ALPINE SUMMIT ENERGY PARTNERS, INC. - Annual Report: 2022 (Form 10-K)

ALPINE SUMMIT ENERGY PARNTERS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report contains certain "forward-looking information" and "forward-looking statements" (together, "forward-looking statements"), including management's assessment of Alpine Summit Energy Partner, Inc.'s (the "Company" or "Alpine Summit") future plans and operations specifically in relation to the remainder of 2023 and 2024. Such forward-looking statements are generally identifiable by words such as "anticipate", "believe", "intend", "plan", "expect", "schedule", "indicate", "focus", "outlook", "propose", "target", "objective", "priority", "strategy", "estimate", "budget", "forecast", "would", "could", "will", "may", "future" or other similar words or expressions and include forward-looking statements relating to or associated with individual wells, facilities, regions or projects as well as timing of any future event which may have an effect on the Company's operations and financial position. Forward-looking statements are based on expectations, forecasts, and assumptions made by the Company using information available at the time of the statement and historical trends which includes expectations and assumptions concerning: the accuracy of reserve estimates and valuations; performance characteristics of producing properties; access to third-party infrastructure; government policies and regulation; future production rates; accuracy of estimated capital expenditures; availability and cost of labor and services and owned or third-party infrastructure; royalties; development and execution of projects; the satisfaction by third parties of their obligations to the Company; and the receipt and timing for approvals from regulators and third parties. All statements concerning expectations or projections about the future and statements and information regarding the future business plan or strategy, timing or scheduling, production volumes with splits by commodity, production declines, expected and future activities and capital expenditures, commodity prices, costs, royalties, schedules, operating or financial results, future financing requirements, and the expected effect of future commitments are forward-looking statements.

The forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to:

Oil, natural gas, and NGL pricing are volatile. Low and volatile commodity prices may adversely affect our business, financial condition, or results of operations and our ability to meet our capital expenditure obligations and financial commitments   

When the Company identifies hydrocarbons of sufficient quantity and quality and successfully brings them on stream, it faces a pricing environment which is volatile and subject to a myriad of factors, largely out of the Company's control. Low prices for the Company's expected primary products will have a material effect on the Company's cash flow and profitability and thus re-investment capacity, and hence ultimate growth potential. Low prices also limit access to capital, both equity and debt. The Company in part mitigates the risk of pricing volatility through the use of risk management contracts, such as puts, fixed priced sales, swaps, collars or similar contracts. However, access to such commodity price protection instruments may not be available in future periods, or available only at a cost considered to be uneconomic.

Lower commodity prices may disrupt the production of crude oil, natural gas, and NGL reserves at an acceptable level of profitability

Production of crude oil, natural gas, and NGL reserves at an acceptable level of profitability may not be possible during periods of low commodity prices. The Company will attempt to mitigate this risk by focusing on higher netback opportunities and will act as operator where possible, thus allowing the Company to manage costs, timing, method and marketing of production. Production risk is also addressed by concentrating field activity in regions where infrastructure is or will be readily accessible at an acceptable cost. In periods of low commodity prices, the Company may shut-in production, either temporarily or permanently, if netbacks are sub-economic.

We may not be able to maintain sufficient capital programs

Capital expenditures are designed to accomplish two main objectives, being the generation of short- and medium-term cash flow from development activities, and expansion of future cash flow from the identification of or further development of reserves and opportunities. The Company focuses its activity in core areas, which allows it to leverage its experience and knowledge, and acts as operator wherever possible. The Company may use farm-outs to minimize risk on plays it considers higher risk or where total capital invested exceeds an acceptable level. In addition, the Company may enter into risk management contracts in support of capital programs, and to manage future debt levels. Generally, capital programs are financed from operating cash flows, disciplined use of debt, development partnerships and occasionally, equity. Failure to develop producing wells or to sell production at a reasonable price and thus maintain an acceptable level of cash flow, will result in the exhaustion of available financial resources and will require the Company to seek additional capital which may not be available, or only available on unacceptable terms, or terms highly dilutive to existing shareholders. In addition, credit availability from the Company's bankers is also necessary to support capital programs and any changes to credit arrangements may have an effect on both the size of the Company's future capital programs and the timing of expenditures. As the banking facility available to the Company is based on future cash flows from existing production, falling commodity prices will likely have an effect on borrowing availability.

We may be unable to secure additional funding in the future to cover working capital and investment needs, which could result, among other things, reduced or delayed capital expenditures   

The Company's operations are highly capital intensive, and the Company anticipates that it will make substantial capital expenditures for the acquisition, development and production of oil, natural gas, and NGL reserves in the future, including in relation to its assets. The Company may therefore require additional funding in the future to cover working capital and investment needs. Should the Company not be able to obtain such funding on favorable terms, or at all, the Company may, inter alia, be forced to reduce or delay capital expenditures, sell assets on unfavorable terms or to restructure or refinance its debt. Failure to obtain funding could also cause the Company to forfeit its interest in certain properties and to miss certain acquisition opportunities. Any of the aforementioned could have a material adverse effect on the Company's business, results of operations, prospects and financial condition.

We may be unable to obtain additional funding in order to carry out our oil, natural gas, and NGL acquisition and development activities   

The Company's cash flow from its reserves may not be sufficient to fund its ongoing activities at all times. From time-to-time, the Company may require additional financing in order to carry out its oil, natural gas, and NGL acquisition and development activities. Failure to obtain such financing on a timely basis could cause the Company to forfeit its interest in certain properties, miss certain acquisition opportunities and reduce or terminate its operations. If the Company's revenues from its reserves decrease as a result of lower oil, natural gas, and NGL pricing or otherwise, it will affect the Company's ability to expend the necessary capital to replace its reserves or to maintain its production. If the Company's cash flow from operations and current cash balance is not sufficient to satisfy its capital expenditure requirements, there can be no assurance that additional debt or equity financing will be available to meet these requirements or available on favorable terms.

Adverse well or reservoir performance could result in reduced corporate volumes and revenues

Changes in productivity in wells and areas developed by the Company could result in termination or limitation of production, or acceleration of decline rates, resulting in reduced overall corporate volumes and revenues. In addition, wells drilled by the Company tend to produce at high initial rates followed by rapid declines until a flattening decline profile emerges. There is a risk that the decline profile which eventually emerges for newly drilled wells is sub-economic.

The Company is exposed to changes in the equity markets, which could result in equity not being available

The Company assesses the sufficiency of its cash flow and borrowing capacity to fund its existing capital budget. Nevertheless, funding is finite and investment must result in production being brought on stream, followed by the generation of cash flow and the identification of proved plus probable reserves. Alpine Summit entered into the credit facility with Goldman Sachs (the "Goldman Facility") in late 2020 and the October 2021 Facility, which was later replaced by the Corporate Credit Facility and the ABS Facility, which were put into place in order to provide the Company with additional working capital flexibility.

Although equity is another source of financing, the Company is exposed to changes in the equity markets, which could result in equity not being available, or only available under conditions which are unacceptably dilutive to existing shareholders. The inability of the Company to develop profitable operations, with the consequent exclusion from debt and equity markets, may result in the Company curtailing or suspending operations.

Periods of high field activity can result in shortages of services, products, equipment, or manpower in many or all of the components of our development cycles

Periods of high field activity can result in shortages of services, products, equipment, or manpower in many or all of the components of the development cycle. Increased demand and inflationary pressures may lead to higher land and service costs during peak activity periods. In addition, access to transportation and processing facilities may be difficult or expensive to secure. The Company's competitors include companies with far greater resources, including access to capital and the ability to secure oilfield services at more favorable prices and to build out operations on a scale which lowers the economic threshold for monetization of a resource. The Company competes by maintaining a large inventory of self-generated development locations, by acting as operator where possible, and through facility access. The Company also seeks to carefully manage key supplier relationships. Declines in commodity prices should, in principle, result in lower service costs; however, this may be offset by service providers choosing to retire equipment rather than operate at sub-optimum prices, or ceasing business altogether.

