UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period

Ended ~~September 30, 2021~~March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From

Commission File

Number

0-7406

PrimeEnergy Resources Corporation

(Exact name of registrant as specified in its charter)


Delaware		84-0637348
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer Identification No.)

9821 Katy Freeway, Houston, Texas 77024

(Address of principal executive offices)

(713)

735-0000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value	PNRG	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings required for the past 90 days. Yes

~~Yes~~

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes

☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☐


Non-Accelerated Filer	☒	Smaller Reporting Company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No

☒

The number of shares outstanding of each class of the Registrant’s Common Stock as of ~~November 8, 202~~

May 20, 2022 was: Common Stock, $0.10 par value ~~1,994,177~~1,975,000 shares.

Table of Contents

PrimeEnergy Resources Corporation

Index to Form

10-Q

~~September 30, 2021~~March 31, 2022


	Page
Part I—Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets ~~– September 30, 2021~~–March 31, 2022 and December ~~30, 2020~~31, 2021		3
Condensed Consolidated Statements of Operations – For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~		4
Condensed Consolidated Statement of Equity – For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~		5
Condensed Consolidated Statements of Cash Flows – For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~		6
Notes to Condensed Consolidated Financial Statements – ~~September 30, 2021~~March 31, 2022		7-13
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operation		14 14-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		22
Item 4. Controls and Procedures		22
Part ~~II—~~II - Other Information
Item 1. Legal Proceedings		23
Item 1A. Risk Factors		23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3. Defaults Upon Senior Securities		23
Item 4. Reserved		23
Item 5. Other Information		23
Item 6. Exhibits		24 24-26
Signatures		2627

PART I—FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

PRIMEENERGY RESOURCES CORPORATION

ONDENSED

ONSOLIDATED

ALANCE

HEETS

–

– Unaudited

(Thousands of dollars)

September 30,
2021

December 31,
2020

ASSETS

Current Assets

Cash and cash equivalents
   $ 3,624 $ 996
Accounts receivable, net
   14,341 7,221
Prepaid obligations
   781 590
Other current assets
   568 104


Total Current Assets
   19,314 8,911
Property and Equipment, at cost

Oil and gas properties (successful efforts method), net
   176,497 185,098
Field and office equipment, net
   5,774 5,955


Total Property and Equipment, Net
   182,271 191,053


Other assets
   593 520


Total Assets
   $ 202,178 $ 200,484


LIABILITIES AND EQUITY

Current Liabilities

Accounts payable
   $ 11,387 $ 5,217
Accrued liabilities
   6,896 6,787
Due to Related Parties
   34 38
Current portion of long-term debt
   1,365 487
Current portion of asset retirement and other long-term obligations
   816 867
Derivative liability short-term
   6,177 724


Total Current Liabilities
   26,675 14,120
Long-Term Bank Debt
   32,164 38,267
Asset Retirement Obligations
   13,281 12,891
Derivative Liability Long-Term
   1,657 44
Deferred Income Taxes
   34,667 36,367
Other Long-Term Obligations
   759 797


Total Liabilities
   109,203 102,486
Commitments and Contingencies
   0 0
Equity

Common stock, $.10 par value; Authorized: 2,810,000 shares; Outstanding: 1,994,177 shares
   281 281
Paid-in
capital
   7,560 7,541
Retained earnings
   121,783 126,804
Treasury stock, at cost; 815,823 shares
   (37,502 ) (37,502 )


Total Stockholders’ Equity – PrimeEnergy Resources
   92,122 97,124
Non-controlling
interest
   853 874


Total Equity
   92,975 97,998


Total Liabilities and Equity
   $ 202,178 $ 200,484


	March 31, 2022			December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	4,076		$	10,347
Accounts receivable, net		20,679			14,208
Prepaid obligations		168			733
Derivative asset		36			—
Other current assets		40			40

Total Current Assets		24,999			25,328
Property and Equipment
Oil and gas properties at cost		541,264			539,484
Less: Accumulated depletion and depreciation		(366,371	)		(359,742	)

		174,893			179,742

Field and office equipment at cost		27,351			27,080
Less: Accumulated depreciation		(22,538	)		(22,159	)

		4,813			4,921

Total Property and Equipment, Net		179,706			184,663
Derivative asset long-term and other assets		782			923

Total Assets	$	205,487		$	210,914

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	9,096		$	7,282
Accrued liabilities		6,709			7,821
Due to related parties		—			52
Current portion of asset retirement and other long-term obligations		1,623			1,630
Derivative liability short-term		12,761			4,935

Total Current Liabilities		30,189			21,720
Long-Term Bank Debt		9,000			36,000
Asset Retirement Obligations		12,894			13,222
Derivative Liability Long-Term		—			650
Deferred Income Taxes		41,886			38,743
Other Long-Term Obligations		2,118			1,488

Total Liabilities		96,087			111,823
Commitments and Contingencies
Equity
Common stock, $.10 par value; 2022 and 2021: Authorized: 2,810,000 shares, outstanding 2022: 1,980,889; outstanding 2021: 1,992,077		281			281
Paid-in capital		7,555			7,555
Retained earnings		140,044			128,902
Treasury stock, at cost; 2022: 829,111 shares; 2021: 817,923		(38,480	)		(37,647	)

Total Equity		109,400			99,091

Total Liabilities and Equity	$	205,487		$	210,914

~~The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements~~

Table of Contents

PRIMEENERGY RESOURCES CORPORATION

ONDENSED

ONSOLIDATED

TATEMENTS

PERATIONS

–

– Unaudited

Three Months Ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~

(Thousands of dollars, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021
Revenues
Oil sales	$	10,442		$	6,339		$	30,376		$	20,663		$	26,305		$	9,270
Natural gas sales		3,998			1,052			7,948			3,212			3,746			1,658
Natural gas liquids sales		3,632			1,474			7,781			2,441			3,851			1,745
Realized (loss) gain on derivative instruments, net		(1,983	)		222			(2,896	)		6,176
Realized (loss) on derivative instruments, net														(3,819	)		(212	)
Field service income		2,975			2,567			8,138			9,248			3,240			1,425
Administrative overhead fees		1,164			1,066			3,455			3,260
Unrealized (loss) on derivative instruments, net		(1,194	)		(1,003	)		(7,162	)		(62	)		(7,139	)		(911	)
Other income		1			75			30			240			29			29

Total Revenues		19,035			11,792			47,670			45,178			26,213			13,004
Costs and Expenses
Lease operating expense		7,248			3,804			17,820			16,378			8,721			4,467
Field service expense		3,413			1,974			7,744			7,448			3,000			1,418
Depreciation, depletion, amortization and accretion on discounted liabilities		6,883			9,431			19,990			24,524			7,178			6,497
General and administrative expense		2,368			2,571			7,475			12,877			6,672			2,016

Total Costs and Expenses		19,912			17,780			53,029			61,227			25,571			14,398
Gain on Sale and Exchange of Assets		5			14,773			111			14,967			13,991			—

(Loss) Income from Operations		(872	)		8,785			(5,248	)		(1,082	)
Income (Loss) from Operations														14,633			(1,394	)
Other Income (Expense)
Interest Income		—			1			—			1
Interest Expense		(462	)		(470	)		(1,469)			(1,629	)		(349	)		(523	)

(Loss) Income Before Income Taxes		(1,334	)		8,316			(6,717	)		(2,710	)
Income Taxes Expense (Benefit)		(186	)		1,372			(1,700	)		(2,664	)
Income (Loss) Before Provision for (Benefit from) Income Taxes														14,284			(1,917	)
Provision for (Benefit from) Income Taxes														3,142			(460	)

Net (Loss) Income		(1,148	)		6,944			(5,017	)		(46	)
Less: Net Income (Loss) Attributable to Non-Controlling Interests		15			443			4			(111	)
Net Income (Loss)														11,142			(1,457	)
Less: Net (Loss) Attributable to Non-Controlling Interests														—			(2	)

Net (Loss) Income Attributable to PrimeEnergy	$	(1,163	)	$	6,501		$	(5,021	)	$	65
Net Income (Loss) Attributable to PrimeEnergy Resources													$	11,142		$	(1,455	)

Basic (Loss) Income Per Common Share	$	(0.58	)	$	3.26		$	(2.52	)	$	0.03
Basic Income (Loss) Per Common Share													$	5.62		$	(0.73	)

Diluted (Loss) Income Per Common Share	$	(0.58	)	$	2.36		$	(2.52	)	$	0.02
Diluted Income (Loss) Per Common Share													$	4.07		$	(0.73	)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements

PRIMEENERGY RESOURCES CORPORATION

ONDENSED

ONSOLIDATED

TATEMENT

QUITY

–

– Unaudited

~~Nine months~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Thousands of dollars)

Common Stock


Shares

Amount

Additional
Paid-In

Capital

Retained
Earnings

Treasury
Stock

Total
Stockholders’
Equity –
PrimeEnergy

Non-
Controlling
Interest

Total
Equity

Balance at December 31, 2020
   1,994,177 $ 281    $ 7,541    $ 126,804 $ (37,502 ) $ 97,124 $ 874 $ 97,998
Net Income (Loss)
         (5,021 ) (5,021 ) 4 (5,017 )
Purchase of non- controlling interest

—

—

19

—

—

19

(25
)

(6
)







Balance at September 30, 2021
   1,994,177 $ 281    $ 7,560    $ 121,783 $ (37,502 ) $ 92,122 $ 853 $ 92,975






Balance at December 31, 2019
   1,998,978 $ 281    $ 7,505    $ 129,120 $ (36,792 ) $ 100,114 $ 3,249 $ 103,363
Purchase 4,801 shares of common stock
   (4,801 ) —      —      —   (709 ) (709 ) —   (709 )
Net Income (Loss)
   —   —      —      65 —   65 (111 ) (46 )






Balance at September 30, 2020
   1,994,177 $ 281    $ 7,505    $ 129,185 $ (37,501 ) $ 99,470 $ 3,138 $ 102,608


	Shares Outstanding			Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Total Stockholders’ Equity – PrimeEnergy			Non- Controlling Interest			Total Equity
Balance at December 31, 2021		1,992,077		$	281	$	7,555	$	128,902		$	(37,647	)	$	99,091		$	0		$	99,091
Purchase 11,188 shares of common stock		(11,188	)	$	—	$	—	$	—		$	(833	)	$	(833	)	$	—		$	(833	)
Net Income		—			—		—		11,142			—			11,142			0			11,142

Balance at March 31, 2022		1,980,889		$	281	$	7,555	$	140,044		$	(38,480	)	$	109,400		$	0		$	109,400

Balance at December 31, 2020		1,994,177		$	281	$	7,541	$	126,804		$	(37,502	)	$	97,124		$	874		$	97,998
Net (Loss)		—			—		—		(1,455	)		—			(1,455	)		(2	)		(1,457	)

Balance at March 31, 2021		1,994,177		$	281	$	7,541	$	125,349		$	(37,502	)	$	95,669		$	872		$	96,541

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements

Table of Contents

PRIMEENERGY RESOURCES CORPORATION

ONDENSED

ONSOLIDATED

TATEMENTS

ASH

LOWS

–

Unaudited

~~Nine months ended September 30,~~Three Months Ended March 31, 2022 and 2021 ~~and 2020~~

(Thousands of dollars)

2021

2020

Cash Flows from Operating Activities:

Net (Loss)    $ (5,017 ) $ (46 )
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion on discounted liabilities
   19,990 24,524
Gain on sale of properties
   (111 ) (14,967 )
Unrealized loss (gain) on derivative instruments, net
   7,162 (62 )
Provision for deferred income taxes
   (1,700 ) 676
Changes in operating assets and liabilities:

Accounts receivable
   (7,120 ) 9,073
Due to related parties
   (4 ) —
Other assets
   (655 ) 422
Accounts payable
   6,170 (438 )
Accrued liabilities
   109 (1,293 )


Net Cash Provided by Operating Activities    18,824 17,889


Cash Flows from Investing Activities:

Capital expenditures
   (11,301 ) (13,142 )
Proceeds from sale of properties and equipment
   111 10,777


Net Cash (Used in) Investing Activities
   (11,190 ) (2,365 )


Cash Flows from Financing Activities:

Purchase of stock for treasury
   —   (709 )
Purchase of
non-controlling
interests
   (6   ) 0
Proceeds from long-term bank debt and other long-term obligations
   3,000 6,756
Repayment of long-term bank debt and other long-term obligations
   (8,000 ) (18,500 )


Net Cash (Used in) Financing Activities
   (5,006 ) (12,453 )


Net Increase in Cash and Cash Equivalents
   2,628 3,071
Cash and Cash Equivalents at the Beginning of the Period
   996 1,015


Cash and Cash Equivalents at the End of the Period
   $ 3,624 $ 4,086


Supplemental Disclosures:

Income taxes paid
   $ 0—   $ 01
Interest paid
   $ 1,384 $ 1,653

Cash Flows from Operating Activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion on discounted liabilities

Gain on sale and exchange of assets

Unrealized loss on derivative instruments, net

Deferred income taxes

Changes in assets and liabilities:

Due to related parties

Prepaids and other assets

Net Cash provided by Operating Activities

Cash Flows from Investing Activities:

Capital expenditures, including exploration expense

Proceeds from sale of properties and equipment

Net Cash Provided by (Used in) Investing Activities

Cash Flows from Financing Activities:

Purchase of stock for treasury

Proceeds from long-term bank debt

Repayment of long-term bank debt

Net Cash (Used in) Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Period

Cash and Cash Equivalents at the End of the Period

Supplemental Disclosures:

PRIMEENERGY RESOURCES CORPORATION

OTES

ONDENSED

ONSOLIDATED

INANCIAL

TATEMENTS

~~September 30, 2021~~March 31, 2022

(1) Basis of Presentation:

The accompanying condensed consolidated financial statements of PrimeEnergy Resources 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 Company’s Form

10-K

for the year ended December 31, ~~2020.~~2021. 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 Company’s condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the condensed consolidated results of operations, cash flows and equity for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

As of ~~September 30, 2021,~~March 31, 2022, PrimeEnergy’s significant accounting policies are consistent with those discussed in Note 1—Description of Operations and Significant Accounting Policies of its consolidated financial statements contained in PrimeEnergy’s Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2020.~~2021. 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.

