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Note 5 - Other Long-Term Obligations and Commitments

6 Months Ended

Jun. 30, 2025

Other Long Term Obligations And Commitments Disclosure [Text Block]

(5)

Other Long-Term Obligations and Commitments:

Operating Leases:

The Company leases office facilities under operating leases and recognizes lease expense on a straight-line basis over the lease term. Lease assets and liabilities are initially recorded at commencement date based on the present value of lease payments over the lease term. As most of the Company’s lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted average discount rate used was 9.50%. Certain leases may contain variable costs above the minimum required payments and are not included in the right-of-use assets or liabilities. Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease. The exercise of those options is at the Company’s sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required.

Operating lease costs for the six months ended June 30, 2025 and 2024 were $386 thousand and $370 thousand, respectively. Cash payments included in the operating lease cost for the six months ended June 30, 2025 and 2024 were $408 thousand and $391 thousand, respectively. The weighted-average remaining operating lease terms as of June 30, 2025 and 2024 were 8.63 months and 5.19 months, respectively. The Company acquired and amended certain leases for office space in Texas providing for future payments of $412 thousand for the remainder of 2025, and $291 thousand in 2026, $127 thousand in 2027 and $27 thousand in 2028.

All current leases have been included within the current balance sheet and the Company has not entered into any new leases since the reporting date of June 30, 2025. Rent expense for office space for the six months ended June 30, 2025 and 2024 was $438 thousand and $441 thousand, respectively.

The payment schedule for the Company’s operating lease obligations as of June 30, 2025 is as follows:

(Thousands of dollars)	Operating Leases
2025 (remainder of year)	$	412
2026		291
2027		127
2028		27

Total undiscounted lease payments	$	857
Less: Amount associated with discounting		(84	)
Total net operating lease liabilities	$	773
Less: Current portion of net operating lease liabilities		571
Non-current portion included in Other long-term obligations	$	202

Asset Retirement Obligation:

A reconciliation of the liability for plugging and abandonment costs for the six months ended June 30, 2025 is as follows:

(Thousands of dollars)	June 30, 2025
Asset retirement obligation at December 31, 2024	$	13,867
Net wells placed on production		67
Liabilities settled		(503	)
Accretion of discount		335
Asset retirement obligation at June 30, 2025	$	13,766
Less current portion of asset retirement obligations		859
Asset retirement obligations, long-term	$	12,907

The Company’s liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive life of wells and a credit adjusted risk free interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation. Revisions to the asset retirement obligation are recorded with an offsetting change to producing properties, resulting in prospective changes to depreciation, depletion and amortization expense and accretion of discount. Because of the subjectivity of assumptions and the relatively long life of most of the Company’s wells, the costs to ultimately retire the wells may vary significantly from previous estimates.