Our crude oil, natural gas, and NGL development and production activities depend on adequate infrastructure and available drilling equipment   

Crude oil, natural gas, and NGL development and production activities depend, to one degree or another, on adequate infrastructure and the availability of drilling and related equipment in the particular areas where such activities will be conducted. Reliable roads, bridges, power sources, water supply and disposal facilities are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the operations, financial condition and results of operations.  In the past, for example, the Company has had to curtail production to due maintenance issues or equipment damage of our suppliers and marketers.  If the Company is unable to obtain, or unable to obtain without undue cost, drilling rigs, equipment, supplies or personnel, its development and production operations could be delayed or adversely affected. Furthermore, pipeline and trucking operations are subject to uncertainty and lack of availability, due to mechanical and/or social issues. Oil, natural gas, and NGLs pipelines and truck transport travel through miles of territory and are subject to the risk of diversion, destruction, or delay. Some transport methods may result in increased levels of risk and could lead to operational delays which could affect the Company's ability to add to its resource base and produce oil and could have a significant impact on its reputation or cash flow. Additionally, some required equipment may be difficult to obtain in the Company's areas of operations, which could hamper or delay operations, and could increase the cost of those operations. 

Our production depends in part on adequate gathering and transportation facilities   

The marketability of production depends in part on the availability, proximity and capacity of gathering and transportation pipeline facilities and trucks.  In South Texas, for example, this has been a particular challenge because of the lack of existing takeaway capacity. These facilities and equipment may be temporarily unavailable to the Company due to market conditions, regulatory reasons, mechanical reasons or other factors or conditions, and may not be available in the future on terms the Company considers acceptable, if at all. If any pipelines, or trucks become unavailable, the Company would, to the extent possible, be required to find a suitable alternative to transport crude oil and condensate, NGLs and natural gas, which could increase the costs and/or reduce the revenues the Company might obtain from the sale of production. Adverse weather, such as rain, mud and ice, have hampered the ability of trucks to get to and from our drilling locations. 

Production is also dependent in part on access to third-party facilities and pipelines with the result that production may be reduced by outages, accidents, maintenance programs, pro-rationing and similar interruptions outside of the Company's control.  For example, on June 8, 2022, an explosion occurred at the Freeport LNG liquefaction plant on Quintana Island, TX which caused the temporary shutdown of that plant and materially decreased the amount of LNG the U.S. producers, including Alpine Summit, were able to export during the remainder of 2022.

Transportation of natural gas to processing facilities and to market is similarly exposed to the extent that the required capacity is not covered by contract. In addition, contracts for processing or pipeline access are for a fixed term and may not be renewed or may be renewed under more onerous terms.  A pipeline shutdown could also have an impact on safety because it would require the use of additional trucksand personnel. In addition, both the cost and availability of pipelinesor trucks to transport production could be adversely impacted by new state or federal regulations relating to transportation of crude oil. Any significant change in market, regulatory or other conditions affecting access to, or the availability of, these facilities and equipment, including due to failure or inability to obtain access to these facilities and equipment on terms acceptable to the Company or at all, could materially and adversely affect business and, in turn, financial condition and results of operations.

Our business and operations could be adversely affected if we lose key personnel   

A loss in key personnel of the Company could delay the completion of certain projects or otherwise have a material adverse effect on the Company. Shareholders are dependent on the Company's management and staff in respect of the administration and management of all matters relating to the Company's assets.

Recruiting and retaining qualified personnel is critical to the Company's success. The number of persons skilled in the acquisition and development of oil and natural gas properties is limited and competition for such persons is intense. The Company believes that it will be successful in recruiting excellent personnel to meet its corporate objectives but, as the Company's business activity grows, it may require additional key financial, administrative and technical personnel. Although the Company believes that it will be successful in attracting and retaining qualified personnel, there can be no assurance of such success. In the event that the Company is unable to retain existing qualified personnel and/or attract additional qualified personnel, its ability to grow its business or develop its existing properties could be materially impaired.

Property development projects may not result in the discovery of economic reserves 

Alpine Summit's development programs require sophisticated and scarce technical skills as well as capital and access to land and oilfield service equipment. The Company endeavors to minimize the associated risks by ensuring that:

• activity is focused in core regions where internal expertise and experience can be applied;
   
• prospects are internally generated;
   
• development drilling is in areas where there is immediate or near-term access to facilities, pipelines and markets or where construction of or access to necessary infrastructure is within the Company's financial capacity; and
   
• the Company acts as operator where possible which enables the Company to generally control the timing, cost and technical content of its exploration and development programs.

Nevertheless, drilling and completing a well may not result in the discovery of economic reserves, or a well may be rendered uneconomic by commodity price declines or an increasing cost structure. In addition, the Company's investment program has been focused on development of the Giddings Assets and the Hawkville Assets, resulting in asset concentration risk.

Field operations may lead to environmental, health and safety risks

The Company's current and future development and production activities involve the use of heavy equipment and the handling of volatile liquids and gases. Catastrophic events, regardless of cause or responsibility, such as well blowouts, explosions and fires within pipeline, gathering, or facility infrastructure, as well as failure of gathering systems or mechanical equipment, could lead to releases of liquids or gases, spills of contaminants, personal injuries and death, damage to the environment, as well as uncontrolled cost escalation. With support from suitably qualified external parties, the Company has developed and implemented policies and procedures to mitigate environmental, health and safety risks. These policies and procedures include the use of formal corporate policies, emergency response plans, and other policies and procedures reflecting what management considers to be best oilfield practices. These policies and procedures are subject to periodic review. The Company also manages environmental and safety risks by maintaining its operations to a high standard and complying with all state and federal environmental and safety regulations. Nevertheless, application of best practices to field operations serves only to mitigate, not eliminate, risk. The Company maintains industry-specific insurance policies, including environmental damage and control of well, on important owned drilled locations and specific equipment. Although the Company believes its current insurance coverage corresponds to industry standards, there is no guarantee that such coverage will be available in the future, and if it is, at a cost acceptable to the Company, or that existing coverage will necessarily extend to all circumstances or incidents resulting in loss or liability.

Declining general economic, business or industry conditions may have a material adverse effect on our results of operations, liquidity and financial condition   

Markets for future production of crude oil, natural gas, and NGLs are outside the Company's capacity to control or influence and can be affected by events such as weather, climate change, regulation, regional, national and international supply and demand imbalances, facility and pipeline access, geopolitical events, currency fluctuation, introduction of new or termination of existing supply arrangements, as well as downtime due to maintenance or damage, either to owned or third-party facilities and pipelines. The Company will attempt to mitigate these risks as follows:

• Properties are developed in areas where there is access to existing or planned processing and pipeline or other transportation infrastructure.
• The Company will delay drilling or tie-in of new wells or shut-in production if acceptable pricing cannot be realized.

Our future oil, natural gas, and NGL development may involve unprofitable efforts

Oil, natural gas, and NGL development involves a high degree of risk and there is no assurance that expenditures made on development by the Company will result in new discoveries of oil, natural gas, or NGL in commercial quantities. It is difficult to project the costs of implementing a drilling program due to the inherent uncertainties of drilling in unknown formations, the costs associated with encountering various drilling conditions such as over pressured zones and tools lost in the drilling process, and changes in drilling plans and locations as a result of prior exploratory wells or additional seismic data and interpretations thereof.

The long-term commercial success of the Company depends on its ability to find, acquire, develop, and commercially produce oil and natural gas reserves. No assurance can be given that the Company will be able to locate satisfactory properties for acquisition or participation. Moreover, if such acquisitions or participations are identified, the Company may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations uneconomic.

Future oil and natural gas development may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While close well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to adversely affect revenue and cash flow levels to varying degrees.

In addition, oil and natural gas operations are subject to the risks of development and production of oil, natural gas, and NGL properties, including encountering unexpected formations or pressures, premature declines of reservoirs, blow outs, cratering, sour gas releases, fires, spills or leaks. These risks could result in personal injury, loss of life, and environmental or property damage. Any of the aforementioned risks could have a material adverse effect on the Company's future results of operations, liquidity and financial conditions.

We cannot guarantee that the Company's future development efforts will result in the discovery and development of oil and natural gas reserves   

The Company's future oil and natural gas reserves, production, and cash flows to be derived therefrom are highly dependent on the Company successfully acquiring or discovering new reserves. Without the continual addition of new reserves, any existing reserves the Company may have at any particular time and the production therefrom will decline over time as such existing reserves are realized. A future increase in the Company's reserves will depend not only on the Company's ability to develop any properties it may have from time to time, but also on its ability to select and acquire suitable producing properties or prospects. There can be no assurance that the Company's future development efforts will result in the discovery and development of additional commercial accumulations of oil, natural gas, and NGLs.

