Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2023 | Aug. 10, 2023 | |
Document Information Line Items | ||
Entity Registrant Name | Energy Resources 12, L.P. | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 11,031,579 | |
Amendment Flag | false | |
Entity Central Index Key | 0001696088 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Period End Date | Jun. 30, 2023 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-55916 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-4805237 | |
Entity Address, Address Line One | 120 W 3rd Street, Suite 220 | |
Entity Address, City or Town | Fort Worth | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 76102 | |
City Area Code | 817 | |
Local Phone Number | 882-9192 | |
Title of 12(g) Security | None | |
Entity Interactive Data Current | Yes |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Assets | ||
Cash and cash equivalents | $ 7,181,060 | $ 18,442,414 |
Accounts receivable and other current assets | 4,509,646 | 9,360,950 |
Total Current Assets | 11,690,706 | 27,803,364 |
Oil and natural gas properties, successful efforts method, net of accumulated depreciation, depletion and amortization of $74,163,295 and $65,100,662, respectively | 176,561,079 | 179,376,326 |
Total Assets | 188,251,785 | 207,179,690 |
Liabilities | ||
Accounts payable and accrued expenses | 7,219,930 | 4,449,340 |
Total Current Liabilities | 7,219,930 | 4,449,340 |
Asset retirement obligations | 710,779 | 695,889 |
Total Liabilities | 7,930,709 | 5,145,229 |
Partners’ Equity | ||
Limited partners' interest (11,031,579 common units issued and outstanding, respectively) | 180,321,291 | 202,034,676 |
General partner's interest | (215) | (215) |
Total Partners’ Equity | 180,321,076 | 202,034,461 |
Total Liabilities and Partners’ Equity | $ 188,251,785 | $ 207,179,690 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Oil and natural gas properties, successful efforts method, accumulated depreciation, depletion and amortization (in Dollars) | $ 74,163,295 | $ 65,100,662 |
Limited partners' interest, common units issued | 11,031,579 | 11,031,579 |
Limited partners' interest, common units outstanding | 11,031,579 | 11,031,579 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Revenues | ||||
Oil | $ 9,504,044 | $ 12,091,563 | $ 22,783,116 | $ 22,888,680 |
Natural gas | 328,637 | 1,402,611 | 1,510,247 | 2,718,611 |
Natural gas liquids | 707,154 | 1,520,564 | 1,826,533 | 2,950,999 |
Total revenue | 10,539,835 | 15,014,738 | 26,119,896 | 28,558,290 |
Operating costs and expenses | ||||
Production expenses | 4,779,856 | 3,825,704 | 10,234,485 | 8,010,781 |
Production taxes | 902,562 | 1,167,541 | 2,183,068 | 2,199,463 |
General and administrative expenses | 477,580 | 539,900 | 1,212,777 | 1,251,107 |
Depreciation, depletion, amortization and accretion | 4,057,242 | 2,919,373 | 9,077,377 | 5,921,957 |
Total operating costs and expenses | 10,217,240 | 8,452,518 | 22,707,707 | 17,383,308 |
Operating income | 322,595 | 6,562,220 | 3,412,189 | 11,174,982 |
Interest income, net | 121,576 | 6,065 | 225,754 | 5,594 |
Total other income, net | 121,576 | 6,065 | 225,754 | 5,594 |
Net income | $ 444,171 | $ 6,568,285 | $ 3,637,943 | $ 11,180,576 |
Basic and diluted net income per common unit (in Dollars per share) | $ 0.04 | $ 0.6 | $ 0.33 | $ 1.01 |
Weighted average common units outstanding - basic and diluted (in Shares) | 11,031,579 | 11,031,579 | 11,031,579 | 11,031,579 |
Consolidated Statements of Part
Consolidated Statements of Partners' Equity - USD ($) | Total | Limited Partner [Member] | General Partner [Member] |
Balance at Dec. 31, 2021 | $ 196,798,023 | $ 196,798,238 | $ (215) |
Balance (in Shares) at Dec. 31, 2021 | 11,031,579 | ||
Distributions declared and paid to common units | (3,554,275) | $ (3,554,275) | |
Net income | 4,612,291 | 4,612,291 | |
Balance at Mar. 31, 2022 | 197,856,039 | $ 197,856,254 | (215) |
Balance (in Shares) at Mar. 31, 2022 | 11,031,579 | ||
Balance at Dec. 31, 2021 | 196,798,023 | $ 196,798,238 | (215) |
Balance (in Shares) at Dec. 31, 2021 | 11,031,579 | ||
Distributions declared and paid to common units | (7,404,749) | ||
Net income | 11,180,576 | ||
Balance at Jun. 30, 2022 | 200,573,850 | $ 200,574,065 | (215) |
Balance (in Shares) at Jun. 30, 2022 | 11,031,579 | ||
Balance at Mar. 31, 2022 | 197,856,039 | $ 197,856,254 | (215) |
Balance (in Shares) at Mar. 31, 2022 | 11,031,579 | ||
Distributions declared and paid to common units | (3,850,474) | $ (3,850,474) | |
Net income | 6,568,285 | 6,568,285 | |
Balance at Jun. 30, 2022 | 200,573,850 | $ 200,574,065 | (215) |
Balance (in Shares) at Jun. 30, 2022 | 11,031,579 | ||
Balance at Dec. 31, 2022 | $ 202,034,461 | $ 202,034,676 | (215) |
Balance (in Shares) at Dec. 31, 2022 | 11,031,579 | 11,031,579 | |
Distributions declared and paid to common units | $ (3,850,473) | $ (3,850,473) | |
Net income | 3,193,772 | 3,193,772 | |
Balance at Mar. 31, 2023 | 201,377,760 | $ 201,377,975 | (215) |
Balance (in Shares) at Mar. 31, 2023 | 11,031,579 | ||
Balance at Dec. 31, 2022 | $ 202,034,461 | $ 202,034,676 | (215) |
Balance (in Shares) at Dec. 31, 2022 | 11,031,579 | 11,031,579 | |
Distributions declared and paid to common units | $ (25,351,473) | ||
Net income | 3,637,943 | ||
Balance at Jun. 30, 2023 | $ 180,321,076 | $ 180,321,291 | (215) |
Balance (in Shares) at Jun. 30, 2023 | 11,031,579 | 11,031,579 | |
Balance at Mar. 31, 2023 | $ 201,377,760 | $ 201,377,975 | (215) |
Balance (in Shares) at Mar. 31, 2023 | 11,031,579 | ||
Distributions declared and paid to common units | (21,501,000) | $ (21,501,000) | |
Adjustment to state tax withholding for limited partners | 145 | 145 | |
Net income | 444,171 | 444,171 | |
Balance at Jun. 30, 2023 | $ 180,321,076 | $ 180,321,291 | $ (215) |
