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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________
 FORM 10-Q
______________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              
 Commission file number: 1-13283
rocc-20220331_g1.jpg
RANGER OIL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 23-1184320
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
16285 Park Ten Place, Suite 500
Houston, TX 77084
(Address of principal executive offices) (Zip Code)
(713722-6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 Par ValueROCCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 28, 2022, there were 43,712,392 shares of common stock outstanding, including 21,163,394 shares of Class A Common Stock and 22,548,998 shares of Class B Common Stock.



RANGER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
 For the Quarterly Period Ended March 31, 2022
 Table of Contents
 Page
 
 
 
 
 
 
 



Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
(in thousands, except per share data) 
Three Months Ended March 31,
 20222021
Revenues and other
Crude oil$226,732 $81,913 
Natural gas liquids16,740 3,562 
Natural gas12,127 2,833 
Other operating income, net856 247 
Total revenues and other256,455 88,555 
Operating expenses
Lease operating18,102 8,825 
Gathering, processing and transportation9,040 4,674 
Production and ad valorem taxes13,140 5,513 
General and administrative9,779 13,177 
Depreciation, depletion and amortization50,893 23,884 
Impairments of oil and gas properties 1,811 
Total operating expenses100,954 57,884 
Operating income155,501 30,671 
Other income (expense)
Interest expense, net of amounts capitalized(10,697)(5,397)
Gain (loss) on extinguishment of debt2,157 (1,231)
Derivative losses(167,887)(44,368)
Other, net76 (6)
Loss before income taxes(20,850)(20,331)
Income tax benefit189 310 
Net loss(20,661)(20,021)
Net loss attributable to Noncontrolling interest10,676 6,449 
Net loss attributable to common shareholders$(9,985)$(13,572)
Net loss per share attributable to common shareholders:
Basic$(0.47)$(0.89)
Diluted$(0.47)$(0.89)
Weighted average shares outstanding – basic21,107 15,263 
Weighted average shares outstanding – diluted21,107 15,263 

See accompanying notes to condensed consolidated financial statements.

3


RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS UNAUDITED
(in thousands) 
 
 Three Months Ended March 31,
 20222021
Net loss$(20,661)$(20,021)
Other comprehensive loss:
Change in pension and postretirement obligations, net of tax 2 
Comprehensive loss(20,661)(20,019)
Net loss attributable to Noncontrolling interest10,676 6,449 
Other comprehensive income attributable to Noncontrolling interest (1)
Comprehensive loss attributable to common shareholders$(9,985)$(13,571)

See accompanying notes to condensed consolidated financial statements.
4


RANGER OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED
(in thousands, except share data)
 March 31, 2022December 31, 2021
Assets  
Current assets  
Cash and cash equivalents$6,358 $23,681 
Accounts receivable, net of allowance for credit losses154,179 118,594 
Derivative assets9,631 11,478 
Prepaid and other current assets15,989 20,998 
Assets held for sale11,400 11,400 
Total current assets197,557 186,151 
Property and equipment, net (full cost method)1,417,715 1,383,348 
Derivative assets2,912 2,092 
Other assets4,636 5,017 
Total assets$1,622,820 $1,576,608 
Liabilities and Equity  
Current liabilities  
Accounts payable and accrued liabilities246,189 214,381 
Derivative liabilities149,008 50,372 
Current portion of long-term debt1,925 4,129 
Total current liabilities397,122 268,882 
Deferred income taxes2,073 2,793 
Derivative liabilities42,620 23,815 
Other non-current liabilities9,900 10,358 
Long-term debt, net521,780 601,252 
Commitments and contingencies (Note 11)
Equity  
Preferred stock of $0.01 par value – 5,000,000 shares authorized; none issued as of March 31, 2022 and December 31, 2021
  
Class A common stock of $0.01 par value – 110,000,000 shares authorized; 21,146,230 and 21,090,259 shares issued as of March 31, 2022 and December 31, 2021, respectively
729 729 
Class B common stock of $0.01 par value – 30,000,000 shares authorized; 22,548,998 shares issued as of March 31, 2022 and December 31, 2021
2 2 
Paid-in capital273,807 273,329 
Retained earnings39,598 49,583 
Accumulated other comprehensive loss(111)(111)
Ranger Oil shareholders’ equity314,025 323,532 
Noncontrolling interest335,300 345,976 
Total equity649,325 669,508 
Total liabilities and equity$1,622,820 $1,576,608 

