XML 46 R23.htm IDEA: XBRL DOCUMENT
v3.22.1

SUBSEQUENT EVENTS | 12 Months Ended
--- | ---
Dec. 31, 2021
Subsequent Events [Abstract] |
SUBSEQUENT EVENTS | 16. SUBSEQUENT EVENTS On January 5, 2022 (the “Closing Date”), the Company closed the acquisitions contemplated by three separate Purchase and Sale Agreements (the “Purchase Agreements”), entered into by the Company on October 4, 2021, with each of (a) Lubbock Energy Partners LLC (“Lubbock”); (b) Banner Oil & Gas, LLC, Woodford Petroleum, LLC and Llano Energy LLC (collectively, “Banner”), and (c) Synergy Offshore LLC (“Synergy”, and collectively with Lubbock and Banner, (the “Sellers”). Pursuant to the Purchase Agreements, the Company acquired certain oil and gas properties from the Sellers, representing a diversified portfolio of primarily operated, producing, oil-weighted assets located across the Rockies, West Texas, Eagle Ford, and Mid-Continent. The acquisition also included certain wells, contracts, technical data, records, personal property and hydrocarbons associated with the acquired assets (collectively with the oil and gas properties acquired, the “Acquired Assets”). The purchase price for the Acquired Assets was (a) $125,000 in cash and 6,568,828 shares of our common stock, as to Lubbock; (b) $1,000,000 in cash, the assumption of $3.3 million of debt, and 6,790,524 shares of common stock, as well as the novation of certain hedges which had a mark to market loss of approximately $3.1 million as of the Closing Date, as to Banner; and (c) $125,000 in cash and 6,546,384 shares of common stock, as to Synergy. The aggregate purchase price under all the Purchase Agreements was $67.4 million, representing $1.25 million in cash, the value of 19,905,736 shares of our common stock on the Closing Date of $64.7 million and purchase price adjustments on the Closing Date of $1.4 million. In addition, we assumed various liabilities, including the repayment of $3.3 million in debt, as well as a derivative liability from the novation of the hedges discussed above of $3.1 million, suspense accounts and asset retirement obligations. The initial base purchase price remains subject to final post-closing settlement including customary working capital and other adjustments between the Company and the Sellers 120 days following the Closing Date. Each Purchase Agreement required the Company to place a $500,000 deposit into escrow ($1.5 million in aggregate) (the “Deposits”). The Deposits, included in other assets in the consolidated balance sheet at December 31, 2021, were released on the Closing Date to pay a portion of the purchase price and closing adjustments for the Acquired Assets. The Company is currently evaluating certain accounting and valuation considerations for the Acquired Assets. Board of Directors On January 4, 2022, and effective as of the Closing on January 5, 2022, the Board of Directors (the “Board”) (i) increased the size of the Company’s Board of Directors from five members to seven members (with Javier F. Pico resigning from the Board effective immediately prior to Closing), and appointed (a) Mr. John A. Weinzierl, the Chief Executive Officer of Lubbock, who was designated by Lubbock, as a director and Chairman of the Company; (b) Mr. Joshua Batchelor, the Managing Partner of Sage Road Capital, LP, the owner of Banner, who was designated by Banner, as a director of the Company; and (c) Mr. Duane H. King, the Chief Executive Officer of Synergy, who was designated by Synergy, as a director of the Company. Credit agreement Separate from the Closing, but also effective on January 5, 2022, the Company entered into a five-year credit agreement (“Credit Agreement”) with Firstbank Southwest (“Firstbank”) as administrative agent for one or more lenders (the “Lenders”), which provides for a revolving line of credit with an initial borrowing base of $15 million, and a maximum credit amount of $100 million. Under the Credit Agreement, revolving loans may be borrowed, repaid and re-borrowed until January 5, 2026, when all outstanding amounts must be repaid. Interest on the outstanding amounts under the Credit Agreement will accrue at an interest rate equal to (a) the greatest of (i) the prime rate in effect on such day, and (b) the Federal Funds rate in effect on such day (as determined in the Credit Agreement) plus 0.50%, and an applicable margin that ranges between 0.25% to 1.25% depending on utilization of the amount of the borrowing base (the “Applicable Margin”). During the first six months of the term, the applicable margin will be 0.75% regardless of utilization. Accrued interest on each revolving loan is payable in arrears on the last day of each March, June, September and December. A commitment fee of 0.50% accrues on the average daily amount of the unused portion of the borrowing base (as of March 22, $11,500,000) is payable in arrears on the last business day of March, June, September and December of each year and on the maturity date. The Company is also required to make certain mandatory repayments under the Credit Agreement, in the event the borrowing base decreases below the aggregate amount of loans made by the Lenders and/or if as of the last business day of any calendar month, certain required debt ratios required under the Credit Agreement are not met, there are outstanding amounts owed to the Lenders, and the Company has consolidated cash on hand in excess of $5 million, and in some cases we are also required to pay cash to the agent to be held as collateral. The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries (the “Loan Parties”). In addition, the Credit Agreement contains financial covenants, tested quarterly, that limit the Company’s ratio of total debt to EBITDAX (as defined in the Credit Agreement) to 3:1 and require its ratio of consolidated current assets to consolidated current liabilities (as each is described in the Credit Agreement) to remain at 1:1 or higher. The Credit Agreement also requires the Company to hedge certain oil and gas volumes, based on utilization of the borrowing base, which hedging will be accomplished pursuant to the ISDA Master Agreement, discussed below. If any event of default occurs as defined in the Credit Agreement