EX-99.2 8 ex99-2.htm LUBBOCK ENERGY UNAUDITED


 

Exhibit 99.2

 

Lubbock Energy Partners, LLC

 

 

Financial Statements

For the nine months ended September 30, 2021 and 2020

 

 

 

 

Lubbock Energy Partners, LLC

 

INDEX TO FINANCIAL STATEMENTS

 

Unaudited Condensed Balance Sheets 3
Unaudited Condensed Statements of Operations 4
Unaudited Condensed Statements of Changes in Members’ Equity 5
Unaudited Condensed Statements of Cash Flows 6
Notes to Unaudited Condensed Financial Statements 7

 

 

 

 

Lubbock Energy Partners, LLC

Unaudited Condensed Balance Sheets

 

   September 30,   December 31, 
   2021   2020 
Assets        
Current assets:          
Cash   $135,335   $194,130 
Oil and gas sales receivable   729,930    237,281 
Other receivables   244    152,473 
Receivable from related parties   37,500    - 
Prepaid expenses   27,000    - 
Total current assets   930,009    583,884 
           
Oil and gas properties:          
Oil and gas properties, at cost, using the full cost method   17,281,094    17,281,094 
Less accumulated depreciation, depletion, amortization and impairment   (9,705,976)   (8,665,806)
Net oil and gas properties   7,575,118    8,615,288 
Total assets  $8,505,127   $9,199,172 
           
Liabilities and members’ equity          
Current liabilities:          
Accounts payable  $62,693   $222,359 
Accrued liabilities   257,119    16,707 
Payable to related parties   232,508    22,717 
Total current liabilities   552,320    261,783 
Asset retirement obligations   3,798,386    3,584,349 
Total liabilities   4,350,706    3,846,132 
           
Commitments and contingencies   -    - 
           
Members’ equity   4,154,421    5,353,040 
Total liabilities and members’ equity  $8,505,127   $9,199,172 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3
 

 

Lubbock Energy Partners, LLC

Unaudited Condensed Statements of Operations

 

  

For the nine months ended

September 30,

 
   2021   2020 
Revenue -        
Oil and gas (Note 5)  $6,091,601   $1,177,616 
           
Operating expenses:          
Lease operating expense (Note 5)   1,976,930    673,729 
Production taxes and transportation costs (Note 5)   339,851    76,136 
Depreciation, depletion and amortization   1,040,170    284,381 
Accretion   214,037    146,381 
Impairment   -    2,406,109 
General and administrative - related parties   219,754    122,837 
General and administrative   310,517    21,747 
Total costs and expenses   4,101,259    3,731,320 
           
Income (loss) before income tax   1,990,342    (2,553,704)
           
Income tax provision   -    2,809 
Net income (loss)  $1,990,342   $(2,556,513)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4
 

 

Lubbock Energy Partners, LLC

Unaudited Condensed Statements of Changes in Members’ Equity

 

Balance at January 1, 2020  $3,765,844 
Equity distributions   (270,000)
Net loss   (2,556,513)
Balance at September 30, 2020  $939,331 
      
Balance at January 1, 2021  $5,353,040 
Equity distributions   (3,188,961)
Net income   1,990,342 
Balance at September 30, 2021  $4,154,421 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

5
 

 

Lubbock Energy Partners, LLC

Unaudited Condensed Statements of Cash Flows

 

  

For the nine months ended

September 30,

 
   2021   2020 
Cash flows from operating activities:          
Net income (loss)  $1,990,342   $(2,556,513)
Adjustments to reconcile net income (loss) to net cash from operating activities:          
Depreciation, depletion and amortization   1,040,170    284,381 
Accretion   214,037    146,381 
Impairment   -    2,406,109 
Changes in assets and liabilities:          
Accounts receivable   (377,920)   223,539 
Prepaid expenses   (27,000)   - 
Accounts payable   (159,666)   179,905 
Payable to related parties   209,791    (40,504)
Accrued liabilities   240,412    (43,793)
Net cash from operating activities   3,130,166    599,505 
           
Cash flows from investing activities -          
Purchases of oil and gas properties   -    (5,000)
           