Project risks may have an impact on our expected revenues

Project delays, should they occur, may delay expected revenues from operations and could also have other negative consequences for the Company. Further, project cost estimates may not be accurate due to several factors, and significant project cost over-runs could make a project uneconomic. The Company's ability to execute projects and market oil, natural gas, and NGLs will depend upon numerous factors beyond the Company's control, including: the availability of processing capacity; the availability and proximity of pipeline capacity or other means of transport; the availability of storage capacity; the supply of and demand for oil, natural gas, and NGLs; the availability of alternative fuel sources; the effects of inclement weather; the availability of drilling and related equipment; unexpected cost increases; accidental events; currency fluctuations; changes in regulations; the availability and productivity of skilled labor; and the regulation of the oil and natural gas industry by various levels of government and governmental agencies. Because of these factors, the Company could be unable to execute projects on time, on budget or at all, and may not be able to effectively market the oil, natural gas, and NGLs that it produces. Consequently, any of the aforementioned factors could have a material adverse effect on the Company's business, cash flows, financial position, results of operations or prospects.

As a holding company we are subject to the risks attributable to each of our subsidiaries

Alpine Summit is a holding company and essentially all of its assets are its indirect ownership of Origination. As a result, investors in Alpine Summit will be subject to the risks attributable to Origination and its subsidiaries. As a holding company, Alpine Summit conducts substantially all of its business through Origination and its subsidiaries, which generate substantially all of its revenues. Consequently, Alpine Summit's cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of Origination and its subsidiaries. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of the Company's subsidiaries, holders of indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries before Alpine Summit, which may have an adverse effect on the business, prospects, result of operation and financial condition of Alpine Summit.

We may not be insured for, or our insurance may be inadequate to protect us against, all risks     

The Company's involvement in the development of oil and natural gas properties may result in the Company becoming subject to liability for pollution, blow-outs, property damage, personal injury or other hazards. Although the Company has obtained insurance in accordance with industry standards to address such risks, such insurance has exclusions or limitations on liability that may render it insufficient to cover the full extent of such liabilities. In addition, such risks or additional risks may not, in all circumstances be insurable or, in certain circumstances, the Company may elect not to obtain insurance to deal with specific risks due to the high premiums associated with such insurance or for other reasons. The payment of such uninsured liabilities would reduce the funds available to the Company. The occurrence of a significant event that the Company is not fully insured against, or the insolvency of the insurer of such event, could have a material adverse effect on the Company's financial position, results of operations or prospects.

If we are unable to foster necessary working relationships with industry participants, it may impair the Company's ability to grow   

The ability of the Company to successfully bid on and acquire additional properties, to discover reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements will depend on developing and maintaining effective working relationships with industry participants and on the Company's ability to select and evaluate suitable partners and to consummate transactions in a highly competitive environment. These relationships are subject to change and may impair the Company's ability to grow.

To develop the Company's business, it may enter into strategic and business relationships, which may take the form of joint ventures with other parties or with local government bodies, or contractual arrangements with other oil and natural gas companies, including those that supply equipment and other resources that the Company may use in its business. The Company may not be able to establish these business relationships or, if established, it may not be able to maintain them. In addition, the dynamics of the Company's relationships with strategic partners may require the Company to incur expenses or undertake activities it would not otherwise be inclined to take to fulfill its obligations to these partners or maintain its relationships. If the Company fails to make the cash calls required by its joint venture partners in the joint ventures it does not operate, the Company may be required to forfeit its interests in joint ventures. If the Company's strategic relationships are not established or maintained, its business prospects may be limited, which could diminish its ability to conduct its operations.

Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire skilled industry personnel and find and develop reserves in the future   

The oil and natural gas industry is highly competitive. The Company actively competes for acquisitions, leases and licenses, skilled industry personnel and capital to finance such activities with a substantial number of other oil and natural gas companies, many of which have significantly greater financial, technical and personnel resources than the Company. The Company's competitors include major integrated oil and natural gas companies and numerous other independent oil and natural gas companies and individual producers and operators. Competitors may be able to evaluate, bid for and purchase a greater number of properties and prospects than the Company's financial, technical or personnel resources permit. The Company's size and financial status may impair its ability to compete for oil and natural gas properties and prospects.

The Company's ability to acquire additional prospects and to find and develop reserves in the future will depend on its ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. If the Company is unable to compete successfully in these areas in the future, its future revenues and growth may be diminished or restricted. The availability of properties for acquisition depends largely on the business practices of other oil and natural gas companies, commodity prices, general economic conditions and other factors the Company cannot control or influence.

We may not be able to keep pace with technological developments in our industry   

The oil and natural gas industry is characterized by rapid and significant technological advancements and introductions of new products and services utilizing new technologies. Other oil and natural gas companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and may in the future allow them to implement new technologies before the Company. There can be no assurance that the Company will be able to respond to such competitive pressures and implement such technologies on a timely basis or at an acceptable cost. One or more of the technologies currently utilized by the Company or implemented in the future may become obsolete. In such case, the Company's business, financial condition and results of operations could be materially adversely affected. If the Company is unable to utilize the most advanced commercially available technology, its business, financial condition and results of operations could be materially adversely affected.

Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves   

Estimates of economically recoverable crude oil, natural gas reserves, and NGLs, and related future net cash flows, are based upon a number of variable factors and assumptions. These include commodity prices, production, future operating, transportation, development and facility as well as decommissioning costs, access to market, and potential changes to the Company's operations or to reserve measurement protocols arising from regulatory or fiscal changes. All of these estimates may vary from actual circumstances, with the result that estimates of recoverable crude oil and natural gas reserves attributable to any property are subject to revision. In future, the Company's actual production, revenues, royalties, transportation, operating expenditures, finding, development, facility and decommissioning costs associated with its reserves may vary from such estimates, and such variances may be material.

We may be exposed to third party credit risk that could have a material adverse effect on the Company's financial results and financial condition   

The Company is or may be exposed to third party credit risk through its contractual arrangements with its current or future joint venture partners, marketers of its petroleum and natural gas production, counterparties to financial instruments and other parties. In the event such entities fail to meet their contractual obligations, such failures could have a material adverse effect on the Company's financial results and financial condition.

Conservation measures and technological advances could reduce demand for our petroleum products   

Fuel reduction regulations, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and renewable energy generation devices could reduce the demand for crude oil and liquid hydrocarbons. Recently, certain jurisdictions have implemented policies or incentives to decrease the use of fossil fuels and encourage the use of renewable fuel alternatives, which may lessen the demand for petroleum products and put downward pressure on commodity prices. In addition, advancements in energy efficient products have a similar effect on the demand for oil and natural gas products. The Company cannot predict the effect of changing demand for oil and natural gas products, and any major changes may have a material adverse effect on the Company's business, financial condition, results of operations and cash flow.

If any of our operations cause damage in the areas in which we operate, the Company's reputation could be negatively affected   

Any environmental damage, loss of life, injury or damage to property caused by the Company's operations could damage its reputation in the areas in which the Company operates. Negative sentiment towards the Company could result in a lack of willingness of municipal authorities to grant the necessary licenses or permits for the Company to operate its business and in residents in the areas where the Company is doing business opposing the Company's further operations in the area. If the Company develops a reputation for having an unsafe worksite, it may impact the Company's ability to attract and retain the necessary skilled employees, consultants and contractors to operate its business. Further, the Company's reputation could be affected by actions and activities of other companies operating in the oil and natural gas industry, over which the Company has no control. In addition, environmental damage, loss of life, injury or damage to property caused by the Company's operations could result in negative investor sentiment towards the Company, which may result in limiting the Company's access to capital, increasing the cost of capital, and decreasing the price and liquidity of the Subordinate Voting Shares.