Balance (in Shares) at Jun. 30, 2023 | 11,031,579 | 11,031,579 |
Consolidated Statements of Pa_2
Consolidated Statements of Partners' Equity (Parentheticals) - $ / shares | 3 Months Ended | |||
Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | |
General Partner [Member] | ||||
Distributions declared and paid per unit | $ 1.949041 | $ 0.349041 | $ 0.349041 | $ 0.322191 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Cash flow from operating activities: | ||||||
Net income | $ 444,171 | $ 3,193,772 | $ 6,568,285 | $ 4,612,291 | $ 3,637,943 | $ 11,180,576 |
Adjustments to reconcile net income to cash from operating activities: | ||||||
Depreciation, depletion, amortization and accretion | 4,057,242 | 2,919,373 | 9,077,377 | 5,921,957 | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable and other current assets | 4,851,304 | (1,821,757) | ||||
Accounts payable and accrued expenses | 311,043 | (420,130) | ||||
Net cash flow provided by operating activities | 17,877,667 | 14,860,646 | ||||
Cash flow from investing activities: | ||||||
Additions to oil and natural gas properties | (3,787,548) | (3,203,905) | ||||
Net cash flow used in investing activities | (3,787,548) | (3,203,905) | ||||
Cash flow from financing activities: | ||||||
Distributions paid to limited partners | (21,501,000) | (3,850,473) | (3,850,474) | (3,554,275) | (25,351,473) | (7,404,749) |
Net cash flow used in financing activities | (25,351,473) | (7,404,749) | ||||
Increase (decrease) in cash and cash equivalents | (11,261,354) | 4,251,992 | ||||
Cash and cash equivalents, beginning of period | $ 18,442,414 | $ 13,058,237 | 18,442,414 | 13,058,237 | ||
Cash and cash equivalents, end of period | $ 7,181,060 | $ 17,310,229 | 7,181,060 | 17,310,229 | ||
Supplemental non-cash information: | ||||||
Accrued capital expenditures related to additions to oil and natural gas properties | $ 4,661,617 | $ 2,105,579 |
Partnership Organization
Partnership Organization | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Note 1. Partnership Organization Energy Resources 12, L.P. (together with its wholly-owned subsidiary, the “Partnership”) is a Delaware limited partnership formed to acquire producing and non-producing oil and natural gas properties onshore in the United States and to develop those properties. The initial capitalization of the Partnership of $1,000 occurred on December 30, 2016. The Partnership completed its best-efforts offering in October 2019 with a total of approximately 11.0 million common units sold for gross proceeds of $218.0 million and proceeds net of offering costs of $204.3 million. As of June 30, 2023, the Partnership owned an approximate 5.6% non-operated working interest in 412 producing wells, predominantly in McKenzie, Dunn, McLean and Mountrail counties of North Dakota (collectively, the “Bakken Assets”). The Partnership also owns an estimated approximate 4.2% non-operated working interest in 18 wells in various stages of the drilling and completion process, and possible future development locations in the Bakken Assets. The Bakken Assets, which are a part of the Bakken shale formation in the Greater Williston Basin, are operated by 12 third-party operators on behalf of the Partnership and other working interest owners. The general partner of the Partnership is Energy Resources 12 GP, LLC (the “General Partner”). The General Partner manages and controls the business affairs of the Partnership. The Partnership’s fiscal year ends on December 31. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for Article 10 of SEC Regulation S-X. Accordingly, they do not include all of the information required by generally accepted accounting principles (“GAAP”) in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Partnership’s audited December 31, 2022 financial statements included in its 2022 Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the twelve-month period ending December 31, 2023. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. Cash balances may at times exceed federal depository insurance limits. Use of Estimates The preparation of financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition The Partnership is bound by a joint operating agreement with the operator of each of its producing wells. Under the joint operating agreement, the Partnership’s proportionate share of production is marketed at the discretion of the operators. The Partnership typically satisfies its performance obligations upon transfer of control of its products and records the related revenue in the month production is delivered to the purchaser. As the Partnership does not operate its properties, it receives actual oil, natural gas, and NGL sales volumes and prices, net of costs incurred by the operators, two to three months after the date production is delivered by the operator. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from the Partnership’s operators are accrued in Accounts receivable and other current assets in the consolidated balance sheets. Variances between the Partnership’s estimated revenue and actual payments are recorded in the month the payment is received; differences have been and are insignificant. As a result, the variable consideration is not constrained. The Partnership has elected to utilize the practical expedient in ASC 606 that states the Partnership is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Each delivery of product represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Virtually all of the Partnership’s contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil, natural gas and natural gas liquids and prevailing supply and demand conditions, so that prices fluctuate to remain competitive with other available suppliers. Accounts Receivable and Concentration of Credit Risk Substantially