10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-08157

THE RESERVE PETROLEUM COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware	73-0237060
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
6801 BROADWAY EXT., SUITE 300 OKLAHOMA CITY, OK 73116-9037 (405) 848-7551
(Address and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes oNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þYes oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ
	Smaller reporting company þ		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes þNo

As of August 4, 2023, 155,850 shares of the Registrant’s $0.50 par value common stock were outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	4
	Consolidated Statements of Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1 - Basis of Presentation	7
	Note 2 - Revenue Recognition	8
	Note 3 - Other Income/(Loss), Net	8
	Note 4 - Investments and Related Commitments and Contingent Liabilities, Including Guaranties	8
	Note 5 - Non-Controlling Interest and Variable Interest Entities	10
	Note 6 - Note Payable	11
	Note 7 - Provision for Income Taxes	12
	Note 8 - Asset Retirement Obligation	12
	Note 9 - Fair Value Measurements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19

1

PART I – FINANCIAL INFORMATION

ITEM 1.       CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THE RESERVE PETROLEUM COMPANY

CONSOLIDATED BALANCE SHEETS (1)

(Unaudited)

ASSETS

	June 30, 2023		December 31, 2022
Current Assets:
Cash and Cash Equivalents	$	5,468,633	$	7,299,224
Available-for-Sale Debt Securities	4,629,750		4,208,648
Equity Securities	2,952,309		2,302,959
Refundable Income Taxes	182,814		120,230
Accounts Receivable	1,898,080		2,318,183
Total Current Assets	15,131,586		16,249,244
Investments:
Equity Method Investments	2,827,715		2,469,644
Other Investments	5,191,303		5,085,806
Total Investments	8,019,018		7,555,450
Property, Plant and Equipment:
Oil and Gas Properties, at Cost,
Based on the Successful Efforts Method of Accounting –
Unproved Properties	1,945,734		1,846,543
Proved Properties	66,777,316		65,328,501
Oil and Gas Properties, Gross	68,723,050		67,175,044
Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance	(53,823,903)		(52,773,978)
Oil and Gas Properties, Net	14,899,147		14,401,066
Other Property and Equipment, at Cost	725,991		758,256
Less – Accumulated Depreciation	(239,288)		(236,883)
Other Property and Equipment, Net	486,703		521,373
Total Property, Plant and Equipment, Net	15,385,850		14,922,439
Total Assets	$	38,536,454	$	38,727,133

See accompanying notes to unaudited consolidated financial statements

2

THE RESERVE PETROLEUM COMPANY

CONSOLIDATED BALANCE SHEETS, CONTINUED (1)

(Unaudited)

LIABILITIES AND EQUITY

	June 30, 2023		December 31, 2022
Current Liabilities:
Accounts Payable	$	308,724	$	399,735
Other Current Liabilities	372,980		75,675
Note Payable, Current Portion	139,280		136,637
Total Current Liabilities	820,984		612,047
Long-Term Liabilities:
Asset Retirement Obligation	2,839,906		2,809,257
Deferred Tax Liability, Net	1,901,034		1,619,595
Note Payable, Less Current Portion	1,230,525		1,300,872
Total Long-Term Liabilities	5,971,465		5,729,724
Total Liabilities	6,792,449		6,341,771
Equity:
Common Stock	92,368		92,368
Additional Paid-in Capital	65,000		65,000
Retained Earnings	33,167,536		33,828,418
Equity Before Treasury Stock	33,324,904		33,985,786
Less – Treasury Stock, at Cost	(1,762,887)		(1,749,858)
Total Equity Applicable to The Reserve Petroleum Company	31,562,017		32,235,928
Non-Controlling Interests	181,988		149,434
Total Equity	31,744,005		32,385,362
Total Liabilities and Equity	$	38,536,454	$	38,727,133

(1) Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

See accompanying notes to unaudited consolidated financial statements

3

THE RESERVE PETROLEUM COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating Revenues:
Oil and Gas Sales	$	2,707,455	$	4,038,353	$	5,642,896	$	7,472,177
Lease Bonuses and Other	—		104,147		—		141,801
Water Well Drilling Services	111,382		269,154		275,582		544,688
Total Operating Revenues	2,818,837		4,411,654		5,918,478		8,158,666
Operating Costs and Expenses:
Production	1,009,591		825,870		2,066,340		1,604,045
Exploration	199,221		47,758		573,569		(6,023)
Water Well Drilling Services	147,997		221,096		314,570		370,617
Depreciation, Depletion, Amortization and Valuation Provision	380,595		295,400		1,315,330		630,446
Gain on Disposition of Oil and Gas Properties	—		(279)		—		(199,025)
General, Administrative and Other	702,171		399,910		1,315,758		934,077
Total Operating Costs and Expenses	2,439,575		1,789,755		5,585,567		3,334,137
Income from Operations	379,262		2,621,899		332,911		4,824,529
Equity Income/(Loss) in Investees	26,977		(50,133)		58,633		(133,590)
Interest Expense	(17,096)		—		(34,049)		—
Other Income/(Loss), Net	188,709		(1,466,938)		757,542		(1,532,044)
Income Before Income Taxes and Non-Controlling Interest	577,852		1,104,828		1,115,037		3,158,895
Income Tax Provision/(Benefit):
Current	(61,208)		(638,138)		(49,674)		(586,968)
Deferred	159,526		917,056		281,439		1,234,474
Total Income Tax Provision	98,318		278,918		231,765		647,506
Net Income	$	479,534	$	825,910	$	883,272	$	2,511,389
Less: Net Loss Attributable to Non-Controlling Interest	(7,629)		—		(16,550)		—
Net Income Attributable to Common Stockholders	$	487,163	$	825,910	$	899,822	$	2,511,389
Per Share Data
Net Income Attributable to Common Stockholders, Basic	$	3.12	$	5.29	$	5.76	$	16.08
Cash Dividends Declared and/or Paid	$	10.00	$	10.00	$	10.00	$	10.00
Weighted Average Shares Outstanding, Basic	156,089		156,161		156,123		156,167

See accompanying notes to unaudited consolidated financial statements

4

THE RESERVE PETROLEUM COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Non- Controlling Interests		Total
Three Months Ended June 30, 2023
Balance as of March 31, 2023	$	92,368	$	65,000	$	34,241,077	$	(1,749,858)	$	163,811	$	32,812,398
Net Income/(Loss)	—		—		487,163		—		(7,629)		479,534
Dividends Declared	—		—		(1,560,704)		—		—		(1,560,704)
Purchase of Treasury Stock	—		—		—		(13,029)		—		(13,029)
Contributions	—		—		—		—		25,806		25,806
Balance as of June 30, 2023	$	92,368	$	65,000	$	33,167,536	$	(1,762,887)	$	181,988	$	31,744,005
Three Months Ended June 30, 2022
Balance as of March 31, 2022	$	92,368	$	65,000	$	33,074,719	$	(1,747,778)	$	—	$	31,484,309
Net Income	—		—		825,910		—		—		825,910
Dividends Declared	—		—		(1,561,573)		—		—		(1,561,573)
Purchase of Treasury Stock	—		—		—		(2,080)		—		(2,080)
Balance as of June 30, 2022	$	92,368	$	65,000	$	32,339,056	$	(1,749,858)	$	—	$	30,746,566
Six Months Ended June 30, 2023
Balance as of December 31, 2022	$	92,368	$	65,000	$	33,828,418	$	(1,749,858)	$	149,434	$	32,385,362
Net Income/(Loss)	—		—		899,822		—		(16,550)		883,272
Dividends Declared	—		—		(1,560,704)		—		—		(1,560,704)
Purchase of Treasury Stock	—		—		—		(13,029)		—		(13,029)
Contributions	—		—		—		—		49,104		49,104
Balance as of June 30, 2023	$	92,368	$	65,000	$	33,167,536	$	(1,762,887)	$	181,988	$	31,744,005
Six Months Ended June 30, 2022
Balance as of December 31, 2021	$	92,368	$	65,000	$	31,389,240	$	(1,747,778)	$	—	$	29,798,830
Net Income	—		—		2,511,389		—		—		2,511,389
Dividends Declared	—		—		(1,561,573)		—		—		(1,561,573)
Purchase of Treasury Stock	—		—		—		(2,080)		—		(2,080)
Balance as of June 30, 2022	$	92,368	$	65,000	$	32,339,056	$	(1,749,858)	$	—	$	30,746,566

See accompanying notes to unaudited consolidated financial statements

5

THE RESERVE PETROLEUM COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Net Cash Provided by Operating Activities	$	2,644,446	$	4,391,434
Cash Provided by/(Applied to) Investing Activities:
Maturity of Available-for-Sale Debt Securities	4,478,841		—
Purchase of Available-for-Sale Debt Securities	(4,899,943)		—
Proceeds from Disposal of Property, Plant and Equipment	33,866		457,898
Purchase of Property, Plant and Equipment	(1,885,765)		(3,083,402)
Purchase of Equity Method and Other Investments	(432,434)		(1,029,426)
Cash Distributions from Other Investments	340,399		81,205
Sale of Equity Securities	305,781		2,059,005
Purchase of Equity Securities	(817,901)		(2,408,898)
Net Cash Applied to Investing Activities	(2,877,156)		(3,923,618)
Cash Provided by/(Applied to) Financing Activities:
Dividends Paid to Stockholders	(1,560,704)		(1,561,573)
Purchase of Treasury Stock	(13,029)		(2,080)
Payments of Note Payable	(67,704)		—
Capital Contributions from Non-Controlling Interests	43,556		—
Total Cash Applied to Financing Activities	(1,597,881)		(1,563,653)
Net Change in Cash and Cash Equivalents	(1,830,591)		(1,095,837)
Cash and Cash Equivalents, Beginning of Period	7,299,224		10,129,157
Cash and Cash Equivalents, End of Period	$	5,468,633	$	9,033,320

See accompanying notes to unaudited consolidated financial statements

6

THE RESERVE PETROLEUM COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 1 – BASIS OF PRESENTATION

The Reserve Petroleum Company, a Delaware corporation, is an independent oil and gas company engaged in oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming, a single business segment. The Company is also engaged in investments and joint ventures that are not significant business segments. The Company’s consolidated subsidiaries consist of Grand Woods Development, LLC (“Grand Woods”), an Oklahoma limited liability company and Trinity Water Services, LLC, an Oklahoma limited liability company, which has a water well drilling joint venture agreement with TWS South, LLC, a Texas limited liability company (Collectively, “TWS”). Unless otherwise specified or the context otherwise requires, all references in these notes to “the Company,” “its,” “our,” and “we” are to The Reserve Petroleum Company and its consolidated subsidiaries.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of The Reserve Petroleum Company and its subsidiaries in which the Company holds a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, the Company consolidates Variable Interest Entities (“VIEs”) under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications that are not material to the consolidated financial statements are made to prior period financial information to conform to the current year presentation.

The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (hereinafter the “2022 Form 10-K”).

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year.

Variable Interest Entities

The Company decides at the inception of each arrangement whether an entity in which an investment is made or in which we have other variable interests is considered a VIE. Generally, an entity is a VIE if (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entity’s investors lack any characteristics of a controlling financial interest or (3) the entity was established with non-substantive voting rights. The Company consolidates VIEs when the Company is deemed to be the primary beneficiary. The primary beneficiary of a VIE is generally the party that both: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. If the Company is not deemed to be the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP.