(2) Acquisitions and ~~Dispositions:~~

Dispositions

~~Historically~~In the first quarter of 2022, the Company ~~has repurchased the interests~~sold 1,809 net leasehold acres in Reagan and Midland Counties, Texas through two separate transactions receiving gross proceeds 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 repurchased $6,000 of such

$14.0 million.

~~non-controlling~~

~~interests during the nine months ended September 30, 2021.~~

(3) Additional Balance Sheet Information:

Certain balance sheet amounts are comprised of the following:

(Thousands of dollars)

September,
30, 2021

December 31,
2020

Accounts Receivable:

Joint interest billing
   $ 2,589    $ 2,475
Trade receivables
   1,866    1,073
Oil and gas sales
   10,084    3,469
Other
   400    802




   14,939    7,819
Less: Allowance for doubtful accounts
   (598 )    (598 )




Total
   $ 14,341    $ 7,221




Accounts Payable:

Trade
   $ 7,011    $ 876
Royalty and other owners
   3,724    3,569
Partner advances
   223    193
Other
   429    579




Total
   $ 11,387    $ 5,217




Accrued Liabilities:

Compensation and related expenses
   $ 3,259    $ 3,331
Property costs
   2,533    2,056
Taxes
   866    1,016
Other
   238    384




Total
   $ 6,896    $ 6,787


(Thousands of dollars)	March 31, 2022			December 31, 2021
Accounts Receivable:
Joint interest billing	$	3,025		$	1,902
Trade receivables		1,768			1,429
Oil and gas sales		16,152			11,154
Other		105			94

		21,050			14,579
Less: Allowance for doubtful accounts		(371	)		(371	)

Total	$	20,679		$	14,208

Accounts Payable:
Trade	$	3,983		$	2,390
Royalty and other owners		3,290			2,802
Partner advances		1,063			1,209
Other		760			881

Total	$	9,096		$	7,282

Accrued Liabilities:
Compensation and related expenses	$	3,865		$	3,919
Property costs		1,731			2,901
Taxes		813			893
Other		300			108

Total	$	6,709		$	7,821

Table of Contents

(4) ~~Property and Equipment:~~

~~Property and equipment at September 30, 2021 and December 31, 2020 consisted of the following:~~

(Thousands of dollars)

September
30,

2021

December 31,
2020

Proved oil and gas properties, at cost
   $ 531,475    $ 520,488
Less: Accumulated depletion and depreciation
   (354,978 )    (335,390 )




Oil and Gas Properties, Net
   $ 176,497    $ 185,098




Field and office equipment
   $ 27,018    $ 26,797
Less: Accumulated depreciation
   (21,244 )    (20,842 )




Field and Office Equipment, Net
   $ 5,774    $ 5,955




Total Property and Equipment, Net
   $ 182,271    $ 191,053

~~(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. Under 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 Company’s financial statements and the estimated value of the Company’s 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 Company’s oil and gas properties. The 2017 Credit Agreement includes terms and covenants that require the Company to maintain a minimum current ratio and total indebtedness to EBITDAX (earnings before depreciation, depletion, amortization, taxes, interest expense and exploration costs) 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.

~~During 2020, the 2017 Credit Agreement was amended to add loans under the Paycheck Protection Program to the Permitted loans, as defined in the agreement.~~

On ~~February 11,~~December 20, 2021 the ~~Company and its lenders~~company entered into a ~~Sixth~~Seventh Amendment to the 2017 Credit ~~Agreement.~~Agreement and Citibank N.A was appointed as successor administrative agent replacing PNC Bank. Under this amendment the Company’s borrowing base is ~~$40~~$50 million. Borrowings under the 2017 Credit Agreement will bear interest at aalternate base rate (ABR) plus an applicable margin ranging from 2.00% to 3.00% or at the Company’s option, at ~~LIBOR~~a rate equal to the secured overnight financing rate (SOFR rate) as administered by the SOFR Administrator, in this case the Federal Reserve Bank of New York, plus an applicable margin ranging from 3.00% to 4.00%. The 2017 Credit Agreement ~~will mature on~~matures February 11, 2023. The current borrowing base review and maturity extension is schedule for June 2022. The Company’s borrowings under this credit facility approximates fair value because the interest rates are variable and reflective of market rates.

~~September~~

~~30, 2021,~~ March 31, 2022, the Company had a total of ~~$31.5~~$9 million of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of ~~5.35%~~6.74% and

~~8.5~~ $41 million was available for future borrowings. The combined weighted average interest rate paid on outstanding bank borrowings subject to ABR base rate and ~~LIBO~~SOFR interest was ~~5.31%~~6.30% for the

~~nine~~

~~months~~ quarter ended

~~September~~

~~30, 2021~~ March 31, 2022 as compared to ~~3.94%~~5.27% for the quarter ended March 31, 2021.

~~nine~~

~~months ended~~

~~September~~

~~30, 2020.~~On May 20, 2022, there were 0 outstanding borrowings under the Company’s revolving credit facility.

~~Paycheck Protection Program Loans~~

During May 2020, Prime Operating Company and Eastern Oil Well Services Corporation, subsidiaries of the Company received loan proceeds in the amount of $1.28 million and $0.47 million, respectively, under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020. The PPP Loans are evidenced by a promissory note in favor of the Lender, which bears interest at the rate of 1.00% per annum. No payments of principal or interest are due under the note until the date on which the amount of loan forgiveness (if any) under the CARES Act, which can be up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”). The note may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred prior to February 15, 2020 (the “Qualifying Expenses”). Under the terms of the PPP Loans, certain amounts thereunder may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act. The Company utilized the PPP Loan proceeds exclusively for Qualifying Expenses during the

~~24-week~~

coverage period and has submitted its application for forgiveness in accordance with the terms of the CARES Act and related guidance. In the event the PPP Loan or any portion thereof is forgiven, the amount forgiven is applied to the outstanding principal.

~~To the extent, if any, that any or all of the PPP loans are not forgiven, beginning one month following~~

~~expi~~

ration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the “Maturity Date”), the Company is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Note, in such equal amounts required to fully amortize the principal amount outstanding on such Note as of the last day of the applicable Deferral Period by the applicable Maturity Date. The Company accounts for these loans on the balance sheet as financial liabilities reported within the following lines: Current portion of long-term debt in the amount of $~~1. 37~~ ~~million and included as part of the long-term bank debt in the amount of $323 thousand.~~

~~(6)~~(5) Other Long-Term Obligations and Commitments:

Operating Leases:

The Company leases office facilities under operating leases and recognizes lease expense on a straight-line basis over the lease term. Leases assets and liabilities are initially recorded at commencement date based on the present value of lease payments over the lease term.

A new finance lease for office equipment is included in property and equipment, other current liabilities and other long-term liabilities this quarter. As

most of the Company’s lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted average discount rate used was 5.5%. Certain leases may contain variable costs above the minimum required payments and are not included in the

right-of-use

assets or liabilities. Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease. The exercise of those options is at the Company’s sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Operating lease costs for the ~~nine months~~quarter ended ~~September 30, 2021~~March 31, 2022 were

~~$450,000~~

.$142 thousand. Cash payments included in the operating lease cost for ~~nine months~~the quarter ended ~~September 30, 2021~~March 31, 2022 were

~~$433,000~~

.$150 thousand. The weighted-average remaining operating lease terms is

~~11.5~~are 12 months.

The Company amended certain leases for office space in Texas providing for payments of ~~$299,000 in 2021, $158,000~~$451,000 in 2022 and ~~$17,000~~$150,000 in 2023.

Rent expense for office space ~~for~~ the ~~nine months~~quarter ended ~~September 30,~~March 31, 2022 and 2021 was $177,000 and ~~2020 was $441,000 and $496,000,~~$163,000

, respectively.

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The payment schedule for the Company’s operating lease obligations as of ~~September 30, 2021~~March 31, 2022 is as follows:

(Thousands of dollars)

Operating
Leases

2021
   $ 144
2022
   158
2023
   17


Total undiscounted lease payments
   $ 319
Less: Amount associated with discounting
   (11 )


Net operating lease liabilities
   $ 308


(Thousands of dollars)	Operating Leases
2022	$	451
2023		150

Total undiscounted lease payments	$	601
Less: Amount associated with discounting		(51	)

Net operating lease liabilities	$	550

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the

~~nine~~

three months ended ~~September 30,~~

~~2021~~

March 31, 2022 is as follows:


(Thousands of dollars)	March 31, 2022
Asset retirement obligation at December 31, 2021	$	14,295
Liabilities incurred		0
Liabilities settled		(498	)
Accretion expense		170

Asset retirement obligation at March 31, 2022	$	13,967

(Thousands of dollars)

September
30,

2021

Asset retirement obligation at December 31, 2020
   $ 13,660
Liabilities incurred
   721
Liabilities settled
   (1,047 )
Accretion expense
   487


Asset retirement obligation at
September
30, 2021
   $ 13,821

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~~(7)~~The Company’s 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 Company’s wells, the costs to ultimately retire the wells may vary significantly from previous estimates.

(6) 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 Company’s 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 Company’s 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)~~(7) Stock Options and Other Compensation:

In May 1989,

non-statutory

stock options were granted by the Company to 4 key executive officers for the purchase of shares of common stock. At ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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.

~~(9)~~(8) 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 repurchased $6,000 of such

~~non-controlling~~

~~interests during the nine months ending September 30, 2021.~~ 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 Company’s Board of Directors, for oil and gas sales net of expenses.

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~~(10)~~

(9) 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 Company’s interest rate swaps, natural gas and crude oil price collars and swaps are designated as Level 3. The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

September 30, 2021

Quoted Prices in
Active Markets
For Identical
Assets (Level 1)

Significant
Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)

Balance at
September 30,
2021

(Thousands of dollars)

Liabilities

Commodity derivative contracts
   $ —      $ —      $ (7,834 )    $ (7,834 )








Total liabilities
   $ —      $ —      $ (7,834 )    $ (7,834 )


March 31, 2022	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, 2022
(Thousands of dollars)
Assets
Commodity derivative contracts	$	—	$	—	$	36		$	36

Total assets	$	—	$	—	$	36		$	36

Liabilities
Commodity derivative contracts	$	—	$	—	$	(12,761	)	$	(12,761	)

Total liabilities	$	—	$	—	$	(12,761	)	$	(12,761	)

December 31, 2020

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,
2020

(Thousands of dollars)

Assets

Commodity derivative contracts
   $ —      $ —      $ 97    $ 97








Total assets
   $ —      $ —      $ 97    $ 97








Liabilities

Commodity derivative contract
   $ —      $ —      $ (768 )    $ (768 )








Total liabilities
   $ —      $ —      $ (768 )    $ (768 )

~~Table of Contents~~


December 31, 2021	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, 2021
(Thousands of dollars)
Assets
Commodity derivative contracts	$	—	$	—	$	0		$	0

Total assets	$	—	$	—	$	0		$	0

Liabilities

Total liabilities	$	—	$	—	$	(5,585	)	$	(5,585	)

The derivative contracts were measured based on quotes from the Company’s 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 and crude oil, 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.