all of the Partnership’s accounts receivable are due from the operators of the Partnership’s oil and natural gas properties in North Dakota (the operators have accounts receivable from purchasers of oil, natural gas and NGLs). Oil, natural gas and NGL sales receivables are generally unsecured. This industry and location concentration has the potential to impact the Partnership’s overall exposure to credit risk, in that the purchasers of the Partnership’s oil, natural gas and NGLs and the operators of the properties the Partnership has an interest in may be similarly affected by changes in economic, industry or other conditions. At June 30, 2023 and December 31, 2022, the Partnership did not reserve for bad debt expense, as all amounts are deemed collectible and the Partnership’s operators do not have a history of non-payment. For the six months ended June 30, 2023, approximately 93% of the Partnership’s total revenue was generated through sales by three of its 12 operators, respectively. All oil and natural gas producing activities of the Partnership are in North Dakota and represent substantially all of the business activities of the Partnership. Income Tax The Partnership is taxed as a partnership for federal and state income tax purposes. Typically, the Partnership has not recorded a provision for income taxes since the liability for such taxes is that of each of the partners rather than the Partnership. In mid-2022, the Partnership was contacted by the state of North Dakota, which asserted that the Partnership has an obligation to make tax payments on behalf of certain non-resident partners. The Partnership reached a resolution with the state of North Dakota that entailed in the Partnership making a payment of taxes on behalf of certain non-resident limited partners to the state for the tax years of 2021 and 2022. The Partnership made a payment of approximately $365,000 (approximately $0.03 per common unit) in May 2023 that settled the 2021 tax year. The Partnership anticipates that the estimate recorded at December 31, 2022 of approximately $480,000 for the 2022 tax year will be settled and paid in the fourth quarter of 2023. The Partnership’s income tax returns are subject to examination by the federal and state taxing authorities, and changes, if any, could adjust the individual income tax of the partners. The Partnership has evaluated whether any material tax position taken will more likely than not be sustained upon examination by the appropriate taxing authority and believes that all such material tax positions taken are supportable by existing laws and related interpretations. Fair Value of Other Financial Instruments The carrying value of the Partnership’s other financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, reflect these items’ cost, which approximates fair value based on the timing of the anticipated cash flows, current market conditions and short-term maturity of these instruments. Net Income Per Common Unit Basic net income per common unit is computed as net income divided by the weighted average number of common units outstanding during the period. Diluted net income per common unit is calculated after giving effect to all potential common units that were dilutive and outstanding for the period. There were no common units with a dilutive effect for the three and six months ended June 30, 2023 and 2022. As a result, basic and diluted outstanding common units were the same. The Incentive Distribution Rights, as defined below, are not included in net income per common unit until such time that it is probable Payout (as discussed in Note 5) will occur. |
Oil and Gas Investments
Oil and Gas Investments | 6 Months Ended |
Jun. 30, 2023 | |
Oil and Gas Property [Abstract] | |
Oil and Gas Properties [Text Block] | Note 3. Oil and Gas Investments On February 1, 2018, the Partnership completed its first purchase (“Acquisition No. 1”) in the Bakken Assets for approximately $90.5 million, including all closing costs and assumed liabilities. On August 31, 2018, the Partnership completed its second purchase of an additional non-operated working interest in the Bakken Assets for approximately $81.3 million, including all closing costs and assumed liabilities. As of June 30, 2023, the Partnership’s ownership of the Bakken Assets consisted of an approximate 5.6% non-operated working interest in 412 producing wells, and an estimated approximate 4.2% non-operated working interest in 18 wells in various stages of the drilling and completion process. From September 1, 2017, the effective date of Acquisition No. 1, to June 30, 2023, the Partnership has participated in the drilling of 228 wells, of which 208 have been completed as of June 30, 2023. The Partnership incurred approximately $6.2 million and $4.1 million in capital drilling and completion costs for the six-month periods ended June 30, 2023 and 2022. The Partnership anticipates approximately $3 to $4 million of capital expenditures will be incurred to complete the 18 wells in process as of June 30, 2023. Estimated capital expenditures to complete these 18 wells could be significantly different from amounts actually invested, and the timing of these expenditures is difficult to estimate. |
Asset Retirement Obligations
Asset Retirement Obligations | 6 Months Ended |