A negative shift in investor or shareholder sentiment of the oil and natural gas industry could adversely affect our business and ability to raise debt and equity capital   

A number of factors, including the concerns of the effects of the use of fossil fuels on climate change, the effect of crude oil and natural gas operations on the environment, environmental damage relating to spills of petroleum products during production and transportation and indigenous rights, have affected certain investors' sentiments towards investing in the crude oil and natural gas industry. As a result of these concerns, some institutional, retail and public investors have announced that they no longer are willing to fund or invest in crude oil and natural gas properties or companies tied to crude oil and natural gas or are reducing the amount thereof over time. In addition, certain institutional investors are requesting that issuers develop and implement more robust social, environmental and governance policies and practices. Developing and implementing such policies and practices can be costly and require a significant time commitment from the Board, management and employees of the Company. Failing to implement the policies and practices as requested by institutional investors may result in such investors      not investing in the Company at all. Any reduction in the investor base interested or willing to invest in the crude oil and natural gas industry, and more specifically, the Company, may result in limiting the Company's access to capital, increasing the cost of capital, and decreasing the price and liquidity of the Subordinate Voting Shares, even if the Company's operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause a decrease in the value of the Company's assets which may result in an impairment change.

Our operations and financial condition may be impacted by unforeseeable or uncontrollable circumstances   

The Company's operations and its financial condition may be affected by uncontrollable, unpredictable and unforeseeable circumstances such as weather patterns, changes in contractual, regulatory or fiscal terms, actions by governments at various levels, both domestic and other, termination of access to third-party pipelines or facilities, actions by industry organizations, local communities, exclusion from certain markets or other undeterminable events.

We may fail in achieving the anticipated benefits of acquisitions and dispositions

The Company may make acquisitions and dispositions of businesses and assets that occur in the ordinary course of business. Achieving the benefits of acquisitions depends in part on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner, as well as realizing the anticipated growth opportunities and synergies from combining the acquired businesses and operations with those of the Company. The integration of acquired businesses or assets may require substantial management effort, time and resources and may divert management's focus from other strategic opportunities and operational matters. Management assesses the value and contribution of individual properties and other assets.

We may experience challenges finding, developing, and acquiring petroleum and natural gas reserves on an economic basis

Petroleum and natural gas reserves naturally deplete as they are produced over time. The success of the Company's business is highly dependent on its ability to acquire and/or discover new reserves in a cost-efficient manner. Substantially all of the Company's cash flow is derived from the sale of the oil and natural gas reserves it accumulates and develops. In order to remain financially viable, the Company must be able to replace reserves over time at a lesser cost on a per unit basis than its cash flow on a per unit basis. The reserves and costs used in this determination are estimated each year based on numerous assumptions and these estimates and costs may vary materially from the actual reserves produced or from the costs required to produce those reserves. The Company mitigates this risk by employing a qualified and experienced team of petroleum and natural gas professionals, operating in geological areas in which prospects are well understood by management and by closely monitoring the capital expenditures made for the purposes of increasing its petroleum and natural gas reserves.

Our return on certain assets operated by other companies may depend upon a number of factors that may be outside of our control   

The Company has certain farm-in agreements under which other companies may operate some of the assets in which the Company will have or has an interest. The Company will have diminished ability to exercise influence over the operation of those assets or their associated costs, which could adversely affect the Company's financial performance. The Company's return on assets operated by others may therefore depend upon a number of factors that may be outside of the Company's control, including the timing and amount of capital expenditures, the operator's expertise and financial resources, the approval of other participants, the selection of technology and risk management practices.

We may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls, which could have a material adverse impact on our business, operations and prospects   

The Company may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of the Company to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Company to deal with this growth could have a material adverse impact on its business, operations and prospects.

We may be unable to obtain all necessary registrations, permits, and authorizations that are required to carry out development at our properties   

The operations of the Company require registrations, permits and authorizations from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary registrations, permits and authorizations that are required to carry out development at its properties. The permitting process in Texas and the United States, particularly at the local level, may take significant time, meaning that development projects have a longer cycle time to completion than they might elsewhere.

Macroeconomic and Financial Risks

Our Debt Facilities (as defined below) contain operating and financial restrictions that may restrict our business and financing activities.

Our Corporate Credit Facility and ABS Facility (collectively, "Debt Facilities") contain a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

• sell assets, including equity interests in our subsidiary;
• redeem our debt;
• make investments;
• incur or guarantee additional indebtedness;
• create or incur certain liens;
• make certain acquisitions and investments;
• enter into agreements that restrict distributions or other payments from our restricted subsidiary to us;
• consolidate, divide, merge or transfer all or substantially all of our assets;
• engage in transactions with affiliates;
• create unrestricted subsidiaries;
• enter into swap agreements beyond certain maximum thresholds; and
• engage in certain business activities.

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.  Our ability to comply with some of the covenants and restrictions contained in our Debt Facilities may be affected by events beyond our control. If market or other economic conditions deteriorate, or if oil, natural gas, and NGL pricing decline further from their current level or remain volatile for an extended period of time, our ability to comply with these covenants may be impaired. A failure to comply with the covenants, ratios or tests in our Debt Facilities or any future indebtedness could result in an event of default under our Debt Facilities or our future indebtedness, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations.

If an event of default under either of our Debt Facilities occurs and remains uncured, the lenders or holders under the applicable Credit Facility:

• would not be required to lend any additional amounts to us;
• could elect to declare all borrowings or notes outstanding, together with accrued and unpaid interest and fees, to be due and payable;
• may have the ability to require us to apply all of our available cash to repay these borrowings or notes; or
• may prevent us from making debt service payments under our other agreements.

The borrowing base under our Corporate Credit Facility is redetermined at least quarterly, based in part on assumptions of the administrative agent with respect to, among other things, crude oil, natural gas, and NGL pricing. A negative adjustment to the borrowing base could occur if crude oil, natural gas, or NGL prices used by the lenders are significantly lower than those used in the last redetermination, including as result of a decline in commodity prices or an expectation that reduced prices will continue. As of December 31, 2022, we had $41,500,000 outstanding under our Corporate Credit Facility. In the event that the amount outstanding under our Corporate Credit Facility exceeds the redetermined borrowing base, we could be forced to repay a portion of our borrowings. In addition, the portion of our borrowing base made available to us for borrowing is subject to the terms and covenants of our Corporate Credit Facility, including compliance with the ratios and other financial covenants of such facility.

Our obligations under the Corporate Credit Facility are collateralized by first priority liens and security interests on substantially all of our assets excluding those included in the ABS Facility, including mortgage liens on oil and natural gas properties having at least 90% of the PV-9 (determined using commodity price assumptions by the administrative agent of the Corporate Credit Facility) of the borrowing base properties (with respect to the Corporate Credit Facility). If we are unable to repay our indebtedness under the Corporate Credit Facility (including any amount of borrowings in excess of the borrowing base resulting from a redetermination of our Corporate Credit Facility), the lenders could seek to foreclose. Our obligations under the ABS Facility are collateralized by first priority liens and security interests on a discrete set of wells that have been conveyed to a subsidiary that issued the ABS Facility notes (the “Issuer”).  If the Issuer is unable to repay the indebtedness under the ABS Facility, the noteholders could seek to foreclose against the Issuer.

Global market conditions can impact the prices for crude oil, natural gas, and NGLs

Market conditions which include global crude oil, natural gas, and NGL supply and demand and global events including the Russian invasion of Ukraine; actions taken by OPEC, Russia's withdrawal from OPEC, sanctions against Russia, Iran and Venezuela, slowing growth in China and emerging economies, weakening global relationships, isolationist and punitive trade policies, shale production in the United States, sovereign debt levels and political upheavals in various countries including growing anti-fossil fuel sentiment, the outbreak of COVID-19 and the price war between Saudi Arabia and Russia have caused significant volatility in commodity prices. In addition, continued hostilities in the Middle East and the occurrence or threat of terrorist attacks, including attacks on crude oil infrastructure in crude oil producing nations, in the United States or other countries could adversely affect the economies of the United States and other countries. These events and conditions may cause a significant reduction in the valuation of crude oil and natural gas companies and a decrease in confidence in the future of the crude oil and natural gas industry.

The war in Ukraine and Russia may continue to have a material adverse impact on us and our subsidiaries.

On February 24, 2022, the President of Russia, Vladimir Putin, announced a military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia on certain businesses and individuals, including, but not limited to, those in the banking, import and export sectors. This invasion has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby. These disruptions caused by the invasion have included, and may continue to include, political, social, and economic disruptions and uncertainties and material increases in certain commodity prices that may affect our business operations or the business operations of our subsidiaries.