Non-Controlling Interests

When the Company consolidates an entity, 100% of the assets, liabilities, revenues and expenses of the subsidiary are included in the consolidated financial statements. For those consolidated entities in which the Company’s ownership is less than 100%, the Company records a non-controlling interest as a component of equity on the consolidated balance sheets, which represents the third-party ownership in the net assets of the respective consolidated subsidiary. Additionally, the portion of the net income or loss attributable to the non-controlling interest is reported as net income (loss) attributable to non-controlling interest on the consolidated statements of income. Changes in ownership interests in an entity that do not result in deconsolidation are generally recognized within equity. See Note 5 for additional details on non-controlling interests.

7

Note 2 – REVENUE RECOGNITION

A portion of oil and natural gas sales recorded in the consolidated statements of income are the result of estimated volumes and pricing for oil and natural gas payments not yet received for the period. For the six months ended June 30, 2023 and 2022, that estimate represented $1,748,836 and $2,144,069, respectively, of oil and natural gas sales included in the consolidated statements of income.

The Company’s disaggregated revenue has two primary revenue sources, which are oil sales and natural gas sales. The following is an analysis of the components of oil and natural gas sales:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Oil Sales	$	2,195,462	$	2,629,073	$	4,539,499	$	4,981,206
Natural Gas Sales	436,431		1,288,688		971,832		2,225,496
Miscellaneous Oil and Gas Product Sales	75,562		120,592		131,565		265,475
	$	2,707,455	$	4,038,353	$	5,642,896	$	7,472,177

Note 3 – OTHER INCOME/(LOSS), NET

The following is an analysis of the components of Other Income/(Loss), Net:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Realized and Unrealized Gain/(Loss), Equity Securities	$	54,596	$	(1,583,840)	$	137,231	$	(1,729,916)
Interest Income	121,748		9,670		235,566		17,199
Dividend Income	16,589		87,824		26,889		184,126
Income/(Loss) from Other Investments	19,401		48,137		329,097		56,455
Miscellaneous Income/(Expenses)	(23,625)		(28,729)		28,759		(59,908)
Other Income/(Loss), Net	$	188,709	$	(1,466,938)	$	757,542	$	(1,532,044)

Note 4 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTIES

The Company’s Equity Method Investments include:

Broadway Sixty-Eight, LLC (“Broadway 68”), an Oklahoma limited liability company, with a 33% ownership, owns and operates an office building in Oklahoma City, Oklahoma. The Company leases its corporate office from Broadway 68 on a month-to-month basis under the terms of the modified lease agreement. Rent expense for lease of the corporate office from Broadway 68 was $22,358 and $19,874 during the six months ended June 30, 2023 and 2022, respectively. The Company’s investment in Broadway 68 totaled $131,593 and $115,093 at June 30, 2023, and December 31, 2022, respectively.

Broadway Seventy-Two, LLC (“Broadway 72”), an Oklahoma limited liability company, with a 40% ownership, was acquired in 2021. Broadway 72 owns and operates a commercial building in Oklahoma City, Oklahoma. The Company’s investment in Broadway 72 totaled $1,107,595 and $1,080,465 at June 30, 2023, and December 31, 2022, respectively.

QSN Office Park, LLC (“QSN”), an Oklahoma limited liability company, with a 20% ownership, was acquired in 2016. QSN is constructing and selling office buildings in a new office park. The Company has guarantied 20% of a $953,931 development loan that matures July 15, 2025, and 20% of a construction loan of $585,000 that matures July 25, 2024. The Company’s investment in QSN totaled $280,878 and $284,249 at June 30, 2023, and December 31, 2022, respectively. The Company does not anticipate the need to perform on the guaranties of the loans.

8

Stott’s Mill, with a 50% ownership, was acquired in May 2022. Stott’s Mill consists of two residential lots in a developing subdivision located in Basalt, Colorado. The Company’s investment in Stott’s Mill totaled $704,046 and $688,575 at June 30, 2023, and December 31, 2022, respectively.

Victorum BRH2 Investment, LLC (“BRH2”), with a 16.3% ownership, was acquired in August 2021. BRH2 serves as a special purpose investment vehicle to hold an investment in Berry-Rock Capital, LP (“Berry-Rock”). Berry-Rock is a provider of a rent-to-own program for individuals unable to qualify for a mortgage. The Company receives quarterly distributions on an 11% annualized return on investment. The Company’s investment in BRH2 totaled $301,442 and $300,754 at June 30, 2023, and December 31, 2022, respectively.

Victorum BRH3 Investment, LLC (“BRH3”), with a 27.27% ownership, was acquired in November 2022. BRH3 serves as a special purpose investment vehicle to hold an investment in Berry-Rock. The Company receives quarterly distributions on an 11% annualized return on investment. The Company’s investment in BRH3 totaled $302,161 and $301,261 at June 30, 2023, and December 31, 2022, respectively.

The Company’s Other Investments primarily include:

Bailey Hilltop Pipeline, LLC (“Bailey”), with a 10% ownership, was acquired in 2008. Bailey is a gas gathering system pipeline for the Bailey Hilltop Prospect oil and gas properties in Grady County, Oklahoma. The Company’s investment in Bailey totaled $77,377 at June 30, 2023, and December 31, 2022.

Cloudburst International, Inc. (“Cloudburst”), with a 12.99% ownership, was acquired in 2019. Cloudburst owns exclusive rights to a water purification process technology that is being developed and currently tested. The Company’s investment in Cloudburst totaled $1,596,007 at June 30, 2023, and December 31, 2022.

Genlith, Inc. (“Genlith”), with a 5.15% ownership, was acquired in July 2020. Genlith identifies and structures investments in the new energy economy through corporate ventures, advisory and fund management. The Company’s investment in Genlith totaled $311,958 and $460,000 at June 30, 2023, and December 31, 2022, respectively.

Chilean Cobalt Corp. ("C3") is a spin-off from Genlith that has submitted an S-1 filing with the SEC to become a publicly traded entity. The Company owns 740,211 of S-1 Registered Shares of C3, representing less than 2% of outstanding shares, and entered into a twelve month lock-up agreement on May 11, 2023, whereby the Company agreed that it will not attempt to sell, transfer, or otherwise dispose of the Registered Shares, subject to a "trickle" into market, except at a rate not to exceed 30,000 shares per month on a non-cumulative basis. The Company's investment in C3 totaled $148,042 at June 30, 2023.

OKC Industrial Properties, LC (“OKC”), with a 10% ownership, was acquired in 1992. OKC originally owned approximately 260 acres of undeveloped land in north Oklahoma City. In March 2023, OKC sold 10 acres, resulting in a gain of $290,000 for the Company. There was no basis adjustment in accordance with the sale and there is approximately 13 acres of land remaining. The Company’s investment in OKC totaled $82,482 at June 30, 2023, and December 31, 2022.

Grand Woods holds approximately 26.56 acres of undeveloped real estate in northeast Oklahoma City. The accumulated costs of the land totaled $2,171,828 at June 30, 2023, and December 31, 2022. See Note 5 for information related to Grand Woods.

Victorum Capital Club (“VCC”) invests in and manages special investment vehicles that hold investments in various startup companies. The Company participates with minority ownership in an assortment of investments held with VCC. The Company’s investment in VCC special investment vehicles totaled $357,259 at June 30, 2023, and December 31, 2022.

VCC Venture Fund I, LP (“VCC Venture”), serves as a limited partnership to be used for investments in start-up entities and is managed by Victorum Capital Club. The Company committed to a $250,000 investment in VCC Venture. The Company’s investment in VCC Venture totaled $62,500 and $31,250 at June 30, 2023, and December 31, 2022, respectively. The balance at June 30, 2023, represents 25% of the Company's capital commitment.

9

Cortado Ventures Fund II-A, LP (“Cortado II-A”), serves as a limited partnership to be used for investments in start-up entities and is managed by Cortado Capital II, LLC. The Company committed to a $1,000,000 investment in Cortado II-A on June 20, 2023. The Company’s investment in Cortado II-A totaled $375,000 at June 30, 2023, which represents 37.50% of the Company's capital commitment.

Note 5 – NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES

TWS and Grand Woods are accounted for as consolidated VIEs. The Company owns an 80.37% interest in Grand Woods in the form of 47.08 Class A units and 546,735 Class C units, with the remaining non-controlling member interests held by other members, including 8.72% owned by executive officers of the Company. Grand Woods holds approximately 26.56 acres of undeveloped real estate in northeast Oklahoma City.

On September 15, 2022, Grand Woods entered into an agreement (“the 2022 Agreement”) with its members that resulted in the Company having the power to direct the activities significant to Grand Woods and becoming the primary beneficiary; therefore, consolidation of Grand Woods became required and effective for the period ended September 30, 2022. The Company is the only guarantor of $1,200,000 of a note payable held by Grand Woods. See Note 6 for terms and guaranty of debt held by Grand Woods, which is included in the consolidated balance sheets. As a result of the Company’s guaranty of $1,200,000 of Grand Woods debt, the note holder has partial recourse to the Company for the consolidated VIE’s liabilities.

The following table presents the summarized assets and liabilities of Grand Woods and TWS included in the consolidated balance sheets as of June 30, 2023, and December 31, 2022. The assets of Grand Woods and TWS in the table below may only be used to settle obligations of Grand Woods or TWS, respectively. The assets and liabilities in the table below include third party assets and liabilities only and exclude intercompany balances that eliminate in consolidation.

	June 30, 2023
	Grand Woods		TWS		Total
Assets:
Cash	$	112,323	$	508,010	$	620,333
Accounts Receivable	—		122,982		122,982
Total Current Assets	112,323		630,992		743,315
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		442,244		442,244
Less – Accumulated Depreciation	—		(128,861)		(128,861)
Other Property and Equipment, Net	—		313,383		313,383
Total Assets	$	2,284,151	$	944,375	$	3,228,526
Liabilities:
Accounts Payable	$	—	$	19,529	$	19,529
Note Payable, Current Portion	139,280		—		139,280
Deferred Revenue	—		338,985		338,985
Total Current Liabilities	139,280		358,514		497,794
Note Payable, Less Current Portion	1,230,525		—		1,230,525
Total Liabilities	$	1,369,805	$	358,514	$	1,728,319

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	December 31, 2022
	Grand Woods		TWS		Total
Assets:
Cash	$	24,050	$	281,654	$	305,704
Accounts Receivable	—		72,716		72,716
Total Current Assets	24,050		354,370		378,420
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		419,044		419,044
Less – Accumulated Depreciation	—		(92,278)		(92,278)
Other Property and Equipment, Net	—		326,766		326,766
Total Assets	$	2,195,878	$	681,136	$	2,877,014
Liabilities:
Accounts Payable	$	—	$	58,742	$	58,742
Note Payable, Current Portion	136,637		—		136,637
Total Current Liabilities	136,637		58,742		195,379
Note Payable, Less Current Portion	1,300,872		—		1,300,872
Total Liabilities	$	1,437,509	$	58,742	$	1,496,251

Note 6 – NOTE PAYABLE

Grand Woods has a note payable (“the Note”) that was used for the purchase and development of property. The Note has a 4% interest rate and matures November 23, 2026. The Note has scheduled payments of principal and interest in the amount of $16,034 per month, with a balloon payment of any unpaid principal balance due on November 23, 2026. The balance of the Note at June 30, 2023, and December 31, 2022, is $1,369,805 and $1,437,509, respectively, of which $139,280 is classified as current at June 30, 2023. Interest paid on the Note in the period ended June 30, 2023, totaled $28,501, with none in 2022. The Note is secured by the underlying property and a $1,200,000 guaranty issued by the Company. Covenants of the Note include a pay down requirement that states that sales of parcels will require a pay down on the loan of 90% of the net proceeds received from the purchaser less capital gains tax obligation. The remaining 10% shall be held in an operating reserve account for operating expenses and the use in payment of taxes. No distributions to partners, except for taxes, are permitted throughout the term of the loan. The intent of the Grand Woods investment manager and members is that proceeds from the sale of all, or part of, the property will be used to reduce or eliminate the Note. The Company does not anticipate the need to perform on the guaranty of the Note.