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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 quarter ended ~~September 30, 2021.~~March 31, 2022.


(Thousands of dollars)
Net Liabilities – December 31, 2020	$	(671	)
Net Liabilities – December 31, 2021				$	(5,585	)
Total realized and unrealized (gains) losses:
Included in earnings (a)		(10,058	)		(10,958	)
Purchases, sales, issuances and settlements		2,895			3,818

Net Liabilities — September 30, 2021	$	(7,834	)
Net Liabilities — March 31, 2022				$	(12,725	)

(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 Company’s exposure to cash flow variability resulting from the commodity price changes and interest rate fluctuations. Futures, swaps and options are used to manage the Company’s exposure to commodity price risk inherent in the Company’s 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.

The following table sets forth the effect of derivative instruments on the consolidated balance sheets at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Fair Value								Fair Value
(Thousands of dollars)	Balance Sheet Location	September 30, 2021			December 31, 2020			Balance Sheet Location		March 31, 2022			December 31, 2021
Asset Derivatives:
Derivatives not designated as cash-flow hedging instruments:
Natural gas commodity contracts	Derivative asset long-term and other assets		—		$	97

Crude Oil commodity contracts									Derivative asset short-term	$	36		$	—

Total		$	—		$	97				$	36		$	—

Liability Derivatives:
Derivatives not designated as cash-flow hedging instruments:
Crude oil commodity contracts	Derivative liability short-term	$	(3,994	)	$	(428	)		Derivative liability short-term	$	(9,711	)	$	(3,992	)
Natural gas commodity contracts	Derivative liability short-term		(2,183	)		(296	)		Derivative liability short-term		(3,050	)		(943	)
Crude oil commodity contracts	Derivative liability long-term		(1,178	)		—			Derivative liability long-term		—			(490	)
Natural gas commodity contracts	Derivative liability long-term		(479	)		(44	)		Derivative liability long-term		—			(160	)

Total		$	(7,834	)	$	(768	)			$	(12,761	)	$	(5,585	)

Total derivative instruments		$	(7,834	)	$	(671	)			$	(12,725	)	$	(5,585	)

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The following table sets forth the effect of derivative instruments on the consolidated statements of operations for the ~~nine months~~quarters ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Amount of gain/loss
recognized in income

(Thousands of dollars)

Location of gain/loss recognized in income

2021

2020

Derivatives not designated as cash-flow hedge instruments:

Natural gas commodity contracts

Unrealized

gain

(loss)

on

derivative

instruments,

net
(2,418 )    (576 )
Crude oil commodity contracts

Unrealized

(loss)

gain

on

derivative

instruments,

net
(4,744 )    514
Natural gas commodity contracts

Realized gain (loss) on derivative instruments, net
(1,009 )    533
Crude oil commodity contracts

Realized (loss) on derivative instruments, net
(1,887 )    5,643



$ (10,058)
   $ 6,114

~~Table of Contents~~


	Location of gain/loss recognized in income	Amount of gain/loss recognized in income
(Thousands of dollars)	Location of gain/loss recognized in income	2022			2021
Derivatives not designated as cash-flow hedge instruments:
Natural gas commodity contracts	Unrealized (loss) on derivative instruments, net	$	(1,948	)	$	(15	)
Crude oil commodity contracts	Unrealized (loss) on derivative instruments, net		(5,191	)		(896	)
Natural gas commodity contracts	Realized (loss) on derivative instruments, net		(620	)		(60	)
Crude oil commodity contracts	Realized (loss) on derivative instruments, net		(3,199	)		(152	)

		$	(10,958	)	$	(1,123	)

~~(11)~~(10) 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:

	Quarter Ended March 31,
	2022						2021
	Net Income (In 000’s)		Weighted Average Number of Shares Outstanding		Per Share Amount		Net Loss (In 000’s)			Weighted Average Number of Shares Outstanding		Per Share Amount
Basic	$	11,142		1,980,878	$	5.62	$	(1,455	)		1,994,197	$	(0.73	)

Effect of dilutive securities:
Options(a)				756,544

Diluted	$	11,142		2,737,422	$	4.07	$	(1,455	)		1,994,197	$	(0.73	)

Nine Months Ended September 30,


2021

2020


Net Loss
(In
000’s)

Weighted
Average
Number of
Shares
Outstanding

Per
Share
Amount

Net
Income
(In
000’s)

Weighted
Average
Number of
Shares
Outstanding

Per
Share
Amount

Basic
   $ (5,021 ) 1,994,177    $ (2.52 $ 65    1,994,175    $ 0.03
Effect of dilutive securities:

Options (a)
         758,367







Diluted
   $ (5,021 ) 1,994,177    $ (2.52 ) $ 65    2,752,542    $ 0.02









Three Months Ended September 30,


2021

2020


Net Loss

(In
000’s)

Weighted
Average
Number of
Shares
Outstanding

Per
Share
Amount

Net
Income
(In
000’s)

Weighted
Average
Number of
Shares
Outstanding

Per
Share
Amount

Basic
   $ (1,163 ) 1,994,177    $ (0.58 ) $ 6,501    1,994,177    $ 3.26
Effect of dilutive securities:

Options (a)
      —      756,154







Diluted
   $ (1,163 ) 1,994,177    $ (0.58 ) $ 6,501    2,750,331    $ 2.36

(a)	The effect of the ~~767,500~~ 767,000 outstanding stock options is antidilutive for the ~~nine and three months~~quarter ended ~~September 30,~~March 31, 2021, due to net loss for ~~these periods.~~ this period.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our Condensed Consolidated Financial Statements and the accompanying Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report contain additional information that should be referred to when reviewing this material.

OVERVIEW

We are an independent oil and natural gas company engaged in acquiring, developing, and producing oil and natural gas. We presently own producing and

non-producing

properties located primarily in Texas, and Oklahoma. In addition, we own a substantial amount of well servicing equipment. All of our oil and gas properties and interests are located in the United States. Assets in our principal focus areas include mature properties with long-lived reserves and significant development opportunities as well as newer properties with development and exploration potential. We believe our balanced portfolio of assets and our ongoing hedging program position us well for both the current commodity price environment and future potential upside as we develop our attractive resource opportunities. Our primary sources of liquidity are cash generated from our operations and our credit facility.

We attempt to assume the position of operator in all acquisitions of producing properties and will continue to evaluate prospects for leasehold acquisitions and for exploration and development operations in areas in which we own interests. We continue to actively pursue the acquisition of producing properties. To diversify and broaden our asset base, we will consider acquiring the assets or stock in other entities and companies in the oil and gas business. Our main objective in making any such acquisitions will be to acquire income producing assets to build stockholder value through consistent growth in our oil and gas reserve base on a cost-efficient basis.

Our cash flows depend on many factors, including the price of oil ~~gas,~~ and ~~natural~~ gas, ~~liquids (NGL’s),~~ the success of our acquisition and drilling activities and the operational performance of our producing properties. We use derivative instruments to manage our commodity price risk. This practice may prevent us from receiving the full advantage of any increases in ~~commodity~~oil and gas prices above the maximum fixed amount specified in the derivative agreements and subjects us to the credit risk of the counterparties to such agreements. Since all our derivative contracts are accounted for under

mark-to-market

accounting, we expect continued volatility in gains and losses on

mark-to-market

derivative contracts in our consolidated statement of operations as changes occur in the NYMEX price indices.

Our financial results depend on many factors, particularly the price of natural gas and crude oil ~~and NGLs~~ and our ability to market our ~~products~~production on economically attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by weather conditions, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. In addition, our realized prices are further impacted by our derivative and hedging activities.

We derive our revenue and cash flow principally from the sale of oil, natural gas and NGLs. As a result, our revenues are determined, to a large degree, by prevailing prices for crude oil, natural gas and NGLs. We sell our oil and natural gas ~~and NGLs~~ on the open market ~~and to local processing companies~~ at prevailing market prices or through forward delivery contracts. Because some of our operations are located outside major markets, we are directly impacted by regional prices regardless of Henry Hub, WTI or other major market pricing. The market price for oil, natural gas and NGLs is dictated by supply and demand; consequently, we cannot accurately predict or control the ~~prices~~price we may receive for our ~~produced products.~~oil, natural gas and NGLs. Index prices for oil, natural gas and ~~NGLs are considerably higher than and~~NGL’s have improved since the lows of 2020, however, we expect prices to remain volatile and consequently cannot determine with any degree of certainty what effect increases or decreases in these prices will have on our capital program, production volumes or revenue.

We are the operator of the majority of our developed and undeveloped acreage which is nearly all held by production. In the Permian Basin of West Texas and eastern New Mexico the Company maintains an acreage position of approximately ~~19,680~~17,148 gross ~~(12,460~~(10,640 net) acres, 97% of which is located in Reagan, Upton, Martin, and Midland counties of Texas where our current horizontal drilling activity is focused. ~~This~~We believe this acreage has significant resource potential in the Spraberry and Wolfcamp intervals for additional horizontal drilling that could support the drilling of ~~more than~~as many as 250 additional horizontal wells. In Oklahoma we maintain an acreage position of approximately ~~49,765~~48,400 gross ~~(10,953~~(10,802 net) acres. Our Oklahoma horizontal development is focused primarily in Canadian, Kingfisher, Grady, ~~Garfield, Major~~ and Garvin counties. We believe approximately ~~5,579~~6,200 net acres in these counties hold significant additional resource potential that could support the drilling of as many as 495 new horizontal wells based on an estimate of four wells per section, ~~depending on~~two in the ~~reservoir target area.~~Mississippian and two in the Woodford Shale. Should we choose to participate with a working interest in future development, our share of these future capital expenditures would be approximately ~~$34~~$36 million at an average 10% ownership level.

Future development plans are established based on various factors, including the expectation of available cash flows from operations and availability of funds under our revolving credit facility.

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District ~~Information:~~Information

The following table represents certain ~~reserve~~reserves and well information as of December 31, ~~2020.~~2021.


	Gulf Coast		Mid- Continent		West Texas		Other		Total		Gulf Coast		Mid- Continent		West Texas		Other		Total
Proved Reserves as of December 31, 2020 (MBoe)
Proved Reserves as of December 31, 2021 (MBoe)
Developed		517		1,575		5,116		6		7,214		906		2,383		8,957		6		12,252
Undeveloped		—		95		3,126		—		3,221		—		—		—		—		—
Total		517		1,670		8,242		6		10,435		906		2,383		8,957		6		12,252
Average Daily Production (Boe per day)		297		788		3,178		2		4,265
Average Net Daily Production (Boe per day)												336		747		2,878		3		3,964
Gross Productive Wells (Working Interest and ORRI Wells)		239		549		556		170		1,514		207		549		576		200		1,532
Gross Productive Wells (Working Interest Only)		209		485		518		69		1,281		189		400		530		88		1,207
Net Productive Wells (Working Interest Only)		124		217		263		2		606		105		189		263		6		564
Gross Operated Productive Wells		158		209		325		—		692		137		195		321		—		653
Gross Operated Water Disposal, Injection and Supply wells		9		53		6		—		68		7		44		6		—		57

In several of our producing regions we have field service groups to service our operated wells and locations as well as third-party operators in the area. These services consist of well service support, site preparation and construction services for drilling and workover operations. Our operations are performed utilizing workover ~~and~~or swab rigs, water transport ~~trucks, hot oil~~ trucks, saltwater disposal facilities, various land excavating equipment and trucks we own and that are operated by our field employees.

Gulf Coast Region

Our ~~development, exploitation, exploration, and production~~ activities in the Gulf Coast region are primarily production and development of our existing operated properties concentrated in east and southeast Texas. This region is managed from our office in Houston, Texas. Principal producing intervals are in the Wilcox, San Miguel, Olmos, and Yegua formations at depths ranging from 3,000 to 12,500 feet. WeAs of December 31, 2021, we had ~~239~~207 producing wells ~~(124~~(105 net) in the Gulf Coast region, ~~as of December 31, 2020,~~ of which ~~158~~137 wells are operated by us. Average net daily production in our Gulf Coast Region in ~~2020~~2021 was ~~297~~336 Boe. OnAt December 31, ~~2020,~~2021, we had ~~517~~906 MBoe of proved reserves in the Gulf Coast region, which represented 5%7% of our total proved reserves. We maintain an acreage position of over ~~11,548~~11,000 gross ~~(3,968~~(3,447 net) acres in this region, primarily in Dimmit and Polk counties. We operate a field service group in this region from a field office in Carrizo Springs, Texas utilizing four workover rigs, nineteen water transport trucks, two saltwater disposal wells ~~two hot oilers,~~and several trucks and excavating equipment. Services including well service support, site preparation and construction services for drilling and workover operations are provided to third-party operators as well as utilized in our own operated wells and locations. As of ~~September 30, 2021,~~March 31, 2022, the Gulf Coast region has no operated wells in the process of being drilled, no waterfloods in the process of being installed and no other related activities of material importance.

