| Oil and Gas Reserve Data (Unaudited) | 16.
Oil and Gas Reserve Data (Unaudited) The
estimates of the Company’s proved oil and gas reserves, which are located entirely within the United States, were prepared in accordance
with the generally accepted petroleum engineering and evaluation principles and definitions and guidelines established by the SEC. The
estimates as of March 31, 2022 and 2021 were based on evaluations prepared by Russell K. Hall and Associates, Inc. The services provided
by Russell K. Hall and Associates, Inc. are not audits of our reserves but instead consist of complete engineering evaluations of the
respective properties. For more information about their evaluations performed, refer to the copy of their report filed as an exhibit
to this Annual Report on Form 10-K. Management emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries
are more imprecise than those of currently producing oil and natural gas properties. Accordingly, these estimates are expected to change
as additional information becomes available in the future. The
following table presents the weighted average first-day-of-the-month prices used for oil and gas reserve preparation, based upon SEC
guidelines. Schedule of Changes in Proved Reserve
March 31,
2022 2021 % Change
Prices utilized in the reserve estimates before adjustments:
Oil per Bbl $ 71.72 $ 36.49 97 %
Natural gas per MMBtu $ 4.09 $ 2.16 89 % The
Company’s total estimated proved reserves at March 31, 2022 were approximately 1.616
MBOE of which 50 %
was oil and natural gas liquids and 50 %
was natural gas. Changes
in Proved Reserves Schedule of Changes in Proved Reserve
Oil Natural Gas
Proved Developed and Undeveloped Reserves:
As of April 1, 2020 1,008,000 4,850,000
Revision of previous estimates (292,000 ) (200,000 )
Purchase of minerals in place - -
Extensions and discoveries 92,000 283,000
Sales of minerals in place (20,000 ) (14,000 )
Production (50,000 ) (324,000 )
As of March 31, 2021 738,000 4,595,000
Revision of previous estimates (70,000 ) (96,000 )
Purchase of minerals in place 13,000 50,000
Extensions and discoveries 190,000 698,000
Sales of minerals in place - (11,000 )
Production (62,000 ) (394,000 )
As of March 31, 2022 809,000 4,842,000 Proved
developed reserves are those expected to be recovered through existing wells, equipment and operating methods. Proved undeveloped reserves
(“PUD”) are proved 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 within five years of the date of their initial recognition. Moreover,
the Company may be required to write down its proved undeveloped reserves if the operators do not drill on the reserves within the required
five-year timeframe. Such downward revisions are primarily the result of reserves written off due to the five-year limitation and the
change in the timing of new development. They are primarily working interests on a lease in Reagan County, Texas which are held by production
and still in place to be developed in the future and royalty interests on a lease held by production in Upton County, Texas. Summary
of Proved Developed and Undeveloped Reserves as of March 31, 2022 and 2021 Summary of Proved Developed and Undeveloped Reserves
Oil Natural Gas
Proved Developed Reserves:
As of April 1, 2020 358,230 3,344,210
As of March 31, 2021 413,050 3,639,330
As of March 31, 2022 428,680 3,583,470
Proved Undeveloped Reserves:
As of April 1, 2020 649,570 1,506,160
As of March 31, 2021 325,020 956,050
As of March 31, 2022 380,550 1,258,210 At
March 31, 2022, the
Company reported estimated PUDs of 590 MBOE, which accounted for 37 97 26 35 17 19 The
following table discloses the Company’s progress toward the conversion of PUDs during fiscal 2022. Progress
of Converting Proved Undeveloped Reserves Schedule of Progress of Converting Proved Undeveloped Reserves
Oil & Natural Gas Future
(BOE) Development Costs
PUDs, beginning of year 484,362 $ 3,015,174
Revision of previous estimates (73,798 ) (225,915 )
Sales of reserves - -
Conversions to PD reserves (87,915 ) (771,288 )
Additional PUDs added 267,610 4,494,985
PUDs, end of year 590,259 $ 6,512,956 Estimated
future net cash flows represent an estimate of future net revenues from the production of proved reserves using average prices for 2022
and 2021 along with estimates of the operating costs, production taxes and future development costs necessary to produce such