Jun. 30, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligation Disclosure [Text Block] | Note 4. Asset Retirement Obligations The Partnership records an asset retirement obligation (“ARO”) and capitalizes the asset retirement costs in oil and natural gas properties in the period in which the asset retirement obligation is incurred based upon the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells. After recording these amounts, the ARO is accreted to its future estimated value using an assumed cost of funds and the additional capitalized costs are depreciated on a unit-of-production basis. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit-adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions of these assumptions impact the present value of the existing asset retirement obligation, a corresponding adjustment is made to the oil and natural gas property balance. The changes in the aggregate ARO are as follows: 2023 2022 Balance at January 1 $ 695,889 $ 743,583 Well additions 145 31 Accretion 14,745 12,997 Revisions - (91,400 ) Balance at June 30 $ 710,779 $ 665,211 |
Capital Contribution and Partne
Capital Contribution and Partners' Equity | 6 Months Ended |
Jun. 30, 2023 | |
Partners' Capital Notes [Abstract] | |
Partners' Capital Notes Disclosure [Text Block] | Note 5. Capital Contribution and Partners Equity At inception, the General Partner and organizational limited partner made initial capital contributions totaling $1,000 to the Partnership. Upon closing of the minimum offering, the organizational limited partner withdrew its initial capital contribution of $990, the General Partner received Incentive Distribution Rights (defined below), and has been reimbursed for its documented third-party out-of-pocket expenses incurred in organizing the Partnership and offering the common units. The Partnership completed its best-efforts offering of common units as of the close of business on October 24, 2019. As of the conclusion of the offering, the Partnership had completed the sale of approximately 11.0 million common units for total gross proceeds of $218.0 million and proceeds net of offering costs of $204.3 million. Under the agreement with David Lerner Associates, Inc. (the “Managing Dealer”), the Managing Dealer received a total of 6% in selling commissions and a marketing expense allowance based on gross proceeds of the common units sold. The Managing Dealer also has Dealer Manager Incentive Fees (defined below) where the Managing Dealer could receive distributions up to an additional 4% of gross proceeds of the common units sold in the Partnership’s best-efforts offering as outlined in the prospectus based on the performance of the Partnership. Based on the common units sold in the best-efforts offering, the Dealer Manager Incentive Fees are approximately $8.7 million, subject to Payout (defined below). Prior to “Payout,” which is defined below, all of the distributions made by the Partnership, if any, will be paid to the holders of common units. Accordingly, the Partnership will not make any distributions with respect to the Incentive Distribution Rights or the Dealer Manager Incentive Fees to the Managing Dealer until Payout occurs. The Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”) provides that “Payout”, which is defined below, occurs on the day when the aggregate amount distributed with respect to each of the common units equals $20.00 plus the Payout Accrual. The Partnership Agreement defines “Payout Accrual” as 7% per annum simple interest accrued monthly until paid on the Net Investment Amount outstanding from time to time. The Partnership Agreement defines Net Investment Amount initially as $20.00 per common unit, regardless of the amount paid for the common unit. If at any time the Partnership distributes to holders of common units more than the Payout Accrual, the amount the Partnership distributes in excess of the Payout Accrual will reduce the Net Investment Amount. In June 2023, the General Partner declared and paid a special distribution to return $1.60 per common unit of capital to holders of Partnership common units. As described in Income Tax All distributions made by the Partnership after Payout, which may include all or a portion of the proceeds of the sale of all or substantially all of the Partnership’s assets, will be made as follows: ● First, (i) to the Record Holders of the Incentive Distribution Rights, 30%; (ii) to the Managing Dealer, the “Dealer Manager Incentive Fees”, 30%, until such time as the Managing Dealer receives 4% of the gross proceeds of the common units sold; and (iii) to the Record Holders of outstanding common units, 40%, pro rata based on their percentage interest. ● Thereafter, (i) to the Record Holders of the Incentive Distribution Rights, 60%; and (ii) to the Record Holders of outstanding common units, 40%, pro rata based on their percentage interest. All items of income, gain, loss and deduction will be allocated to each Partner’s capital account in a manner generally consistent with the distribution procedures outlined above. For the three and six months ended June 30, 2023, the Partnership paid distributions of $1.949041 and $2.298082 per common unit, or $21.5 million and $25.4 million, respectively. For the three and six months ended June 30, 2022, the Partnership paid distributions of $0.349041 and $0.671232 per common unit, or $3.9 million and $7.4 million, respectively. |
Related Parties
Related Parties | 6 Months Ended |
Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Note 6. Related Parties The Class A voting members of the General Partner are affiliates of Glade M. Knight, Chairman and Chief Executive Officer and David S. McKenney, Chief Financial Officer. Messrs. Knight and McKenney are also the Chief Executive Officer and Chief Financial Officer of Energy 11 GP, LLC, the general partner of Energy 11, L.P. (“Energy 11”), a limited partnership that also invests in producing and non-producing oil and gas properties on-shore in the United States. The Partnership has, and is expected to continue to engage in, significant transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Partnership’s operations may be different than if conducted with non-related parties. The General Partner’s Board of Directors oversees and reviews the Partnership’s related party relationships and is required to approve any significant modifications to any existing related party transactions, as well as any new significant related party transactions. The Partnership will reimburse the General Partner for any costs incurred by the General Partner for certain expenses, which include costs for organizing the Partnership, costs incurred in the offering of the common units and general and administrative costs. The Partnership also agreed to pay the General Partner an advisory fee to manage the day-to-day affairs of the Partnership, including serving as an investment advisor and consultant in connection with the acquisition, development, operation and disposition of oil and gas properties and other assets of the Partnership. In accordance with the Partnership Agreement, subsequent to the Partnership’s first asset purchase, which occurred on February 1, 2018, the Partnership is required to pay quarterly an annual fee of 0.5% of the total gross equity proceeds raised by the Partnership in its best-efforts offering. The management fee that has been paid to the General Partner for the three and six months ended June 30, 2023 and 2022 was approximately $273,000 and $545,000 in both periods, and is included in General and administrative expenses on the consolidated statements of operations. For the three and six months ended June 30, 2023, approximately $64,000 and $106,000 of general and administrative costs were incurred by a member of the General Partner and have been or will be reimbursed by the Partnership. At June 30, 2023, approximately $64,000 was due to a member of the General Partner and is included in Accounts payable and accrued expenses in the consolidated balance sheets. For the three and six months ended June 30, 2022, approximately $39,000 and $76,000 of general and administrative costs were incurred by a member of the General Partner and have been reimbursed by the Partnership. On December 1, 2020, the Partnership entered into an Administrative Services Agreement (the “ASA”) with Regional Energy Investors, L.P. d/b/a Regional Energy Management (the “Administrator”) and Energy 11, whereby the Administrator was to provide administrative, operating and professional services necessary and useful to the Partnership. The Administrator also was to assist the General Partner with the day-to-day operations of the Partnership. The Administrator is owned by entities that are controlled by Anthony F. Keating, III and Michael J. Mallick, the former Co-Chief Operating Officers of Energy 11’s general partner. The ASA became effective January 1, 2021. On April 5, 2023, the Partnership and Energy 11 entered into an agreement (the “Agreement”) with Messrs. Knight, McKenney, Keating and Mallick and various affiliates of each, including the Administrator. Pursuant to the Agreement, the ASA was terminated effective immediately, subject to a 60-day transition period to transition the services being provided by the Administrator to Partnership and Energy 11 management. All Administrator costs and expenses were accumulated (based on actual costs incurred with no mark-up or profit to the Administrator) and approved by the Partnership prior to reimbursement. Costs and expenses reimbursed under the ASA included, but were not limited to, employee wages and benefits – including the former president of Energy 11’s general partner, who was paid as an employee of the Administrator, rent for office space and network and information technology support. Other expenses, such as business travel costs and accounting, legal or banking services, were not incurred by the Administrator on behalf of the Partnership without prior express written consent of the Partnership. Costs and expenses attributable to the services performed by the Administrator under the ASA have been reimbursed by the Partnership. For the three and six months ended June 30, 2023, approximately $32,000 and $162,000 of costs and expenses subject to the ASA were reimbursed by the Partnership to the Administrator. For the three and six months ended June 30, 2022, approximately $134,000 and $272,000 of costs and expenses subject to the ASA were reimbursed by the Partnership to the Administrator. Also pursuant to the Agreement, the affiliates of Messrs. Keating and Mallick sold (i) their Class B Unit interests in the General Partner; (ii) all interests in the general partner of Energy 11; (iii) all common unit interests in Energy 11; and (iv) all Class B Unit interests in Energy 11 to an affiliate of Mr. Knight and withdrew as members of General Partner and the general partner of Energy 11. Prior to the execution of the Agreement, the General Partner had agreed to pay one-half of its annual management fee to the Administrator in exchange for the services to be provided under the ASA. Therefore, one-half of the management fee for the three months ended March 31, 2023 described above was paid by the General Partner to the Administrator. In addition, one-half of the management fee for the three and six months ended June 30, 2022 was paid by the General Partner to the Administrator. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Note 7. Subsequent Events In July 2023, the Partnership declared and paid $1.1 million, or $0.098628 per outstanding common unit, in distributions to its holders of common units. |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for Article 10 of SEC Regulation S-X. Accordingly, they do not include all of the information required by generally accepted accounting principles (“GAAP”) in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Partnership’s audited December 31, 2022 financial statements included in its 2022 Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the twelve-month period ending December 31, 2023. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. Cash balances may at times exceed federal depository insurance limits. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Revenue [Policy Text Block] | Revenue Recognition The Partnership is bound by a joint operating agreement with the operator of each of its producing wells. Under the joint operating agreement, the Partnership’s proportionate share of production is marketed at the discretion of the operators. The Partnership typically satisfies its performance obligations upon transfer of control of its products and records the related revenue in the month production is delivered to the purchaser. As the Partnership does not operate its properties, it receives actual oil, natural gas, and NGL sales volumes and prices, net of costs incurred by the operators, two to three months after the date production is delivered by the operator. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from the Partnership’s operators are accrued in Accounts receivable and other current assets in the consolidated balance sheets. Variances between the Partnership’s estimated revenue and actual payments are recorded in the month the payment is received; differences have been and are insignificant. As a result, the variable consideration is not constrained. The Partnership has elected to utilize the practical expedient in ASC 606 that states the Partnership is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Each delivery of product represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Virtually all of the Partnership’s contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil, natural gas and natural gas liquids and prevailing supply and demand conditions, so that prices fluctuate to remain competitive with other available suppliers. |
Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block] | Accounts Receivable and Concentration of Credit Risk Substantially all of the Partnership’s accounts receivable are due from the operators of the Partnership’s oil and natural gas properties in North Dakota (the operators have accounts receivable from purchasers of oil, natural gas and NGLs). Oil, natural gas and NGL sales receivables are generally unsecured. This industry and location concentration has the potential to impact the Partnership’s overall exposure to credit risk, in that the purchasers of the Partnership’s oil, natural gas and NGLs and the operators of the properties the Partnership has an interest in may be similarly affected by changes in economic, industry or other conditions. At June 30, 2023 and December 31, 2022, the Partnership did not reserve for bad debt expense, as all amounts are deemed collectible and the Partnership’s operators do not have a history of non-payment. For the six months ended June 30, 2023, approximately 93% of the Partnership’s total revenue was generated through sales by three of its 12 operators, respectively. All oil and natural gas producing activities of the Partnership are in North Dakota and represent substantially all of the business activities of the Partnership. |
Income Tax, Policy [Policy Text Block] | Income Tax The Partnership is taxed as a partnership for federal and state income tax purposes. Typically, the Partnership has not recorded a provision for income taxes since the liability for such taxes is that of each of the partners rather than the Partnership. In mid-2022, the Partnership was contacted by the state of North Dakota, which asserted that the Partnership has an obligation to make tax payments on behalf of certain non-resident partners. The Partnership reached a resolution with the state of North Dakota that entailed in the Partnership making a payment of taxes on behalf of certain non-resident limited partners to the state for the tax years of 2021 and 2022. The Partnership made a payment of approximately $365,000 (approximately $0.03 per common unit) in May 2023 that settled the 2021 tax year. The Partnership anticipates that the estimate recorded at December 31, 2022 of approximately $480,000 for the 2022 tax year will be settled and paid in the fourth quarter of 2023. The Partnership’s income tax returns are subject to examination by the federal and state taxing authorities, and changes, if any, could adjust the individual income tax of the partners. The Partnership has evaluated whether any material tax position taken will more likely than not be sustained upon examination by the appropriate taxing authority and believes that all such material tax positions taken are supportable by existing laws and related interpretations. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Other Financial Instruments The carrying value of the Partnership’s other financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, reflect these items’ cost, which approximates fair value based on the timing of the anticipated cash flows, current market conditions and short-term maturity of these instruments. |