Mid-Continent

Region

Our

Mid-Continent

activities are concentrated in central Oklahoma. This region is managed from our office in Oklahoma City, Oklahoma. As of December 31, 2021, we had 549 producing wells (189 net) in the

Mid-Continent

area, of which 195 wells are operated by us. Principal producing intervals are in the Roberson, Avant, Skinner, Sycamore, Bromide, McLish, Hunton, Mississippian, Oswego, Red Fork, and Chester formations at depths ranging from 1,100 to 10,500 feet. Average net daily production in our

Mid-Continent

Region in 2021 was 747 Boe. At December 31, 2021, we had 2,383 MBoe of proved reserves in the

Mid-Continent

area, representing 20% of our total proved reserves. We maintain an acreage position of approximately 48,400 gross (10,802 net) acres in this region, primarily in Canadian, Kingfisher, Grant, Major, and Garvin counties. Our

Mid-Continent

region is actively participating with third-party operators in the horizontal development of lands that include ~~Company-owned interest~~Company owned interests in several counties in the Stack and Scoop plays of Oklahoma where drilling is primarily ~~targeting~~targets reservoirs of the Mississippian, and Woodford formations.

In the ~~second~~first quarter of ~~2021,~~2022, in the

Mid-Continent

region the Company ~~participated for 11.25%~~committed to participate with ~~Ovintiv~~

~~Mid-Continent,~~

~~LLC~~9.38% interest in the drilling of four horizontal wells in Canadian County, Oklahoma ~~targeting~~operated by Ovintiv

Mid-Continent

Inc. The first of these was spud April 2, and the ~~Mississippian~~fourth on May 1,

2022. All four wells are expected to be completed and ~~Woodford formations, which are currently~~online in July of this year. These proved undeveloped drilling plans and their reserves were not included in the ~~process of being completed. Our share of these will be approximately $2.8 million. As of September 30,~~ 2021 ~~our~~

year-end

reserve report.

~~Mid-Continent~~

Table of Contents

~~region has four other wells operated by third parties that have been drilled but have yet to be completed. These four wells were included as Proved Undeveloped in the 2020~~

~~year-end~~

~~reserve report: one for 9.9% interest and three for less than one percent~~

~~interest.~~

West Texas Region

Our West Texas activities are concentrated in the Spraberry and Wolfcamp shale plays of the Permian Basin ofencompassing eight counties in West ~~Texas and New Mexico.~~Texas. The ~~basin covers more than 75,000 square miles and extends across 52 Counties. The Wolfcamp and Spraberry reservoirs of this basin are among the largest contiguous accumulations of~~ oil ~~and gas in the United States. Production~~produced from these ~~reservoirs~~shales is West Texas Intermediate Sweet

~~Table~~ and the gas is primarily casing-head gas with an average energy content of ~~Contents~~

~~Crude oil and high-quality casing-head gas.~~1,400 Btu. The horizontal target depths range from 7,600 feet to 12,500 feet. This region is managed from our office in Midland, Texas.

As of December 31, ~~2020,~~2021, we had ~~556~~576 wells (263 net) in the West Texas area, of which ~~325~~321 wells are operated by us. ~~Principal producing intervals are in the Wolfcamp and Spraberry formations at depths ranging from 5,500 to 12,500 feet. The average~~Average net daily production in Our West Texas Region in ~~2020~~2021 was ~~3,178~~2,878 Boe. OnAt December 31, ~~2020,~~2021, we had ~~8,242~~8,957 MBoe of proved reserves in the West Texas area, or ~~79%~~73% of our total proved reserves. We maintain an acreage position of approximately ~~19,679~~17,148 gross ~~(12,461~~(10,640 net) acres in the Permian Basin in West Texas, primarily in Reagan, Upton, Martin, and Midland counties and believe this acreage has significant resource potential for horizontal drilling in the Spraberry, Jo Mill, and Wolfcamp intervals. We operate a field service group in this region utilizing nine workover rigs, ~~three~~four hot oiler trucks, one kill truck, and two roustabout trucks. Services, including well service support, site preparation, and construction services for drilling and workover operations, are provided to third-party operators as well as utilized in our own operated wells and locations.

In the ~~third~~first quarter of ~~2021,~~2022, the Company ~~and Apache Corporation completed nine new Kashmir~~participated with 10.3% interest in the drilling of four

1.5-mile

long horizontal wells in ~~Upton~~Irion County, ~~Texas: three each~~Texas operated by SEM Operating Company, LLC. All four wells have finished drilling and are awaiting completion which is expected to occur in the ~~Upper Wolfcamp, Jo Mill, and Lower Spraberry reservoirs. Six~~second quarter of ~~these had been drilled~~2022.

In addition, the Company has received proposals for 13 new horizontal wells in West Texas planned for the third quarter. We intend to participate for 50% interest in the ~~spring~~drilling of ~~2020~~nine horizontal wells in Reagan County, Texas with BTA Oil Producers, Inc and ~~three were drilled early~~to participate for 38% in ~~2021. The Company owns 47.5% working interest~~the drilling of four horizontal wells in ~~these~~Martin County, Texas with ConocoPhilips. We also anticipate to begin development of ten new horizontal wells ~~and has invested approximately $24 million~~

~~to-date~~

with Hibernia Energy III, LLC, in ~~their drilling and completions. All nine wells are producing as of October 4, 2021. We believe the additional production from these wells will have a significant impact on the Company’s cash flow~~Reagan County, Texas, in the fourth quarter of ~~2021.~~2022. The Company will own approximately 25% of these ten wells expected to be completed in 2023. These proved undeveloped drilling plans were added in 2022, and are therefore not represented in the

year-end

2021 reserves report.

Reserve Information:

Our interests in proved developed and undeveloped oil and gas properties, including the interests held by the Partnerships, have been evaluated by Ryder Scott Company, L.P. for each of the three years ended December 31, ~~2020.~~2021. The professional qualifications of the technical persons primarily responsible for overseeing the preparation of the reserve estimates can be found in Exhibit 99.1, the Ryder Scott Company, L.P. Report on Registrant’s Reserves Estimates. In matters related to the preparation of our reserve estimates, our district managers report to the Engineering Data manager, who maintains oversight and compliance responsibility for the internal reserve estimate process and provides oversight for the annual preparation of reserve estimates of 100% of our

year-end

reserves by our independent third-party engineers, Ryder Scott Company, L.P. The members of our district and central groups consist of degreed engineers and geologists with between approximately twenty and thirty-five years of industry experience, and between eight and twenty-five years of experience managing our reserves. Our Engineering Data manager, the technical person primarily responsible for overseeing the preparation of reserves estimates, has over thirty years of experience, holds a ~~Bachelor’s~~Bachelor degree in Geology and an MBA in finance and is a member of the Society of Petroleum Engineers and American Association of Petroleum Geologist. See Part II, Item 8 “Financial Statements and Supplementary Data”, for additional discussions regarding proved reserves and their related cash flows.

All of our reserves are located within the continental United States. The following table summarizes our oil and gas reserves at each of the respective dates:


	Reserve Category																								Reserve Category
	Proved Developed								Proved Undeveloped								Total								Proved Developed								Proved Undeveloped								Total
As of December 31,	Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)		Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)		Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)		Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)		Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)		Oil (MBbls)		NGLs (MBbls)		Gas (MMcf)		Total (MBoe)
2018		6,404		2,707		21,065		12,622		10		12		124		43		6,414		2,719		21,189		12,665
2019		4,381		2,914		19,995		10,268		1,833		1,017		4,547		3,608		6,214		3,931		24,542		14,235		4,381		2,914		19,995		10,268		1,833		1,017		4,547		3,608		6,214		3,931		24,542		14,235
2020		2,684		2,258		13,633		7,214		1,784		787		3,897		3,221		4,468		3,045		17,530		10,435		2,684		2,258		13,633		7,214		1,784		787		3,897		3,221		4,468		3,045		17,530		10,435
2021																										5,386		2,882		23,902		12,252		—		—		—		—		5,386		2,882		23,902		12,252

(a)	In computing total reserves on a ~~barrel~~barrels of oil equivalent (Boe) basis, gas is converted to oil based on its relative energy content at the rate of six Mcf of gas to one barrel of oil and NGLs are converted based upon volume; one barrel of natural gas liquids equals one barrel of oil.

~~December 31, 2020,~~In 2019, in West Texas, we participated in the ~~Company had 3,221 Mboe of proved undeveloped (PUD) reserves attributable to 13 wells operated by others,~~initial three ~~of which are new wells spud in 2020 but not drilled until the first quarter of 2021, and 10 of which that were drilled as of~~

~~year-end~~

~~but not yet completed. The three new horizontal wells along with six uncompleted wells are located~~shallow horizontals on our Kashmir tract ~~in Upton County, Texas. They are operated by Apache Corporation and all nine wells are producing as~~with one of ~~October 4, 2021. These nine wells account for 3,127 Mboe of the total undeveloped reserves at~~

~~year-end.~~

~~Our average 47.5% share of the total cost~~each of these ~~nine horizontal~~ wells ~~will be approximately $27.8 million.~~completed in the Wolfcamp “A”, Jo Mill, and Lower Spraberry. The ~~four remaining PUD~~Company has 48% interest in two of these wells ~~drilled but not completed at~~

~~year-end,~~

~~are located~~and 5.3% in ~~Grady County, Oklahoma and account for 95 Mboe~~one well. All three wells were brought on production in May of ~~the total undeveloped~~2019.

~~reserves.~~

Table of Contents

In 2020, in West Texas we participated in the drilling of seven wells: one for 8.6% interest which was brought into production in July of 2020, and six wells with an average 47.5% interest that were drilled but not completed at

year-end

and therefore classified as Proved Undeveloped in the

year-end

reserve report. The Company invested approximately $8.0 million in these seven wells in 2020. Also in 2020, proved producing reserves were added in West Texas through the addition of 11 horizontal wells completed in Midland County, Texas, in which we receive 0.56% to 1% over-riding royalty interest.

In 2021, in West Texas, we participated with Apache in the drilling of three additional horizontals on the Kashmir Tract in Upton County, Texas and completed these three wells in September of 2021 along with six other wells drilled in 2020 on the same lease that were drilled but uncompleted at

year-end

2020. The Company has an average of 47.8% interest in these nine wells and invested approximately $30 million in these horizontal wells.

In our Oklahoma, Scoop-Stack play, in 2019, we participated in the drilling and completion of six wells on our WM Wallace tract for 7.67% interest, and nine wells, included on our Slash, Osborn, and Leon tracts, with an average 1.34% interest. In addition, three wells drilled in Oklahoma in 2018, were completed in 2019 converting 24 Mboe of reserves to proved developed. Also in Oklahoma, six wells designated as

Shut-in

on December 31, 2018, were brought into production in 2019: five located on our Ruthie tract, and one on our Braum tract.

In 2019, in our Gulf Coast region, we added production through the recompletion of three vertical wells in Polk County, Texas: one operated by the Company in which we have 72.5% interest, and two operated by Unit Petroleum in which the Company owns 2.81% working interest and 3.77% net revenue interest. In 2020, the Company successfully recompleted one additional operated well in the Segno field with a 72.5% interest.

At December 31, 2020, in total, the Company had 3,221 Mboe of proved undeveloped reserves attributable to 13 wells operated by others, 10 of which were drilled but not completed by

year-end

2020, and three that were not drilled until 2021. The three new horizontals along with the six uncompleted wells at

year-end

were brought online in late September and early October of 2021. These successful new wells are on our Kashmir tract in Upton County, Texas operated by Apache Corporation. These nine PUD wells at

year-end

2020 accounted for 3,127 Mboe of the total undeveloped reserves where the Company has an average 47.5% interest and invested approximately $30 million dollars in these wells. The four other PUD wells, drilled but not completed at

year-end

2020, are located in Grady County, Oklahoma and accounted for 95 Mboe of the total undeveloped reserves.