Below is a schedule of future principal payments on the outstanding Note at June 30, 2023:

Years Ending December 31,	Principal Payments
2023	$	68,933
2024	142,136
2025	148,155
2026	1,010,581
Total	$	1,369,805

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Note 7 – PROVISION FOR INCOME TAXES

In 2023 and 2022, the effective tax rate differed from the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and natural gas properties.

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates will be updated throughout the year until finalized with the detail well-by-well calculations at year-end. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. When a benefit for income taxes is recorded, federal excess percentage depletion benefits increase the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small, the proportional effect of these items on the effective tax rate may be significant.

Note 8 – ASSET RETIREMENT OBLIGATION

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value which is currently 3.25%.

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2022	$	2,809,257
Liabilities settled (wells sold or plugged)	(5,793)
Accretion expense	36,442
Balance at June 30, 2023	$	2,839,906

Note 9 – FAIR VALUE MEASUREMENTS

The Company uses a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions.

Recurring Fair Value Measurements

Certain of the Company’s assets are reported at fair value in the accompanying consolidated balance sheets on a recurring basis. The Company determined the fair value of equity securities and available-for-sale debt securities using quoted market prices, and where applicable, securities with similar maturity dates and interest rates.

12

At June 30, 2023, and December 31, 2022, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	June 30, 2023
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,629,750	$	—
Equity Securities:
Domestic Equities	2,501,833		—		—
International Equities	293,494		—		—
Others	156,982		—		—
	$	2,952,309	$	4,629,750	$	—

	December 31, 2022
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,208,648	$	—
Equity Securities:
Domestic Equities	$	1,720,410	$	—	$	—
International Equities	448,405		—		—
Others	134,144		—		—
	$	2,302,959	$	4,208,648	$	—

Non-Recurring Fair Value Measurements

The Company’s asset retirement obligation annually represents a non-recurring fair value liability, for which there were no liabilities incurred in the periods ended June 30, 2023 or 2022. See Note 8 above for more information about this liability and the inputs used for calculating fair value.

Impairment losses recorded on oil and gas assets in the six months ended June 30, 2023 were $443,456, with none in the comparable period in 2022. This also relates to non-recurring fair value measurements calculated using Level 3 inputs. Certain oil and natural gas producing properties have been deemed to be impaired because the assets, evaluated on a property-by-property basis, are not expected to recover their entire carrying value through future cash flows. Impairment losses, when recorded, are included in the consolidated statements of income in the line-item Depreciation, Depletion, Amortization and Valuation Provisions. Impairments are calculated by reducing the carrying value of the individual properties to an estimated fair value equal to the discounted present value of the future cash flow from these properties. Forward pricing is used for calculating future revenue and cash flow.

Fair Value of Financial Instruments

The Company’s other financial instruments consist primarily of cash and cash equivalents, trade receivables, and trade payables. At June 30, 2023, and December 31, 2022, the historical cost of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to the short-term maturities of these items.

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ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read with reference to ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the 2022 Form 10-K, as well as the consolidated financial statements included in this Form 10-Q.

Forward-Looking Statements

This discussion and analysis includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give the Company’s current expectations of future events. They include statements regarding the drilling of oil and natural gas wells, the production that may be obtained from oil and natural gas wells, cash flow and anticipated liquidity and expected future expenses.

Although management believes the expectations in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that would cause actual results to differ materially from expected results are described under “Forward-Looking Statements” on page 3 of the 2022 Form 10-K.

We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q, and we undertake no obligation to update this information because of new information, future developments, or otherwise. You are urged to carefully review and consider the disclosures made in this and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.

LIQUIDITY AND CAPITAL RESOURCES

Please refer to the consolidated balance sheets and the condensed consolidated statements of cash flows in this Form 10-Q to supplement the following discussion. In the first six months of 2023, the Company continued to fund its business activity using internal sources of cash. The Company had net cash provided by operating activities of $2,644,446 in the six months ended June 30, 2023. The Company had sales of equity securities of $305,781, cash provided by property dispositions of $33,866, cash distributions from other investments of $340,399, primarily related to the sale of property in OKC Industrial Properties, LC, and maturity of available-for-sale debt securities of $4,478,841 for total cash provided by investing activities of $5,158,887. The Company utilized cash for the purchase of property of $1,885,765, the purchase of equity securities of $817,901, purchase of equity method and other investments of $432,434, and purchase of available-for-sale debt securities of $4,899,943 for cash applied to investing activities of $8,036,043. The Company paid $1,560,704 in stockholder dividends, $13,029 for the purchase of treasury stock, and $67,704 in payments on the Grand Woods note payable, for total cash applied to financing activities of $1,641,437. Cash provided by financing activities included Grand Woods Class C non-controlling interest contributions of $43,556. Cash and cash equivalents decreased $1,830,591 (25%) to $5,468,633 at June 30, 2023, from $7,299,224 at December 31, 2022.

Discussion of Significant Changes in Working Capital. In addition to the changes in cash and cash equivalents discussed above, there were other changes in working capital line items from December 31, 2022. A discussion of these items follows.

Equity securities increased $649,350 (28%) to $2,952,309 as of June 30, 2023, from $2,302,959 at December 31, 2022. The increase was the result of $512,120 in net purchases and a $137,230 net increase in market value.

Accounts receivable decreased $420,103 (18%) to $1,898,080 as of June 30, 2023, from $2,318,183 at December 31, 2022. This was primarily due to decreased oil and natural gas prices on expected production accrued.

Refundable income taxes increased $62,584 (52%) to $182,814 as of June 30, 2023, from $120,230 at December 31, 2022, primarily resulting from a decrease in taxable income over payments made.

Accounts payable decreased $91,011 (23%) to $308,724 as of June 30, 2023, from $399,735 at December 31, 2022, primarily due to timing differences in the processing of accounts payable.

Other current liabilities increased $297,305 (393%) to $372,980 as of June 30, 2023, from $75,675 at December 31, 2022, primarily due to an increase in deferred revenue of $263,985 and an increase in property taxes of $33,220.

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Discussion of Significant Changes in the Condensed Consolidated Statements of Cash Flows. As noted in the first paragraph above, net cash provided by operating activities was $2,644,446 in the six months ended June 30, 2023, a decrease of $1,746,988 (40%) from cash provided by operations in the comparable period in 2022 of $4,391,434. For more information see “Operating Revenues” and “Other Income/(Loss)” below.

Cash applied to the purchase of property, plant and equipment in the six months ended June 30, 2023, was $1,885,765, a decrease of $1,197,637 (39%) from cash applied to the purchase of property, plant and equipment in the comparable period in 2022 of $3,083,402. See the subheading “Exploration Costs” in the “Results of Operations” section below for additional information.

Cash applied to the purchase of available-for-sale debt securities in the six months ended June 30, 2023, was $4,899,943, with none in the comparable period in 2022. Cash provided by the maturity of available-for-sale debt securities in the six months ended June 30, 2023, was $4,478,841, with none in the comparable period in 2022. Cash applied to equity method and other investments in the six months ended June 30, 2023, was $432,434, a decrease of $596,992 (58%) from cash applied in the comparable period of 2022 of $1,029,426.

Off-Balance Sheet Arrangements. The Company is a guarantor of 20% of a $953,931 development loan that matures July 15, 2025, and 20% of a construction loan of $585,000 that matures July 25, 2024 held by QSN Office Park, LLC. The Company is committed to a $250,000 investment in VCC Venture Fund I, LP, of which $62,500 (25%) is invested at June 30, 2023. The Company is committed to a $1,000,000 investment in Cortado Ventures Fund II-A, of which $375,000 (37.50%) is invested at June 30, 2023. For more information about these entities and the related off-balance sheet arrangements, see Note 4 and Note 5 to the accompanying consolidated financial statements.

Conclusion. Management is unaware of any additional material trends, demands, commitments, events or uncertainties, which would impact liquidity and capital resources to the extent that the discussion presented in the 2022 Form 10-K would not be representative of the Company’s current position.

RESULTS OF OPERATIONS

Results of Operations – Six Months Ended June 30, 2023

Net income attributable to common stockholders decreased $1,611,567 (64%) to $899,822 in the six months ended June 30, 2023, from $2,511,389 in the comparable period in 2022. Net income per share attributable to common stockholders, basic, decreased $10.32 to $5.76 in the six months ended June 30, 2023, from $16.08 in the comparable period in 2022. A discussion of revenue from oil and natural gas sales and other significant line items in the consolidated statements of operations follows.

Operating Revenues. Revenues from oil and natural gas sales decreased $1,829,281 (24%) to $5,642,896 in the six months ended June 30, 2023, from $7,472,177 in the comparable period in 2022. The decrease is due to a decrease in oil sales of $441,707, a decrease in natural gas sales of $1,253,664, and a decrease in miscellaneous oil and natural gas product sales of $133,910.

The $441,707 (9%) decrease in oil sales to $4,539,499 in the six months ended June 30, 2023, from $4,981,206 in the comparable period in 2022 was the result of an increase in the volume sold and a decrease in the average price per barrel (Bbl). The volume of oil sold increased 15,017 Bbls to 63,501 Bbls in the six months ended June 30, 2023, resulting in a positive volume variance of $1,542,847. The average price per Bbl decreased $31.25 to $71.49 per Bbl in the six months ended June 30, 2023, from $102.74 per Bbl in the comparable period in 2022, resulting in a negative price variance of $1,984,554.

The $1,253,664 (56%) decrease in natural gas sales to $971,832 in the six months ended June 30, 2023, from $2,225,496 in the comparable period in 2022 was the result of a decrease in the volume sold and a decrease in the average price per thousand cubic feet ("MCF"). The volume of natural gas sold decreased 886 MCF to 350,168 MCF in the six months ended June 30, 2023, from 351,054 MCF in the comparable period in 2022, resulting in a negative volume variance of $5,617. The average price per MCF decreased $3.56 to $2.78 per MCF in the six months ended June 30, 2023, from $6.34 per MCF in the comparable period in 2022, resulting in a negative price variance of $1,248,047.

15

For both oil and natural gas sales, the price change was mostly the result of a change in the spot market prices upon which most of the Company’s oil and natural gas sales are based. These spot market prices have had significant fluctuations in the past and these fluctuations are expected to continue.

Sales of miscellaneous oil and natural gas products were $131,565 in the six months ended June 30, 2023, compared to $265,475 in the comparable period in 2022, primarily due to decreased prices.

The Company had water well drilling revenues of $275,582 in the six months ended June 30, 2023, related to water well drilling through TWS, with $544,688 in the comparable period in 2022. The decrease was due to downtime resulting from a rig mechanical failure that has since been repaired.