The implementation of risk management instruments may expose us to certain risks and there can be no assurance that these instruments will be available or continue to be available on commercially reasonable terms   

The Company may enter into risk management instruments in the form of swaps, puts, calls, and similar instruments to secure revenue or offset the risk of revenue losses related to changes in commodity prices, carbon prices, interest rates and related global macroeconomic events. However, such arrangements may be expensive and there can be no assurance that these instruments will be available or continue to be available on commercially reasonable terms. In addition, implementing risk management instruments itself carries certain risks, including expenses associated with termination or close-out of treasury transactions under hedging agreements and the risk that the Company could incur losses should it fail to anticipate movements in the underlying referenced futures contract. The Company may also be required to provide cash collateral under its hedging arrangements, which the Company may be unable to provide or which could affect the liquidity of the Company. There is also the risk that the Company will be obliged to make payments under swap arrangements, even in a scenario where its production has decreased or ceased, potentially creating cash obligations which the Company is unable to settle. Further, certain types of hedging arrangements, if entered into by the Company, may also involve a risk of not realizing potential gains if the Company should fail to anticipate movements in the underlying referenced futures contract.

The discontinuation of LIBOR may adversely affect the value of the cost of our borrowings under the ABS Facility

National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices that are deemed to be "reference rates." Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (the "FCA"), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. As of the date of this Annual Report, USD LIBOR is available in five settings (overnight, one-month, three-month, six-month and 12-month). The ICE Benchmark Administration ("IBA") has stated that it will cease to publish all remaining USD LIBOR settings immediately following their publication on June 30, 2023, absent subsequent action by the relevant authorities. As of January 1, 2022, all non-USD LIBOR reference rates in all settings ceased to be published. There can be no assurance that non-USD synthetic LIBOR or USD LIBOR will remain available in the future.

The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee (the "ARRC"), a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate for LIBOR. On December 6, 2021, the ARRC released a statement selecting and recommending forms of SOFR, along with associated spread adjustments and conforming changes, to replace references to 1-week and 2-month USD LIBOR. We expect that a substantial portion of our future floating rate investments will be linked to SOFR. At this time, it is not possible to predict the effect of the transition to SOFR. Although there have been an increasing number of issuances utilizing SOFR or the Sterling Over Night Index Average ("SONIA") (the GBP-LIBOR nominated replacement alternative reference rate that is based on transactions), it is unknown whether SOFR or any other alternative reference rates will attain market acceptance as replacements for LIBOR.

Given the inherent differences between LIBOR and SOFR, or any other alternative reference rates that may be established, the transition from LIBOR may disrupt the overall financial markets and adversely affect the cost of our borrowings under the ABS Facility. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR based securities, including the value and/ The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our accounting, financial reporting, loan servicing, liability management and other aspects of our business.

Our business, operations, and financial conditions may be adversely affected by the COVID-19 pandemic or other similar pandemics   

The Company's business, operations and financial condition could be materially adversely affected by the outbreak of epidemics or pandemics or other health crises. In December 2019, COVID-19 was reported to have surfaced in Wuhan, China; on January 30, 2020, the World Health Organization ("WHO") declared the outbreak a global health emergency; and on March 11, 2020 the WHO declared the outbreak of COVID-19 a global pandemic. The outbreak spread exponentially throughout the world and despite the development and deployment of vaccines, infections have persisted with      numerous variants that have since emerged. The spread of COVID-19 has led companies and various jurisdictions to impose restrictions such as quarantines, business closures and domestic and international travel restrictions. The occasion and duration of the business disruptions internationally and related financial effect cannot be reasonably estimated at this time. Similarly, the Company cannot estimate whether or to what extent this pandemic and the potential financial effect may extend      beyond what has already been experienced.

Such public health crises can result in volatility and disruptions in the supply, demand, and pricing for crude oil, natural gas, and NGLs, global supply chains and financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect commodity prices, interest rates, credit ratings, credit risk and inflation. In particular, crude oil prices significantly weakened in 2020 in response to the outbreak of COVID-19. The risks to the Company of such public health crises also include risks to employee health and safety and a slowdown or temporary suspension of operations in geographic locations affected by an outbreak. This could include the Company's wells and facilities and/or third-party facilities and pipelines used by the Company.     

At this point, the extent to which COVID-19 may continue to affect the Company is uncertain; however, it is possible that the ongoing COVID-19 pandemic may have a material adverse effect in the future on the Company's business, results of operations and financial condition. If subsequent waves or additional variants of COVID-19 emerge which are more transmissible or cause more severe disease, or if other diseases emerge with similar effects, there may be further adverse impacts on the economy, commodity prices, and the Company's operations.

We believe that in addition to the impacts described above, other impacts included or could in the future include, but are not limited to:

• Structural shift in the global economy and its demand for oil, natural gas, and NGLs as a result of changes in the way people work, travel and interact, or in connection with a global or regional recession or depression;
• Infections and quarantining of our employees and the personnel of other third parties in areas in which we operate;

• Our insurance policies may not cover losses associated with pandemics or similar global health threats;
• Litigation risk and possible loss contingencies related to a pandemic and its impact, including with respect to commercial contracts, employment matters, personal injury and insurance arrangements; and
• Cybersecurity incidents, as our reliance on digital technologies increases, those digital technologies may become more vulnerable and experience a higher rate of cybersecurity attacks, intrusions or incidents in the current environment of remote connectivity, as well as increased geopolitical conflicts and tensions.

Legal and Regulatory Risks

Our operations can be substantially affected by changes in government regulations and policies

In the United States the energy industry is subject to scrutiny, frequently hostile, by political and environmental groups. This may lead to increased regulation and increased compliance costs. In particular, there is a risk that existing income tax rates could be increased, rules and regulations around well licensing or surface access could be changed, horizontal drilling and hydraulic fracturing could be subject to increased oversight or regulation. 

We are subject to stringent federal and state laws and regulations related to labor and occupational health and safety issues that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities   

The Company is subject to labor and health and safety laws and regulations, at a national and state level in the United States, that govern, among other things, the relationship between the Company and its employees and the health and safety of the Company's employees. For example, the Company is required to adopt certain measures to safeguard the health and safety of its employees, as well as third parties, in its work locations. In the event that compliance by the Company with such requirements is reviewed by the applicable authorities and a decision that the Company violated any labor or health and safety laws, results from such review, the Company may be exposed to penalties and sanctions, including the payment of fines and, depending on the level of severity of the infraction, exposed to the closure of its work locations and/or stoppage of its operations and the cancellation or suspension of governmental registrations, permits, or authorizations, any one of which may result in interruption or discontinuity of activities in the Company's facilities, and materially and adversely affect the Company.

We are subject to restrictions and costs related to water and waste disposal   

The Company may be subject to regulation that restricts our ability to discharge water produced as part of production operations. Productive zones frequently contain water that must be removed in order for the oil and natural gas to produce, and ability to remove and dispose of sufficient quantities of water from the various zones will determine whether the Company can produce oil, natural gas, and NGLs in commercial quantities. The produced water must be transported from the leasehold and/or injected into disposal wells. The availability of disposal wells with sufficient capacity to receive all of the water produced from wells may affect the ability to produce wells. Also, the cost to transport and dispose of that water, including the cost of complying with regulations concerning water disposal, may reduce profitability. Where water produced from projects fails to meet the quality requirements of applicable regulatory agencies, wells produce water in excess of the applicable volumetric permit limits, the disposal wells fail to meet the requirements of all applicable regulatory agencies, or the Company is unable to secure access to disposal wells with sufficient capacity to accept all of the produced water, the Company may have to shut in wells, reduce drilling activities, or upgrade facilities for water handling or treatment.

The costs to dispose of this produced water may increase if any of the following occur:

• the Company cannot obtain future permits from applicable regulatory agencies;
• water of lesser quality or requiring additional treatment is produced;
• wells produce excess water;
• new laws and regulations require water to be disposed in a different manner; or
• costs to transport the produced water to the disposal wells increase.

The disposal of fluids gathered from oil, natural gas, and NGLs producing operations in underground disposal wells has been pointed to by some groups and regulators as a potential cause of increased induced seismic events in certain areas of the country, particularly in Oklahoma, Texas, Colorado, Kansas, New Mexico and Arkansas. Several states have adopted or are considering adopting laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or underground disposal wells, and state agencies implementing those requirements may issue orders directing certain wells in areas where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring. While the Company cannot predict the ultimate outcome of these actions, any action that temporarily or permanently restricts the availability of disposal capacity for produced water or other oilfield fluids may increase costs or have other adverse impacts on operations.

