PRIMEENERGY RESOURCES CORP

PrimeEnergy Resources Corporation is an independent oil and natural gas company engaged in acquiring, developing, and producing oil and natural gas, with all of its oil and gas properties and interests located in the United States, primarily in Texas and Oklahoma. The company also provides well-servicing support operations through its subsidiaries Prime Operating Company and EOWS Midland Company for many of the onshore oil and gas wells it operates, as well as for third parties. The industry is characterized by intense competition for desirable oil and gas properties, with competitors including major and independent oil and gas companies, income programs, and individual producers and operators, many of which have substantially greater financial resources, staffs, and facilities than those available to PrimeEnergy. The company also faces competition from alternative energy sources such as wind, solar, and other renewables, and competition is expected to increase as alternative energy technology becomes more reliable and governments support or mandate such alternatives.

The company's primary competitors in acquiring producing and non-producing properties include oil and gas companies, independent concerns, income programs, and individual producers and operators, many of which have financial resources, staffs, and facilities substantially greater than those available to PrimeEnergy. The company's stated competitive advantages include its strategy of targeting reservoirs with high initial production rates and cash flow as well as reservoirs with lower initial production rates but higher expected return on investment, and its belief that horizontal development of its reserves provides superior economic results compared to vertical development by delivering higher production rates through greater contact and stimulation of a larger volume of reservoir rock while minimizing the surface footprint. The company also emphasizes maintaining a strong balance sheet and ample liquidity as key components of its business strategy, and it attempts to assume the position of operator in all acquisitions of producing properties.

PrimeEnergy generates revenue primarily from the sale of oil, natural gas, and natural gas liquids, with additional revenue from field service operations. The company sells its oil and natural gas on the open market at prevailing market prices or through forward delivery contracts, and it has an active hedging program to mitigate risk regarding cash flow and protect returns from development activity in the event of decreases in prices received for production. The company's primary customer segments include direct purchasers under direct contracts or through other operators under joint operating agreements, with major customers including DE Central Operating, LLC, Civitas Resources Inc., and APA Corporation. The company operates approximately 508 active wells and owns non-operating interests and royalties in approximately 1,128 additional wells, and it provides well-servicing support operations, site-preparation, and construction services for oil and gas drilling and reworking operations both for its own activities and for third parties.

The company's oil and gas operations are its core business, with all financial results reviewed by the Chief Executive Officer on a consolidated basis as a single operating segment. In 2025, the company participated in 48 horizontals, investing $96 million, primarily in the Midland Basin of West Texas. The company's proved reserves as of December 31, 2025 were 28,388 MBOE, consisting of 82.3% proved developed reserves and 17.7% proved undeveloped reserves. The company's West Texas region is the dominant area, with 21,544 MBoe of proved reserves as of December 31, 2025, representing 93.54% of total proved reserves, and average net daily production of 14,152 Boe per day. The Mid-Continent region had 1,401 MBoe of proved reserves, representing 4.94% of total proved reserves, and the Gulf Coast region had 429 MBoe of proved reserves, representing 1.51% of total proved reserves.

The company's field service operations, conducted through its subsidiaries, provide well-servicing support, site preparation, and construction services for drilling and workover operations, utilizing workover or swab rigs, saltwater disposal facilities, and trucks owned by the company and operated by its field employees. In West Texas, the company operates a field service group utilizing nine workover rigs, three hot oiler trucks, and one kill truck. The company also owns a 12.5% overriding royalty interest in over 30,000 acres in the state of West Virginia, though it is currently not receiving revenue from this asset as development has not begun, and through a wholly owned offshore company, it owns a currently idle 60-mile-long pipeline offshore on the shallow shelf of Texas.