See accompanying notes to condensed consolidated financial statements.
5


RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(in thousands)
 Three Months Ended March 31,
 20222021
Cash flows from operating activities  
Net loss$(20,661)$(20,021)
Adjustments to reconcile net loss to net cash provided by operating activities: 
(Gain) loss on extinguishment of debt(2,157)1,231 
Depreciation, depletion and amortization50,893 23,884 
Impairments of oil and gas properties 1,811 
Derivative contracts:
Net losses167,887 44,368 
Cash settlements and premiums paid, net(29,408)(7,169)
Deferred income tax benefit(721)(310)
Non-cash interest expense800 611 
Share-based compensation 924 2,246 
Other, net(182)2 
Changes in operating assets and liabilities, net(33,540)(13,966)
Net cash provided by operating activities133,835 32,687 
Cash flows from investing activities  
Capital expenditures(71,173)(34,758)
Proceeds from sales of assets, net656 4 
Net cash used in investing activities(70,517)(34,754)
Cash flows from financing activities  
Proceeds from credit facility borrowings50,000  
Repayments of credit facility borrowings(130,000)(85,500)
Repayments of second lien term loan (53,140)
Repayments of acquired debt(83) 
Proceeds from redeemable common units 151,160 
Proceeds from redeemable preferred stock 2 
Transaction costs paid on behalf of Noncontrolling interest (5,543)
Issuance costs paid for Noncontrolling interest securities (3,758)
Withholding taxes for share-based compensation(445)(476)
Debt issuance costs paid(113)(1,830)
Net cash provided by (used in) financing activities(80,641)915 
Net decrease in cash and cash equivalents(17,323)(1,152)
Cash and cash equivalents – beginning of period23,681 13,020 
Cash and cash equivalents – end of period$6,358 $11,868 
Supplemental disclosures:  
Cash paid for:  
Interest, net of amounts capitalized$20,214 $4,888 
Non-cash investing and financing activities:
Changes in property and equipment related to capital contributions$ $(38,415)
Changes in accrued liabilities related to capital expenditures$9,361 $20,246 
 
See accompanying notes to condensed consolidated financial statements.
6


RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - UNAUDITED
(in thousands)
Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling interestTotal Equity
Balance as of December 31, 2021$ $731 $273,329 $49,583 $(111)$345,976 $669,508 
Net loss— — — (9,985)— (10,676)(20,661)
All other changes 1
— — 478 — — — 478 
Balance as of March 31, 2022$ $731 $273,807 $39,598 $(111)$335,300 $649,325 
_______________________
1     Includes equity-classified share-based compensation of $0.9 million during the three months ended March 31, 2022. During the three months ended March 31, 2022, 69,206 of common stock were issued in connection with the vesting of certain time-vested restricted stock units (“RSUs”), net of shares withheld for income taxes. No shares of common stock were issued in connection with the vesting of performance-based restricted stock units (“PRSUs”) during the three months ended March 31, 2022.

Preferred StockCommon StockPaid-in CapitalRetained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive LossNoncontrolling interestTotal Equity
Balance as of December 31, 2020$ $152 $203,463 $9,354 $(131)$ 212,838 
Net loss— — — (13,572)— (6,449)(20,021)
Issuance of preferred stock2 — — — — — 2 
Issuance of Noncontrolling interest
— — (50,068)— — 229,620 179,552 
All other changes 1
— 1 1,769 — 1 1 1,772 
Balance as of March 31, 2021$2 $153 $155,164 $(4,218)$(130)$223,172 $374,143 
_______________________
1 Includes equity-classified share-based compensation of $2.2 million during the three months ended March 31, 2021. During the three months ended March 31, 2021, 102,586 and 6,800 shares of common stock were issued in connection with the vesting of certain RSUs and PRSUs, net of shares withheld for income taxes, respectively.

See accompanying notes to condensed consolidated financial statements.

7


RANGER OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
For the Quarterly Period Ended March 31, 2022
(in thousands, except per share amounts or where otherwise indicated)