reserves. No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest
expense. Operating
costs and production taxes are estimated based on current costs with respect to producing oil and natural gas properties. Future development
costs including abandonment costs are based on the best estimate of such costs assuming current economic and operating conditions. The
future cash flows estimated to be spent to develop the Company’s share of proved undeveloped properties through March 31, 2025
are $ 6,512,956 Income
tax expense is computed based on applying the appropriate statutory tax rate to the excess of future cash inflows less future production
and development costs over the current tax basis of the properties involved, less applicable carryforwards. The
future net revenue information assumes no escalation of costs or prices, except for oil and natural gas sales made under terms of contracts
which include fixed and determinable escalation. Future costs and prices could significantly vary from current amounts and, accordingly,
revisions in the future could be significant. The
current reporting rules require that year end reserve calculations and future cash inflows be based on the 12-month average market prices
for sales of oil and gas on the first calendar day of each month during the fiscal year discounted at 10 74.52 4.60 37.42 2.29 The
standardized measure of discounted future net cash flows is computed by applying the 12-month unweighted average of the first day of
the month pricing for oil and natural gas (with consideration of price changes only to the extent provided by contractual arrangements)
to the estimated future production of proved oil and natural gas reserves, less estimated future expenditures (based on year end costs)
to be incurred in developing and producing the proved reserves, discounted using a rate of 10 The
basis for this table is the reserve studies prepared by an independent petroleum engineering consultant, which contain imprecise estimates
of quantities and rates of production of reserves. Revisions of previous year estimates can have a significant impact on these results.
Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates
of proved reserves and their valuation. Therefore, the standardized measure of discounted future net cash flow is not necessarily indicative
of the fair value of proved oil and gas properties. The
following information is based on the Company’s best estimate of the required data for the Standardized Measure of Discounted Future
Net Cash Flows as of March 31, 2022 and 2021 in accordance with ASC 932, “Extractive Activities – Oil and Gas” which
requires the use of a 10 Standardized
Measure of Discounted Future Net Cash Flows Relating to Proved Reserves: Schedule of Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves
Future cash inflows $ 82,596,000 $ 38,144,000
March 31
2022 2021
Future cash inflows $ 82,596,000 $ 38,144,000
Future production costs and taxes (21,351,000 ) (11,248,000 )
Future development costs (6,839,000 ) (3,213,000 )
Future income taxes (8,586,000 ) (1,714,000 )
Future net cash flows 45,820,000 21,969,000
Annual 10% discount for estimated timing of cash flows (19,900,000 ) (9,206,000 )
Standardized measure of discounted future net cash flows $ 25,920,000 $ 12,763,000 Changes
in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves: Schedule of Changes in Standardized Measure of Discounted Future Net Cash Flows to Proved Oil and Gas Reserves
Sales of oil and gas produced, net of production costs $ (5,244,000 ) $ (1,902,000 )
March 31
2022 2021
Sales of oil and gas produced, net of production costs $ (5,244,000 ) $ (1,902,000 )
Net changes in price and production costs 16,829,000 (6,680,000 )
Changes in previously estimated development costs (159,000 ) 2,623,000
Revisions of quantity estimates (2,594,000 ) (5,954,000 )
Net change due to purchases and sales of minerals in place 568,000 (54,000 )
Extensions and discoveries, less related costs 5,105,000 1,150,000
Net change in income taxes (3,861,000 ) 2,070,000
Accretion of discount 3,078,000 1,376,000
Changes in timing of estimated cash flows and other (565,000 ) 158,000
Changes in standardized measure 13,157,000 (6,213,000 )
Standardized measure, beginning of year 12,763,000 18,976,000
Standardized measure, end of year $ 25,920,000 $ 12,763,000 |