We are subject to stringent federal, state, and local laws and regulations related to environmental issues that could adversely affect the cost, manner, or feasibility of conducting our operations or expose us to significant liabilities   

All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of international conventions and national, state and local laws and regulations. As an owner, licensee, and/or operator of oil and natural gas properties in the United States, the Company is subject to various national, state and local laws and regulations relating to the discharge of materials into, and protection of, the environment.  Environmental laws and regulations in the United States impose substantial restrictions on, among other things, the use of natural resources, interference with the natural environment, the location of facilities, the handling and storage of hazardous materials such as hydrocarbons, the use of radioactive material, the disposal of waste, and the emission of noise and other activities. These laws and regulations may, among other things: (a) impose liability on the owner or lessee under an oil and natural gas lease for the cost of property damage, oil spills, discharge of hazardous materials, remediation and clean-up resulting from operations; (b) subject the owner or lessee to liability for pollution damages and other environmental or natural resource damages; and (c) require suspension or cessation of operations in affected areas.

Environmental protection legislation in the United States is evolving in a manner that has and is expected to continue to result in stricter standards and enforcement, larger fines, liabilities and sanctions, and potentially increased capital expenditures and operating costs. To mitigate potential environmental liabilities, the Company, in addition to implementing policies and procedures designed to prevent an accidental spill or discharge, maintains insurance at industry standards.

If existing environmental regulatory requirements or enforcement policies change or new regulatory or enforcement initiatives are developed and implemented in the future, the Company may be required to make significant, unanticipated capital and operating expenditures with respect to its continued operations. Moreover, these risks are likely to be enhanced with the current presidential administration and Democrats controlling Congress. Examples of recent environmental regulations include the following:

•Ground-Level Ozone Standards. In 2015, the EPA issued a final rule under the CAA, lowering the National Ambient Air Quality Standard ("NAAQS") for ground-level ozone from 75 parts per billion to 70 parts per billion under both the primary and secondary standards to provide requisite protection of public health and welfare, respectively. Since that time, the EPA has issued area designations with respect to ground-level ozone and final requirements that apply to state, local, and tribal air agencies for implementing the 2015 NAAQS for ground-level ozone. State implementation of the revised NAAQS could, among other things, require installation of new emission controls on some of the Company's equipment, result in longer permitting timelines, and significantly increase the Company's capital expenditures and operating costs arising from the program's operations.

• EPA Review of Drilling Waste Classification. Drilling, fluids, produced water and most of the other wastes associated with the exploration, development and production of oil, natural gas, or NGLs, if properly handled, are currently exempt from regulation as hazardous waste under the RCRA and instead, are regulated under RCRA's less stringent non-hazardous waste provisions. However, it is possible that certain oil, natural gas, and NGL drilling and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any future loss of the RCRA exclusion for drilling fluids, produced waters and related wastes could result in an increase in the Company's costs to manage and dispose of generated wastes, which could have a material adverse effect on the industry as well as on the Company's business.

• Federal Jurisdiction over Waters of the United States. In 2015, the EPA and U.S. Army Corps of Engineers ("Corps") under the Obama Administration released a final rule outlining federal jurisdictional reach under the Clean Water Act, over waters of the United States, including wetlands. However, the EPA rescinded this rule in 2019 and promulgated the Navigable Waters Protection Rule in 2020. The Navigable Waters Protection Rule defined what waters qualify as navigable waters of the United States and are under Clean Water Act jurisdiction. This new rule has generally been viewed as narrowing the scope of waters of the United States as compared to the 2015 rule, but litigation in multiple federal district courts is currently challenging the rescission of the 2015 rule and the promulgation of the Navigable Waters Protection Rule. In June 2021, the Biden Administration announced plans to develop its own definition for jurisdictional waters, and in August 2021, a federal judge for the U.S. District Court for the District of Arizona issued an order striking down the Navigable Water Protection Rule. On December 7, 2021, the U.S. Environmental Protection Agency and the Department of the Army announced a proposed rule to revise the definition of "waters of the United States," which would return to the 2015 definition of "waters of the United States," updated to reflect consideration of Supreme Court decisions. On January 24, 2022, the Supreme Court agreed to consider the scope of the Clean Water Act again in Sackett v. EPA. To the extent that a revised rule or Supreme Court decision expands the scope of the Clean Water Act's jurisdiction in areas where the Company conducts operations, the Company could incur increased costs and restrictions, delays or cancellations in permitting or projects, which developments could expose it to significant costs and liabilities.

Additionally, the federal Occupational Safety and Health Act and analogous state occupational safety and health laws require employers to organize information about materials, some of which may be hazardous or toxic, that are used, released or produced in the Company's operations. Moreover, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the Company's operations and that this information be provided to employees as well as certain persons employed by OSHA or its state counterparts.

The discharge of oil, natural gas, NGLs, or other pollutants into the air, soil, or water may give rise to liabilities to third parties and may require the Company to incur costs to remedy such discharge in the event that they are not covered by the Company's insurance. Although the Company maintains insurance to industry standards, which in part covers liabilities associated with discharges, it is not certain that such insurance will cover all possible environmental events, foreseeable or otherwise, or whether changing regulatory requirements or emerging jurisprudence may render such insurance of little benefit.

The Company's oil, natural gas, and NGL operations include drilling, well completions and tie-ins, production, facility operation, distribution, pricing, marketing and transportation and are subject to compliance with federal, state and local laws and regulations controlling the discharge of pollutants into the environment or otherwise relating to the protection of the environment. Regulations and laws impose restrictions on emissions, spills and releases of various substances used in oil and natural gas industry operations, requirements for waste handling and storage, habitat protection and the operation, maintenance, abandonment and reclamation of facilities, pipelines and wells. Changes to environmental regulations could delay or prevent planned activity, affect current and forecast production levels and increase the cost of production and/or development capital expenditures.

Although the Company believes that it is in material compliance with current applicable environmental regulations, changing government regulations may have an adverse effect on the Company. The Company's practice is to do all that it reasonably can to ensure that it remains in material compliance with environmental protection legislation. The Company also believes that it is reasonably likely that the trend towards stricter standards in environmental legislation and regulation will continue. The Company is committed to meeting its responsibilities to protect the environment wherever it operates and will take such steps as required to ensure compliance with environmental legislation.

No assurance can be given that environmental laws will not result in a curtailment of production, a material increase in the costs of production or the costs of development activities, or otherwise adversely affect the Company's financial condition, capital expenditures, results of operations, competitive position or prospects. The complexity and breadth of changes in environmental regulation make it extremely difficult to predict the potential future effects on Alpine Summit.

Climate change, environmental, social and governance and sustainability initiatives may result in regulatory or structural industry changes and/or could result in increased operating costs and reduced demand for the oil, natural gas, and NGLs that we produce while potential physical effects of climate change could disrupt our operations and cause us to incur significant costs in preparing for or responding to those effects   

Climate change, environmental, social and governance ("ESG") and sustainability are a growing global movement. Continuing political and social attention to these issues has resulted in both existing and pending international agreements and national, regional and local legislation, regulatory measures, reporting obligations and policy changes. Also, there is increasing societal pressure in some of the areas where we operate, to limit greenhouse gas emissions as well as other global initiatives. These agreements and measures, including the Paris Climate Accord, may require, or could result in future legislation, regulatory measures or policy changes that would require significant equipment modifications, operational changes, taxes, or purchases of emission credits to reduce emission of greenhouse gases from our operations or those of our customers, which may result in substantial capital expenditures and compliance, operating, maintenance and remediation costs. As a result of heightened public awareness and attention to these issues as well as continued political and regulatory initiatives to reduce the reliance upon oil, natural gas, and NGLs, demand for hydrocarbons may be reduced, which could have an adverse effect on our business, financial condition, and results of operations. The imposition and enforcement of stringent greenhouse gas emissions reduction requirements could severely and adversely impact the oil and natural gas industry and therefore significantly reduce the value of our business.