Note 1 – Organization and Description of Business
Ranger Oil Corporation (together with its consolidated subsidiaries, unless the context otherwise requires, “Ranger Oil,” the “Company,” “we,” “us” or “our”) is an independent oil and gas company focused on the onshore development and production of oil, natural gas liquids (“NGLs”) and natural gas. Our current operations consist of drilling unconventional horizontal development wells and operating our producing wells in the Eagle Ford Shale (the “Eagle Ford”) in South Texas. We operate in and report our financial results and disclosures as one segment, which is the development and production of crude oil, NGLs and natural gas.
On January 15, 2021, the Company consummated the transactions (collectively, the “Juniper Transactions”) contemplated by: (i) the Contribution Agreement, dated November 2, 2020, by and among the Company, PV Energy Holdings, L.P. (the “Partnership”) and JSTX Holdings, LLC (“JSTX”), an affiliate of Juniper Capital Advisors, L.P. (“Juniper Capital” and, together with JSTX and Rocky Creek Resources, LLC, “Juniper”); and (ii) the Contribution Agreement, dated November 2, 2020, by and among Rocky Creek Resources, LLC, an affiliate of Juniper Capital, the Company and the Partnership pursuant to which Juniper contributed $150 million in cash and certain oil and gas assets in South Texas in exchange for equity that entitles Juniper to both vote and share in any dividend on the same basis as 22,548,998 shares of our Class A Common Stock, par value $0.01 per share (“Class A Common Stock”) (after post-closing adjustments). In connection with the consummation of the Juniper Transactions, the Company completed a reorganization into an up-C structure which was intended to, among other things, result in the affiliates of Juniper Capital having a voting interest in the Company that is commensurate with such holders’ economic interest in the Partnership.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
Our unaudited condensed consolidated financial statements include the accounts of Ranger Oil and all of our subsidiaries as of the relevant dates. Intercompany balances and transactions have been eliminated. A substantial noncontrolling interest in our subsidiaries is provided for in our condensed consolidated statements of operations and comprehensive loss and our condensed consolidated balance sheets for the periods presented. Our condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities Exchange Commission (the “SEC”). Preparation of these statements involves the use of estimates and judgments where appropriate. In the opinion of management, all adjustments considered necessary for a fair presentation of our condensed consolidated financial statements have been included. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications did not have a material impact on prior period financial statements. Our condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.
Significant Accounting Policies
The Company’s significant accounting policies are described in “Note 3 – Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”) and are supplemented by the notes included in this Quarterly Report on Form 10-Q. The financial statements and related notes included in this report should be read in conjunction with the Company’s 2021 Annual Report.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Issued Accounting Pronouncements Not Yet Adopted
In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, Business Combinations (Topic 805): (“ASU 2021-08”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 amends Topic 805 to require the acquirer in a business combination to record contract assets and contract liabilities in accordance with Revenue from Contracts with Customers (Topic 606) at acquisition as if it had originated the contract, rather than at fair value. This update is effective for public companies beginning after December 15, 2022, with early adoption permitted. Adoption should be applied prospectively to business combinations occurring on or after the effective date of the amendments unless early adoption occurs during an interim period in which other application rules apply. We do not expect the adoption of this update to have a material impact to our financial statements.
8


Note 3 – Acquisition
Acquisition of Lonestar Resources
On October 5, 2021 (the “Closing Date”), the Company acquired Lonestar Resources US Inc., a Delaware corporation (“Lonestar”), as a result of which Lonestar and its subsidiaries became wholly-owned subsidiaries of the Company (the “Lonestar Acquisition”). The Lonestar Acquisition was effected pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated July 10, 2021, by and between the Company and Lonestar. In accordance with the terms of the Merger Agreement, Lonestar shareholders received 0.51 shares of the Company’s common stock for each share of Lonestar common stock held immediately prior to the effective time of the Lonestar Acquisition. Based on the closing price of the Company’s common stock on October 5, 2021 of $30.19, and in connection with the Lonestar Acquisition, the total value of the Company’s common stock issued to holders of Lonestar common stock, warrants and restricted stock units as applicable, was approximately $173.6 million.
The Lonestar Acquisition constituted a business combination and was accounted for using the acquisition method of accounting, with Ranger Oil being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of Lonestar and its subsidiaries were recorded at their respective preliminary fair values as of the date of completion of the Lonestar Acquisition. Although the purchase price allocation is substantially complete as of March 31, 2022, there may be further adjustments to oil and gas properties as we continue to gather information related to the evaluation of certain properties. We will finalize these amounts within one year subsequent to the closing date of the Lonestar Acquisition. During the three months ended March 31, 2022, there were no changes to the allocation presented in the 2021 Form 10-K.
We expensed $1.7 million in acquisition-related costs for the three months ended March 31, 2022 related to employee severance and change-in-control compensation costs and other integration related costs.
Pro Forma Operating Results (Unaudited)
The following unaudited pro forma condensed financial data for the three months ended March 31, 2021 was derived from the historical financial statements of the Company giving effect to the Lonestar Acquisition, as if it had occurred on January 1, 2020.
Three Months Ended March 31, 2021
Total revenues$128,371 
Net income (loss) attributable to common shareholders$(23,850)
Note 4 – Revenue Recognition
Revenue from Contracts with Customers
Crude oil. We sell our crude oil production to our customers at either the wellhead or a contractually agreed-upon delivery point, including certain regional central delivery point terminals or pipeline inter-connections. We recognize revenue when control transfers to the customer considering factors associated with custody, title, risk of loss and other contractual provisions as appropriate. Pricing is based on a market index with adjustments for product quality, location differentials and, if applicable, deductions for intermediate transportation. Costs incurred by us for gathering and transporting the products to an agreed-upon delivery point are recognized as a component of gathering, processing and transportation expense (“GPT”) in our condensed consolidated statements of operations.
NGLs. We have natural gas processing contracts in place with certain midstream processing vendors. We deliver “wet” natural gas to our midstream processing vendors at the inlet of their processing facilities through gathering lines, certain of which we own and others which are owned by gathering service providers. Subsequent to processing, NGLs are delivered or transported to a third-party customer. Depending upon the nature of the contractual arrangements with the midstream processing vendors regarding the marketing of the NGL products, we recognize revenue for NGL products on either a gross or net basis. For those contracts where we have determined that we are the principal, and the ultimate third party is our customer, we recognize revenue on a gross basis, with associated processing costs presented as GPT expenses. For those contracts where we have determined that we are the agent and the midstream processing vendor is our customer, we recognize NGL product revenues on a net basis with processing costs presented as a reduction of revenue.
Natural gas. Subsequent to the processing of “wet” natural gas and the separation of NGL products, the “dry” or residue gas is purchased by the processor or delivered to us at the tailgate of the midstream processing vendors’ facilities and sold to a third-party customer. We recognize revenue when control transfers to the customer considering factors associated with custody, title, risk of loss and other contractual provisions as appropriate. Pricing is based on a market index with adjustments for product quality and location differentials, as applicable. Costs incurred by us for gathering and transportation from the wellhead through the processing facilities are recognized as a component of GPT in our condensed consolidated statements of operations.