In 2025, the company participated in 48 horizontals, investing $96 million, compared to $113 million invested in 48 horizontals in 2024 and $96 million invested in 35 horizontals in 2023. Since January 2023 through 2025, the company invested roughly $305 million in horizontal development, primarily in the Midland Basin of West Texas. The company raised proceeds of $2.2 million from the sale of acreage and commercial property in 2025. The company also repurchased 75,970 shares of its common stock for $13.552 million in 2025, compared to 111,630 shares repurchased for $13.429 million in 2024. As of December 31, 2025, a total of 3,913,956 shares had been repurchased under the stock repurchase program for $116,968,950 at an average price of $29.89 per share, with 86,044 shares remaining available for repurchase.

For the fiscal year ended December 31, 2025, the company reported net income of $26.312 million, or $15.85 per basic share and $10.86 per diluted share, compared to net income of $55.404 million, or $31.43 per basic share and $21.95 per diluted share, for the fiscal year ended December 31, 2024. Total revenues and other income were $189.052 million in 2025, compared to $237.796 million in 2024. Oil, NGL, and gas sales decreased $45.529 million, or 20.4%, to $177.513 million in 2025 from $223.042 million in 2024. Net cash provided by operating activities was $96.734 million in 2025, compared to $115.909 million in 2024.

The company's capital budget for 2026 is reflective of current commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under its revolving credit facility. The company plans to continue its focus on preserving financial flexibility and liquidity as it manages the risks facing its industry, and as it has done historically to preserve or enhance liquidity, it may adjust its capital program throughout the year, divest non-strategic assets, or enter into strategic joint ventures.

The company has identified significant future drilling opportunities in West Texas, anticipating proposals for the drilling of between 36 and 45 new horizontals targeting the Wolfcamp "D" pay zone in Reagan County, with the potential to invest over $100 million in this development. Additionally, the company has identified 37 horizontal locations across its acreage in Upton and Martin counties that could be drilled in the 2026-2027 timeframe, requiring an investment of approximately $87 million. In total, the company has the potential to invest approximately $187 million in horizontal drilling in West Texas over the next several years. In Oklahoma, the company has plans to participate in three wells in 2026: one 3-mile long horizontal well in Grady County with 3.47% interest, investing roughly $351,000 through completion; one 2.5-mile long horizontal in Garvin County with 3.36% interest, investing roughly $291,000 through completion; and one 3-mile long horizontal in Garvin County with 2.27% interest, investing roughly $194,000 through completion.

The company's margin trajectory is influenced by commodity price volatility, with realized prices at the well head decreasing an average of $12.48 per barrel, or 16.5%, on crude oil, decreasing an average of $4.93 per barrel, or 24.4%, on NGL, and increasing $0.33 per Mcf, or 77.3%, on natural gas during 2025 as compared to 2024. Oil and gas production expense decreased $2.7 million, or 5.7%, to $45.0 million in 2025 from $47.7 million in 2024, reflecting fewer workover related costs offset by increases in service rates related to recurring lease operating expenses. Depreciation, depletion, and amortization decreased $0.8 million, or 1.0%, to $75.7 million in 2025 from $76.5 million in 2024.

The company's operational outlook includes continued horizontal development of its leasehold acreage, particularly in West Texas, where it maintains an acreage position of approximately 16,838 gross (9,420 net) acres, 97.6% of which are located in Reagan, Upton, and Martin counties. The company currently operates 508 wells, including producing, saltwater disposal, injection, and supply wells, through its offices in Houston, Midland, and Oklahoma City. The company has a field service group in West Texas utilizing nine workover rigs, three hot oiler trucks, and one kill truck to provide oil field support for drilling and workover operations both to third-party operators and for its own operated wells and locations.

The company's capital allocation strategy includes continued spending under its stock repurchase program in 2026, with 86,044 shares remaining available for repurchase under the current program authorized by the Board of Directors in December 1993. The company's capital budget for 2026 is reflective of current commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under its revolving credit facility. The company's credit agreement provides for a credit facility totaling $300 million, with a borrowing base of $115 million, and as of April 15, 2026, the company had no outstanding borrowings and $115 million in availability under this facility.

