XML 27 R15.htm IDEA: XBRL DOCUMENT

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

Commitments and contingencies

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

Currently, the Company has one operating sublease for office space that requires Accounting Standards Codification (“ASC”) Topic 842 treatment, discussed below.

The Company’s leases typically do not provide an implicit rate. Accordingly, the Company is required to use its incremental borrowing rate in determining the present value of lease payments based on the information available at the commencement date. The Company’s incremental borrowing rate would reflect the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. However, the Company currently maintains no debt, and in order to apply an appropriate discount rate, the Company used a borrowing rate obtained from a financial institution at which it maintains banking accounts.

The Company had a lease for its corporate offices in Houston, Texas on approximately 5,200 square feet of office space that expired on August 31, 2023, which had a base monthly rent of approximately $10,000. In December 2022, the Company entered into a new lease agreement for its existing office space that commenced on September 1, 2023, which expires on February 28, 2027. The base monthly rent is approximately $9,200 for the first 18 months and will increase to approximately $9,500 thereafter. The Company paid both a security deposit and prepaid rent of $14,700 and $14,700, respectively.

Supplemental cash flow information related to the Company’s operating office sublease is included in the table below (in thousands):

Nine Months Ended

September 30,

2024

Cash paid for amounts included in the measurement of lease liabilities

$

83

Supplemental balance sheet information related to operating leases is included in the table below (in thousands):

		September 30, 2024
Operating lease – right-of-use asset		$	248

Operating lease liabilities – current		$	96
Operating lease liabilities - long-term			154
Total lease liability		$	250

The weighted-average remaining lease term for the Company’s operating lease is 2.4 years as of September 30, 2024, with a weighted-average discount rate of 7.90%.

Lease liability with enforceable contract terms that have greater than one-year terms are as follows (in thousands):

Remainder of 2024		$	28
2025			112
2026			115
Thereafter			19
Total lease payments			274
Less imputed interest			(24	)
Total lease liability		$	250

Leasehold Drilling Commitments

The Company’s oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production or otherwise exercises options to extend such leases, if available, in exchange for payment of additional cash consideration. In the D-J Basin, no net acres expire during the remainder of 2024, and 5,829 net acres expire within the next two-year period (net to our direct ownership interest only). In the Permian Basin, 40 net acres are due to expire during the remainder of 2024 and no net acres expire within the next two-year period (net to our direct ownership interest only). The Company allowed 6,769 net acres to expire in its Chaveroo NE field which is a non-core area with no future drilling locations planned northeast of the Company’s core Chaveroo area in the Permian Basin. The Company plans to hold significantly all of this acreage through a program of drilling and completing producing wells. If the Company is not able to drill and complete a well before lease expiration, the Company may seek to extend leases where able.

Other Commitments

Although the Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business, the Company is not currently a party to any material legal proceeding or government proceeding.

As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters.

Although the Company provides no assurance about the outcome of any future legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.