At December 31, 2021, the Company had 159 Mboe of proved developed

shut-in

reserves attributable to three horizontal wells drilled and completed in Canadian County, Oklahoma in December of 2021, but not yet online. Three of the four wells were successfully completed and online in January, 2022, while one well had completion issues and has been temporarily abandoned. In regard to the four drilled but uncompleted PUD wells in Grady County, Oklahoma, noted in the paragraph above, reserves previously attributed to these wells were not included in the 2021

year-end

reserve report as the operator has no near-term plans for their completion.

In the first quarter of 2022, in our West Texas horizontal drilling program, the Company participated with 10.3% interest in the drilling of four horizontal wells with SEM Operating Company and has received proposals for an additional 23 horizontal wells to begin this year. In total the Company is likely to invest approximately $76 million in these 27 wells. In Oklahoma, thus far in 2022, the Company is participating for 9.38% interest with Ovintiv

Mid-Continent

in the drilling of four wells in Canadian County, Oklahoma. These four wells and the four SEM wells are anticipated to be online in July of this year. Additional drilling and future development plans will be established based on an expectation of available cash flows from operations and ~~the~~ availability of funds under our revolving credit facility.

We employ technologies to establish ~~proven~~proved reserves that have been demonstrated to provide consistent results capable of repetition. The technologies and economic data being used in the estimation of our proved reserves include, but are not limited to, ~~decline curve and volumetric analysis, analogy,~~electrical logs, radioactivity logs, geologic ~~mapping, as well as evaluation of reservoir properties,~~maps, production data, and well test data. The estimated reserves of wells with sufficient production history are estimated using appropriate decline curves. Estimated reserves of producing wells with limited production history and for undeveloped locations are estimated using performance data from analogous wells in the area. These wells are considered analogous based on production performance from the same formation and with similar completion techniques.

The estimated future net revenue (using current prices and costs as of those dates) and the present value of future net revenue (at a 10% discount for estimated timing of cash flow) for our proved developed and proved undeveloped oil and gas reserves at the end of each of the three years ended December 31, ~~2020,~~2021, are summarized as follows (in thousands of dollars):


	Proved Developed				Proved Undeveloped				Total								Proved Developed				Proved Undeveloped				Total
As of December 31,	Future Net Revenue		Present Value 10 Of Future Net Revenue		Future Net Revenue		Present Value 10 Of Future Net Revenue		Future Net Revenue		Present Value 10 Of Future Net Revenue		Present Value 10 Of Future Income Taxes		Standardized Measure of Discounted Cash flow		Future Net Revenue		Present Value 10 Of Future Net Revenue		Future Net Revenue		Present Value 10 Of Future Net Revenue		Future Net Revenue		Present Value 10 Of Future Net Revenue		Present Value 10 Of Future Income Taxes		Standardized Measure of Discounted Cash flow
2018	$	239,337	$	161,376	$	767	$	525	$	240,104	$	161,901	$	23,992	$	137,909
2019	$	116,592	$	82,155	$	42,700	$	17,876	$	159,292	$	100,031	$	18,419	$	81,612	$	116,592	$	82,155	$	42,700	$	17,876	$	159,292	$	100,031	$	18,419	$	81,612
2020	$	43,886	$	34,717	$	37,346	$	21,823	$	81,232	$	56,539	$	14,920	$	41,619	$	43,886	$	34,717	$	37,346	$	21,823	$	81,232	$	56,539	$	14,920	$	41,619
2021																	$	275,227	$	171,906	$	—	$	—	$	275,227	$	171,906	$	36,100	$	135,806

The PV 10 Value represents the discounted future net cash flows attributable to our proved oil and gas reserves before income tax, discounted at 10%. Although this measure is not in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe that the presentation of the PV10 Value is relevant and useful to investors because it presents the discounted future net cash flow attributable to proved reserves ~~before~~prior to taking into account corporate future income taxes and the current tax structure. We use this measure when assessing the potential return on investment related to oil and gas properties. The PV10 of future income taxes represents the sole reconciling item between this

non-GAAP

PV10 Value versus the GAAP measure presented in the standardized measure of discounted cash flow. A reconciliation of these values is presented in the last three columns of the table above. The standardized measure of discounted future net cash flows represents the present value of future cash flows attributable to proved oil and natural gas reserves after income tax, discounted at 10%.

“Proved developed” oil and gas reserves are reserves that can be expected to be recovered from existing wells with existing equipment and operating methods. “Proved undeveloped” oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Our reserves include amounts attributable to

non-controlling

interests in the Partnerships. These interests represent less than 10% of our reserves.

In accordance with U.S. generally accepted accounting principles, product prices are determined using the twelve-month average oil and gas index prices, calculated as the unweighted arithmetic average for the first day of the month price for each month, adjusted for oilfield or gas gathering hub and wellhead price differentials (e.g. grade, transportation, gravity, sulfur, and basic sediment and water) as appropriate. Also, in accordance with SEC specifications and U.S. generally accepted accounting principles, changes in market prices subsequent to December 31 are not considered.

While it may be reasonably anticipated that the prices received for the sale of our production may be higher or lower than the prices used in this evaluation, as described above, and the operating costs relating to such production may also increase or decrease from existing levels, such possible changes in prices and costs were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation for the SEC case. Actual volumes produced, prices received and costs incurred may vary significantly from the SEC case.

Natural gas prices, based on the twelve-month average of the first of the month Henry Hub index price, were $3.598 per MMBtu in 2021 as compared to $1.985 per MMBtu in 2020, ~~as compared to $2.58~~and $2.581 per MMBtu in ~~2019, and $3.10 per MMBtu in 2018.~~2019. Oil prices, based on the NYMEX first of the month average price, were $66.56 per barrel in 2021 as compared to $39.57 per barrel in 2020, ~~as compared to~~and $55.69 per barrel in ~~2019,~~2019. Since January 1, 2021, we have not filed any estimates of our oil and ~~$65.56 per barrel~~gas reserves with, nor were any such estimates included in ~~2018.~~any reports to, any federal authority or agency, other than the Securities and Exchange Commission.

RECENT ACTIVITIES

The Company’s activities include development and exploratory drilling. Our strategy is to develop the Company’s extensive oil and gas reserves primarily through horizontal drilling. This strategy includes targeting reservoirs with high initial production rates and cash flow as well as targeting reservoirs with lower initial production rates but with higher expected return on investment. We believe that with today’s technology, horizontal development of our reserves provides superior economic results as compared to vertical development, by delivering higher production rates through greater contact and stimulation of a larger volume of reservoir rock while minimizing the surface footprint required to develop those same reserves.

Maintaining a strong balance sheet and ample liquidity are key components of our business strategy. ~~For 2021,~~In 2022, we will continue our focus on preserving financial flexibility and ample liquidity as we manage the risks facing our industry. Our ~~2021~~ capital budget isfor the year is• reflective of current commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under our revolving credit facility. As we have done historically to preserve or enhance liquidity, we may adjust our capital program throughout the year, divest

non-strategic

assets, or enter into strategic joint ventures.

In the third quarter of 2021, ~~the Company, together with Apache Corporation, completed~~ nine ~~new~~

two-mile

horizontal wells ~~on the Kashmir tract~~ in Upton County, ~~Texas. These nine~~Texas, operated by Apache Corporation, were completed and brought into production. In the fourth quarter of 2021, three

two-mile

horizontal wells ~~include three laterals~~ operated by Ovintiv

Mid-Continent

in ~~each of the Upper Wolfcamp, Jo Mill,~~Canadian County, Oklahoma were completed and ~~Lower Spraberry reservoirs. All nine wells were on production by October 4, 2021.~~brought online in January 2022. The Company has an average of 47.5% ~~working~~ interest in ~~these~~the nine wells completed with a total investment of approximately $24 million. We believe the additional income from these wells will have a significant impact on the Company’s fourth-quarter cash flow. In addition to the MiddleApache and ~~Upper Wolfcamp, the Jo Mill and the Lower Spraberry, which we now consider fully developed, we believe there is future development potential~~11.25% interest in the ~~Middle Spraberry reservoir on this 1280 acre block. This reservoir will likely be developed~~three wells completed with ~~four~~Ovintiv.

~~two-mile~~

~~laterals. The approximate completed cost of four wells~~To date in ~~the Middle Spraberry is $30.2 million, with the Company’s share being $14.2 million.~~

~~In the second quarter of 2021,~~2022, the Company has participated with ~~Ovintiv~~

~~Mid-Continent,~~

SEM Operating Company LLC in the drilling of four 7,900’ horizontal wells ~~located~~in Irion County, Texas with 10.3% interest, and participated with Ovintiv

Mid-Continent

Inc in the drilling of four 10,000’-long horizontal wells in Canadian County, ~~Oklahoma. These four~~

~~two-mile~~

~~laterals are in the process~~Oklahoma with 9.38% interest. We expect all eight of ~~being completed and are expected~~these wells to be ~~on production~~completed soon and online in ~~December~~July of this year. ~~The Company has an 11.25% working interest~~An additional 23 wells are planned to begin development in ~~each well~~the second half of 2022; nine with BTA Oil Producers, four with ConocoPhilips, and ~~expects to invest~~ten with Hibernia Energy III>

Since the start of our West Texas horizontal drilling program, in 2015, we have participated in 81 wells and invested approximately ~~$1.98~~$130 million in ~~these wells.~~horizontal drilling in the Permian Basin. This includes the four wells currently in progress with SEM Operating Company in Irion County, Texas.

In ~~West~~Upton County, Texas, ~~in addition to the Kashmir Tract described above,~~ we are ~~actively~~ developing a contiguous 3,260 acre ~~Area of Mutual Interest (AMI) in Upton County~~block with our joint venture partner, Apache Corporation. In this ~~acreage~~ block the Company has 2,600 leasehold acres with interest of between 14% and 56% depending on the particular lease and depth being developed. ~~Development~~

~~to-date~~

~~has been~~In 2018, eight successful wells were drilled horizontally by Apache Corporation in the Wolfcamp “B” ~~reservoir where we have 33 horizontal wells currently producing. We believe this reservoir is fully developed and the next phase~~ of ~~development for~~ this block with the Company participating for 49% interest and this is believed to be full development of the ~~shallower~~Wolfcamp “B” reservoir. Together with Apache, we are planning development of the Upper Wolfcamp, Jo Mill, and Lower Spraberry ~~reservoirs.~~reservoirs of this block. These shallower reservoirs have been

proven-up

~~by near-offset completions. PrimeEnergy and Apache are planning an initial three~~on our offset 1,300 acre Kashmir tract. It is expected that as many as 54 additional horizontals will be developed on this 3,260 acres in the near future. This development is estimated to cost approximately $370.6 million, with the Company’s share being approximately $170.8 million. In addition to the 54 prospective wells to be drilled ~~in 2022 that will each be three miles in length. The Company has 36 horizontals laid out~~ for ~~the development of~~ these three ~~reservoirs,18 of which are designed as three-mile laterals. In addition to these~~ reservoirs, ~~there is~~ a fourth target reservoir, the Middle Spraberry, ~~target that will likely be developed in~~is also prospective for future development. The potential of the ~~future with 12 horizontal wells. In total, we anticipate 48~~Middle Spraberry on the 3,260 acre block is for 18 horizontal wells ~~will develop these four reservoirs~~to be drilled and completed at a gross cost of approximately $126.3 million with ~~a cost estimate of $146 million net to~~ the ~~Company.~~Company’s share being approximately $61.8 million. The actual number of wells that are eventually drilled as well as the cost and the timing of drilling will vary based upon many factors, including commodity market conditions.

In addition to the 3,260 acre block being developed, as described above, the Company is also developing an offsetting 1,300 acre block in Upton County, Texas, with Apache Corporation as operator. In the second quarter of 2019 three horizontal wells were completed and brought on production from reservoirs above the Middle Wolfcamp: one in the Wolfcamp “A”, one in the Jo Mill, and one in the Lower Spraberry, confirming the economic viability of these reservoirs on our acreage. Prime holds 47.5% working interest in these reservoirs. As a result of the success of the initial three wells, nine additional horizontals followed and were completed in the third quarter of 2021. Our average 47.5% share of the cost of these nine horizontal wells was approximately $26.7 million in total. In addition to the Wolfcamp “A”, Jo Mill and Lower Spraberry, that are now considered fully developed on the tract, four locations in the Middle Spraberry will be considered for future development at an estimated gross cost of approximately $30.2 million with the Company’s share being approximately $14.2 million.