Earnings Per Share, Policy [Policy Text Block] | Net Income Per Common Unit Basic net income per common unit is computed as net income divided by the weighted average number of common units outstanding during the period. Diluted net income per common unit is calculated after giving effect to all potential common units that were dilutive and outstanding for the period. There were no common units with a dilutive effect for the three and six months ended June 30, 2023 and 2022. As a result, basic and diluted outstanding common units were the same. The Incentive Distribution Rights, as defined below, are not included in net income per common unit until such time that it is probable Payout (as discussed in Note 5) will occur. |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Schedule of Asset Retirement Obligations [Table Text Block] | The Partnership records an asset retirement obligation (“ARO”) and capitalizes the asset retirement costs in oil and natural gas properties in the period in which the asset retirement obligation is incurred based upon the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells. After recording these amounts, the ARO is accreted to its future estimated value using an assumed cost of funds and the additional capitalized costs are depreciated on a unit-of-production basis. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit-adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions of these assumptions impact the present value of the existing asset retirement obligation, a corresponding adjustment is made to the oil and natural gas property balance. The changes in the aggregate ARO are as follows: 2023 2022 Balance at January 1 $ 695,889 $ 743,583 Well additions 145 31 Accretion 14,745 12,997 Revisions - (91,400 ) Balance at June 30 $ 710,779 $ 665,211 |
Partnership Organization (Detai
Partnership Organization (Details) shares in Millions | 6 Months Ended | 25 Months Ended | |
Dec. 30, 2016 USD ($) | Jun. 30, 2023 | Oct. 24, 2019 USD ($) shares | |
Partnership Organization (Details) [Line Items] | |||
Limited Liability Company or Limited Partnership, Business, Formation State | Delaware | ||
Partners' Capital Account, Contributions (in Dollars) | $ 1,000 | ||
Number of Operators | 12 | ||
Best-Efforts Offering [Member] | |||
Partnership Organization (Details) [Line Items] | |||
Partners' Capital Account, Units, Sale of Units (in Shares) | shares | 11 | ||
Proceeds from Issuance of Common Limited Partners Units (in Dollars) | $ 218,000,000 | ||
Proceeds, Net of Offering Costs, from Issuance of Common Limited Partners Units (in Dollars) | $ 204,300,000 | ||
Bakken Assets [Member] | |||
Partnership Organization (Details) [Line Items] | |||
Number of Operators | 12 | ||
Bakken Assets [Member] | Non-operated Completed Wells [Member] | |||
Partnership Organization (Details) [Line Items] | |||
Gas and Oil Area Developed, Net | 5.60% | ||
Oil, Productive Well, Number of Wells, Net | 412 | ||
Bakken Assets [Member] | Non-operated Wells in the Process of Drilling [Member] | |||
Partnership Organization (Details) [Line Items] | |||
Gas and Oil Area Developed, Net | 4.20% | ||
Oil and Gas, Present Activity, Well in Process of Drilling | 18 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 24 Months Ended | |
Jun. 30, 2023 | May 31, 2023 | Jun. 30, 2023 | Jun. 30, 2023 | Dec. 31, 2022 | |
Accounting Policies [Abstract] | |||||
Operator, Percentage | 93% | ||||
Number of Operators | 12 | ||||
Estimated State Tax Withholding For Limited Partners | $ 365,000 | $ 145 | $ 480,000 | ||
Distribution Withholding Tax To Limited Partner Per Common Unit | $ 0.03 | $ 0.03 |
Oil and Gas Investments (Detail
Oil and Gas Investments (Details) - Bakken Assets [Member] $ in Millions | 6 Months Ended | 70 Months Ended | |||
Aug. 31, 2018 USD ($) | Feb. 01, 2018 USD ($) | Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 | |
Oil and Gas Investments (Details) [Line Items] | |||||
Oil, Productive Well, Number of Wells, Net | 18 | 18 | |||
Number Of Wells In Various Stages Of Completion | 18 | ||||
Non-operated Completed Wells [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Gas and Oil Area Developed, Net | 5.60% | ||||
Oil, Productive Well, Number of Wells, Net | 412 | 412 | |||
Non-operated Wells in the Process of Drilling [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Gas and Oil Area Developed, Net | 4.20% | ||||
Oil, Productive Well, Number of Wells, Net | 18 | 18 | |||
Acquisition No. 1 [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Business Combination, Consideration Transferred (in Dollars) | $ 90.5 | ||||
Wells Drilled | 228 | ||||
Oil and Gas, Development Well Drilled, Net Productive, Number | 208 | ||||
Costs Incurred, Development Costs (in Dollars) | $ 6.2 | $ 4.1 | |||
Acquisition No. 1 [Member] | Minimum [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Capital Expenditures Drilling and Completion of Wells (in Dollars) | 3 | ||||
Acquisition No. 1 [Member] | Maximum [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Capital Expenditures Drilling and Completion of Wells (in Dollars) | $ 4 | ||||
Acquisition No. 2 [Member] | |||||
Oil and Gas Investments (Details) [Line Items] | |||||
Business Combination, Consideration Transferred (in Dollars) | $ 81.3 |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details) - Schedule of Asset Retirement Obligations - USD ($) | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Schedule Of Asset Retirement Obligations Abstract | ||
Balance | $ 695,889 | $ 743,583 |
Balance | 710,779 | 665,211 |
Well additions | 145 | 31 |
Accretion | 14,745 | 12,997 |
Revisions | $ 0 | $ (91,400) |
Capital Contribution and Part_2
Capital Contribution and Partners' Equity (Details) - USD ($) $ / shares in Units, shares in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 25 Months Ended | ||||||
Dec. 30, 2016 | Jun. 30, 2023 | May 31, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2017 | Oct. 24, 2019 | |
Capital Contribution and Partners' Equity (Details) [Line Items] | |||||||||||
Partners' Capital Account, Contributions | $ 1,000 | ||||||||||
Partners' Capital Account, Return of Contribution Upon Minimum Offering | $ 990 | ||||||||||
Partners' Capital Account, Description of Units Sold | Under the agreement with David Lerner Associates, Inc. (the “Managing Dealer”), the Managing Dealer received a total of 6% in selling commissions and a marketing expense allowance based on gross proceeds of the common units sold. The Managing Dealer also has Dealer Manager Incentive Fees (defined below) where the Managing Dealer could receive distributions up to an additional 4% of gross proceeds of the common units sold in the Partnership’s best-efforts offering as outlined in the prospectus based on the performance of the Partnership. | ||||||||||
