OIL AND GAS PROPERTIES

12 Months Ended

Dec. 31, 2022

OIL AND GAS PROPERTIES

OIL AND GAS PROPERTIES

NOTE 6 - OIL AND GAS PROPERTIES

The following tables summarize the Company’s oil and gas activities by classification for the years ended December 31, 2022 and 2021, respectively (in thousands):The following tables summarize the Company’s oil and gas activities by classification for the years ended December 31, 2022 and 2021, respectively (in thousands):

	Balance at December 31,											Balance at December 31,
	2021			Additions			Disposals		Transfers			2022
Oil and gas properties, subject to amortization	$	151,338		$	22,356		$	-	$	2,559		$	176,253
Oil and gas properties, not subject to amortization		2,559			775			-		(2,559	)		775
Asset retirement costs		789			618			-		-			1,407
Accumulated depreciation, depletion and impairment		(88,219	)		(10,069	)		-		-			(98,288	)
Total oil and gas assets	$	66,467		$	13,680		$	-	$	-		$	80,147

	Balance at December 31,											Balance at December 31,
	2020			Additions			Disposals			Transfers			2021
Oil and gas properties, subject to amortization	$	146,950		$	4,454		$	(66	)	$	-		$	151,338
Oil and gas properties, not subject to amortization		4			2,555			-			-			2,559
Asset retirement costs		1,108			(314	)		(5	)		-			789
Accumulated depreciation, depletion and impairment		(81,064	)		(7,155	)		-			-			(88,219	) )
Total oil and gas assets	$	66,998		$	(460	)	$	(71	)	$	-		$	66,467

For the year ended December 31, 2022, the Company incurred $23,131,000 of capital costs primarily related to drilling operations, completion and facility construction for the two new wells started at the end of 2021 and production enhancement cleanouts in our Permian Basin Asset for approximately $8.4 million and the acquisition and development of assets in the D-J Basin, which also includes our participation in the drilling and completion of six wells by a third-party operator for approximately $12.5 million in the latter part of the period.

Additionally, the Company consummated the acquisition of certain additional assets located in the D-J Basin from a third-party effective July 1, 2021, for approximately $500,000 in cash consideration. These assets include approximately 46.6 net leasehold acres and interests in 14 horizontal wells currently producing from the acreage. The Company incurred $1.2 million (included in the $23.1 million total above) in net capital costs for its working interest in these 14 new well interests during the year ended December 31, 2022.

As of December 31, 2022, the Company also acquired approximately 480 net mineral acres and 787 net lease acres in and around its existing footprint in the D-J Basin through multiple transactions at total acquisition and due diligence costs of $607,000 and $688,000, respectively.

For the year ended December 31, 2021, the Company incurred $7,009,000 in capital costs related to capital workovers for our Permian Basin Asset, which included four clean outs, converting three wells from ESPs to rod pumps, installation of a new ESP, and purchase in place of ESP systems that were previously rentals. The Company incurred additional capital costs upon implementation of a recompletions and reactivation program for our existing vertical wells in the Permian Basin Asset, and in our D-J Basin Asset, the Company incurred capital costs related to converting a well from gas lift to rod pump. In the D-J Basin Asset, the Company also participated in the drilling and completion of four non-operated wells and began drilling operations for two new wells and construction of a new production facility began in our Permian Basin Asset.

On March 18, 2021, the Company, through its wholly-owned subsidiary Red Hawk, consummated the sale of certain assets and associated liabilities located in its D-J Basin Asset to third parties pursuant to a Purchase and Sale Agreement. The Company received net cash at closing of $1.9 million. The final purchase price was further subject to customary post-closing adjustments, resulting in an additional $52,000 paid by Red Hawk in July 2021. As a result of the transaction, the Company recognized a $1.8 million gain on sale of oil and gas properties on the Statement of Operations for the year ended December 31, 2021.

The depletion recorded for production on proved properties for the year ended December 31, 2022 and 2021, amounted to $10,069,000 and $7,155,000, respectively.