Also in the Permian Basin of West Texas, we are developing a

~~965-acre~~

965 acre block with ConocoPhillips in Martin County, Texas. In 2016 and 2017, four horizontal wells were drilled, completed, and ~~have been producing from the Wolfcamp.~~put on production. The Company owns ~~between~~ 35% ~~and~~to 38% interest in ~~various leases of~~ this joint venture acreage ~~where ConocoPhillips is the operator. No near-term additional~~and we have received drilling plans ~~have been received, however, development of offset acreage by other operators has demonstrated the potential~~from ConocoPhilips for ~~good economic production from multiple landing zones on our acreage block.~~

In Reagan County, Texas, the Company has two separate joint development projects that are in the planning stage for the initial phase of development to occur in 2022: one with BTA Producers, Inc. and one with Hibernia Resources, LLC. These two joint development acreage blocks can accommodate the drilling of ~~144 horizontal~~four wells in the third quarter of 2022 that are likely to ~~produce from five prospective reservoirs, four of which are proven.~~be

2.5-mile

laterals. The Company’s ~~share~~investment in these wells is expected to be ~~50% and the potential investment by the Company would be approximately $442~~$15 million. ~~The actual number of wells eventually drilled, and the cost and the timing of such wells are dependent upon many factors including commodity market conditions.~~

~~Also,~~ In ~~Reagan County,~~2022, in West Texas, the Company ~~and Pioneer Natural Resources have agreed to jointly develop approximately 3,680 gross acres. This agreement facilitates~~is currently participating for 10.3% interest with SEM Operating Company in the drilling of ~~as many as 108~~four 7,900’-long horizontal ~~laterals where the company would~~wells in Irion County, Texas. We anticipate an investment of $2.55 million in these wells. We have ~~an average of 34.5% working interest and invest approximately $236 million. We believe this agreement represents significant future value~~also received proposals from BTA Oil Producers for ~~PrimeEnergy.~~

~~In addition, we are in discussions with Earthstone Energy, Inc. regarding~~ the drilling of ~~three wells~~nine

2.5-mile-long

horizontals in Reagan County, Texas ~~in which the Company would have 20% working interest and would invest approximately $3.8 million in three 9,650 foot laterals.~~

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Our primary sources of liquidity are cash generated from our operations, through our producing oil and gas properties, field services business, and sales of acreage.~~

~~Net cash provided by operating activities for the nine months ended September 30, 2021, was $18.8 million, compared~~ to $17.9 million in the first nine months of 2020. Excluding the effects of significant unforeseen expenses or other income, our cash flow from operations fluctuates primarily because of variations in oil and gas production and prices or changes in working capital accounts. Our oil and gas production will vary based on actual well performance but may be curtailed due to factors beyond our control.

Our realized oil and gas prices vary due to world political events, supply and demand of products, product storage levels, and weather patterns. We sell the majority of our production at spot market prices. Accordingly, product price volatility will affect our cash flow from operations. To mitigate price volatility, we sometimes lock in prices for some portion of our production through the use of derivatives.

Maintaining a strong balance sheet and ample liquidity are key components of our business strategy. For 2021, we will continue our focus on preserving financial flexibility and ample liquidity as we manage the risks facing our industry. Our 2021 capital budget is reflective of commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under our revolving credit facility. As we have done historically to preserve or enhance liquidity, we may adjust our capital program throughout the year, divest assets, or enter into strategic joint ventures. We are actively in discussions with financial partners for funding to develop our asset base and, if required, pay down our revolving credit facility should our borrowing base become limited due to the deterioration of commodity prices.

The Company maintains a Credit Agreement with a maturity date of February 15, 2023, providing for a credit facility totaling $300 million, with a borrowing base of $40 million. At September 30, 2021, the Company had $31.5 million in outstanding borrowings and $8.5 million in availability under this facility. The bank reviews the borrowing base semi-annually and, at their discretion, may decrease or propose an increase to the borrowing base relative to a

~~re-determined~~

estimate of proved oil and gas reserves. The current borrowing base review is in progress and expected to be set at $50 million. Our oil and gas properties are pledged as collateral for the line of credit and we are subject to certain financial and operational covenants defined in the agreement. We are currently in compliance with these covenants and expect to be in compliance over the next twelve months. If we do not comply with these covenants on a continuing basis, the lenders have the right to refuse to advance additional funds under the facility and/or declare all principal and interest immediately due and payable. Our borrowing base may decrease as a result of lower natural gas or oil prices, operating difficulties, declines in reserves, lending requirements or regulations, the issuance of new indebtedness or for other reasons set forth in our revolving credit agreement. In the event of a decrease in our borrowing base due to declines in commodity prices or otherwise, our ability to borrow under our revolving credit facility may be limited and we could be required to repay any indebtedness in excess of the

~~re-determined~~

~~borrowing base.~~

Our credit agreement requires us to hedge a portion of our production as forecasted for the PDP reserves included in our borrowing base review engineering reports. Accordingly, as of September 30, 2021, the Company has in place the following swap and put agreements for oil and natural gas.

2021

2022

2023

2021

2022

2023

Swap Agreements

Natural Gas (MMBTU)
   268,000    928,000    131,000    $ 2.48    $ 2.67    $ 2.81
Oil (barrels)
   133,500    196,200    27,200    $ 53.60    $ 51.99    $ 50.31

The Company’s activities include development drilling. Our strategy is to develop a balanced portfolio of drilling prospects that includes lower risk wells with a high probability of success and higher risk wells with greater economic potential. In 2016, based upon the results of horizontal wells and historical vertical well performance, we decided to reduce the number of vertical wells in our drilling program and focus primarily on horizontal well drilling. We believe horizontal development of our resource base provides superior returns relative to vertical development, due to the ability of horizontals to come in contact with and drain from a greater volume of reservoir rock over more acreage, with less infrastructure, and thus at a lower cost of development per acre.

Our primary focus is the development of our leasehold acreage in the Permian Basin of West Texas where the Company currently holds an acreage position of 19,680 gross (12,460 net) acres, the majority of which is in Reagan, Upton, Martin and Midland counties. We believe this acreage has significant resource potential in as many as 10 reservoirs, including benches of the Spraberry, Jo Mill, and Wolfcamp, and can support the potential drilling of more than 250 additional horizontal wells.

The Middle Wolfcamp was our primary target for production in the area until the Company drilled three horizontal wells with Apache Corporation into the shallower reservoirs of the Wolfcamp “A”, the Jo Mill, and the Lower Spraberry, in 2019. These three test wells proved the productive capability of these reservoirs for the 1,280 acre Kashmir block in which we recently completed an additional nine wells. These nine wells were completedbegin in the third quarter ~~and all were on production by October 4~~

~~2021. We have an average 47.5%~~of this year. The Company intends to participate for its 50% interest in six wells and 31% interest in three wells. Our expected investment in the drilling and completion of these wells is $40.5 million. In addition, we received a proposal from ConocoPhilips for the drilling of four horizontal wells in Marting Couty, and a proposal from Hibernia Energy III for the drilling of ten horizontal wells in Reagan County. We expect ~~a total investment net to~~ the ~~Company of approximately $24 million.~~

~~The successful~~ development of these ~~reservoirs has proven~~projects to begin in the ~~productive potential~~fourth quarter of ~~these reservoirs on our nearby~~

~~3,260-acre~~

~~AMI block with Apache Corporation~~2022. PrimeEnergy will have approximately 38% interest in ~~Upton County, Texas. Here~~ the ~~Company holds between 14%~~four ConocoPhilips wells and ~~56%~~25% interest ~~and is planning~~in the drilling of an initial three wells to be drilled in 2022. These three will each be three-mile-long laterals. The future development will likely be the drilling of 48 horizontal wells targeting four reservoirs from the Wolfcamp “A” through the Middle Spraberry. The cost of such development will be approximately $370 million with the Company’s share being approximately $146 million. The actual number of wells that will be drilled, the cost, and the timing of drilling will vary based upon many factors, including commodity market conditions.Hibernia Energy wells.

In Reagan County, Texas, the Company holds 12,700 Gross (8.870 net) acres with exceptional potential. Offset operators have proven the productive capability of four reservoirs from the Middle Wolfcamp to the Lower Spraberry. Here the Company could participate in an estimated 352 horizontals with a net cost of approximately $890 million. Near-term development plans being discussed include the drilling of three 12,500’ laterals on one acreage block with BTA Producers, Inc., and six horizontal laterals on a second acreage block with laterals from 7,500’ to 10,000’ in length with Hibernia Resources, LLC. The Company’s share of these wells would average about 37.5% and cost approximately $35.2 million net.

In Oklahoma, ~~the Company’s horizontal activity is~~we are focused on development of our reserves in Canadian, Grady, Kingfisher, Garfield, Major, and Garvin counties where we have approximately ~~579~~6,200 net leasehold acres in the Scoop/Stack Play. In 2019, we participated for an average of 4.6% interest with ~~exceptional development potential.~~ Newfield Exploration in twelve successful wells in Canadian County on our Slash and Wallace tracts. In 2021, we participated for 11.25% interest with Ovintiv

Mid-Continent

Inc. in four wells on our Peters tract, in Canadian County. Three of these wells were successfully completed in December 2021 and online in January 2022, while one well had completion issues and has been temporarily abandoned. At today’s product prices, payout of the Company’s $2.2 million investment in these four wells is expected to be in approximately six months.

In April 2022. in Oklahoma, the Company and Ovintiv

Mid-Continent

began drilling four horizontal wells on our Bohlman tract in the same area as the successful Peters wells. All four of the Bohlman wells have been spud and the first is in the process of being drilled at the time of this writing. The Company is participating with 9.38% interest for approximately $1.8 million through completion which is expected to occur in June and July.

We believe ~~this acreage could~~our 6,200 net leasehold acres in Oklahoma have the resource potential to support the drilling of as many as 4954 new horizontal wells based on an estimate of four wells per section: two in the Mississippian and two in the Woodford Shale. Should we choose to participate in future development, our share of the capital expenditures would be approximately ~~$34~~$36 million at an average 10% ownership ~~otherwise~~level; the Company will otherwise sell its rights for cash, or cash plus a royalty or working interest.

The majority of our capital spending is discretionary, and the ultimate level of expenditures will be dependent on our assessment of the oil and gas business environment, the number and quality of oil and gas prospects available, the market for oilfield services, and oil and gas business opportunities in general.

The Company has in place both a stock repurchase program and a limited partnership interest repurchase program. Spending under these programs in 2020 was $1.452 million. The Company expects continued spending under these programs through 2021.

RESULTS OF OPERATIONS

~~2021 and 2020 Compared~~

We reported net income of ~~$6.5~~$11.1 million, ~~or $3.26 per share and $65 thousand or $0.03~~$5.62 per share, for the three ~~and nine~~ months ended ~~September 30, 2020, respectively, as~~March 2022 compared towith a net ~~losses~~loss of ~~$1.2~~$1.5 million, ~~or $(0.58) per share and $5.0 million, or $(2.52)~~$0.73 per share, for the ~~three and nine months ended September 30, 2021, respectively. Current~~same period of 2021. The current year net ~~loss~~income reflects changes in oil, gas and NGLs sales related to increased production combined with higher commodity ~~price increases over the three and nine months ended September 30, 2020, decreases in gains related to the sale of acreage and changes related to the valuation of~~prices offset by losses on derivative ~~instruments.~~contracts. The significant components of income and expense are discussed below.

Oil, gas and NGLs sales

increased ~~$9.2 million, or 103.9%~~166.9% to ~~$18.1~~$33.9 million for the three months ended ~~September 30,~~March 2022 from $12.7 million in the same period of 2021. Sales vary due to changes in volumes of production sold and realized commodity prices. Our production across all three products increased substantially reflecting the production from our West Texas wells added in the fourth quarter of 2021 ~~from $8.9 million for~~and our Oklahoma wells which were placed in production in January 2022. The changes in volumes and prices are presented in the ~~three months ended September 30, 2020 and $19.8 million, or 75.2% to $46.1 million for the nine months ended September 30, 2021 from $26.3 million for the nine months ended September 30, 2020.~~table below.

The following table summarizes the primary components of production volumes and average sales prices realized for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (excluding realized gains and losses from derivatives).