Certain financial institutions, institutional investors and other sources of capital have begun to limit or eliminate their investment in financing of conventional energy-related activities due to concerns about climate change, which could make it more difficult for our customers and for us to finance our respective businesses. Increasing attention to climate change, ESG and sustainability has resulted in governmental investigations, and public and private litigation, which could increase our costs or otherwise adversely affect our business or results of operations.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other companies or industries, which could have a negative impact on the price of our securities and our access to and costs of capital.

Any or all of these ESG and sustainability initiatives may result in significant operational changes and expenditures, reduced demand for our products and services, and could materially adversely affect our business, financial condition, results of operations, stock price or access to capital markets.

We may become involved in, named as a party to, or be the subject of, various legal proceedings   

In the normal course of the Company's operations, it may become involved in, named as a party to, or be the subject of, various legal proceedings, including regulatory proceedings, tax proceedings and legal actions, proceedings related to personal injuries, property damage, property tax, provision of services, leases, land rights, the environment and/or contract disputes. The outcome of outstanding, pending or future proceedings cannot be predicted with certainty and may be determined adversely to the Company and as a result, could have a material adverse effect on the Company's assets, liabilities, business, financial condition and results of operations.

Risks Related to Ownership of our Common Stock

The Board of Directors may modify or revoke our dividend policy at any time at its discretion   

The declaration and payment of future dividends (and the amount thereof) is subject to the discretion of the Board and may vary depending on a variety of factors and conditions existing from time to time, including fluctuations in commodity prices, the financial condition of the Company, production levels, results of operations, capital expenditure requirements, working capital requirements, debt service requirements, operating costs, interest rates, contractual restrictions, the Company's hedging activities or programs, available investment opportunities, the Company's business plan, strategies and objectives, the satisfaction of the solvency and liquidity tests imposed by the BCBCA for the declaration and payment of dividends and other factors that the Board may deem relevant. Depending on these and various other factors, many of which are beyond the control of the Company, the dividend policy of the Company may vary from time to time and, as a result, future cash dividends could be reduced or suspended entirely.

Pursuant to the BCBCA, the Company may not declare or pay a dividend if there are reasonable grounds for believing that: (i) the Company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realizable value of its assets would thereby be less than the aggregate of its liabilities and stated capital of its outstanding shares.

Dividends may be reduced or suspended during periods of lower cash flow from operations. The timing and amount of the Company's capital expenditures, and the ability of the Company to repay or refinance debt as it becomes due, directly affect the amount of cash dividends that may be declared by the Board. Future acquisitions, expansions of the Company's assets, and other capital expenditures and the repayment or refinancing of debt as it becomes due may be financed from sources such as cash flows from operations, the issuance of additional shares or other securities of the Company, and borrowings. Dividends may be reduced, or even eliminated, at times when significant capital or other expenditures are made. There can be no assurance that sufficient capital will be available on terms acceptable to the Company, or at all, to make additional investments, fund future expansions or make other required capital expenditures. To the extent that external sources of capital, including the issuance of additional shares or other securities or the availability of credit facilities, become limited or unavailable on favorable terms or at all due to credit market conditions or otherwise, the ability of the Company to make the necessary capital investments to maintain or expand its operations, to repay debt and to invest in assets, as the case may be, may be impaired. To the extent the Company is required to use cash flows from operations to finance capital expenditures or acquisitions or to repay debt as it becomes due, the cash available for dividends may be reduced and the level of dividends declared may be reduced or suspended entirely.

Over time, the Company's capital and other cash needs may change significantly from its current needs, which could affect whether the Company pays dividends and the amounts of dividends, if any, it may pay in the future. If the Company pays dividends, it may not retain a sufficient amount of cash to finance external growth opportunities, meet any large unanticipated liquidity requirements or fund its activities in the event of a significant business downturn.

The market value of the Company's securities may deteriorate if dividends are reduced or suspended. Furthermore, the future treatment of dividends for tax purposes will be subject to the nature and composition of dividends paid by the Company and potential legislative and regulatory changes.

Our principal shareholder, executive officers, and directors have the ability to control or significantly influence all matters submitted to the Company's shareholders for approval

Our largest shareholder holds approximately 31.9% of the voting rights of the Company as of March 27, 2023. In addition, management and the Board own or control approximately 17.7% of the Subordinate Voting Shares as of March 27, 2023. If acting together, such holders would be able to significantly influence all matters requiring shareholder approval, including without limitation, the election of directors.

Conflicts of interest could arise in the future between us, on the one hand, and certain of our directors and officers   

Directors and officers of the Company may also be directors and officers of other oil and natural gas companies involved in oil and natural gas exploration and development, and conflicts of interest may arise between their duties as officers and directors of the Company and as officers and directors of such other companies. Such conflicts must be disclosed in accordance with, and are subject to such other procedures and remedies as apply under the BCBCA.

Any additional capital raised by the Company through the sale of equity or convertible securities may dilute your ownership in the Company   

The Company may issue additional securities in the future, which may dilute a shareholder's holdings in the Company. The Company's articles permit the issuance of an unlimited number of Subordinate Voting Shares, Multiple Voting Shares and Proportionate Voting Shares, and shareholders will have no pre-emptive rights in connection with such further issuances. Also, additional shares may be issued by the Company in a number of circumstances, including on the exercise of warrants that may be issued by the Company, on the exercise of convertible securities under the Company's equity incentive plans and in connection with the put right granted by Origination in respect of any of the Company's development partnerships.

We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Subordinate Voting Shares less attractive to investors

We are currently a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act. As a "smaller reporting company," we are subject to reduced disclosure obligations in our SEC filings compared to other issuers, including, among other things, an exemption from the requirement to present five years of selected financial data, being required to provide only two years of audited financial statements in annual reports and being subject to simplified executive compensation disclosures. Until such time as we cease to be a "smaller reporting company," such reduced disclosure in our SEC filings may make it harder for investors to analyze our operating results and financial prospects. If some investors find our common stock less attractive as a result of any choices to reduce disclosure we may make, there may be a less active trading market for our common stock and our stock price may be more volatile.

We are currently an "Emerging Growth Company" under United States Securities Laws   

We are an "emerging growth company" as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act), and will continue to qualify as an emerging growth company until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of US$1.235 billion (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than US$1 billion in non-convertible debt; and (d) the date on which we are deemed to be a "large accelerated filer", as defined in Rule 12b-2 under the Exchange Act. We will qualify as a large accelerated filer (and would cease to be an emerging growth company) at such time when on the last business day of our second fiscal quarter of such year the aggregate worldwide market value of our common equity held by non-affiliates is US$700 million or more.

For so long as we remain an emerging growth company, we are permitted to, and intend to, rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404. We cannot predict whether investors will find our securities less attractive because we rely upon certain of these exemptions. If some investors find the securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities may be more volatile. On the other hand, if we no longer qualify as an emerging growth company, we would be required to divert additional management time and attention from development and other business activities and incur increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact our business, financial condition and results of operations.

Certain Tax Risks

The following is a discussion of certain material federal income tax risks associated with the acquisition and ownership of Subordinate Voting Shares. This Annual Report does not discuss risks associated with any applicable state, provincial, local or foreign tax laws. The tax related information in this Annual Report does not constitute tax advice and is for informational purposes only. For advice on tax laws applicable to a shareholder's individual tax situation, shareholders should seek the advice of their tax advisors. Each prospective shareholder is urged to review this Annual Report in its entirety and to consult his, her or its own tax advisors with respect to the federal, state, provincial, local and foreign tax consequences arising in connection with the acquisition and ownership of Subordinate Voting Shares.

Tax Classification of the Company

Although the Company is and expects to continue to be a Canadian corporation, the Company should be treated as a United States corporation for United States federal income tax purposes under Section 7874 of the U.S. Internal Revenue Code of 1986, as amended ("Code") and should be subject to United States federal income tax on its worldwide income. However, for Canadian tax purposes and regardless of any application of Section 7874 of the Code, the Company will be treated as being resident in Canada under the Income Tax Act (Canada) ("Tax Act") and be subject to Canadian federal income tax on its worldwide income. As a result, the Company is anticipated to be subject to taxation both in Canada and the United States which could have a material adverse effect on its financial condition and results of operations.

Dividends received by shareholders who are residents of Canada for purposes of the Tax Act generally must be included in the shareholder's income for Canadian tax purposes and will also be subject to U.S. withholding tax. Any such dividends may not qualify for a reduced rate of U.S. withholding tax under the Canada-United States income tax treaty. In addition, a foreign tax credit or a deduction under the Tax Act in respect of any U.S. withholding tax may not be available for such Canadian shareholders.