9


Performance obligations
We record revenue in the month that our oil and gas production is delivered to our customers. However, the collection of revenues from oil and gas production may take up to 60 days following the month of production. Therefore, we make accruals for revenues and accounts receivable based on estimates of our share of production sold. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized.
We apply a practical expedient which provides for an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. Under our commodity product sales contracts, we bill our customers and recognize revenue when our performance obligations have been satisfied. At that time, we have determined that payment is unconditional. Accordingly, our commodity sales contracts do not create contract assets or liabilities.
Accounts Receivable from Contracts with Customers
Our accounts receivable consists mainly of trade receivables from commodity sales and joint interest billings due from partners on properties we operate. Our allowance for credit losses is entirely attributable to receivables from joint interest partners. We generally have the right to withhold future revenue distributions to recover past due receivables from joint interest owners. Generally, our oil, natural gas, and NGL receivables are collected within 30 to 90 days. The following table summarizes our accounts receivable by type as of the dates presented:
 March 31, 2022December 31, 2021
Customers$132,760 $96,195 
Joint interest partners21,518 21,755 
Derivative settlements from counterparties55 1,037 
Other275 18 
Total154,608 119,005 
Less: Allowance for credit losses(429)(411)
Accounts receivable, net of allowance for credit losses$154,179 $118,594 
Note 5 – Derivative Instruments
We utilize derivative instruments, typically swaps, put options and call options which are placed with financial institutions that we believe are acceptable credit risks, to mitigate our financial exposure to commodity price volatility associated with anticipated sales of our future production and volatility in interest rates attributable to our variable rate debt instruments. Our derivative instruments are not formally designated as hedges for accounting purposes. While the use of derivative instruments limits the risk of adverse commodity price and interest rate movements, such use may also limit the beneficial impact of future product revenues and interest expense from favorable commodity price and interest rate movements. From time to time, we may enter into incremental derivative contracts in order to increase the notional volume of production we are hedging, restructure existing derivative contracts or enter into other derivative contracts resulting in modification to the terms of existing contracts. In accordance with our internal policies, we do not utilize derivative instruments for speculative purposes.
For our commodity derivatives, we typically combine swaps, purchased put options, purchased call options, sold put options and sold call options in order to achieve various hedging objectives. Certain of these objectives result in combinations that operate as collars which include purchased put options and sold call options, three-way collars, which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap, among others.
10