Nine months ended September 30,


2021

2020

Increase /
(Decrease)

Increase /
(Decrease)

Barrels of Oil Produced
   480,000    538,000    (58,000 )    (10.80 )%
Average Price Received
   $ 63.28    $ 38.41    $ 24.88    64.8 %







Oil Revenue (In 000’s)
   $ 30,376    $ 20,663    $ 9,713    47.0 %







Mcf of Gas Sold
   2,395,000    2,038,000    357,000    17.5 %
Average Price Received
   $ 3.32    $ 1.20    $ 2.12    177.1 %







Gas Revenue (In 000’s)
   $ 7,948    $ 2,441    $ 5,507    225.6 %







Barrels of Natural Gas Liquids Sold
   298,000    319,000    (21,000 )    (6.60 )%
Average Price Received
   $ 26.11    $ 10.07    $ 16.04    159.3 %







Natural Gas Liquids Revenue (In 000’s)
   $ 7,781    $ 3,212    $ 4,569    142.2 %







Total Oil & Gas Revenue (In 000’s)
   $ 46,105    $ 26,316    $ 19,789    75.2 %

~~Table of Contents~~


			Three months ended September 30,										Three Months Ended March 31,
	2021		2020		Increase / (Decrease)			Increase / (Decrease)			2022		2021		Increase / (Decrease)		Increase / (Decrease)
Barrels of Oil Produced		152,000		160,000		(8,000	)		(5.0	)%		273,000		163,000		110,000		67.48	%
Average Price Received	$	68.70	$	39.62	$	29.08			73.4	%	$	96.36	$	56.87	$	39.48		69.43	%

Oil Revenue (In 000’s)	$	10.442	$	6,339	$	4,103			64.7	%	$	26,305	$	9,270	$	17,035		183.76	%

Mcf of Gas Sold		950,000		496,000		454,000			91.5	%		777,000		665,000		112,000		16.84	%
Average Price Received	$	4.21	$	2.12	$	2.09			98.5	%	$	4.82	$	2.49	$	2.33		93.37	%

Gas Revenue (In 000’s)	$	3,998	$	1,052	$	2,946			280.0	%	$	3,746	$	1,658	$	2,088		125.93	%

Barrels of Natural Gas Liquids Sold		103,000		106,000		(3,000	)		(2.80	)%		104,000		86,000		18,000		20.93	%
Average Price Received	$	35.26	$	13.91	$	21.35			153.5	%	$	37.03	$	20.29	$	16.74		82.40	%

Natural Gas Liquids Revenue (In 000’s)	$	3,632	$	1,474	$	2,158			146.4	%	$	3,851	$	1,745	$	2,106		120.69	%

Total Oil & Gas Revenue (In 000’s)	$	18,072	$	8,865	$	9,207			103.9	%	$	33,902	$	12,673	$	21,229		167.51	%

~~Oil, Natural Gas and NGL Derivatives~~Losses on derivative instruments

We do not apply hedge accounting to any of our ~~commodity based~~commodity-based derivatives, thus changes in the fair market value of commodity contracts held at the end of a reported period, referred to as

mark-to-market

adjustments, are recognized as unrealized gains and losses in the accompanying condensed consolidated statements of operations. As oil and natural gas prices remain volatile,

mark-to-market

accounting treatment creates volatility in our revenues. Unrealized and realized losses by product are presented in the table below.


	2022			2021
Unrealized (loss) on natural gas derivative instruments	$	(1,948	)	$	(15	)
Unrealized (loss) on crude oil derivative instruments		(5,191	)		(896	)
Realized (loss) on natural gas derivative instruments		(620	)		(60	)
Realized (loss) on crude oil derivative instruments		(3,199	)		(152	)

	$	(10,958	)	$	(1,123	)

Average oil and gas prices received for the three months ended March 31, including the impact of derivatives were:


	2022		2021
Average sales prices per barrel of oil	$	84.52	$	55.70
Average sales price per MCF of natural gas	$	4.02	$	2.40

Field service income

increased ~~$0.4~~$1.8 million or ~~15.9%~~128.6% for the first quarter 2022 to ~~$3.0~~$3.2 million from $1.4 million for the ~~third~~first quarter ~~2021 from $2.6 million for~~2021. This increase is a combined result of increased utilization and rates charged to customers during the ~~third~~current quarter ~~2020 and decreased $1.1 million, or 12.0%~~compared to ~~$8.1 million for~~ the ~~nine months ended September 30, 2021 from $9.2 million for the nine months ended September 30, 2020.~~same quarter in 2021. Workover rig services, hot oil treatments, ~~saltwater~~salt water hauling and disposal represent the bulk of our field service operations.

Lease operating expense

increased ~~$3.4~~$4.2 million or ~~90.5% to $7.2~~93.3% from $4.5 million for the ~~third~~first quarter 2021 to ~~$3.8~~$8.7 million for the ~~third~~first quarter ~~2020, and increased $1.4 million or 8.8% to $17.8 million for the nine months ended September 30, 2021 from $16.4 million for the nine months ended September 30, 2020.~~2022. This increase ~~is primarily due to returning to production~~reflects the ~~high lifting cost properties~~

~~shut-in~~

~~during 2020 combined with higher~~increased production taxes related to ~~higher commodity prices.~~the increased oil, gas and NGL revenue, and the additional operating expenses related to the wells added in the fourth quarter of 2021 and the first quarter of 2022.

Field service expense

increased ~~$1.4~~$1.6 million or ~~72.9%~~114.3% to ~~$3.4~~$3.0 million for the ~~third~~first quarter ~~2021~~2022 from ~~$2.0~~$1.4 million for the ~~third~~first quarter ~~2020 and increased $0.3 million, or 4.0% to $7.7 million for the nine months ended September 30, 2021 from $7.4 million for the nine months ended September 30, 2020.~~2021. Field service expenses primarily consist of ~~salaries~~wages and ~~vehicle~~equipment operating expenses which have increased during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 over the same ~~periods~~period of ~~2020~~2021 related to increased utilization of the equipment ~~as oil and gas prices increased~~ during the current quarter compared to the same quarter in 2021.

Depreciation, depletion, amortization and accretion on discounted liabilities

~~decreased $2.5~~increased $0.7 million or ~~27.0% to $6.9~~10.8% from $6.5 million for the ~~third~~first quarter 2021 ~~from $9.4~~to $7.2 million for the ~~third~~first quarter ~~2020 and decreased $4.5 million, or 18.5% to $20.0 million for the nine months ended September 30, 2021 from $24.5 million for the nine months ended September 30, 2020,~~2022 reflecting the ~~reduced capital base~~increased production in the first quarter of ~~the producing properties in 2021.~~2022.

General and administrative expense

~~decreased $0.2~~increased $4.7 million or ~~7.9% to $2.4~~235% from $2.0 million for the three months ended ~~September 30,~~March 31, 2021 ~~from $2.6~~to $6.7 million for the three months ended ~~September 30, 2020, and decreased $5.4 million, or 42.0% to $7.5 million for the nine months ended September 30, 2021 from $12.9 million for the nine months ended September 30, 2020.~~March 31, 2022. This ~~overall decrease~~increase in ~~2021~~2022 is primarily due to ~~decreases in~~increased employee ~~wages~~compensation and ~~benefits and by staff reductions in 2020.~~

~~Gain on sale and exchange of assets~~

of $15.0 million for the nine months ended September 30, 2020 consists of principally of sales of deep rights in undeveloped acreage in West Texas and marginal wells in West Virginia. No such sales took place during 2021.benefits.

Interest expense

decreased ~~to $0.46~~$0.2 million or 40% from $0.5 million for the ~~third~~first quarter 2021 ~~from $0.47~~to $0.3 million for the ~~third~~first quarter ~~2020 and to $1.5 million for the nine months ended September 30, 2021 from $1.6 million for the nine months ended September 30, 2020.~~2022. This decrease reflects the decrease in current borrowings under our revolving credit agreement.

Income tax expense orand benefit

for the ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 periods~~quarters varied due to the change in net income orand loss for those periods.

LIQUIDITY AND CAPITAL RESOURCES

Maintaining a strong balance sheet and ample liquidity are key components of our business strategy. For 2022, we will continue our focus on preserving financial flexibility and ample liquidity as we manage the risks facing our industry. Our 2022 capital budget is reflective of commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under our revolving credit facility. As we have done historically to preserve or enhance liquidity, we may adjust our capital program throughout the year, divest assets, or enter into strategic joint ventures.

Our primary sources of liquidity are cash generated from our operations, through our producing oil and gas properties, field services business and sales of acreage. Net cash provided by operating activities and proceeds from the sale of properties for the quarter ended March 31, 2022 was $23.3 million, compared to $4.7 million in the prior year.

Excluding the effects of significant unforeseen expenses or other income, our cash flow from operations fluctuates primarily because of variations in oil and gas production and prices or changes in working capital accounts. Our oil and gas production will vary based on actual well performance but may be curtailed due to factors beyond our control.

Our credit agreement required us to hedge a portion of our production as forecasted for the PDP reserves included in our borrowing base review engineering reports. Accordingly, the Company has in place the following swap agreements for oil and natural gas.


	2022		2023		2022		2023
Swap Agreements
Natural Gas (MMBTU)		919,000		254,000	$	2.96	$	3.60
Oil (barrels)		269,900		70,700	$	62.32	$	69.50

In the first quarter of 2022, the Company participated in the drilling of four wells with SEM Operating Company in Irion County, Texas for 10.3% interest and in April of this year began participating with Ovintiv

Mid-Continent

in four wells in Canadian County, Oklahoma with 9.38% interest. In addition, the Company has received drilling proposals for an additional 23 horizontal wells to be drilled in West Texas this year. In total the Company is likely to invest approximately $76 million in these 31 wells. Additional drilling and future development plans will be established based on an expectation of available cash flows from operations and availability of funds under our revolving credit facility.

The Company maintains a Credit Agreement providing for a reserves-based line of credit totaling $300 million, with a current borrowing base of $50 million. As of May 20, 2022, the Company has no outstanding borrowings under this line. The bank reviews the borrowing base semi-annually and, at their discretion, may decrease or propose an increase to the borrowing base relative to a

re-determined

estimate of proved oil and gas reserves. The next borrowing base review is scheduled for June 2022, at this time we expect the borrowing base to be increased approximately 50%. Our oil and gas properties are pledged as collateral for the line of credit and we are subject to certain financial and operational covenants defined in the agreement. We are currently in compliance with these covenants and expect to be in compliance over the next twelve months. If we do not comply with these covenants on a continuing basis, the lenders have the right to refuse to advance additional funds under the facility and/or declare all principal and interest immediately due and payable. Our borrowing base may decrease as a result of lower natural gas or oil prices, operating difficulties, declines in reserves, lending requirements or regulations, the issuance of new indebtedness or for other reasons set forth in our revolving credit agreement. In the event of a decrease in our borrowing base due to declines in commodity prices or otherwise, our ability to borrow under our revolving credit facility may be limited and we could be required to repay any indebtedness in excess of the

re-determined

borrowing base.

In the first quarter of 2022, The Company sold 1,809 net leasehold acres in Regan and Midland Counties, Texas through two transactions receiving gross proceeds of $14.0 million and retaining certain over-riding royalty interests.

The Company has a stock repurchase program in place, spending under this program during the first quarter of 2022 was $833 thousand. The Company expects continued spending under the stock repurchase program in 2022.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a smaller reporting company and no response is required pursuant to this Item.

Item 4.

CONTROLS AND PROCEDURES

As of the end of the current reported period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules

13a-15

and

15d-15

of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective with respect to the recording, processing, summarizing and reporting, within the time periods specified in the Commission’s rules and forms, of information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

There were no changes in the Company’s internal control over financial reporting that occurred during the first ~~nine~~three months of ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

None.

Item 1A.

RISK FACTORS

The Company is a smaller reporting company and no response is required pursuant to this Item.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of equity securities by the Company during the period covered by this report.

~~During the nine months ended September 30, 2021,~~ There was no purchase of equity securities by the Company ~~purchased~~during the ~~following shares of common stock as treasury shares.~~period covered by this report.