The Company received no lease bonuses for leases on its owned minerals in the six months ended June 30, 2023, compared to $141,801 in the comparable period in 2022.

Operating Costs and Expenses. Operating costs and expenses increased $2,251,430 (68%) to $5,585,567 in the six months ended June 30, 2023, from $3,334,137 in the comparable period of 2022.

Production Costs. Production costs increased $462,295 (29%) to $2,066,340 in the six months ended June 30, 2023, from $1,604,045 in the comparable period in 2022. Lease operating expenses increased $619,592 (65%), primarily due to increased producing properties from acquisitions and workovers to increase production. Hauling, compression, and other costs decreased by $99,990 (34%). Gross production taxes decreased $57,307 (16%) due to decreased revenues from oil and natural gas.

Exploration Costs. Exploration costs increased $579,592 to $573,569 in the six months ended June 30, 2023, from $(6,023) in the comparable period in 2022, primarily due to increases of $54,086 in geological and geophysical and other expenses, $365,273 in dry hole and plugging costs, and $160,234 in leaseholds.

Water Well Drilling Costs. Water well drilling costs decreased $56,047 (15%) to $314,570 in the six months ended June 30, 2023, from $370,617 in the comparable period in 2022. These costs consist of contract labor, equipment rental and maintenance, fuel costs, and other operating supplies related to the drilling of water wells through TWS.

Depreciation, Depletion, Amortization and Valuation Provision (DD&A). DD&A increased $684,884 (109%) to $1,315,330 in the six months ended June 30, 2023, from $630,446 in the comparable period in 2022, primarily due to an increase in long-lived assets impairments of $443,456 resulting from decreased oil and natural gas prices, and a $241,428 net increase in depletion, depreciation, and amortization due to the increase in properties through acquisition.

Gain on Disposition of Oil and Gas Properties. The Company had no gains on oil and gas property sales in the six months ended June 30, 2023, compared to $199,025 in the comparable period in 2022. The prior period gain was primarily due to the sale of 29.75% ownership of assets in a Nolan County, Texas prospect.

General, Administrative and Other (G&A). G&A increased $381,681 (41%) to $1,315,758 in the six months ended June 30, 2023, from $934,077 in the comparable period in 2022. Due to the divestiture of an affiliate, overhead increased 10% due to higher allocation rates to the Company. Other increases include human resources of $97,520 primarily due to increased salaries, consulting of $71,363 and regulatory costs of $53,896, primarily due to expenses related to acquisitions from and managed services agreement with an affiliate. Other increases include $60,644 in information technology primarily due to implementation of new financial reporting and SEC filing software of $50,000, $18,008 in real estate taxes, $20,054 in repairs and maintenance, and $60,197 in all other G&A accounts.

Equity Income/(Loss) in Investees. Equity income/(loss) in investees changed $192,223 to income of $58,633 in the six months ended June 30, 2023, from a loss of $133,590 in the comparable period in 2022. Income was made up of income of $16,499 in Broadway Sixty-Eight, LLC (“Broadway 68”), income of $27,130 in Broadway Seventy-Two, LLC (“Broadway 72”), losses of $12,572 in QSN Office Park, LLC (“QSN”), and income of $27,576 from Victorum BRH2 Investment, LLC and Victorum BRH3 Investment, LLC. See Note 4 to the accompanying financial statements for additional information on equity method investments.

Other Income/(Loss), Net. Other income, net was $757,542 in the six months ended June 30, 2023, as compared to other loss, net of $1,532,044 in the comparable period in 2022. See Note 3 to the accompanying consolidated financial statements for an analysis of the components of this line item.

16

Income Tax Provision. Income tax provision decreased $415,741 (64%) to $231,765 in the six months ended June 30, 2023, from $647,506 in the comparable period in 2022. Of the 2023 tax provision, estimated current tax benefit was $49,674 and estimated deferred tax provision was $281,439. Of the 2022 income tax provision, the estimated current tax benefit was $586,968 and the estimated deferred tax provision was $1,234,474. See Note 7 to the accompanying consolidated financial statements for additional information on income taxes.

Results of Operations – Three Months Ended June 30, 2023

Net income attributable to common stockholders decreased $338,747 to $487,163 in the three months ended June 30, 2023, from $825,910 in the comparable period in 2022. The significant changes in the consolidated statements of income are discussed below. Net income per share attributable to common stockholders, basic decreased $2.17 to $3.12 in the three months ended June 30, 2023, from $5.29 in the comparable period in 2022.

Operating Revenues. Revenues from oil and gas sales decreased $1,330,898 (33%) to $2,707,455 in the three months ended June 30, 2023, from $4,038,353 in the comparable period in 2022. The decrease is due to a decrease in oil sales of $433,611, a decrease in natural gas sales of $852,257, and a decrease in miscellaneous oil and gas product sales of $45,030.

The $433,611 (16%) decrease in oil sales to $2,195,462 in the three months ended June 30, 2023, from $2,629,073 in the comparable period in 2022 was the result of an increase in the volume sold and a decrease in the average price per barrel (Bbl). The volume of oil sold increased 7,378 Bbls to 30,823 Bbls in the three months ended June 30, 2023, resulting in a positive volume variance of $827,369. The average price per Bbl decreased $40.91 to $71.23 per Bbl in the three months ended June 30, 2023, from $112.14 per Bbl in the comparable period in 2022, resulting in a negative price variance of $1,260,980.

The $852,257 (66%) decrease in natural gas sales to $436,431 in the three months ended June 30, 2023, from $1,288,688 in the comparable period in 2022 was the result of an increase in the volume sold and a decrease in the average price per MCF. The volume of natural gas sold increased 7,420 MCF to 188,316 MCF in the three months ended June 30, 2023, from 180,896 MCF in the comparable period in 2022, resulting in a positive volume variance of $52,830. The average price per MCF decreased $4.80 to $2.32 per MCF in the three months ended June 30, 2023, from $7.12 per MCF in the comparable period in 2022, resulting in a negative price variance of $905,087.

Operating Costs and Expenses. Operating costs and expenses increased $649,820 (36%) to $2,439,575 in the three months ended June 30, 2023, from $1,789,755 in the comparable period in 2022. The increase was primarily the net result of an increase in production costs of $183,721; an increase in exploration costs charged to expense of $151,463; a decrease in water well drilling costs of $73,099; an increase in DD&A of $85,195; and an increase in G&A of $302,261. G&A increases were due to increases in costs in overhead allocation, human resources of $51,210, consulting of $47,546, regulatory of $100,930, information technology of $50,921, real estate taxes of $6,682 , repairs and maintenance of $10,938, and $34,035 in all other G&A accounts.

Equity Income/(Loss) in Investees. Equity income/(loss) in investees changed $77,110 to income of $26,977 in the three months ended June 30, 2023, from a loss of $50,133 in the comparable period in 2022. See Note 4 to the accompanying financial statements for additional information on equity method investments.

Other Income/(Loss), Net. Other income/(loss), net changed $1,655,647 in the three months ended June 30, 2023, to income of $188,709 from losses of $1,466,938 in the comparable period in 2022. See Note 3 to the accompanying consolidated financial statements for an analysis of the components of this item.

Income Tax Provision/(Benefit). Income tax provision decreased $180,600 to $98,318 in the three months ended June 30, 2023, from $278,918 in the comparable period in 2022. Of the 2023 tax provision, estimated current tax benefit was $61,208 and estimated deferred tax provision was $159,526. Of the 2022 income tax provision, the estimated current tax benefit was $638,138 and the estimated deferred tax provision was $917,056. See discussions above in “Results of Operations” section and Note 7 to the accompanying consolidated financial statements for additional explanation of the changes in the provision for income taxes.

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ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.       CONTROLS AND PROCEDURES

As defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, they concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2023.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act).

PART II – OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

As of June 30, 2023, the Company was not party to, and its properties were not subject to, any material legal proceedings.

ITEM 1A.       RISK FACTORS

Not applicable.

ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.       MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.       OTHER INFORMATION

None.

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ITEM 6.       EXHIBITS

The following documents are exhibits to this Form 10-Q. Each document marked by an asterisk is filed electronically herewith.

Exhibit Number	Description
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32*	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)

* Filed electronically herewith.

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

	THE RESERVE PETROLEUM COMPANY
	(Registrant)
Date:         August 14, 2023	/s/ Cameron R. McLain
	Cameron R. McLain
	Principal Executive Officer
Date:         August 14, 2023	/s/ Lawrence R. Francis
	Lawrence R. Francis
	Principal Financial Officer

20

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Cameron R. McLain, certify that:

1.I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:           August 14, 2023	/s/ Cameron R. McLain
	Cameron R. McLain
	Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Lawrence R. Francis, certify that:

1.I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the consolidated financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:           August 14, 2023	/s/ Lawrence R. Francis
	Lawrence R. Francis
	Principal Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL

FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of The Reserve Petroleum Company (the "Company") on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Cameron R. McLain and Lawrence R. Francis, Principal Executive Officer and Principal Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, that to our knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company for the quarter ended June 30, 2023.

August 14, 2023	/s/ Cameron R. McLain
	Cameron R. McLain, President
	(Principal Executive Officer)
	/s/ Lawrence R. Francis
	Lawrence R. Francis, 1st Vice President
	(Principal Financial Officer)

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2023	Aug. 05, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	000-08157
Entity Registrant Name	RESERVE PETROLEUM CO
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	73-0237060
Entity Address, Address Line One	6801 BROADWAY EXT.,
Entity Address, Address Line Two	SUITE 300
Entity Address, City or Town	OKLAHOMA CITY
Entity Address, State or Province	OK
Entity Address, Postal Zip Code	73116-9037
City Area Code	405
Local Phone Number	848-7551
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		155,850
Entity Central Index Key	0000083350
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($)		Jun. 30, 2023	Dec. 31, 2022
Current Assets:
Cash and Cash Equivalents	[1]	$ 5,468,633	$ 7,299,224
Available-for-Sale Debt Securities	[1]	4,629,750	4,208,648
Equity Securities	[1]	2,952,309	2,302,959
Refundable Income Taxes	[1]	182,814	120,230
Accounts Receivable	[1]	1,898,080	2,318,183
Total Current Assets	[1]	15,131,586	16,249,244
Investments:
Equity Method Investments	[1]	2,827,715	2,469,644
Other Investments	[1]	5,191,303	5,085,806
Total Investments	[1]	8,019,018	7,555,450
Property, Plant and Equipment:
Unproved Properties	[1]	1,945,734	1,846,543
Proved Properties	[1]	66,777,316	65,328,501
Oil and Gas Properties, Gross	[1]	68,723,050	67,175,044
Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance	[1]	(53,823,903)	(52,773,978)
Oil and Gas Properties, Net	[1]	14,899,147	14,401,066
Other Property and Equipment, at Cost	[1]	725,991	758,256
Less – Accumulated Depreciation	[1]	(239,288)	(236,883)
Other Property and Equipment, Net	[1]	486,703	521,373
Total Property, Plant and Equipment, Net	[1]	15,385,850	14,922,439
Total Assets	[1]	38,536,454	38,727,133
Current Liabilities:
Accounts Payable	[1]	308,724	399,735
Other Current Liabilities	[1]	372,980	75,675
Note Payable, Current Portion	[1]	139,280	136,637
Total Current Liabilities	[1]	820,984	612,047
Long-Term Liabilities:
Asset Retirement Obligation	[1]	2,839,906	2,809,257
Deferred Tax Liability, Net	[1]	1,901,034	1,619,595
Note Payable, Less Current Portion	[1]	1,230,525	1,300,872
Total Long-Term Liabilities	[1]	5,971,465	5,729,724
Total Liabilities	[1]	6,792,449	6,341,771
Equity:
Common Stock	[1]	92,368	92,368
Additional Paid-in Capital	[1]	65,000	65,000
Retained Earnings	[1]	33,167,536	33,828,418
Equity Before Treasury Stock	[1]	33,324,904	33,985,786
Less – Treasury Stock, at Cost	[1]	(1,762,887)	(1,749,858)
Total Equity Applicable to The Reserve Petroleum Company	[1]	31,562,017	32,235,928
Non-Controlling Interests	[1]	181,988	149,434
Total Equity	[1]	31,744,005	32,385,362
Total Liabilities and Equity	[1]	$ 38,536,454	$ 38,727,133