The company faces structural headwinds from the volatility of commodity prices, as a sustained decline in natural gas or crude oil prices would have a material adverse effect on its business, financial condition, results of operations, cash flows, liquidity, or ability to finance planned capital expenditures and commitments. Natural gas prices, based on the twelve-month average of the first of the month Henry Hub index price, were $3.39 per MMBTU in 2025 as compared to $2.13 per MMBTU in 2024, and oil prices, based on West Texas Intermediate Light Sweet Crude first-of-the-month prices, averaged $65.34 per barrel in 2025 as compared to $75.48 per barrel in 2024. The company also faces risks from the potential reduction of its borrowing base under its revolving credit facility, which is currently $115 million, as the borrowing base is redetermined semi-annually and may decrease as a result of lower natural gas or oil prices, operating difficulties, declines in reserves, lending requirements or regulations, or other reasons set forth in the revolving credit agreement.

The company faces execution risks related to its drilling program, as drilling for natural gas and oil involves numerous risks including the risk that no commercially productive reservoirs will be encountered, and the cost of drilling, completing, and operating wells is substantial and uncertain. The company's ability to drill and develop identified drilling locations depends on a number of factors including the availability of capital, seasonal conditions, regulatory approvals, negotiation of agreements with third parties, commodity prices, costs, access to and availability of equipment, services, resources and personnel, and drilling results. The company also faces risks from the shut-in of its wells due to mechanical failures, contract terms, pipeline and processing plant interruptions, market conditions, operator priorities, and weather conditions, which could negatively impact production, liquidity, and operations.

The prices of oil, NGL, and gas are highly volatile, and a sustained decline in these commodity prices could materially and adversely affect the company's business, financial condition, and results of operations, as revenues, operating results, and financial condition depend substantially on prevailing prices. Natural gas prices based on the twelve-month average of the first of the month Henry Hub index price were $3.39 per MMBTU ¹ in 2025 as compared to $2.13 per MMBTU ² in 2024, and oil prices based on West Texas Intermediate Light Sweet Crude first-of-the-month prices averaged $65.34 per barrel ³ in 2025 as compared to $75.48 per barrel ⁴ in 2024. The borrowing base under the company's revolving credit facility is currently $115 million ⁵, and it may be reduced as a result of lower commodity prices, declines in reserves, or other factors, which could limit the company's ability to borrow and require repayment of indebtedness in excess of the redetermined borrowing base. The company's reserve estimates are inherently uncertain, and any material inaccuracies could cause the quantities and net present value of reserves to be overstated; as of December 31, 2025, the standardized measure of discounted future net cash flows was $226.183 million ⁶, compared to $273.045 million ⁷ as of December 31, 2024. The company faces significant environmental and regulatory risks, including potential changes in laws and regulations regarding hydraulic fracturing, greenhouse gas emissions, and endangered species protection, which could result in increased costs, operational delays, or restrictions on development activities.

Management's message emphasizes maintaining a strong balance sheet and ample liquidity as key components of the business strategy, with a plan to continue focusing on preserving financial flexibility and liquidity while managing the risks facing the industry. The capital budget for 2026 is reflective of current commodity prices and has been established based on an expectation of available cash flows, with any cash flow deficiencies expected to be funded by borrowings under the revolving credit facility. Management states that as it has done historically to preserve or enhance liquidity, it may adjust its capital program throughout the year, divest non-strategic assets, or enter into strategic joint ventures. The strategic priorities emphasized for the period ahead include responsible development of oil and gas reserves predominantly through horizontal drilling, targeting reservoirs with high initial production rates and cash flow as well as those with lower initial production rates but higher expected return on investment, and continuing the stock repurchase program which has meaningfully reduced shares outstanding from approximately 7.6 million shares in 1987 to approximately 1.6 million shares currently, contributing significantly to long-term per-share value creation.