Commodity Derivatives 1
The following table sets forth our commodity derivative positions, presented on a net basis by period of maturity, as of March 31, 2022:
2Q20223Q20224Q20221Q20232Q20233Q20234Q20231Q20242Q2024
NYMEX WTI Crude Swaps
Average Volume Per Day (bbl)3,000 3,000 3,000 2,500 2,400 2,807 2,657 462 462
Weighted Average Swap Price ($/bbl)$74.12 $73.01 $69.20 $54.40 $54.26 $54.92 $54.93 $58.75 $58.75
NYMEX WTI Crude Collars
Average Volume Per Day (bbl)17,720 14,266 9,375 6,250 6,181 1,630 1,630 
Weighted Average Purchased Put Price ($/bbl)$59.12 $57.14 $52.17 $50.67 $50.67 $60.00 $60.00 
Weighted Average Sold Call Price ($/bbl)$77.01 $81.13 $67.57 $65.65 $65.65 $76.12 $76.12 
NYMEX WTI Crude CMA Roll Basis Swaps
Average Volume Per Day (bbl)20,879 14,674 14,674 
Weighted Average Swap Price ($/bbl)$1.120 $1.172 $1.172 
NYMEX HH Swaps
Average Volume Per Day (MMBtu)12,500 12,500 12,500 10,000 7,500 
Weighted Average Swap Price ($/MMBtu)$3.727 $3.745 $3.793 $3.620 $3.690 
NYMEX HH Collars
Average Volume Per Day (MMBtu)13,187 13,043 13,043 11,538 11,413 11,413 11,538 11,538 
Weighted Average Purchased Put Price ($/MMBtu)$2.500 $2.500 $2.500 $2.500 $2.500 $2.500 $2.500 $2.328 
Weighted Average Sold Call Price($/MMBtu)$3.220 $3.220 $3.220 $2.682 $2.682 $2.682 $3.650 $3.000 
OPIS Mt Belv Ethane Swaps
Average Volume per Day (gal)28,022 27,717 27,717 98,901 34,239 34,239 34,615 
Weighted Average Fixed Price ($/gal)$0.2500 $0.2500 $0.2500 $0.2288 $0.2275 $0.2275 $0.2275 
_______________________
1    NYMEX WTI refers to New York Mercantile Exchange West Texas Intermediate that serves as the benchmark for crude oil. NYMEX HH refers to NYMEX Henry Hub that serves as the benchmark for natural gas. OPIS Mt Belv refers to Oil Price Information Service Mt. Belvieu that serves as the benchmark for ethane which represents a commodity proxy for NGLs.
Interest Rate Derivatives
As of March 31, 2022, we had a series of interest rate swap contracts (the “Interest Rate Swaps”) establishing fixed interest rates on a portion of our variable interest rate indebtedness. The notional amount of the Interest Rate Swaps totals $300 million, with us paying a weighted average fixed rate of 1.36% on the notional amount, and the counterparties paying a variable rate equal to LIBOR through May 2022.
Financial Statement Impact of Derivatives
The impact of our derivative activities on income is included within Derivatives on our condensed consolidated statements of operations. Derivative contracts that have expired at the end of a period, but for which cash had not been received or paid as of the balance sheet date, have been recognized as components of Accounts receivable (see Note 4) and Accounts payable and accrued liabilities (see Note 9) on the condensed consolidated balance sheets. The effects of derivative gains and (losses) and cash settlements are reported as adjustments to reconcile net loss to net cash provided by operating activities. These items are recorded within the Derivative contracts section of our condensed consolidated statements of cash flows under Net losses and Cash settlements and premiums paid, net.
11


The following table summarizes the effects of our derivative activities for the periods presented:
Three Months Ended March 31,
 20222021
Interest Rate Swap gains recognized in the condensed consolidated statements of operations$83 $32 
Commodity losses recognized in the condensed consolidated statements of operations(167,970)(44,400)
$(167,887)$(44,368)
Interest rate cash settlements recognized in the condensed consolidated statements of cash flows$(938)$(922)
Commodity cash settlements and premiums paid recognized in the condensed consolidated statements of cash flows(28,470)(6,247)
$(29,408)$(7,169)
The following table summarizes the fair values of our derivative instruments, which we elect to present on a gross basis, as well as the locations of these instruments on our condensed consolidated balance sheets as of the dates presented:
Fair Values
  March 31, 2022December 31, 2021
  DerivativeDerivativeDerivativeDerivative
TypeBalance Sheet LocationAssetsLiabilitiesAssetsLiabilities
Interest rate contractsDerivative assets/liabilities – current$ $458 $ $1,480 
Commodity contractsDerivative assets/liabilities – current9,631 148,550 11,478 48,892 
Interest rate contractsDerivative assets/liabilities – non-current    
Commodity contractsDerivative assets/liabilities – non-current2,912 42,620 2,092 23,815 
  $12,543 $191,628 $13,570 $74,187 
As of March 31, 2022, we reported net commodity derivative liabilities of $178.6 million and net Interest Rate Swap liabilities of $0.5 million. The contracts associated with these positions are with eight counterparties for commodity derivatives and four counterparties for Interest Rate Swaps, all of which are investment grade financial institutions and are participants in our revolving credit facility (the “Credit Facility”). This concentration may impact our overall credit risk in that these counterparties may be similarly affected by changes in economic or other conditions. Non-performance risk is incorporated by utilizing discount rates adjusted for the credit risk of our counterparties if the derivative is in an asset position, and our own credit risk if the derivative is in a liability position.
The agreements underlying our derivative instruments include provisions for the netting of settlements with the counterparties for contracts of similar type. We have neither paid to, nor received from, our counterparties any cash collateral in connection with our derivative positions. Furthermore, our derivative contracts are not subject to margin calls or similar accelerations. No significant uncertainties exist related to the collectability of amounts that may be owed to us by these counterparties.
See Note 10 for information regarding the fair value of our derivative instruments.
Note 6 – Property and Equipment
The following table summarizes our property and equipment as of the dates presented: 
 March 31, 2022December 31, 2021
Oil and gas properties:  
Proved$2,412,399 $2,327,686 
Unproved58,686 57,900 
Total oil and gas properties2,471,085 2,385,586 
Other property and equipment 1
31,060 31,055 
Total properties and equipment2,502,145 2,416,641 
Accumulated depreciation, depletion, amortization and impairments(1,084,430)(1,033,293)
Total property and equipment, net$1,417,715 $1,383,348 
_______________________
1     Excludes the corporate office building and related assets acquired in connection with the Lonestar Acquisition that were classified as Assets held for sale on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
12