Managing Dealer, Selling Commissions, Percentage | 6% | ||||||||||
Managing Dealer, Maximum Contingent Incentive Fee on Gross Proceeds, Percentage | 4% | ||||||||||
Managing Dealer, Maximum Contingent Incentive Fee on Gross Proceeds | $ 8,700,000 | ||||||||||
Key Provisions of Operating or Partnership Agreement, Description | The Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”) provides that “Payout”, which is defined below, occurs on the day when the aggregate amount distributed with respect to each of the common units equals $20.00 plus the Payout Accrual. The Partnership Agreement defines “Payout Accrual” as 7% per annum simple interest accrued monthly until paid on the Net Investment Amount outstanding from time to time. The Partnership Agreement defines Net Investment Amount initially as $20.00 per common unit, regardless of the amount paid for the common unit. If at any time the Partnership distributes to holders of common units more than the Payout Accrual, the amount the Partnership distributes in excess of the Payout Accrual will reduce the Net Investment Amount.In June 2023, the General Partner declared and paid a special distribution to return $1.60 per common unit of capital to holders of Partnership common units. As described in Income Tax in Note 2. Summary of Significant Accounting Policies, in May 2023, the Partnership paid a withholding tax of approximately $0.03 per common unit to the state of North Dakota on behalf of its limited partners related to tax year 2021. This withholding tax payment, along with the $1.60 per common unit special distribution to holders of its common units in June 2023, have reduced the Net Investment Amount described above by an approximate total of $1.63 per common unit.All distributions made by the Partnership after Payout, which may include all or a portion of the proceeds of the sale of all or substantially all of the Partnership’s assets, will be made as follows: ● First, (i) to the Record Holders of the Incentive Distribution Rights, 30%; (ii) to the Managing Dealer, the “Dealer Manager Incentive Fees”, 30%, until such time as the Managing Dealer receives 4% of the gross proceeds of the common units sold; and (iii) to the Record Holders of outstanding common units, 40%, pro rata based on their percentage interest. ● Thereafter, (i) to the Record Holders of the Incentive Distribution Rights, 60%; and (ii) to the Record Holders of outstanding common units, 40%, pro rata based on their percentage interest. All items of income, gain, loss and deduction will be allocated to each Partner’s capital account in a manner generally consistent with the distribution procedures outlined above. | ||||||||||
Distribution Made to Limited Partner, Distributions Paid, Per Unit (in Dollars per share) | $ 1.63 | $ 1.949041 | $ 0.349041 | $ 2.298082 | $ 0.671232 | ||||||
Distribution Withholding Tax To Limited Partner Per Common Unit (in Dollars per share) | 0.03 | $ 0.03 | |||||||||
Distribution Made to Limited Partner, Cash Distributions Paid | $ 21,501,000 | $ 3,850,473 | $ 3,850,474 | $ 3,554,275 | $ 25,351,473 | $ 7,404,749 | |||||
Special Distribution [Member] | |||||||||||
Capital Contribution and Partners' Equity (Details) [Line Items] | |||||||||||
Distribution Made to Limited Partner, Distributions Paid, Per Unit (in Dollars per share) | $ 1.6 | ||||||||||
Best-Efforts Offering [Member] | |||||||||||
Capital Contribution and Partners' Equity (Details) [Line Items] | |||||||||||
Partners' Capital Account, Units, Sale of Units (in Shares) | 11 | ||||||||||
Proceeds from Issuance of Common Limited Partners Units | $ 218,000,000 | ||||||||||
Proceeds, Net of Offering Costs, from Issuance of Common Limited Partners Units | $ 204,300,000 |
Related Parties (Details)
Related Parties (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Dec. 01, 2020 | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Related Parties (Details) [Line Items] | |||||
Related Party Transaction, Description of Transaction | subsequent to the Partnership’s first asset purchase, which occurred on February 1, 2018, the Partnership is required to pay quarterly an annual fee of 0.5% of the total gross equity proceeds raised by the Partnership in its best-efforts offering. | ||||
General Partner [Member] | |||||
Related Parties (Details) [Line Items] | |||||
Selling, General and Administrative Expense | $ 64,000 | $ 39,000 | $ 106,000 | $ 76,000 | |
Other Liabilities, Current | 64,000 | 64,000 | |||
Affiliated Entity [Member] | |||||
Related Parties (Details) [Line Items] | |||||
Selling, General and Administrative Expense | 32,000 | $ 134,000 | 162,000 | $ 272,000 | |
Administrative Service Agreement [Member] | |||||
Related Parties (Details) [Line Items] | |||||
Related Party, Administrative Service Agreement | Prior to the execution of the Agreement, the General Partner had agreed to pay one-half of its annual management fee to the Administrator in exchange for the services to be provided under the ASA | ||||
Management Fee [Member] | General Partner [Member] | |||||
Related Parties (Details) [Line Items] | |||||
Selling, General and Administrative Expense | $ 273,000 | $ 545,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] $ / shares in Units, $ in Millions | 1 Months Ended |
Jul. 31, 2023 USD ($) $ / shares | |
Subsequent Events (Details) [Line Items] | |
Distribution Made to Limited Partner, Cash Distributions Paid | $ | $ 1.1 |
Distribution Made to Limited Partner, Distributions Paid, Per Unit | $ / shares | $ 0.098628 |