Oil and Gas Exploration and Production Industries Disclosures [Text Block] | Note 7. Supplementary Information on Oil, Natural Gas and Natural Gas Liquid Reserves (Unaudited) Aggregate Capitalized Costs and Costs Incurred The aggregate amount of capitalized costs of oil, natural gas and NGL properties and related accumulated depreciation, depletion and amortization as of December 31, 2022 and 2021 is as follows: 2022 2021 Producing properties $ 173,338,198 $ 161,615,609 Non-producing 71,138,790 71,118,790 244,476,988 232,734,399 Accumulated depreciation, depletion and amortization (65,100,662 ) (51,325,366 ) Net capitalized costs $ 179,376,326 $ 181,409,033 For the years ended December 31, 2022 and 2021, the Partnership incurred the following costs in oil and natural gas producing activities: 2022 2021 Development costs $ 11,742,590 $ 4,427,940 Estimated Quantities of Proved Oil, NGL and Natural Gas Reserves The following unaudited information regarding the Partnership’s oil, natural gas and NGL reserves is presented pursuant to the disclosure requirements promulgated by the SEC and the FASB. Proved oil and natural gas reserves are those quantities of oil, natural gas and NGLs which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project within a reasonable time. The area of the reservoir considered as proved includes: (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or natural gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated natural gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities. The independent consulting petroleum engineering firm of Pinnacle Energy of Oklahoma City, OK, prepared estimates of the Partnership’s oil, natural gas and NGL reserves as of December 31, 2022, 2021 and 2020. The Partnership’s net proved oil, NGL and natural gas reserves, all of which are located in the contiguous United States, as of December 31, 2022, 2021 and 2020 have been estimated by the Partnership’s independent consulting petroleum engineering firm. Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering and evaluation principles and techniques that are in accordance with SEC rules and regulations along with practices generally recognized by the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information (Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and completeness of basic data and production history. For depletion-type reservoirs or those whose performance disclosed a reliable decline in producing-rate trends or other diagnostic characteristics, reserves were estimated by the application of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the limits of economic production or to the limit of the production licenses as appropriate. Accordingly, these estimates should be expected to change, and such changes could be material and occur in the near term as future information becomes available. “Revisions of previous estimates” in the table below represent changes in previous reserve estimates, either upward or downward, resulting from a change in economic factors, such as commodity prices, operating costs or development costs, or resulting from information obtained from the Partnership’s production history. The rollforward of net quantities of proved developed and undeveloped oil, natural gas and NGL reserves are summarized as follows: Proved Reserves Oil Natural Gas NGLs (Bbls) (Mcf) (Bbls) Total (BOE) December 31, 2020 17,065,540 16,978,759 2,224,690 22,120,022 Acquisition - - - - Extensions, discoveries and other additions (1) 616 4,131 - 1,305 Revisions of previous estimates (2) (6,403,447 ) (3,852,738 ) (28,435 ) (7,074,004 ) Production (706,981 ) (1,255,604 ) (200,166 ) (1,116,414 ) December 31, 2021 9,955,728 11,874,548 1,996,089 13,930,908 Acquisition - - - - Extensions, discoveries and other additions (3) 7,228 7,069 1,670 10,076 Revisions of previous estimates (4) (1,417,243 ) (40,881 ) (235,088 ) (1,659,145 ) Production (503,925 ) (927,779 ) (141,495 ) (800,050 ) December 31, 2022 8,041,788 10,912,957 1,621,176 11,481,790 (1) In 2021, extensions, discoveries and other additions of 1 MBOE were primarily attributable to successful drilling by the Partnership’s operators of the Bakken Assets. (2) Revisions to previous estimates decreased proved reserves by a net amount of 7,074 MBOE. These revisions result from 5,487 MBOE of downward adjustments attributable to changes in the future drill schedule and 1,665 MBOE of downward adjustments attributable to well performance, offset by 78 MBOE of upward adjustments caused by changes in oil, natural gas and NGL prices when comparing the Partnership’s reserve estimates at December 31, 2021 to December 31, 2020. (3) In 2022, extensions, discoveries and other additions of 10 MBOE were primarily attributable to successful drilling by the Partnership’s operators of the Bakken Assets. (4) Revisions to previous estimates decreased proved reserves by a net amount of 1,659 MBOE. These revisions result from 967 MBOE of downward adjustments attributable to well performance and 836 MBOE of downward adjustments attributable to changes in the future drill schedule, offset by 144 MBOE of upward adjustments caused by changes in oil, natural gas and NGL prices when comparing the Partnership’s reserve estimates at December 31, 2022 to December 31, 2021. In accordance with SEC Regulation S-X, Rule 4-10, as amended, the Partnership uses the 12-month average price calculated as the unweighted arithmetic average of the spot price on the first day of each month within the 12-month period prior to the end of the reporting period. The average realized oil, natural gas and NGL prices, including the effect of price differential adjustments, used in computing the Partnership’s reserves as of December 31, 2022 were $94.41 per barrel of oil, $6.54 per MMcf of natural gas and $20.67 per barrel of NGL. The average realized oil, natural gas and NGL prices, including