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)		Jun. 30, 2023	Dec. 31, 2022
Assets	[1]	$ 38,536,454	$ 38,727,133
Liabilities	[1]	6,792,449	6,341,771
Variable Interest Entity, Primary Beneficiary | Grand Woods
Assets		2,284,151	2,195,878
Liabilities		1,369,805	1,437,509
Cash		112,323	24,050
Variable Interest Entity, Primary Beneficiary | TWS
Assets		944,375	681,136
Liabilities		358,514	58,742
Cash		$ 508,010	$ 281,654

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

XML

Consolidated Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating Revenues:
Total Operating Revenues	$ 2,818,837	$ 4,411,654	$ 5,918,478	$ 8,158,666
Operating Costs and Expenses:
Depreciation, Depletion, Amortization and Valuation Provision	380,595	295,400	1,315,330	630,446
Gain on Disposition of Oil and Gas Properties	0	(279)	0	(199,025)
General, Administrative and Other	702,171	399,910	1,315,758	934,077
Total Operating Costs and Expenses	2,439,575	1,789,755	5,585,567	3,334,137
Income from Operations	379,262	2,621,899	332,911	4,824,529
Equity Income/(Loss) in Investees	26,977	(50,133)	58,633	(133,590)
Interest Expense	(17,096)	0	(34,049)	0
Other Income/(Loss), Net	188,709	(1,466,938)	757,542	(1,532,044)
Income Before Income Taxes and Non-Controlling Interest	577,852	1,104,828	1,115,037	3,158,895
Income Tax Provision/(Benefit):
Current	(61,208)	(638,138)	(49,674)	(586,968)
Deferred	159,526	917,056	281,439	1,234,474
Total Income Tax Provision	98,318	278,918	231,765	647,506
Net Income	479,534	825,910	883,272	2,511,389
Less: Net Loss Attributable to Non-Controlling Interest	(7,629)	0	(16,550)	0
Net Income Attributable to Common Stockholders	$ 487,163	$ 825,910	$ 899,822	$ 2,511,389
Per Share Data
Net Income Attributable to Common Stockholders, Basic (in dollars per share)	$ 3.12	$ 5.29	$ 5.76	$ 16.08
Cash Dividends Declared and/or Paid (in dollars per share)	$ 10.00	$ 10.00	$ 10.00	$ 10.00
Weighted Average Shares Outstanding, Basic (in shares)	156,089	156,161	156,123	156,167
Oil and Gas Sales
Operating Revenues:
Total Operating Revenues	$ 2,707,455	$ 4,038,353	$ 5,642,896	$ 7,472,177
Lease Bonuses and Other
Operating Revenues:
Total Operating Revenues	0	104,147	0	141,801
Water Well Drilling Services
Operating Revenues:
Total Operating Revenues	111,382	269,154	275,582	544,688
Operating Costs and Expenses:
Operating costs and expenses	147,997	221,096	314,570	370,617
Production
Operating Costs and Expenses:
Operating costs and expenses	1,009,591	825,870	2,066,340	1,604,045
Exploration
Operating Costs and Expenses:
Operating costs and expenses	$ 199,221	$ 47,758	$ 573,569	$ (6,023)

XML

Consolidated Statements of Equity (Unaudited) - USD ($)	Total		Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Non- Controlling Interests
Beginning balance at Dec. 31, 2021	$ 29,798,830		$ 92,368	$ 65,000	$ 31,389,240	$ (1,747,778)	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income/(Loss)	2,511,389				2,511,389
Dividends Declared	(1,561,573)				(1,561,573)
Purchase of Treasury Stock	(2,080)					(2,080)
Ending balance at Jun. 30, 2022	30,746,566		92,368	65,000	32,339,056	(1,749,858)	0
Beginning balance at Mar. 31, 2022	31,484,309		92,368	65,000	33,074,719	(1,747,778)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income/(Loss)	825,910				825,910
Dividends Declared	(1,561,573)				(1,561,573)
Purchase of Treasury Stock	(2,080)					(2,080)
Ending balance at Jun. 30, 2022	30,746,566		92,368	65,000	32,339,056	(1,749,858)	0
Beginning balance at Dec. 31, 2022	32,385,362	[1]	92,368	65,000	33,828,418	(1,749,858)	149,434
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income/(Loss)	883,272				899,822		(16,550)
Dividends Declared	(1,560,704)				(1,560,704)
Purchase of Treasury Stock	(13,029)					(13,029)
Contributions	49,104						49,104
Ending balance at Jun. 30, 2023	31,744,005	[1]	92,368	65,000	33,167,536	(1,762,887)	181,988
Beginning balance at Mar. 31, 2023	32,812,398		92,368	65,000	34,241,077	(1,749,858)	163,811
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income/(Loss)	479,534				487,163		(7,629)
Dividends Declared	(1,560,704)				(1,560,704)
Purchase of Treasury Stock	(13,029)					(13,029)
Contributions	25,806						25,806
Ending balance at Jun. 30, 2023	$ 31,744,005	[1]	$ 92,368	$ 65,000	$ 33,167,536	$ (1,762,887)	$ 181,988

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Statement of Cash Flows [Abstract]
Net Cash Provided by Operating Activities	$ 2,644,446	$ 4,391,434
Cash Provided by/(Applied to) Investing Activities:
Maturity of Available-for-Sale Debt Securities	4,478,841	0
Purchase of Available-for-Sale Debt Securities	(4,899,943)	0
Proceeds from Disposal of Property, Plant and Equipment	33,866	457,898
Purchase of Property, Plant and Equipment	(1,885,765)	(3,083,402)
Purchase of Equity Method and Other Investments	(432,434)	(1,029,426)
Cash Distributions from Other Investments	340,399	81,205
Sale of Equity Securities	305,781	2,059,005
Purchase of Equity Securities	(817,901)	(2,408,898)
Net Change in Cash and Cash Equivalents	(1,830,591)	(1,095,837)
Net Cash Applied to Investing Activities	(2,877,156)	(3,923,618)
Cash Provided by/(Applied to) Financing Activities:
Dividends Paid to Stockholders	(1,560,704)	(1,561,573)
Purchase of Treasury Stock	(13,029)	(2,080)
Payments of Note Payable	(67,704)	0
Capital Contributions from Non-Controlling Interests	43,556	0
Total Cash Applied to Financing Activities	(1,597,881)	(1,563,653)
Cash and Cash Equivalents, Beginning of Period	7,299,224	10,129,157
Cash and Cash Equivalents, End of Period	$ 5,468,633	$ 9,033,320

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

Note 1 – BASIS OF PRESENTATION

The Reserve Petroleum Company, a Delaware corporation, is an independent oil and gas company engaged in oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming, a single business segment. The Company is also engaged in investments and joint ventures that are not significant business segments. The Company’s consolidated subsidiaries consist of Grand Woods Development, LLC (“Grand Woods”), an Oklahoma limited liability company and Trinity Water Services, LLC, an Oklahoma limited liability company, which has a water well drilling joint venture agreement with TWS South, LLC, a Texas limited liability company (Collectively, “TWS”). Unless otherwise specified or the context otherwise requires, all references in these notes to “the Company,” “its,” “our,” and “we” are to The Reserve Petroleum Company and its consolidated subsidiaries.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of The Reserve Petroleum Company and its subsidiaries in which the Company holds a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, the Company consolidates Variable Interest Entities (“VIEs”) under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications that are not material to the consolidated financial statements are made to prior period financial information to conform to the current year presentation.

The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (hereinafter the “2022 Form 10-K”).

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year.

Variable Interest Entities

The Company decides at the inception of each arrangement whether an entity in which an investment is made or in which we have other variable interests is considered a VIE. Generally, an entity is a VIE if (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entity’s investors lack any characteristics of a controlling financial interest or (3) the entity was established with non-substantive voting rights. The Company consolidates VIEs when the Company is deemed to be the primary beneficiary. The primary beneficiary of a VIE is generally the party that both: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. If the Company is not deemed to be the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP.

Non-Controlling Interests

When the Company consolidates an entity, 100% of the assets, liabilities, revenues and expenses of the subsidiary are included in the consolidated financial statements. For those consolidated entities in which the Company’s ownership is less than 100%, the Company records a non-controlling interest as a component of equity on the consolidated balance sheets, which represents the third-party ownership in the net assets of the respective consolidated subsidiary. Additionally, the portion of the net income or loss attributable to the non-controlling interest is reported as net income (loss) attributable to non-controlling interest on the consolidated statements of income. Changes in ownership interests in an entity that do not result in deconsolidation are generally recognized within equity. See Note 5 for additional details on non-controlling interests.

XML

Revenue Recognition

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

REVENUE RECOGNITION

Note 2 – REVENUE RECOGNITION

A portion of oil and natural gas sales recorded in the consolidated statements of income are the result of estimated volumes and pricing for oil and natural gas payments not yet received for the period. For the six months ended June 30, 2023 and 2022, that estimate represented $1,748,836 and $2,144,069, respectively, of oil and natural gas sales included in the consolidated statements of income.

The Company’s disaggregated revenue has two primary revenue sources, which are oil sales and natural gas sales. The following is an analysis of the components of oil and natural gas sales:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Oil Sales	$	2,195,462	$	2,629,073	$	4,539,499	$	4,981,206
Natural Gas Sales	436,431		1,288,688		971,832		2,225,496
Miscellaneous Oil and Gas Product Sales	75,562		120,592		131,565		265,475
	$	2,707,455	$	4,038,353	$	5,642,896	$	7,472,177

XML

Other Income (Loss), Net

6 Months Ended

Jun. 30, 2023

Other Income and Expenses [Abstract]

OTHER INCOME/(LOSS), NET

Note 3 – OTHER INCOME/(LOSS), NET

The following is an analysis of the components of Other Income/(Loss), Net:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Realized and Unrealized Gain/(Loss), Equity Securities	$	54,596	$	(1,583,840)	$	137,231	$	(1,729,916)
Interest Income	121,748		9,670		235,566		17,199
Dividend Income	16,589		87,824		26,889		184,126
Income/(Loss) from Other Investments	19,401		48,137		329,097		56,455
Miscellaneous Income/(Expenses)	(23,625)		(28,729)		28,759		(59,908)
Other Income/(Loss), Net	$	188,709	$	(1,466,938)	$	757,542	$	(1,532,044)

XML

Investments and Related Commitments and Contingent Liabilities, Including Guaranties

6 Months Ended

Jun. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTIES

Note 4 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTIES

The Company’s Equity Method Investments include:

Broadway Sixty-Eight, LLC (“Broadway 68”), an Oklahoma limited liability company, with a 33% ownership, owns and operates an office building in Oklahoma City, Oklahoma. The Company leases its corporate office from Broadway 68 on a month-to-month basis under the terms of the modified lease agreement. Rent expense for lease of the corporate office from Broadway 68 was $22,358 and $19,874 during the six months ended June 30, 2023 and 2022, respectively. The Company’s investment in Broadway 68 totaled $131,593 and $115,093 at June 30, 2023, and December 31, 2022, respectively.