~~2021 Month~~	Number of shares		Average price paid per share		Maximum number of shares that may yet be purchased under the program at month end ~~(1)~~
~~January~~		1—	$	—		~~147,921~~
~~February~~		—	$	—		~~147,921~~
~~March~~		—	$	—		~~147,921~~
~~April~~		—	$	—		~~147,921~~
~~May~~		—	$	—		~~147,921~~
~~June~~		—	$	—		~~147,921~~
~~July~~		—	$	—		~~147,921~~
~~August~~		—	$	—		~~147,921~~
~~September~~		—	$	—		~~147,021~~

~~Total/Average~~			$


2022 Month	Number of Shares		Average Price Paid per share		Maximum Number of Shares that May Yet Be Purchased Under The Program at Month—End (1)
January		2,981	$	76.21		144,740
February		5,948	$	73.26		138,792
March		2,259	$	75.36		136,533

Total/Average		11,188	$	74.48

(1)

In December 1993, we announced that the Board of Directors authorized a stock repurchase program whereby we may purchase outstanding shares of the common stock from

time-to-time,

in open market transactions or negotiated sales. On October 31, 2012 and June 13, 2018, the Board of Directors of the Company approved an additional 500,000 and 200,000 shares respectively, of the Company’s stock to be included in the stock repurchase program. A total of 3,700,000 shares have been authorized, to date, under this program. Through ~~September 30, 2021,~~March 31, 2022, a total of ~~3,552,279~~3,565,567 shares have been repurchased under this program for ~~$74,934,725~~$75,913,047 at an average price of ~~$21.09~~$21.29 per share. Additional purchases of shares may occur as market conditions warrant. We expect future purchases will be funded with internally generated cash flow or from working capital.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None

Item 4.

RESERVED

Item 5.

OTHER INFORMATION

None


32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS		Inline XBRL (eXtensible Business Reporting Language) Instance Document (filed herewith)

101.SCH		Inline XBRL Taxonomy Extension Schema Document (filed herewith)

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

2526

SIGNATURES

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities and Exchange Act of 1934, ~~the registrant~~Registrant has duly caused this ~~report~~Report to be signed on its behalf by the undersigned thereunto duly authorized.


		PrimeEnergy Resources Corporation
		~~PRIMEENERGY RESOURCES CORPORATION~~ (Registrant)

~~Dated: November 19, 2021~~ May 20, 2022		~~By:~~	/s/ Charles E. Drimal, Jr.
	(Date)		Charles E. Drimal, Jr.
		President
	~~Chairman,~~	Principal Executive Officer

		/s/ Beverly A. Cummings
May 20, 2022		Beverly A. Cummings
		Executive Vice President
		Principal Financial Officer

2627


Exhibit No.

3.1		Certificate of Incorporation of PrimeEnergy Resources Corporation, as amended and restated of December 21, 2018, (filed as Exhibit 3.1 of PrimeEnergy Resources Corporation Form 8-K on December 27, 2018, and incorporated herein by reference).

3.2		Bylaws of PrimeEnergy Resources Corporation as amended and restated as of April 24, 2020 (filed as Exhibit 3.2 of PrimeEnergy Resources Corporation Form 8-K on April 27, 2020 and incorporated herein by reference).

10.18		Composite copy of Non-Statutory Option Agreements (Incorporated by reference to Exhibit 10.18 of PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2004).

10.22.5.10		Third Amended and Restated Credit Agreement dated as of February 15, 2017 among PrimeEnergy Resources Corporation, as Borrower, Compass Bank, as Administrative Agent and Lender, Wells Fargo, National Association, as Document Agent, the Lenders Party Hereto (Compass Bank, Wells Fargo, National Association, Citibank, N.A.) and BBVA Compass Bank, as Letter of Credit Issuer and Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.22.5.10 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

10.22.5.10.1		FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 22, 2017 among PRIMEENERGY CORPORATION, as Borrower, THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole Lead Arranger and Sole Book Runner, (Incorporated by reference to Exhibit 10.22.5.10.1 to PrimeEnergy Corporation Form 10-K for the year ended December 31, 2017).

10.22.5.10.2		SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 17, 2018 among PRIMEENERGY CORPORATION, as Borrower, THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole Lead Arranger and Sole Book Runner, (Incorporated by reference to Exhibit 10.22.5.10.2 to PrimeEnergy Corporation Form 10-Q for the quarter ended June 30, 2018).

10.22.5.10.3		THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of ~~January 8, 2019,~~December 27, 2018, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, COMPASS BANK, as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA COMPASS, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.3 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2018).

10.22.5.10.4		FOURTH AMENDMENT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 8, 2020 among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, BBVA USA (f/k/a COMPASS BANK), as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA USA, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to ~~10.22.5.10.4~~10.22.5.4 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended September 30, 2020).

10.22.5.10.5		FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 4, 2020, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE LENDERS PARTY HERETO, BBVA USA (f/k/a COMPASS BANK,) as Administrative Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and BBVA USA, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to ~~10.22.5.10.5~~10.22.5.5 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended September 30, 2020).

10.22.5.10.6		SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of FEBRUARY 11, 2021, among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE GUARANTORS PARTY HERETO, THE LENDERS PARTY, HERETO, BBVA USA, as Administrative Agent and BBVA USA, as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.6 to PrimeEnergy Resources Corporation Form 8-K dated February 16, 2021).


~~Exhibit No.~~ 10.22.5.10.7		SEVENTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 20, 2021 among PRIMEENERGY RESOURCES CORPORATION, as Borrower, THE GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO, CITIBANK, N.A., as Administrative Agent, and CITIBANK, N.A., as Sole Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.22.5.10.7 to PrimeEnergy Resources Form 10-K filed April 21, 2022).

10.22.5.11		Amended, Restated and Consolidated Guaranty dated as of February 15, 2017, among PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C. in favor of Compass Bank, as Administrative Agent for the Lenders (Incorporated by reference to Exhibit 10.22.5.11 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

10.22.5.12		Amended, Restated and Consolidated Pledge and Security Agreement dated as of February 15, 2017, among PrimeEnergy Resources Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service Company, Southwest Oilfield Construction Company, EOWS Midland Company and Prime Offshore L.L.C. and Compass Bank, as Administrative Agent for the Secured Parties (Incorporated by reference to Exhibit 10.22.5.12 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2016).

10.22.5.13		Amended, Restated and Consolidated Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as of May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.13 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

10.22.5.13.1		THIS FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “Amendment”) is made and entered into as of December 20, 2021, by PRIMEENERGY RESOURCES CORPORATION, a Delaware corporation, formerly known as PrimeEnergy Corporation (“Prime”) and PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation (“PEMC,” and Prime and PEMC herein, individually and collectively, “Grantor”), and CITIBANK, N.A., as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “Beneficiary”). (Incorporated by reference to 10.22.5.13.1 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2021).

10.22.5.14		Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement Dated as of May 5, 2017 (Incorporated by reference to Exhibit 10.22.5.14 to PrimeEnergy Resources Corporation Form 10-Q for the quarter ended March 31, 2017).

10.22.5.14.1		FIRST AMENDMENT TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “Amendment”) is made and entered into as of December 20, 2021, by PRIMEENERGY RESOURCES CORPORATION, a Delaware corporation, formerly known as PrimeEnergy Corporation (“Prime”) and PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation (“PEMC,” and Prime and PEMC herein, individually and collectively, “Grantor”), and CITIBANK, N.A., as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “Beneficiary”) (Incorporated by reference to 10.22.5.14.1 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2021).

10.22.5.14.2		THIS SECOND AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED MORTGAGE OF OIL AND GAS PROPERTY, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT (this “Amendment”) is made and entered into as of December 20, 2021, between PRIMEENERGY RESOURCES CORPORATION, a Delaware corporation, formerly known as PrimeEnergy Corporation (“Prime”) and PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation (“PEMC,” and Prime and PEMC herein, individually and collectively, “Mortgagor”), and CITIBANK, N.A., as Administrative Agent for the benefit of the Secured Parties (in such capacity and together with its successors and assigns in such capacity, “Mortgagee”). (Incorporated by reference to 10.22.5.14.2 to PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2021).

14		PrimeEnergy Resources Corporation Code of Business Conduct and Ethics, as amended December 16, 2011 (Incorporated by reference to Exhibit 14 of PrimeEnergy Resources Corporation Form 10-K for the year ended December 31, 2011).

31.1		Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).

31.2		Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).


	September 30, 2021			December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	3,624		$	996
Accounts receivable, net		14,341			7,221
Prepaid obligations		781			590
Other current assets		568			104

Total Current Assets		19,314			8,911
Property and Equipment, at cost
Oil and gas properties (successful efforts method), net		176,497			185,098
Field and office equipment, net		5,774			5,955

Total Property and Equipment, Net		182,271			191,053

Other assets		593			520

Total Assets	$	202,178		$	200,484

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	11,387		$	5,217
Accrued liabilities		6,896			6,787
Due to Related Parties		34			38
Current portion of long-term debt		1,365			487
Current portion of asset retirement and other long-term obligations		816			867
Derivative liability short-term		6,177			724

Total Current Liabilities		26,675			14,120
Long-Term Bank Debt		32,164			38,267
Asset Retirement Obligations		13,281			12,891
Derivative Liability Long-Term		1,657			44
Deferred Income Taxes		34,667			36,367
Other Long-Term Obligations		759			797

Total Liabilities		109,203			102,486
Commitments and Contingencies		0			0
Equity
Common stock, $.10 par value; Authorized: 2,810,000 shares; Outstanding: 1,994,177 shares		281			281
Paid-in capital		7,560			7,541
Retained earnings		121,783			126,804
Treasury stock, at cost; 815,823 shares		(37,502	)		(37,502	)

Total Stockholders’ Equity – PrimeEnergy Resources		92,122			97,124
Non-controlling interest		853			874

Total Equity		92,975			97,998

Total Liabilities and Equity	$	202,178		$	200,484


	Common Stock
	Shares			Amount		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Total Stockholders’ Equity – PrimeEnergy			Non- Controlling Interest			Total Equity
Balance at December 31, 2020		1,994,177		$	281	$	7,541	$	126,804		$	(37,502	)	$	97,124		$	874		$	97,998
Net Income (Loss)									(5,021	)					(5,021	)		4			(5,017	)
Purchase of non- controlling interest		—			—		19		—			—			19			(25	)		(6	)

Balance at September 30, 2021		1,994,177		$	281	$	7,560	$	121,783		$	(37,502	)	$	92,122		$	853		$	92,975

Balance at December 31, 2019		1,998,978		$	281	$	7,505	$	129,120		$	(36,792	)	$	100,114		$	3,249		$	103,363
Purchase 4,801 shares of common stock		(4,801	)		—		—		—			(709	)		(709	)		—			(709	)
Net Income (Loss)		—			—		—		65			—			65			(111	)		(46	)

Balance at September 30, 2020		1,994,177		$	281	$	7,505	$	129,185		$	(37,501	)	$	99,470		$	3,138		$	102,608


(Thousands of dollars)	September, 30, 2021			December 31, 2020
Accounts Receivable:
Joint interest billing	$	2,589		$	2,475
Trade receivables		1,866			1,073
Oil and gas sales		10,084			3,469
Other		400			802

		14,939			7,819
Less: Allowance for doubtful accounts		(598	)		(598	)

Total	$	14,341		$	7,221

Accounts Payable:
Trade	$	7,011		$	876
Royalty and other owners		3,724			3,569
Partner advances		223			193
Other		429			579

Total	$	11,387		$	5,217

Accrued Liabilities:
Compensation and related expenses	$	3,259		$	3,331
Property costs		2,533			2,056
Taxes		866			1,016
Other		238			384

Total	$	6,896		$	6,787


September 30, 2021	Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Balance at September 30, 2021
(Thousands of dollars)
Liabilities
Commodity derivative contracts	$	—	$	—	$	(7,834	)	$	(7,834	)

Total liabilities	$	—	$	—	$	(7,834	)	$	(7,834	)


December 31, 2020	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, 2020
(Thousands of dollars)
Assets
Commodity derivative contracts	$	—	$	—	$	97		$	97

Total assets	$	—	$	—	$	97		$	97

Liabilities
Commodity derivative contract	$	—	$	—	$	(768	)	$	(768	)

Total liabilities	$	—	$	—	$	(768	)	$	(768	)


	Nine Months Ended September 30,
	2021								2020
	Net Loss (In 000’s)			Weighted Average Number of Shares Outstanding		Per Share Amount			Net Income (In 000’s)		Weighted Average Number of Shares Outstanding		Per Share Amount
Basic	$	(5,021	)		1,994,177	$	(2.52		$	65		1,994,175	$	0.03
Effect of dilutive securities:
Options (a)												758,367

Diluted	$	(5,021	)		1,994,177	$	(2.52	)	$	65		2,752,542	$	0.02


	Three Months Ended September 30,
	2021								2020
	Net Loss (In 000’s)			Weighted Average Number of Shares Outstanding		Per Share Amount			Net Income (In 000’s)		Weighted Average Number of Shares Outstanding		Per Share Amount
Basic	$	(1,163	)		1,994,177	$	(0.58	)	$	6,501		1,994,177	$	3.26
Effect of dilutive securities:
Options (a)										—		756,154

Diluted	$	(1,163	)		1,994,177	$	(0.58	)	$	6,501		2,750,331	$	2.36