Note 16 - Supplemental Oil and Gas Disclosures (Unaudited)

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Oil and Gas Exploration and Production Industries Disclosures [Text Block]

16. Supplemental Oil and Gas Disclosures (Unaudited)

The accompanying tables present information concerning the Company’s oil and gas producing activities “Disclosures about Oil and Gas Producing Activities.”  Capitalized costs relating to oil and gas producing activities are as follows as of December 31, 2021 and 2022:

	Years Ended December 31,
	(in thousands)
	2021			2022
Proved oil and gas properties	$	1,165,707		$	1,122,670
Unproved properties		-			-
Total		1,165,707			1,122,670
Accumulated depreciation, depletion, amortization and impairment		(1,074,144	)		(1,078,865	)
Net capitalized costs	$	91,563		$	43,805

Cost incurred in oil and gas property acquisition and development activities were as follows for the years ended December 31, 2021 and 2022 (in thousands):

	2021		2022
Development costs	$	1,145	$	1,509
Exploration costs		-		-
Property acquisition costs		-		-
	$	1,145	$	1,509

Results of operations from oil and gas producing activities were as follows for the years ended December 31, 2021 and 2022:

	2021			2022
Revenues	$	78,836		$	49,715
Production costs		(24,137	)		(14,562	)
Depreciation, depletion and amortization		(13,495	)		(4,720	)
Accretion of future site restoration		(330	)		(170	)
Results of operations from oil and gas producing activities (excluding corporate overhead and interest costs)	$	40,874		$	30,263
Depletion rate per barrel of oil equivalent	$	6.67		$	5.80

Estimated Quantities of Proved Oil and Gas Reserves

Reserve estimates are inherently imprecise and estimates of new discoveries are more imprecise than those of producing oil and gas properties.  Accordingly, the estimates are expected to change as future information becomes available.  The estimates have been predominately prepared by independent petroleum reserve engineers. Proved oil and gas reserves are the estimated quantities of oil and gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods. All of the Company’s proved reserves are located in the continental United States.

Proved reserves were estimated in accordance with guidelines established by the SEC and the FASB, which require that reserve estimates be prepared under existing economic and operating conditions with no provision for price and cost escalations except by contractual arrangements; therefore, the unweighted average prior 12-month first-day-of-the-month commodity prices and year-end costs were used in estimating reserve volumes and future net cash flows for the periods presented.

The following table presents the Company’s estimate of its net proved developed and undeveloped oil and gas reserves as of December 31, 2021 and 2022:

	Total
							Oil
	Oil		NGL		Gas		Equivalents
	(MBbl)		(MBbl)		(MMcf)		(Mboe)
Proved Developed Reserves:
December 31, 2021		6,883		2,914		30,158		14,823
December 31, 2022		3,300		1,508		18,847		7,949
Proved Undeveloped Reserves:
December 31, 2021		-		-		-		-
December 31, 2022		-		-		-		-

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The Company’s proved oil and gas reserves have been estimated by the independent petroleum engineering firm, Netherland Sewell & Associates Inc., assisted by the engineering and operations departments of the Company as of   December 31, 2022 and by DeGolyer & MacNaughton, assisted by the engineering and operations departments of the Company, as of December 31, 2021. The following information has been prepared in accordance with SEC rules and accounting standards based on the 12-month first-day-of-the-month unweighted average prices in accordance with provisions of the FASB’s Accounting Standards Update No. 2010-03, “Extractive Activities—Oil and Gas (Topic 932).” Future cash inflows were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash inflows. Future net cash flows have not been adjusted for commodity derivative contracts outstanding at the end of each year. Future income taxes were computed by applying the statutory tax rate to the excess of pre-tax cash inflows over the tax basis and net operating losses associated with the properties.  Since prices used in the calculation are average prices for 2021, and 2022, the standardized measure could vary significantly from year to year based on the market conditions that occurred during a given year.

The technical personnel responsible for preparing the reserve estimates at Netherland Sewell & Associates Inc. meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. Netherland Sewell & Associates Inc. is an independent firm of petroleum engineers, geologists, geophysicists, and petrophysicists; they do not own an interest in our properties and are not employed on a contingent fee basis. All reports by Netherland Sewell & Associates Inc. were developed utilizing studies performed by Netherland Sewell & Associates Inc. and assisted by the Engineering and Operations departments of Abraxas. Reserves are estimated by independent petroleum engineers.  The report of Netherland Sewell & Associates Inc. dated February 10, 2023, contains further discussions of the reserve estimates and evaluations prepared by Netherland Sewell & Associates Inc. as well as the qualifications of Netherland Sewell & Associates Inc's. technical personnel responsible for overseeing such estimates and evaluations is attached as Exhibit 99.1 to this report.

The technical personnel responsible for preparing the reserve estimates at DeGolyer & MacNaughton meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. DeGolyer & MacNaughton is an independent firm of petroleum engineers, geologists, geophysicists, and petrophysicists; they do not own an interest in our properties and are not employed on a contingent fee basis. All reports by DeGolyer & MacNaughton were developed utilizing studies performed by DeGolyer & MacNaughton and assisted by the Engineering and Operations departments of Abraxas. Reserves are estimated by independent petroleum engineers. The report of DeGolyer & MacNaughton dated February 4, 2022, contains further discussions of the reserve estimates and evaluations prepared by DeGolyer & MacNaughton as well as the qualifications of DeGolyer & MacNaughton's technical personnel responsible for overseeing such estimates and evaluations is was filed as Exhibit 99.2 to this report.

Estimates of proved reserves at  December 31, 2021 and 2022 were based on studies performed by our independent petroleum engineers assisted by the Engineering and Operations departments of Abraxas.  The Engineering department is directly responsible for Abraxas’ reserve evaluation process.  The Vice President of Engineering is the manager of this department and is the primary technical person responsible for this process.  The Vice President of Engineering holds a Bachelor of Science degree in Petroleum Engineering and has 43 years of experience in reserve evaluations. The Vice President of Engineering is a Registered Professional Engineer in the State of Texas.  The operations department of Abraxas assisted in the process.

The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted to represent the fair market value of the Company’s proved oil and gas reserves.  An estimate of fair market value would also take into account, among other factors, the recovery of reserves not classified as proved, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.

Future net cash inflows after income taxes were discounted using a 10% annual discount rate to arrive at the Standardized Measure. The table below sets forth the Standardized Measure of our proved oil and gas reserves for the years ended  December 31, 2021  and 2022 :

	Years Ended December 31,
	(in thousands)
	2021			2022
Future cash inflows	$	485,982		$	431,728
Future production costs		(222,309	)		(192,611	)
Future development costs		(5,623	)		(4,728	)
Future income tax expense		-			-
Future net cash flows		258,050			234,389
Discount	$	(104,775	)	$	(100,511	)
Standardized Measure of discounted future net cash relating to proved reserves	$	153,275		$	133,878