Broadway Seventy-Two, LLC (“Broadway 72”), an Oklahoma limited liability company, with a 40% ownership, was acquired in 2021. Broadway 72 owns and operates a commercial building in Oklahoma City, Oklahoma. The Company’s investment in Broadway 72 totaled $1,107,595 and $1,080,465 at June 30, 2023, and December 31, 2022, respectively.

QSN Office Park, LLC (“QSN”), an Oklahoma limited liability company, with a 20% ownership, was acquired in 2016. QSN is constructing and selling office buildings in a new office park. The Company has guarantied 20% of a $953,931 development loan that matures July 15, 2025, and 20% of a construction loan of $585,000 that matures July 25, 2024. The Company’s investment in QSN totaled $280,878 and $284,249 at June 30, 2023, and December 31, 2022, respectively. The Company does not anticipate the need to perform on the guaranties of the loans.

Stott’s Mill, with a 50% ownership, was acquired in May 2022. Stott’s Mill consists of two residential lots in a developing subdivision located in Basalt, Colorado. The Company’s investment in Stott’s Mill totaled $704,046 and $688,575 at June 30, 2023, and December 31, 2022, respectively.

Victorum BRH2 Investment, LLC (“BRH2”), with a 16.3% ownership, was acquired in August 2021. BRH2 serves as a special purpose investment vehicle to hold an investment in Berry-Rock Capital, LP (“Berry-Rock”). Berry-Rock is a provider of a rent-to-own program for individuals unable to qualify for a mortgage. The Company receives quarterly distributions on an 11% annualized return on investment. The Company’s investment in BRH2 totaled $301,442 and $300,754 at June 30, 2023, and December 31, 2022, respectively.

Victorum BRH3 Investment, LLC (“BRH3”), with a 27.27% ownership, was acquired in November 2022. BRH3 serves as a special purpose investment vehicle to hold an investment in Berry-Rock. The Company receives quarterly distributions on an 11% annualized return on investment. The Company’s investment in BRH3 totaled $302,161 and $301,261 at June 30, 2023, and December 31, 2022, respectively.

The Company’s Other Investments primarily include:

Bailey Hilltop Pipeline, LLC (“Bailey”), with a 10% ownership, was acquired in 2008. Bailey is a gas gathering system pipeline for the Bailey Hilltop Prospect oil and gas properties in Grady County, Oklahoma. The Company’s investment in Bailey totaled $77,377 at June 30, 2023, and December 31, 2022.

Cloudburst International, Inc. (“Cloudburst”), with a 12.99% ownership, was acquired in 2019. Cloudburst owns exclusive rights to a water purification process technology that is being developed and currently tested. The Company’s investment in Cloudburst totaled $1,596,007 at June 30, 2023, and December 31, 2022.

Genlith, Inc. (“Genlith”), with a 5.15% ownership, was acquired in July 2020. Genlith identifies and structures investments in the new energy economy through corporate ventures, advisory and fund management. The Company’s investment in Genlith totaled $311,958 and $460,000 at June 30, 2023, and December 31, 2022, respectively.

Chilean Cobalt Corp. ("C3") is a spin-off from Genlith that has submitted an S-1 filing with the SEC to become a publicly traded entity. The Company owns 740,211 of S-1 Registered Shares of C3, representing less than 2% of outstanding shares, and entered into a twelve month lock-up agreement on May 11, 2023, whereby the Company agreed that it will not attempt to sell, transfer, or otherwise dispose of the Registered Shares, subject to a "trickle" into market, except at a rate not to exceed 30,000 shares per month on a non-cumulative basis. The Company's investment in C3 totaled $148,042 at June 30, 2023.

OKC Industrial Properties, LC (“OKC”), with a 10% ownership, was acquired in 1992. OKC originally owned approximately 260 acres of undeveloped land in north Oklahoma City. In March 2023, OKC sold 10 acres, resulting in a gain of $290,000 for the Company. There was no basis adjustment in accordance with the sale and there is approximately 13 acres of land remaining. The Company’s investment in OKC totaled $82,482 at June 30, 2023, and December 31, 2022.

Grand Woods holds approximately 26.56 acres of undeveloped real estate in northeast Oklahoma City. The accumulated costs of the land totaled $2,171,828 at June 30, 2023, and December 31, 2022. See Note 5 for information related to Grand Woods.

Victorum Capital Club (“VCC”) invests in and manages special investment vehicles that hold investments in various startup companies. The Company participates with minority ownership in an assortment of investments held with VCC. The Company’s investment in VCC special investment vehicles totaled $357,259 at June 30, 2023, and December 31, 2022.

VCC Venture Fund I, LP (“VCC Venture”), serves as a limited partnership to be used for investments in start-up entities and is managed by Victorum Capital Club. The Company committed to a $250,000 investment in VCC Venture. The Company’s investment in VCC Venture totaled $62,500 and $31,250 at June 30, 2023, and December 31, 2022, respectively. The balance at June 30, 2023, represents 25% of the Company's capital commitment.

Cortado Ventures Fund II-A, LP (“Cortado II-A”), serves as a limited partnership to be used for investments in start-up entities and is managed by Cortado Capital II, LLC. The Company committed to a $1,000,000 investment in Cortado II-A on June 20, 2023. The Company’s investment in Cortado II-A totaled $375,000 at June 30, 2023, which represents 37.50% of the Company's capital commitment.

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Non-Controlling Interest and Variable Interest Entities

6 Months Ended

Jun. 30, 2023

Noncontrolling Interest [Abstract]

NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES

Note 5 – NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES

TWS and Grand Woods are accounted for as consolidated VIEs. The Company owns an 80.37% interest in Grand Woods in the form of 47.08 Class A units and 546,735 Class C units, with the remaining non-controlling member interests held by other members, including 8.72% owned by executive officers of the Company. Grand Woods holds approximately 26.56 acres of undeveloped real estate in northeast Oklahoma City.

On September 15, 2022, Grand Woods entered into an agreement (“the 2022 Agreement”) with its members that resulted in the Company having the power to direct the activities significant to Grand Woods and becoming the primary beneficiary; therefore, consolidation of Grand Woods became required and effective for the period ended September 30, 2022. The Company is the only guarantor of $1,200,000 of a note payable held by Grand Woods. See Note 6 for terms and guaranty of debt held by Grand Woods, which is included in the consolidated balance sheets. As a result of the Company’s guaranty of $1,200,000 of Grand Woods debt, the note holder has partial recourse to the Company for the consolidated VIE’s liabilities.

The following table presents the summarized assets and liabilities of Grand Woods and TWS included in the consolidated balance sheets as of June 30, 2023, and December 31, 2022. The assets of Grand Woods and TWS in the table below may only be used to settle obligations of Grand Woods or TWS, respectively. The assets and liabilities in the table below include third party assets and liabilities only and exclude intercompany balances that eliminate in consolidation.

	June 30, 2023
	Grand Woods		TWS		Total
Assets:
Cash	$	112,323	$	508,010	$	620,333
Accounts Receivable	—		122,982		122,982
Total Current Assets	112,323		630,992		743,315
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		442,244		442,244
Less – Accumulated Depreciation	—		(128,861)		(128,861)
Other Property and Equipment, Net	—		313,383		313,383
Total Assets	$	2,284,151	$	944,375	$	3,228,526
Liabilities:
Accounts Payable	$	—	$	19,529	$	19,529
Note Payable, Current Portion	139,280		—		139,280
Deferred Revenue	—		338,985		338,985
Total Current Liabilities	139,280		358,514		497,794
Note Payable, Less Current Portion	1,230,525		—		1,230,525
Total Liabilities	$	1,369,805	$	358,514	$	1,728,319

	December 31, 2022
	Grand Woods		TWS		Total
Assets:
Cash	$	24,050	$	281,654	$	305,704
Accounts Receivable	—		72,716		72,716
Total Current Assets	24,050		354,370		378,420
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		419,044		419,044
Less – Accumulated Depreciation	—		(92,278)		(92,278)
Other Property and Equipment, Net	—		326,766		326,766
Total Assets	$	2,195,878	$	681,136	$	2,877,014
Liabilities:
Accounts Payable	$	—	$	58,742	$	58,742
Note Payable, Current Portion	136,637		—		136,637
Total Current Liabilities	136,637		58,742		195,379
Note Payable, Less Current Portion	1,300,872		—		1,300,872
Total Liabilities	$	1,437,509	$	58,742	$	1,496,251

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Note Payable

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

NOTE PAYABLE

Note 6 – NOTE PAYABLE

Grand Woods has a note payable (“the Note”) that was used for the purchase and development of property. The Note has a 4% interest rate and matures November 23, 2026. The Note has scheduled payments of principal and interest in the amount of $16,034 per month, with a balloon payment of any unpaid principal balance due on November 23, 2026. The balance of the Note at June 30, 2023, and December 31, 2022, is $1,369,805 and $1,437,509, respectively, of which $139,280 is classified as current at June 30, 2023. Interest paid on the Note in the period ended June 30, 2023, totaled $28,501, with none in 2022. The Note is secured by the underlying property and a $1,200,000 guaranty issued by the Company. Covenants of the Note include a pay down requirement that states that sales of parcels will require a pay down on the loan of 90% of the net proceeds received from the purchaser less capital gains tax obligation. The remaining 10% shall be held in an operating reserve account for operating expenses and the use in payment of taxes. No distributions to partners, except for taxes, are permitted throughout the term of the loan. The intent of the Grand Woods investment manager and members is that proceeds from the sale of all, or part of, the property will be used to reduce or eliminate the Note. The Company does not anticipate the need to perform on the guaranty of the Note.

Below is a schedule of future principal payments on the outstanding Note at June 30, 2023:

Years Ending December 31,	Principal Payments
2023	$	68,933
2024	142,136
2025	148,155
2026	1,010,581
Total	$	1,369,805

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Provision for Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

PRROVISION FOR INCOME TAXES

Note 7 – PROVISION FOR INCOME TAXES

In 2023 and 2022, the effective tax rate differed from the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and natural gas properties.

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates will be updated throughout the year until finalized with the detail well-by-well calculations at year-end. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. When a benefit for income taxes is recorded, federal excess percentage depletion benefits increase the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small, the proportional effect of these items on the effective tax rate may be significant.

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Asset Retirement Obligation

6 Months Ended

Jun. 30, 2023

Asset Retirement Obligation [Abstract]

ASSET RETIREMENT OBLIGATION

Note 8 – ASSET RETIREMENT OBLIGATION

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value which is currently 3.25%.

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2022	$	2,809,257
Liabilities settled (wells sold or plugged)	(5,793)
Accretion expense	36,442
Balance at June 30, 2023	$	2,839,906

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Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

Note 9 – FAIR VALUE MEASUREMENTS

The Company uses a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions.

Recurring Fair Value Measurements

Certain of the Company’s assets are reported at fair value in the accompanying consolidated balance sheets on a recurring basis. The Company determined the fair value of equity securities and available-for-sale debt securities using quoted market prices, and where applicable, securities with similar maturity dates and interest rates.

At June 30, 2023, and December 31, 2022, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	June 30, 2023
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,629,750	$	—
Equity Securities:
Domestic Equities	2,501,833		—		—
International Equities	293,494		—		—
Others	156,982		—		—
	$	2,952,309	$	4,629,750	$	—

	December 31, 2022
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,208,648	$	—
Equity Securities:
Domestic Equities	$	1,720,410	$	—	$	—
International Equities	448,405		—		—
Others	134,144		—		—
	$	2,302,959	$	4,208,648	$	—

Non-Recurring Fair Value Measurements

The Company’s asset retirement obligation annually represents a non-recurring fair value liability, for which there were no liabilities incurred in the periods ended June 30, 2023 or 2022. See Note 8 above for more information about this liability and the inputs used for calculating fair value.

Impairment losses recorded on oil and gas assets in the six months ended June 30, 2023 were $443,456, with none in the comparable period in 2022. This also relates to non-recurring fair value measurements calculated using Level 3 inputs. Certain oil and natural gas producing properties have been deemed to be impaired because the assets, evaluated on a property-by-property basis, are not expected to recover their entire carrying value through future cash flows. Impairment losses, when recorded, are included in the consolidated statements of income in the line-item Depreciation, Depletion, Amortization and Valuation Provisions. Impairments are calculated by reducing the carrying value of the individual properties to an estimated fair value equal to the discounted present value of the future cash flow from these properties. Forward pricing is used for calculating future revenue and cash flow.

Fair Value of Financial Instruments

The Company’s other financial instruments consist primarily of cash and cash equivalents, trade receivables, and trade payables. At June 30, 2023, and December 31, 2022, the historical cost of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to the short-term maturities of these items.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The Reserve Petroleum Company, a Delaware corporation, is an independent oil and gas company engaged in oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming, a single business segment. The Company is also engaged in investments and joint ventures that are not significant business segments. The Company’s consolidated subsidiaries consist of Grand Woods Development, LLC (“Grand Woods”), an Oklahoma limited liability company and Trinity Water Services, LLC, an Oklahoma limited liability company, which has a water well drilling joint venture agreement with TWS South, LLC, a Texas limited liability company (Collectively, “TWS”). Unless otherwise specified or the context otherwise requires, all references in these notes to “the Company,” “its,” “our,” and “we” are to The Reserve Petroleum Company and its consolidated subsidiaries.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of The Reserve Petroleum Company and its subsidiaries in which the Company holds a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, the Company consolidates Variable Interest Entities (“VIEs”) under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications that are not material to the consolidated financial statements are made to prior period financial information to conform to the current year presentation.

The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (hereinafter the “2022 Form 10-K”).

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year.

Variable Interest Entities

Variable Interest Entities

The Company decides at the inception of each arrangement whether an entity in which an investment is made or in which we have other variable interests is considered a VIE. Generally, an entity is a VIE if (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entity’s investors lack any characteristics of a controlling financial interest or (3) the entity was established with non-substantive voting rights. The Company consolidates VIEs when the Company is deemed to be the primary beneficiary. The primary beneficiary of a VIE is generally the party that both: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. If the Company is not deemed to be the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP.

Non-Controlling Interest

Non-Controlling Interests

When the Company consolidates an entity, 100% of the assets, liabilities, revenues and expenses of the subsidiary are included in the consolidated financial statements. For those consolidated entities in which the Company’s ownership is less than 100%, the Company records a non-controlling interest as a component of equity on the consolidated balance sheets, which represents the third-party ownership in the net assets of the respective consolidated subsidiary. Additionally, the portion of the net income or loss attributable to the non-controlling interest is reported as net income (loss) attributable to non-controlling interest on the consolidated statements of income. Changes in ownership interests in an entity that do not result in deconsolidation are generally recognized within equity. See Note 5 for additional details on non-controlling interests.

Fair Value Measuremens

The Company uses a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions.

Recurring Fair Value Measurements

Certain of the Company’s assets are reported at fair value in the accompanying consolidated balance sheets on a recurring basis. The Company determined the fair value of equity securities and available-for-sale debt securities using quoted market prices, and where applicable, securities with similar maturity dates and interest rates.

Non-Recurring Fair Value Measurements

The Company’s asset retirement obligation annually represents a non-recurring fair value liability, for which there were no liabilities incurred in the periods ended June 30, 2023 or 2022. See Note 8 above for more information about this liability and the inputs used for calculating fair value.

Impairment losses recorded on oil and gas assets in the six months ended June 30, 2023 were $443,456, with none in the comparable period in 2022. This also relates to non-recurring fair value measurements calculated using Level 3 inputs. Certain oil and natural gas producing properties have been deemed to be impaired because the assets, evaluated on a property-by-property basis, are not expected to recover their entire carrying value through future cash flows. Impairment losses, when recorded, are included in the consolidated statements of income in the line-item Depreciation, Depletion, Amortization and Valuation Provisions. Impairments are calculated by reducing the carrying value of the individual properties to an estimated fair value equal to the discounted present value of the future cash flow from these properties. Forward pricing is used for calculating future revenue and cash flow.

Fair Value of Financial Instruments

The Company’s other financial instruments consist primarily of cash and cash equivalents, trade receivables, and trade payables. At June 30, 2023, and December 31, 2022, the historical cost of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to the short-term maturities of these items.

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Schedule of Disaggregation of Revenue

The Company’s disaggregated revenue has two primary revenue sources, which are oil sales and natural gas sales. The following is an analysis of the components of oil and natural gas sales:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Oil Sales	$	2,195,462	$	2,629,073	$	4,539,499	$	4,981,206
Natural Gas Sales	436,431		1,288,688		971,832		2,225,496
Miscellaneous Oil and Gas Product Sales	75,562		120,592		131,565		265,475
	$	2,707,455	$	4,038,353	$	5,642,896	$	7,472,177

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Other Income (Loss), Net (Tables)

6 Months Ended

Jun. 30, 2023

Other Income and Expenses [Abstract]

Schedule of Other Income/(Loss)

The following is an analysis of the components of Other Income/(Loss), Net:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Realized and Unrealized Gain/(Loss), Equity Securities	$	54,596	$	(1,583,840)	$	137,231	$	(1,729,916)
Interest Income	121,748		9,670		235,566		17,199
Dividend Income	16,589		87,824		26,889		184,126
Income/(Loss) from Other Investments	19,401		48,137		329,097		56,455
Miscellaneous Income/(Expenses)	(23,625)		(28,729)		28,759		(59,908)
Other Income/(Loss), Net	$	188,709	$	(1,466,938)	$	757,542	$	(1,532,044)

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Non-Controlling Interest and Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2023

Noncontrolling Interest [Abstract]

Schedule of Variable Interest Entities

The following table presents the summarized assets and liabilities of Grand Woods and TWS included in the consolidated balance sheets as of June 30, 2023, and December 31, 2022. The assets of Grand Woods and TWS in the table below may only be used to settle obligations of Grand Woods or TWS, respectively. The assets and liabilities in the table below include third party assets and liabilities only and exclude intercompany balances that eliminate in consolidation.

	June 30, 2023
	Grand Woods		TWS		Total
Assets:
Cash	$	112,323	$	508,010	$	620,333
Accounts Receivable	—		122,982		122,982
Total Current Assets	112,323		630,992		743,315
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		442,244		442,244
Less – Accumulated Depreciation	—		(128,861)		(128,861)
Other Property and Equipment, Net	—		313,383		313,383
Total Assets	$	2,284,151	$	944,375	$	3,228,526
Liabilities:
Accounts Payable	$	—	$	19,529	$	19,529
Note Payable, Current Portion	139,280		—		139,280
Deferred Revenue	—		338,985		338,985
Total Current Liabilities	139,280		358,514		497,794
Note Payable, Less Current Portion	1,230,525		—		1,230,525
Total Liabilities	$	1,369,805	$	358,514	$	1,728,319

	December 31, 2022
	Grand Woods		TWS		Total
Assets:
Cash	$	24,050	$	281,654	$	305,704
Accounts Receivable	—		72,716		72,716
Total Current Assets	24,050		354,370		378,420
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		419,044		419,044
Less – Accumulated Depreciation	—		(92,278)		(92,278)
Other Property and Equipment, Net	—		326,766		326,766
Total Assets	$	2,195,878	$	681,136	$	2,877,014
Liabilities:
Accounts Payable	$	—	$	58,742	$	58,742
Note Payable, Current Portion	136,637		—		136,637
Total Current Liabilities	136,637		58,742		195,379
Note Payable, Less Current Portion	1,300,872		—		1,300,872
Total Liabilities	$	1,437,509	$	58,742	$	1,496,251

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Note Payable (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Maturities of Note Payable

Below is a schedule of future principal payments on the outstanding Note at June 30, 2023:

Years Ending December 31,	Principal Payments
2023	$	68,933
2024	142,136
2025	148,155
2026	1,010,581
Total	$	1,369,805

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Asset Retirement Obligation (Tables)

6 Months Ended

Jun. 30, 2023

Asset Retirement Obligation [Abstract]

Schedule of Asset Retirement Obligations

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2022	$	2,809,257
Liabilities settled (wells sold or plugged)	(5,793)
Accretion expense	36,442
Balance at June 30, 2023	$	2,839,906

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

At June 30, 2023, and December 31, 2022, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	June 30, 2023
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,629,750	$	—
Equity Securities:
Domestic Equities	2,501,833		—		—
International Equities	293,494		—		—
Others	156,982		—		—
	$	2,952,309	$	4,629,750	$	—

	December 31, 2022
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for-Sale Debt Securities – U.S.
Treasury Bills Maturing within 1 Year	$	—	$	4,208,648	$	—
Equity Securities:
Domestic Equities	$	1,720,410	$	—	$	—
International Equities	448,405		—		—
Others	134,144		—		—
	$	2,302,959	$	4,208,648	$	—

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Revenue Recognition - Narrative (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Revenue Recognition [Abstract]
Estimate of oil and natural gas payments not yet received	$ 1,748,836	$ 2,144,069

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Revenue Recognition - Disaggregated Revenue (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 2,707,455	$ 4,038,353	$ 5,642,896	$ 7,472,177
Oil Sales
Disaggregation of Revenue [Line Items]
Revenue	2,195,462	2,629,073	4,539,499	4,981,206
Natural Gas Sales
Disaggregation of Revenue [Line Items]
Revenue	436,431	1,288,688	971,832	2,225,496
Miscellaneous Oil and Gas Product Sales
Disaggregation of Revenue [Line Items]
Revenue	$ 75,562	$ 120,592	$ 131,565	$ 265,475

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Other Income (Loss), Net - Schedule of Components of Other Income, Net (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Other Income and Expenses [Abstract]
Net Realized and Unrealized Gain/(Loss), Equity Securities	$ 54,596	$ (1,583,840)	$ 137,231	$ (1,729,916)
Interest Income	121,748	9,670	235,566	17,199
Dividend Income	16,589	87,824	26,889	184,126
Income/(Loss) from Other Investments	19,401	48,137	329,097	56,455
Miscellaneous Income/(Expenses)	(23,625)	(28,729)	28,759	(59,908)
Other Income/(Loss), Net	$ 188,709	$ (1,466,938)	$ 757,542	$ (1,532,044)

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Investments and Related Commitments and Contingent Liabilities, Including Guaranties (Details)		1 Months Ended	6 Months Ended
		Mar. 31, 2023 USD ($) a	Jun. 30, 2023 USD ($) a	Jun. 30, 2022 USD ($)	May 11, 2023 shares	Dec. 31, 2022 USD ($)	Dec. 31, 1992 a
Schedule of Equity Method Investments [Line Items]
Equity method investments	[1]		$ 2,827,715			$ 2,469,644
Other Investments	[1]		5,191,303			5,085,806
Special investment vehicles	[1]		725,991			758,256
Corporate Office from Broadway
Schedule of Equity Method Investments [Line Items]
Rent expense			22,358	$ 19,874
Equity method investments			$ 131,593			115,093
Broadway 68
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			33.00%
Broadway 72
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			40.00%
Equity method investments			$ 1,107,595			1,080,465
QSN
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			20.00%
Equity method investments			$ 280,878			284,249
QSN | Development Loan
Schedule of Equity Method Investments [Line Items]
Value of guaranteed loans			953,931
QSN | Construction Loan
Schedule of Equity Method Investments [Line Items]
Value of guaranteed loans			$ 585,000
Stott's Mill
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			50.00%
Other Investments			$ 704,046			688,575
BHR2
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			16.30%
Other Investments			$ 301,442			300,754
Annual return on investment (as a percent)			11.00%
BRH3
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			27.27%
Other Investments			$ 302,161			301,261
Bailey
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			10.00%
Other Investments			$ 77,377			77,377
Cloudburst
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			12.99%
Other Investments			$ 1,596,007			1,596,007
Genlith
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			5.15%
Other Investments			$ 311,958			460,000
OKC
Schedule of Equity Method Investments [Line Items]
Ownership percentage (as a percent)			10.00%
Other Investments			$ 82,482			82,482
Area of land (Acre) | a			13				260
OKC Industrial Properties Sold
Schedule of Equity Method Investments [Line Items]
Area of land (Acre) | a		10
Proceeds from sale of land		$ 290,000
Grand Woods
Schedule of Equity Method Investments [Line Items]
Area of land (Acre) | a			26.56
Other Investments (Land)			$ 2,171,828			2,171,828
VCC | Oil And Gas, Special Investment Vehicles
Schedule of Equity Method Investments [Line Items]
Special investment vehicles			357,259			357,259
VCC Venture
Schedule of Equity Method Investments [Line Items]
Other Investments			62,500			$ 31,250
Committed investment			$ 250,000
Committed investment ratio (as a percent)			25.00%
Cortado II-A
Schedule of Equity Method Investments [Line Items]
Other Investments			$ 375,000
Committed investment			$ 1,000,000
Committed investment ratio (as a percent)			37.50%
C3
Schedule of Equity Method Investments [Line Items]
Investment owned (in shares) | shares					740,211
Number of shares allowed to be sold, transferred, or disposed of per month (in shares) | shares					30,000
Value of investment owned			$ 148,042

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

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Non-Controlling Interest and Variable Interest Entities - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2023 a shares	Sep. 15, 2022 USD ($)
Common Class A
Variable Interest Entity [Line Items]
Units owned (in shares)	47.08
Common Class C
Variable Interest Entity [Line Items]
Units owned (in shares)	546,735
Grand Woods
Variable Interest Entity [Line Items]
Area of land (Acre) | a	26.56
Variable Interest Entity, Primary Beneficiary | Partial recourse | Secured Debt
Variable Interest Entity [Line Items]
Note payable | $		$ 1.2
Variable Interest Entity, Primary Beneficiary | Grand Woods
Variable Interest Entity [Line Items]
Ownership (as a percent)	80.37%
Variable Interest Entity, Primary Beneficiary | Grand Woods | Executive Officer
Variable Interest Entity [Line Items]
Ownership (as a percent)	8.72%

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Non-Controlling Interest and Variable Interest Entities - Schedule of Balance Sheet Information (Details) - USD ($)		Jun. 30, 2023	Dec. 31, 2022
Assets:
Accounts Receivable	[1]	$ 1,898,080	$ 2,318,183
Total Current Assets	[1]	15,131,586	16,249,244
Other Property and Equipment, Net	[1]	486,703	521,373
Total Assets	[1]	38,536,454	38,727,133
Liabilities:
Accounts Payable	[1]	308,724	399,735
Note Payable, Current Portion	[1]	139,280	136,637
Total Current Liabilities	[1]	820,984	612,047
Note Payable, Less Current Portion	[1]	1,230,525	1,300,872
Total Liabilities	[1]	6,792,449	6,341,771
Variable Interest Entity, Primary Beneficiary | Total
Assets:
Cash		620,333	305,704
Accounts Receivable		122,982	72,716
Total Current Assets		743,315	378,420
Other Investments (Land)		2,171,828	2,171,828
Other Property and Equipment, at Cost		442,244	419,044
Less – Accumulated Depreciation		(128,861)	(92,278)
Other Property and Equipment, Net		313,383	326,766
Total Assets		3,228,526	2,877,014
Liabilities:
Accounts Payable		19,529	58,742
Note Payable, Current Portion		139,280	136,637
Deferred Revenue		338,985
Total Current Liabilities		497,794	195,379
Note Payable, Less Current Portion		1,230,525	1,300,872
Total Liabilities		1,728,319	1,496,251
Variable Interest Entity, Primary Beneficiary | Grand Woods
Assets:
Cash		112,323	24,050
Accounts Receivable		0	0
Total Current Assets		112,323	24,050
Other Investments (Land)		2,171,828	2,171,828
Other Property and Equipment, at Cost		0	0
Less – Accumulated Depreciation		0	0
Other Property and Equipment, Net		0	0
Total Assets		2,284,151	2,195,878
Liabilities:
Accounts Payable		0	0
Note Payable, Current Portion		139,280	136,637
Deferred Revenue		0
Total Current Liabilities		139,280	136,637
Note Payable, Less Current Portion		1,230,525	1,300,872
Total Liabilities		1,369,805	1,437,509
Variable Interest Entity, Primary Beneficiary | TWS
Assets:
Cash		508,010	281,654
Accounts Receivable		122,982	72,716
Total Current Assets		630,992	354,370
Other Investments (Land)		0	0
Other Property and Equipment, at Cost		442,244	419,044
Less – Accumulated Depreciation		(128,861)	(92,278)
Other Property and Equipment, Net		313,383	326,766
Total Assets		944,375	681,136
Liabilities:
Accounts Payable		19,529	58,742
Note Payable, Current Portion		0	0
Deferred Revenue		338,985
Total Current Liabilities		358,514	58,742
Note Payable, Less Current Portion		0	0
Total Liabilities		$ 358,514	$ 58,742

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

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Note Payable - Narrative (Details) - USD ($)		6 Months Ended	12 Months Ended
	Sep. 15, 2022	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Current portion of note payable		$ 139,280
Notes Payable
Debt Instrument [Line Items]
Interest rate (as a percent)	4.00%
Monthly principal payment	$ 16,034
Note payable		1,369,805	$ 1,437,509
Interest paid		$ 28,501	$ 0
Pay down requirement included in covenant (as a percent)		90.00%
Remaining portion of pay down covenant (as a percent)		10.00%
Secured Debt | Variable Interest Entity, Primary Beneficiary | Partial recourse
Debt Instrument [Line Items]
Note payable	$ 1,200,000

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Note Payable - Schedule of Future Principal Payments (Details) - Notes Payable - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
2023	$ 68,933
2024	142,136
2025	148,155
2026	1,010,581
Total	$ 1,369,805	$ 1,437,509

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Asset Retirement Obligation - Narrative (Details)	6 Months Ended
	Jun. 30, 2023
Asset Retirement Obligation [Abstract]
Current year inflation (as a percent)	4.08%
Change in net present value (as a percent)	3.25%

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Asset Retirement Obligation - Schedule of Asset Retirement Obligation (Details)	6 Months Ended
	Jun. 30, 2023 USD ($)
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Beginning balance	$ 2,809,257
Liabilities settled (wells sold or plugged)	(5,793)
Accretion expense	36,442
Ending balance	$ 2,839,906

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Fair Value Measurements - Schedule of Fair Value Reported on a Recurring Basis (Details) - USD ($)		Jun. 30, 2023	Dec. 31, 2022
Fair Value, Option, Quantitative Disclosures [Line Items]
Available-for-Sale Debt Securities – U.S.	[1]	$ 4,629,750	$ 4,208,648
Equity Securities	[1]	2,952,309	2,302,959
Fair Value, Recurring | Level 1 Inputs
Fair Value, Option, Quantitative Disclosures [Line Items]
Total assets measured at fair value		2,952,309	2,302,959
Fair Value, Recurring | Level 1 Inputs | Treasury Bills Maturing within 1 Year
Fair Value, Option, Quantitative Disclosures [Line Items]
Available-for-Sale Debt Securities – U.S.		0	0
Fair Value, Recurring | Level 1 Inputs | Domestic Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		2,501,833	1,720,410
Fair Value, Recurring | Level 1 Inputs | International Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		293,494	448,405
Fair Value, Recurring | Level 1 Inputs | Others
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		156,982	134,144
Fair Value, Recurring | Level 2 Inputs
Fair Value, Option, Quantitative Disclosures [Line Items]
Total assets measured at fair value		4,629,750	4,208,648
Fair Value, Recurring | Level 2 Inputs | Treasury Bills Maturing within 1 Year
Fair Value, Option, Quantitative Disclosures [Line Items]
Available-for-Sale Debt Securities – U.S.		4,629,750	4,208,648
Fair Value, Recurring | Level 2 Inputs | Domestic Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		0	0
Fair Value, Recurring | Level 2 Inputs | International Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		0	0
Fair Value, Recurring | Level 2 Inputs | Others
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		0	0
Fair Value, Recurring | Level 3 Inputs
Fair Value, Option, Quantitative Disclosures [Line Items]
Total assets measured at fair value		0	0
Fair Value, Recurring | Level 3 Inputs | Treasury Bills Maturing within 1 Year
Fair Value, Option, Quantitative Disclosures [Line Items]
Available-for-Sale Debt Securities – U.S.		0	0
Fair Value, Recurring | Level 3 Inputs | Domestic Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		0	0
Fair Value, Recurring | Level 3 Inputs | International Equities
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		0	0
Fair Value, Recurring | Level 3 Inputs | Others
Fair Value, Option, Quantitative Disclosures [Line Items]
Equity Securities		$ 0	$ 0

[1] Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), Grand Woods and TWS, as further discussed in Note 5 – Non-Controlling Interest and Variable Interest Entities. As of June 30, 2023, total assets and liabilities of Grand Woods, which are included in the consolidated balance sheets, were $2,284,151 and $1,369,805, respectively, including $112,323 of cash. Grand Woods note holder has partial recourse to the Company. As of June 30, 2023, total assets and liabilities of TWS, which are included in the consolidated balance sheets, were $944,375 and $358,514, respectively, including $508,010 of cash.

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Fair Value Measurements - Narrative (Details) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Fair Value, Nonrecurring
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items]
Impairment of oil and natural gas producing properties	$ 443,456	$ 0