Unproved property costs of $58.7 million and $57.9 million have been excluded from amortization as of March 31, 2022 and December 31, 2021, respectively. We transferred $0.7 million and $7.6 million of undeveloped leasehold costs, including capitalized interest, associated with proved undeveloped reserves, acreage unlikely to be drilled or expiring acreage, from unproved properties to the full cost pool during the three months ended March 31, 2022 and 2021, respectively. We capitalized internal costs of $1.4 million and $0.7 million and interest of $1.1 million and $0.8 million during the three months ended March 31, 2022 and 2021, respectively, in accordance with our accounting policies. Average depreciation, depletion and amortization per barrel of oil equivalent of proved oil and gas properties was $14.98 and $12.92 for the three months ended March 31, 2022 and 2021, respectively.
At the end of each quarterly reporting period, the unamortized cost of our oil and gas properties, net of deferred income taxes, is limited to the sum of the estimated after-tax discounted future net revenues from proved properties adjusted for costs excluded from amortization (the “Ceiling Test”). Beginning in early 2020, certain events such as the COVID-19 pandemic and the decisions by the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (together with OPEC, collectively “OPEC+”) negatively impacted the oil and gas industry with significant declines in crude oil prices and oversupply of crude oil. Over the past year, however, increased mobility, deployment of vaccines and other factors have resulted in increased oil demand and commodity prices. A high level of uncertainty remains regarding the volatility of energy supply and demand as a result of OPEC’s continued strategy to increase production as well as the Russia-Ukraine conflict and related sanctions which began in the first quarter of 2022. WTI crude oil prices have surged, closing at over $120 per bbl during first quarter 2022 due to concerns that it might result in significant oil supply shortages. Because the Ceiling Test utilizes commodity prices based on a trailing 12 month average, the decline in commodity prices in the first quarter of 2021 as a result of COVID-19 and macroeconomic factors resulted in impairments of our oil and gas properties of $1.8 million during the three months ended March 31, 2021. We did not record any impairments of our oil and gas properties during the three months ended March 31, 2022.
Note 7 – Long-Term Debt
The following table summarizes our debt obligations as of the dates presented:
March 31, 2022December 31, 2021
Credit Facility $128,000 $208,000 
9.25% Senior Notes due 2026
400,000 400,000 
Mortgage debt 1
8,391 8,438 
Other 2
322 2,516 
Total536,713 618,954 
Less: Unamortized discount 3
(3,560)(3,720)
Less: Unamortized deferred issuance costs 3, 4
(9,448)(9,853)
Total, net$523,705 $605,381 
Less: Current portion(1,925)(4,129)
Long-term debt$521,780 $601,252 
_______________________
1     The mortgage debt relates to the corporate office building and related assets acquired in connection with the Lonestar Acquisition for which assets are held as collateral for such debt. As of March 31, 2022 and December 31, 2021, these assets met the held for sale criteria and were classified as Assets held for sale on the condensed consolidated balance sheets.
2     Other debt of $2.2 million was extinguished during the three months ended March 31, 2022 and recorded as a gain on extinguishment of debt.
3     The discount and issuance costs of the 9.25% Senior Notes due 2026 are being amortized over its respective term using the effective-interest method.
4     Excludes issuance costs associated with the Credit Facility, which represents costs attributable to the access to credit over its contractual term, that have been presented as a component of Other assets (see Note 9) and are being amortized over the term of the Credit Facility using the straight-line method.
Credit Facility
As of March 31, 2022, the Credit Facility had a $1.0 billion revolving commitment and a $725 million borrowing base with aggregate elected commitments of $400 million, and a $25 million sublimit for the issuance of letters of credit. Availability under the Credit Facility may not exceed the lesser of the aggregate elected commitments or the borrowing base less outstanding advances and letters of credit. The borrowing base under the Credit Facility is redetermined semi-annually, generally in the Spring and Fall of each year. Our next borrowing base redetermination is scheduled in May 2022. Additionally, we and the Credit Facility lenders may, upon request, initiate a redetermination at any time during the six-month period between scheduled redeterminations. The Credit Facility is available to us for general corporate purposes, including working capital.

13


The outstanding borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin ranging from 1.50% to 2.50%, determined based on the utilization level under the Credit Facility or (b) a Eurodollar rate, including LIBOR through 2023, plus an applicable margin ranging from 2.50% to 3.50%, determined based on the utilization level under the Credit Facility. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings is payable every one, three or six months, at the election of the borrower, and is computed on the basis of a year of 360 days. As of March 31, 2022, the actual weighted-average interest rate on the outstanding borrowings under the Credit Facility was 3.02%. Unused commitment fees are charged at a rate of 0.50%.
The Credit Facility requires us to maintain (1) a minimum current ratio (as defined in the Credit Facility, which considers the unused portion of the total commitment as a current asset), measured as of the last day of each fiscal quarter of 1.00 to 1.00 and (2) a maximum leverage ratio (consolidated indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter of 3.50 to 1.00.
The Credit Facility also contains other customary affirmative and negative covenants as well as events of default and remedies. If we do not comply with the financial and other covenants in the Credit Facility, the lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility.
As of March 31, 2022, we had $128.0 million in outstanding borrowings and $0.7 million in outstanding letters of credit under the Credit Facility. Factoring in the outstanding letters of credit, we had $271.3 million of availability under the Credit Facility as of March 31, 2022. During the three months ended March 31, 2021, we incurred and capitalized approximately $0.4 million of issue costs associated with amendments to the Credit Facility.
9.25% Senior Notes due 2026
On August 10, 2021, our indirect, wholly-owned subsidiary Penn Virginia Escrow LLC (the “Escrow Issuer”) completed an offering of $400 million aggregate principal amount of senior unsecured notes due 2026 (the “9.25% Senior Notes due 2026”) that bear interest at 9.25% and were sold at 99.018% of par. Obligations under the 9.25% Senior Notes due 2026 were assumed by Penn Virginia Holdings, LLC (“Holdings”), as borrower, and are guaranteed by the subsidiaries of Holdings that guarantee the Credit Facility.
Interest on the 9.25% Senior Notes due 2026 is payable semi-annually in arrears on February 15 and August 15 of each year. We may redeem the 9.25% Senior Notes due 2026 at any time in whole or in part from time to time in part at specified redemption prices.
The indenture governing the 9.25% Senior Notes due 2026 also contains other customary affirmative and negative covenants as well as events of default and remedies.
As of March 31, 2022, we were in compliance with all debt covenants.
Note 8 – Income Taxes
The income tax provision resulted in a benefit of $0.2 million for the three months ended March 31, 2022. The federal portion was fully offset by an adjustment to the valuation allowance against our net deferred tax assets resulting in an effective tax rate of 0.9%, which is fully attributable to the State of Texas. Our net deferred income tax liability balance of $2.1 million as of March 31, 2022 is also fully attributable to the State of Texas and primarily related to property.
The income tax provision resulted in a benefit of $0.3 million for the three months ended March 31, 2021. The federal portion was fully offset by an adjustment to the valuation allowance against our net deferred tax assets resulting in an effective tax rate of 1.5%, which is fully attributable to the State of Texas.
We had no liability for unrecognized tax benefits as of March 31, 2022 and December 31, 2021. There were no interest and penalty charges recognized during the three months ended March 31, 2022 and 2021. Tax years from 2017 forward remain open to examination by the major taxing jurisdictions to which the Company is subject; however, net operating losses originating in prior years are subject to examination when utilized.
14