the effect of price differential adjustments, used in computing the Partnership’s reserves as of December 31, 2021 were $65.11 per barrel of oil, $3.29 per MMcf of natural gas and $15.97 per barrel of NGL. Net quantities of proved developed and proved undeveloped reserves at December 31, 2022, 2021 and 2020 are summarized in the table below. Oil Natural Gas NGLs (Bbls) (Mcf) (Bbls) Total (BOE) Proved developed reserves: December 31, 2020 6,881,782 9,202,098 1,210,323 9,625,788 December 31, 2021 4,709,922 7,944,532 1,376,457 7,410,468 December 31, 2022 4,213,426 7,986,085 1,222,792 6,767,232 Proved undeveloped reserves: December 31, 2020 10,183,758 7,776,661 1,014,367 12,494,235 December 31, 2021 5,245,806 3,930,016 619,632 6,520,441 December 31, 2022 3,828,362 2,926,872 398,384 4,714,558 The following details the changes in proved undeveloped reserves (PUD) for 2021 and 2022 (in BOE): BOE Proved undeveloped reserves, December 31, 2020 12,494,235 Revisions of previous estimates (1) (5,490,323 ) Extensions, discoveries and other additions (2) 1,305 Conversion to proved developed reserves (3) (484,776 ) Proved undeveloped reserves, December 31, 2021 6,520,441 Revisions of previous estimates (4) (876,492 ) Extensions, discoveries and other additions (5) 10,076 Conversion to proved developed reserves (6) (939,467 ) Proved undeveloped reserves, December 31, 2022 4,714,558 (1) The annual review of the PUDs resulted in a negative revision of approximately 5,490 MBOE. This revision was the result of 5,487 MBOE of downward adjustments attributable to changes in the future drill schedule, and 35 MBOE of downward adjustments attributable to changes in natural gas shrink and NGL yield, offset by 32 MBOE of upward adjustments caused by higher oil, natural gas and NGL prices when comparing the Partnership’s reserve estimates at December 31, 2021 to December 31, 2020. (2) In 2021, extensions, discoveries and other additions of 1 MBOE were primarily attributable to successful drilling by the Partnership’s operators of the Bakken Assets. (3) The Partnership converted 20 wells to proved developed reserves during 2021 as these wells were complete or substantially complete and the costs to bring to production were relatively minor, which resulted in a downward adjustment to PUDs of 485 MBOE. (4) The annual review of the PUDs resulted in a negative revision of approximately 876 MBOE. This revision was the result of 836 MBOE of downward adjustments attributable to changes in the future drill schedule and 40 MBOE of downward adjustments attributable to changes in natural gas shrink and NGL yield when comparing the Partnership’s reserves at December 31, 2022 to December 31, 2021. (5) In 2022, extensions, discoveries and other additions of 10 MBOE were primarily attributable to successful drilling by the Partnership’s operators of the Bakken Assets. (6) The Partnership converted 12 wells to proved developed reserves during 2022 as these wells were complete or substantially complete and the costs to bring to production were relatively minor, which resulted in a downward adjustment to PUDs of 939 MBOE. The Partnership anticipates all current PUD locations will be drilled and converted to PDP within five years of the date they were added. PUD locations and associated reserves which are no longer projected to be drilled within five years from the date they were first booked as proved undeveloped reserves have been removed as revisions at the time that determination was made. Standardized Measure of Discounted Future Net Cash Flows Accounting standards prescribe guidelines for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. The Partnership has followed these guidelines, which are briefly discussed below. Future cash inflows and future production and development costs are determined by applying the trailing unweighted 12-month arithmetic average of the first-day-of-the-month individual product prices and year-end costs to the estimated quantities of oil, natural gas and NGL to be produced. Actual future prices and costs may be materially higher or lower than the unweighted 12-month arithmetic average of the first-day-of-the-month individual product prices and year-end costs used. For each year, estimates are made of quantities of proved reserves and the future periods during which they are expected to be produced based on continuation of the economic conditions applied for such year. The resulting future net cash flows are reduced to present value amounts by applying a 10% annual discount factor. The assumptions used to compute the standardized measure are those prescribed by the FASB and, as such, do not necessarily reflect the Partnership’s expectations of actual revenue to be derived from those reserves nor their present worth. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these estimates affect the valuation process. 2022 2021 (in thousands) (in thousands) Future cash inflows $ 864,173 $ 719,186 Future production costs (369,596 ) (240,407 ) Future development costs (36,554 ) (38,447 ) Future net cash flows 458,023 440,332 10% annual discount (230,729 ) (225,456 ) Standardized measure of discounted future net cash flows $ 227,294 $ 214,876 Changes in the standardized measure of discounted future net cash flows are as follows: 2022 2021 (in thousands) (in thousands) Standardized measure at beginning of period $ 214,876 $ 68,013 Changes resulting from: Extensions, discoveries and other additions 238 15 Sales of oil, natural gas and NGLs, net of production costs (37,082 ) (35,915 ) Net changes in prices and production costs 86,000 221,910 Development costs incurred during the period 11,743 4,428 Revisions to previous estimates (60,149 ) (91,061 ) Accretion of discount 21,517 6,811 Change in estimated future development costs (9,849 ) 40,675 Standardized measure of discounted future net cash flows $ 227,294 $ 214,876 |