Annual report pursuant to Section 13 and 15(d)

Supplemental Oil and Gas Reserve Information (Unaudited)

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Supplemental Oil and Gas Reserve Information (Unaudited)
 12 Months Ended
Dec. 31, 2024
Extractive Industries [Abstract]  
Supplemental Oil and Gas Reserve Information (unaudited) Supplemental Oil and Gas Reserve Information (Unaudited)
The Company’s oil and natural gas reserves are attributable solely to properties within the United States.

Our Share of Oil and Gas Produced

We measure our share of oil and gas produced in barrels of oil equivalent (“Boe”). One Boe equals one barrel of crude oil, condensate, NGLs (natural gas liquids) or approximately 6,000 cubic feet of gas. For the years ended December 31, 2024, 2023 and 2022, our share of oil and gas produced was approximately 26.8, 23.5 and 21.3 thousand Boe per day, respectively.
 
Capitalized Oil and Natural Gas Costs

Aggregate capitalized costs related to oil and natural gas production activities with applicable accumulated depletion are as follows (in thousands):
December 31, 2024 December 31, 2023
Oil, natural gas and NGL interests
Proved $ 150,984  $ 29,222 
Unproved 296,087  22,272 
Total oil, natural gas and NGL interests 447,071  51,494 
Accumulated depletion (14,670) (4,885)
Net oil, natural gas and NGL interests capitalized $ 432,401  $ 46,609 

The Company owns approximately 207,000 NRA as of December 31, 2024. Of our total NRA, approximately 191,000 was acquired in 1888 and was recorded with no value. The remaining approximately 16,000 NRA have been acquired over recent years and are included in royalty interests acquired on the consolidated balance sheet. See additional discussion in Note 4, “Oil and Gas Royalty Interests.”
Costs Incurred in Oil and Natural Gas Activities

Costs incurred in oil, natural gas and NGL acquisition and development activities are as follows (in thousands):

Years Ended December 31,
2024 2023 2022
Acquisition costs
Proved $ 121,018  $ 3,566  $ 1,258 
Unproved 274,559  —  404 
Total $ 395,577  $ 3,566  $ 1,662 

Results of Operations from Oil and Natural Gas Producing Activities

The following table sets forth the revenues and expenses related to the production and sale of oil and natural gas (in thousands). It does not include any general and administrative costs and, therefore, is not necessarily indicative of the net operating results of the Company oil and natural gas operations.

Years Ended December 31,
2024 2023 2022
Oil and natural gas revenues (1)
$ 373,331  $ 357,394  $ 452,434 
Ad valorem taxes (6,952) (7,200) (8,734)
Depletion expense (9,785) (1,982) (1,027)
Income tax expense (76,917) (75,284) (95,307)
Results of operations from oil and natural gas $ 279,677  $ 272,928  $ 347,366 
(1)Oil and natural gas revenues are reported net of production taxes.
Analysis of Changes in Oil and Natural Gas PDP Reserves

Proved developed producing (“PDP”) reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, or in which the cost of the required equipment is relatively minor compared to the cost of a new well. The Company’s oil and gas properties are located in the Permian Basin.

The PDP reserve estimates and their associated future net cash flows were prepared by Ryder Scott Company, L.P. (“Ryder Scott”), an independent third-party petroleum engineering firm, as of December 31, 2024. The reserve report covers only PDP reserves and does not include undeveloped minerals or royalties. The oil and natural gas PDP reserve estimates represent the Company’s net ownership interest in its proved properties and were estimated in accordance with guidelines established by the SEC. Since reserve studies were not completed in prior periods and the comparative information herein is based on the reserve report as of December 31, 2024, the Company rolled volumes backward from 2024 to 2021 without revisions in prior estimates for these time frames.

The following table presents changes in estimated PDP reserves and was prepared in accordance with the rules and regulations of the SEC:

Crude Oil and Condensate
(MBbls)(1)
Natural Gas (MMcf)(1)
Natural Gas Liquids (MBbls)(1)
Total (MBoe)(1)
Net PDP reserves at January 1, 2022 14,190  88,579  13,579  42,533 
Extensions and discoveries 5,427  24,441  3,949  13,449 
Acquisition of reserves 17  62  9  37 
Production (3,401) (13,086) (2,208) (7,791)
Net PDP reserves at December 31, 2022 16,233  99,996  15,329  48,228 
Extensions and discoveries 6,858  31,196  5,010  17,067 
Acquisition of reserves 89  664  102  302 
Production (3,701) (14,528) (2,453) (8,575)
Net PDP reserves at December 31, 2023 19,479  117,328  17,988  57,022 
Extensions and discoveries 5,587  23,483  3,824  13,324 
Acquisition of reserves 2,378  13,317  2,042  6,639 
Production (4,118) (17,074) (2,841) (9,804)
Net PDP reserves at December 31, 2024 23,326  137,054  21,013  67,181 
Net PDP reserves
December 31, 2022 16,233  99,996  15,329  48,228 
December 31, 2023 19,479  117,328  17,988  57,022 
December 31, 2024 23,326  137,054  21,013  67,181 
(1)Commonly used definitions in the oil and gas industry not previously defined: MBbls represents one thousand barrels of crude oil, condensate or NGLs. MMcf represents one million cubic feet of natural gas. MBoe represents one thousand Boe.
Standardized Measure of Oil and Gas

The standardized measure of discounted future net cash flows before income taxes related to the oil and natural gas PDP reserves of the interests is as follows (in thousands):
Years Ended December 31,
2024 2023 2022
Future cash inflows $ 2,566,234  $ 2,150,816  $ 2,662,176 
Future production costs (191,879) (157,805) (205,483)
Future income taxes (423,633) (422,629) (528,926)
Future net cash flows 1,950,722  1,570,382  1,927,767 
Less: 10% annual discount (942,086) (748,864) (932,146)
Standard measure of discounted future net cash flows $ 1,008,636  $ 821,518  $ 995,621 

Reserve estimates and future cash flows are based on the average market prices for sales of oil and natural gas adjusted for basis differentials, on the first calendar day of each month during the year. The average prices used for 2024, 2023 and 2022 were $76.32, $78.21 and $94.14 per barrel for crude oil and $2.13, $2.64 and $6.36 per Mcf for natural gas, respectively.

Future production costs are computed primarily by the Company’s petroleum engineers by estimating the expenditures to be incurred in producing the oil and gas PDP reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair value of the properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently 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 oil and natural gas reserve estimates.

Changes in Standardized Measure of Oil and Gas

Changes in the standardized measure of discounted future net cash flows before income taxes related to the oil and natural gas PDP reserves of the interests are as follows (in thousands):

Years Ended December 31,
2024 2023 2022
Standardized measure - beginning of year $ 821,518  $ 995,621  $ 616,919 
Sales, net of production costs (366,379) (350,194) (443,700)
Net changes of prices and production costs related to future production 10,003  (426,381) 401,411 
Extensions and discoveries 330,825  441,343  486,327 
Acquisition of reserves 125,918  5,827  1,259 
Net change in income taxes 1,424  51,996  (103,905)
Accretion of discount 104,269  126,879  78,618 
Changes in timing and other (18,942) (23,573) (41,308)
Standardized measure - end of year $ 1,008,636  $ 821,518  $ 995,621