Note 9 – Supplemental Balance Sheet Detail
The following table summarizes components of selected balance sheet accounts as of the dates presented:
 March 31, 2022December 31, 2021
Prepaid and other current assets:  
Inventories 1
$13,025 $10,305 
Prepaid expenses 2
2,964 10,693 
 $15,989 $20,998 
Other assets:  
Deferred issuance costs of the Credit Facility, net of amortization$3,138 $3,308 
Right-of-use assets – operating leases1,498 1,671 
Other  38 
 $4,636 $5,017 
Accounts payable and accrued liabilities:  
Trade accounts payable $32,463 $32,452 
Drilling and other lease operating costs47,103 35,045 
Revenue and royalties payable110,493 95,521 
Production, ad valorem and other taxes12,224 7,905 
Derivative settlements to counterparties25,146 6,117 
Compensation and benefits7,957 13,942 
Interest 5,003 15,321 
Environmental remediation liability 3
2,277 2,287 
Current operating lease obligations891 914 
Other 2,632 4,877 
 $246,189 $214,381 
Other non-current liabilities:  
Asset retirement obligations$8,186 $8,413 
Non-current operating lease obligations755 975 
Postretirement benefit plan obligations959 970 
 $9,900 $10,358 
_______________________
1    Includes tubular inventory and well materials of $12.2 million and $9.5 million and crude oil volumes in storage of $0.8 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively.
2 The balances as of March 31, 2022 and December 31, 2021 include $0.6 million and $9.6 million, respectively, for the prepayment of drilling and completion materials and services.
3 The balance as of March 31, 2022 and December 31, 2021 represents estimated costs associated with remediation activities for certain wells and tanks acquired as part of the Lonestar Acquisition.
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Note 10 – Fair Value Measurements
We apply the authoritative accounting provisions included in GAAP for measuring the fair value of both our financial and nonfinancial assets and liabilities. Fair value is an exit price representing the expected amount we would receive upon the sale of an asset or that we would expect to pay to transfer a liability in an orderly transaction with market participants at the measurement date.
Our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term maturities. As of March 31, 2022 and December 31, 2021, the carrying values of the borrowings outstanding under our credit facilities approximate fair value as the borrowings bear interest at variables rates tied to current market rates and the applicable margins represent market rates. The fair value of our fixed rate 9.25% Senior Notes due 2026 is estimated based on the published market prices for issuances of similar risk and tenor and is categorized as Level 2 within the fair value hierarchy. As of March 31, 2022, the carrying amount and estimated fair value of total debt (before amortization of issuance costs) was $536.7 million and $559.4 million, respectively. As of December 31, 2021, the carrying amount and estimated fair value of total debt (before amortization of issuance costs) was $619.0 million and $634.6 million.
Recurring Fair Value Measurements
The fair values of our derivative instruments are measured at fair value on a recurring basis on our condensed consolidated balance sheets. The following tables summarize the valuation of those assets and (liabilities) as of the dates presented:
 As of March 31, 2022
Level 1Level 2Level 3Total
Financial assets:   
Commodity derivative assets – current$ $9,631 $ $9,631 
Commodity derivative assets – non-current 2,912  2,912 
Total financial assets$ $12,543 $ $12,543 
Financial liabilities:   
Interest rate swap liabilities – current$ $(458)$ $(458)
Commodity derivative liabilities – current (148,550) (148,550)
Commodity derivative liabilities – non-current (42,620) (42,620)
Total financial liabilities$ $(191,628)$ $(191,628)
 As of December 31, 2021
Level 1Level 2Level 3Total
Financial assets:   
Commodity derivative assets – current$ $11,478 $ $11,478 
Commodity derivative assets – non-current 2,092  2,092 
Total financial assets$ $13,570 $ $13,570 
Financial liabilities:   
Interest rate swap liabilities – current$ $(1,480)$ $(1,480)
Commodity derivative liabilities – current (48,892) (48,892)
Commodity derivative liabilities – non-current (23,815) (23,815)
Total financial liabilities$ $(74,187)$ $(74,187)
We used the following methods and assumptions to estimate fair values for the financial assets and liabilities described below:
Commodity derivatives: We determine the fair values of our commodity derivative instruments using industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, implied volatilities, time value and non-performance risk. For the current market prices, we use third-party quoted forward prices, as applicable, for NYMEX WTI, MEH crude oil, NYMEX HH natural gas and OPIS Mt Belv Ethane natural gas liquids closing prices as of the end of the reporting periods. Each of these is a Level 2 input.
Interest rate swaps: We determine the fair values of our interest rate swaps using an income approach valuation technique which discounts future cash flows back to a single present value. We estimate the fair value of the swaps based on published interest rate yield curves as of the date of the estimate. Each of these is a Level 2 input.
Non-performance risk is incorporated by utilizing discount rates adjusted for the credit risk of our counterparties if the derivative is in an asset position, and our own credit risk if the derivative is in a liability position. See Note 5 for additional details on our derivative instruments.
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Non-Recurring Fair Value Measurements
The most significant non-recurring fair value measurements utilized in the preparation of our condensed consolidated financial statements are those attributable to the initial determination of AROs associated with the ongoing development of new oil and gas properties and certain share-based compensation awards. The determination of the fair value of AROs is based upon regional market and facility specific information. The amount of an ARO and the costs capitalized represent the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor after discounting the future cost back to the date that the abandonment obligation was incurred using a rate commensurate with the risk, which approximates our cost of funds. Because these significant fair value inputs are typically not observable, we have categorized the initial estimates as Level 3 inputs.
Note 11 – Commitments and Contingencies
Drilling and Completion Commitments
As of March 31, 2022, we have a one year contract for one drilling rig and a contractual commitment on a pad-to-pad basis for one other drilling rig.
Gathering and Intermediate Transportation Commitments
We have long-term agreements that provide us with field gathering and intermediate pipeline transportation services for a majority of our crude oil and condensate production in Lavaca and Gonzales Counties, Texas. We also have volume capacity support for certain downstream interstate pipeline transportation. The following table provides details on these contractual arrangements as of March 31, 2022:
Description of contractual arrangementExpiration
of Contractual Arrangement
Minimum Volume
Commitment (MVC)
(bbl/d)
Expiration of Minimum Volume Commitment (MVC)
Field gathering agreementFebruary 20418,000February 2031
Intermediate pipeline transportation servicesFebruary 20268,000February 2026
Volume capacity supportApril 20268,000April 2026
Each of these arrangements also contain an obligation to deliver the first