and is continuing under the Credit Agreement, the Lenders may terminate their commitments, and may require the Company and its subsidiaries to repay outstanding debt and/or to provide a cash deposit as additional security for outstanding letters of credit. A total of $3.5 million was borrowed under the Credit Agreement, immediately upon the entry into such Credit Agreement, which was evidenced by a Note dated January 5, 2022. Such $3.5 million was immediately used to repay $3.3 million of debt owed by Banner which the Company agreed to assume as part of the Closing. Intercreditor Agreement In connection with the Credit Agreement, Firstbank, as administrative agent for the Lenders and as collateral agent on behalf of all creditors, and Nextera Energy Marketing, LLC (“NextEra”), together with one or more future swap counterparties (“Swap Counterparties”) entered into an intercreditor agreement (“Intercreditor Agreement”), dated February 5, 2022, which was acknowledged by the Company. Under the Intercreditor Agreement, the parties agreed that the Loan Parties’ obligations under the Credit Agreement and their obligations to the Swap Counterparties in connection with certain acceptable swap agreements (as defined in the Intercreditor Agreement), and discussed below under “ISDA Master Agreement”, would be pari passu and ratably secured by the deeds of trust securing the Company’s obligations under the Credit Agreement, and permitted such swap agreements under the terms of the Credit Agreement, subject to certain requirements. The Intercreditor Agreement terminates upon payment in full of all amounts owed under the Credit Agreement and the Master Agreement Schedule, discussed below. ISDA Master Agreement Separate from the Closing, but also effective on January 5, 2022, the Company and NextEra entered into an International Swap Dealers Association, Inc. Master Agreement (“Master Agreement”), facilitating the Company to enter into derivative and/or hedging transactions (“Transactions”) to manage the risk associated with its business relating to commodity prices. The derivative and hedging transactions will be governed by the Master Agreement, including the related Schedule to the ISDA Master Agreement (“Schedule”). The Company’s obligations to NextEra under the Master Agreement are secured by the collateral which secures the loans under the Credit Agreement on a pari passu and pro rata basis with the principal of such loans. The structure of the Transactions may include swaps, caps, floors, collars, locks, forwards and options. Certain events of default will apply to the Transactions under the ISDA Master Agreement and Schedule, including, but not limited to, failure to pay or deliver, breach of the agreement, credit support default, cross-defaults and misrepresentation. The Company’s entry into and the obligations of the Company under the Master Agreement and Schedule were required conditions to the Closing of the Banner Purchase Agreement, pursuant to which the Company was required to assume and novate certain hedges of Banner which had a mark to market loss of approximately $3.1 million as of the Closing Date. In addition, on January 12, 2022, the Company entered into additional Nymex WTI crude oil commodity derivative contracts with NextEra for 2022 and 2023 production. The Company’s commodity derivative positions for years 2022 and 2023 are shown in the following table below: SCHEDULES OF DERIVATIVE POSITIONS
|  |  | Collars |  |  | Fixed Price Swaps |
Commodity/ |  |  | Quantity |  |  |  |  |  |  |  |  | Quantity |  |  | Weighted |
Index/ |  |  | Crude oil-(Bbks) |  |  | Weighted Average Prices |  |  | Crude oil-(Bbks) |  |  | Average |
Maturity Period |  |  | Natura lGas-(Mmbtu) |  |  | Floors |  |  | Ceilings |  |  | Natural Gas (mmbtu) |  |  | Price |
Crude Oil |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nymex |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 |  |  |  | 270,500 |  |  | $ | 59.54 |  |  | $ | 79.78 |  |  |  | 35,700 |  |  | $ | 49.99 |
2023 |  |  |  | 223,500 |  |  | $ | 59.33 |  |  | $ | 79.55 |  |  |  | 12,000 |  |  | $ | 59.20 |
Natural Gas |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nymex |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 |  |  |  | 40,000 |  |  | $ | 2.95 |  |  | $ | 3.33 |  |  |  | 180,000 |  |  | $ | 2.96 |
2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 60,000 |  |  | $ | 2.96 |
Transition Services Agreement On the Closing Date, the Company entered into a Transition Services Agreement (“TSA”) with Banner, for Banner to provide services in connection with the assets acquired from Banner (“Services”), including land and lease administration services; accounting services tax services; and other transition services and cooperation sufficient to enable the Company to set up its operations and assume the operation of the assets acquired from Banner. The transition services are to be provided to the Company on an independent contractor basis. The TSA will remain in place for six months (through June 30, 2022), extendable on a month-to-month basis thereafter at the Company’s request, subject to the terms of the agreement, and the Company will pay Banner $90,000 per month during the duration of the TSA, and reimburse Banner for reasonable and documented expenses incurred by Banner, including the cost to maintain insurance. The TSA includes mutual confidentiality and indemnification obligations with the Company agreeing to indemnify Banner in respect to certain third-party claims arising from the Services and Banner agreeing to indemnify the Company against third party claims arising from the willful misconduct or gross negligence of Banner or its related parties. Exercise of Warrants On March 11, 2022, a holder of warrants exercised warrants to purchase 50,000 shares of common stock with an exercise price of $3.92 and we received proceeds of $195 thousand and issued 50,000 shares of common stock.

X
- References No definition available. + Details
Name: | us-gaap_SubsequentEventsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6842918&loc=SL6314017-165662 + Details
Name: | us-gaap_SubsequentEventsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration