
(Thousands of dollars)
|
|
|
|
Net Liabilities December 31, 2017
|
|
$
|
(3,034
|
)
|
Total realized and unrealized (gains) losses:
|
|
|
|
|
Included in earnings (a)
|
|
|
(2,317
|
)
|
Purchases, sales, issuances and settlements
|
|
|
495
|
|
|
|
|
|
|
Net Liabilities March 31, 2018
|
|
$
|
(4,856
|
)
|
|
|
|
|
|
a)
|
Derivative instruments are reported in revenues as realized gain (loss) and on a separately reported line item captioned unrealized gain (loss) on derivative instruments.
|
Derivative Instruments:
The Company is exposed to commodity price and interest rate risk, and management considers periodically the Companys exposure to cash
flow variability resulting from the commodity price changes and interest rate fluctuations. Futures, swaps and options are used to manage the Companys exposure to commodity price risk inherent in the Companys oil and gas production
operations. The Company does not apply hedge accounting to any of its commodity based derivatives. Both realized and unrealized gains and losses associated with commodity derivative instruments are recognized in earnings.
Interest rate swap derivatives are treated as cash-flow hedges and are used to fix our floating interest rates on existing debt. The value of
interest rate swaps if applicable, would be recorded in accumulated other comprehensive loss, net of tax. There are no current interest rate swaps for the periods ending March 31, 2018 and December 31, 2017.
The following table sets forth the effect of derivative instruments on the consolidated balance sheets at March 31, 2018 and
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
(Thousands of dollars)
|
|
Balance Sheet Location
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Asset Derivatives:
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as cash-flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Natural gas commodity contracts
|
|
Other Current Assets
|
|
$
|
295
|
|
|
$
|
|
|
Natural gas liquid contracts
|
|
Other Current Assets
|
|
|
68
|
|
|
|
|
|
Crude oil commodity contracts
|
|
Other Current Assets
|
|
|
|
|
|
|
344
|
|
Natural gas commodity contracts
|
|
Other Assets
|
|
|
19
|
|
|
|
44
|
|
Natural gas liquid contracts
|
|
Other Assets
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
456
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives:
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as cash-flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Crude oil commodity contracts
|
|
Derivative liability short-term
|
|
|
(2,779
|
)
|
|
|
(1,504
|
)
|
Natural gas commodity contracts
|
|
Derivative liability short-term
|
|
|
(8
|
)
|
|
|
(4
|
)
|
Natural gas liquid contracts
|
|
Derivative liability short-term
|
|
|
(16
|
)
|
|
|
|
|
Crude oil commodity contracts
|
|
Derivative liability long-term
|
|
|
(2,503
|
)
|
|
|
(1,910
|
)
|
Natural gas commodity contracts
|
|
Derivative liability long-term
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(5,312
|
)
|
|
$
|
(3,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instruments
|
|
|
|
$
|
(4,856
|
)
|
|
$
|
(3,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
13
The following table sets forth the effect of derivative instruments on the consolidated
statements of operations for the three month period ended March 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of gain (loss) recognized
in income
|
|
Amount of gain/loss
recognized in income
|
|
(Thousands of dollars)
|
|
|
2018
|
|
|
2017
|
|
Derivatives not designated as cash-flow hedge instruments:
|
|
|
|
|
|
|
|
|
|
|
Natural gas commodity contracts
|
|
Unrealized (loss) gain on derivative instruments, net
|
|
$
|
(79
|
)
|
|
$
|
1,313
|
|
Crude oil commodity contracts
|
|
Unrealized (loss) gain on derivative instruments, net
|
|
$
|
(1,868
|
)
|
|
|
1,491
|
|
Natural gas liquids contracts
|
|
Unrealized gain on derivative instruments, net
|
|
|
126
|
|
|
|
|
|
Natural gas commodity contracts
|
|
Realized (loss) on derivative instruments, net
|
|
|
(20
|
)
|
|
|
(149
|
)
|
Crude oil commodity contracts
|
|
Realized (loss) on derivative instruments, net
|
|
|
(478
|
)
|
|
|
(78
|
)
|
Natural gas liquids contracts
|
|
Realized gain on derivative instruments, net
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,317
|
)
|
|
$
|
2,577
|
|
(11) Earnings Per Share:
Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock in gain periods. The following reconciles amounts reported
in the financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Net Income
(In 000s)
|
|
|
Weighted
Average
Number of
Shares
Outstanding
|
|
|
Per Share
Amount
|
|
|
Net Income
(In 000s)
|
|
|
Weighted
Average
Number of
Shares
Outstanding
|
|
|
Per Share
Amount
|
|
Basic
|
|
$
|
3,286
|
|
|
|
2,142,396
|
|
|
$
|
1.53
|
|
|
$
|
22,297
|
|
|
|
2,283,011
|
|
|
$
|
9.77
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
751,326
|
|
|
|
|
|
|
|
|
|
|
|
752,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
3,286
|
|
|
|
2,893,722
|
|
|
$
|
1.14
|
|
|
$
|
22,297
|
|
|
|
3,035,540
|
|
|
$
|
7.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
This Report may contain statements relating to the future results of the Company that are
considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). In addition, certain statements may be contained in the Companys future filings with the SEC, in
press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the PSLRA. Such forward-looking statements, in
addition to historical information, which involve risk and uncertainties, are based on the beliefs, assumptions and expectations of management of the Company. Words such as expects, believes, should,
plans, anticipates, will, potential, could, intend, may, outlook, predict, project, would, estimates,
assumes, likely and variations of such similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks and uncertainties and are based
on a number of assumptions that could ultimately prove inaccurate and, therefore, there can be no assurance that they will prove to be accurate. Actual results and outcomes may vary materially from what is expressed or forecast in such
statements due to various risks and uncertainties. These risks and uncertainties include, among other things, the possibility of drilling cost overruns and technical difficulties, volatility of oil and gas prices, competition, risks inherent in the
Companys oil and gas operations, the inexact nature of interpretation of seismic and other geological and geophysical data, imprecision of reserve estimates, and the Companys ability to replace and expand oil and gas reserves.
Accordingly, stockholders and potential investors are cautioned that certain events or circumstances could cause actual results to differ materially from those projected. The forward-looking statements are made as of the date of this Report and
other than as required by the federal securities laws, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
15