Cash flows from financing activities -          
Distributions to members   (3,188,961)   (270,000)
           
Net change in cash   (58,795)   324,505 
           
Cash at beginning of period   194,130    251,099 
Cash at end of period  $135,335   $575,604 
           
Supplemental cash flow information:          
Cash paid for taxes  $-   $27,817 
Non-cash investing and financing activities:          
Oil and gas properties acquired for note receivable   -    1,100,000 
Asset retirement obligations assumed in acquisitions   -    2,046,229 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

6
 

 

Lubbock Energy Partners, LLC

Notes to Unaudited Condensed Financial Statements

 

1. Organization and Significant Accounting Policies

 

Organization – Lubbock Energy Partners, LLC (the “Company”) was formed as a Texas Limited Liability Company on January 17, 2017. The Company’s principal business activities are focused on the acquisition and development of oil and gas properties in the United States. Our fiscal year-end is December 31.

 

Basis of Presentation – These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements, and should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2020.

 

In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

 

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

 

Significant estimates include (i) oil and gas reserves that are used in the calculation of depreciation, depletion, amortization and impairment of the carrying value of oil and gas properties; (ii) production and commodity price estimates used to record oil and gas sales receivables; and (iii) the cost of future asset retirement obligations. The Company evaluates its estimates on an on-going basis and bases its estimates on historical experience and on various other assumptions we believe to be reasonable. Due to inherent uncertainties, including the future prices of oil and gas, these estimates could change in the near term and such changes could be material.

 

2. Oil and Gas Properties

 

2020 Acquisitions – In May 2020, we acquired a property interest located in Cochran County, Texas for cash totaling $5 thousand. We recognized associated asset retirement obligations of $1.1 million for this acquisition.

 

Separately in June 2020, we acquired an additional interest in an existing property located in Karnes County, Texas by foreclosure of the $1.1 million note receivable from a third-party issued to us in 2019.

 

Ceiling Test Impairments – We recognized an impairment of $2.4 million in 2020 for the excess of the net book value of our oil and gas properties above the cost center ceiling limitation.

 

7
 

 

3. Asset Retirement Obligations

 

The following table summarizes the changes in ARO (in thousands):

 

Balance at January 1, 2020  $1,227 
ARO assumed in acquisitions   2,046 
Accretion   146 
Balance at September 30, 2020  $3,419 
      
Balance at January 1, 2021  $3,584 
Accretion   214 
Balance at September 30, 2021  $3,798 

 

4. Commitments and Contingencies

 

Litigation – From time to time, the Company may be subject to litigation or other claims in the normal course of business.

 

5. Related Party Transactions

 

Our oil and gas properties within the Eagle Ford Basin are operated on our behalf by Caldera Operating Company LLC (“Caldera”), an entity controlled by a Member. Our oil and gas properties within the Permian Basin are operated on our behalf by Extex Operating Company (“Extex”), an entity controlled by another Member. All revenues, lease operating expenses, and production taxes and transportation costs are processed by Caldera or Extex and settled monthly.

 

We pay Caldera and Extex administrative fees as operators of our properties. During the nine months ended September 30, 2021, Caldera was paid administrative fees totaling $133 thousand and Extex was paid $86 thousand. During the nine months ended September 30, 2020, Caldera was paid administrative fees totaling $62 thousand and Extex was paid $61 thousand.

 

At September 30, 2021 and December 31, 2020, payable to related parties includes $233 thousand and $22 thousand, respectively, for reimbursement of expenses for our oil and gas properties.

 

6. Subsequent Events

 

The Company has evaluated events and transactions subsequent to the balance sheet date and through March 1, 2022, the date the financial statements were available to be issued.

 

On October 4, 2021, we entered into Purchase and Sale Agreement with U.S. Energy Corp. (“U.S. Energy”) for the sale of all of our oil and gas properties. The transaction also included certain wells, contracts, technical data, records, personal property and hydrocarbons associated with the assets being sold. This transaction was completed on January 5, 2022 for a total purchase price of $125,000 in cash and 6,568,828 shares of U.S. Energy’s common stock.

 

* * * * *

 

8