Dividends received by U.S. shareholders will not be subject to U.S. withholding tax, but will be subject to Canadian withholding tax. For U.S. federal income tax purposes, a U.S. shareholder may elect for any taxable year to receive either a credit or a deduction for all foreign income taxes paid to the shareholder during the year. Dividends paid by the Company will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code. Accordingly, U.S. shareholders generally will not be able to claim a credit for any Canadian tax withheld unless, depending on the circumstances, they have an excess foreign tax credit limitation due to other foreign source income that is subject to a low or zero rate of foreign tax. In addition, Treasury Regulations that apply to taxes paid or accrued impose additional requirements for Canadian withholding taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied. Subject to certain limitations, a U.S. shareholder should be able to claim a deduction for the U.S. shareholder's Canadian tax paid, provided that the U.S. shareholder has not elected to credit other foreign taxes during the same taxable year.

Dividends received by shareholders that are neither Canadian nor U.S. shareholders will be subject to both U.S. and Canadian withholding tax. These dividends may not qualify for a reduced rate of U.S. or Canadian withholding tax under any income tax treaty otherwise applicable to a shareholder of the Company, subject to examination of the relevant treaty.

Because the Subordinate Voting Shares will be treated as shares of a U.S. domestic corporation, the U.S. gift, estate and generation-skipping transfer tax rules generally apply to a non-U.S. shareholder of Subordinate Voting Shares.

As a U.S. domestic corporation for U.S. federal income tax purposes, the taxation of the Company's non-U.S. shareholders upon a disposition of Subordinate Voting Shares generally depends on whether the Company is classified as a United States real property holding corporation (a "USRPHC") under the Code. The Company expects that it may be classified as a USRPHC for the foreseeable future. Accordingly, it is expected that non-U.S. shareholders will generally be subject to U.S. federal income tax at graduated tax rates as if the gain or loss realized on any disposition of Subordinate Voting Shares was effectively connected with the conduct of a U.S. trade or business, unless the Subordinate Voting Shares were "regularly traded on an established securities market" within the meaning of Section 897 of the Code during such period under the rules set forth in Treasury Regulations, in which case non-U.S. shareholders whose holdings (actually and constructively) at all times during the shorter of the five-year period ending on the date of disposition and such non-U.S. shareholder's holding period for the Subordinate Voting Shares (if shorter) constituted 5% or less of the Company's Subordinate Voting Shares would generally not be subject to such U.S. federal income tax. Alpine's Subordinate Voting Shares are currently listed on the TSXV and traded on the NASDAQ. There can be no assurance that the Subordinate Voting Shares will satisfy such regularly traded exception at any particular point in the future.

Changes in tax laws and the recently enacted Inflation Reduction Act of 2022 may affect the Company and its shareholders

There can be no assurance that the Canadian and U.S. federal income tax treatment of the Company or an investment in the Company will not be modified, prospectively or retroactively, by legislative, judicial or administrative action, in a manner adverse to the Company or its shareholders.

Changes to U.S. tax laws (which changes may have retroactive application) could adversely affect the Company or its shareholders. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future.

The U.S. Congress is currently considering numerous items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact the Company's financial performance and the value of the Subordinate Voting Shares. Additionally, states in which we operate or own assets may impose new or increased taxes. If enacted, most of the proposals would be effective for current or later years. The proposed legislation remains subject to change, and its impact on the Company and holders of Subordinate Voting Shares is uncertain.

In addition, the Inflation Reduction Act of 2022 was recently signed into law and includes provisions that will impact the U.S. federal income taxation of corporations. Among other items, this legislation includes provisions that will impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock. Because the Company should be treated as a United States corporation for United States federal income tax purposes under Section 7874 of the Code, it is anticipated that the Company will likely be subject to the excise tax on certain corporate stock repurchases should it affect any such repurchase transactions. However, it remains unclear how this legislation will be implemented by the U.S. Department of the Treasury and we cannot predict how this legislation or any future changes in tax laws might affect the Company or holders of Subordinate Voting Shares.

Future federal, state or local legislation also may impose new or increased taxes or fees on oil, natural gas, and NGL extraction or production

Future changes in U.S. federal income tax laws, or the introduction of a carbon tax, as well as any similar changes in state law, could eliminate or postpone certain tax deductions that currently are available with respect to oil and natural gas development, or increase costs, and any such changes could have an adverse effect on the Company's financial position, results of operations, and cash flows. Additionally, future legislation could be enacted that increases the taxes or fees imposed on oil, natural gas, and NGL extraction or production. Any such legislation could result in increased operating costs and/or reduced consumer demand for petroleum products, which in turn could affect the prices the Company receives for its oil, natural gas, or NGLs.

Tax Risks Relating to the Company's Organizational Structure

The Company's principal asset is an indirect interest in Origination and, accordingly, the Company depends on distributions from Origination to pay its taxes and expenses. Origination's ability to make such distributions may be subject to various limitations and restrictions

The Company is a holding company and has no material assets other than its indirect ownership of Origination units. As such, the Company has no independent means of generating revenue or cash flow. Moreover, the Company's ability to pay its taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of Origination and its subsidiaries and distributions it receives indirectly from Origination. There can be no assurance that Origination and its subsidiaries will generate sufficient cash flow to distribute funds to the Company or that applicable state law and contractual restrictions will permit such distributions.

Origination will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, will generally not be subject to entity-level U.S. federal income tax. Instead, taxable income will be allocated to the holders of Origination Class A Voting Units and Class B Non-Voting Units. Accordingly, holders of Origination Class A Voting Units and Class B Non-Voting Units will incur income taxes on their allocable share of any net taxable income of Origination. Origination is obligated to make tax distributions to holders of Origination Class A Voting Units and Class B Non-Voting Units. Blocker intends, as its manager, to cause Origination to make cash distributions to the owners of Origination Class A Voting Units and Class B Non-Voting Units in an amount sufficient to fund their tax obligations in respect of taxable income allocated to them, and make cash payments to cover the operating expenses of Blocker and the Company, including payments under the Tax Receivable Agreement (as defined below). However, Origination's ability to make such distributions and payments may be subject to various limitations and restrictions, such as restrictions on distributions and payments that would either violate any contract or agreement to which Origination is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Origination insolvent. If the Company does not have sufficient funds to pay tax or other liabilities or to fund its operations, it may have to borrow funds, which could materially adversely affect its liquidity and financial condition and subject it to various restrictions imposed by any such lenders. In addition, if Origination does not have sufficient funds to make distributions, the Company's ability to declare and pay cash dividends will also be restricted or impaired.

The Tax Receivable Agreement with Origination, Blocker and the Tax Receivable Recipients (as defined below) requires Blocker to make cash payments to the Tax Receivable Recipients in respect of certain tax benefits to which Blocker may become entitled, and Blocker expects that the payments Blocker will be required to make may be substantial

Blocker is a party to the Tax Receivable Agreement with Origination, the Initial Holder and certain executive employees (such agreement, the "Tax Receivable Agreement" and the Initial Holder and executive employees party to the Tax Receivable Agreement, the "Tax Receivable Recipients"). Under the Tax Receivable Agreement, Blocker will be required to make cash payments to the Tax Receivable Recipients equal to 85% of the tax benefits, if any, that Blocker actually realizes, or in certain circumstances is deemed to realize, as a result of: (i) the increases in its share of the tax basis of assets of Origination resulting from any redemptions or exchanges of Class B Non-Voting Units, and (ii) certain other tax benefits related to Blocker making payments under the Tax Receivable Agreement. Although the actual timing and amount of any payments that Blocker makes to the Tax Receivable Recipients under the Tax Receivable Agreement will vary, it expects those payments may be significant. Any payments made by Blocker to the Tax Receivable Recipients under the Tax Receivable Agreement may generally reduce the amount of overall cash flow that might have otherwise been available to it. Furthermore, Blocker's future obligation to make payments under the Tax Receivable Agreement could make the Company a less attractive target for an acquisition.

The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions and exchanges by the holders of Class B Non-Voting Units, the amount of gain recognized by such holders of Class B Non-Voting Units, the amount and timing of the taxable income Blocker generates in the future, and the federal tax rates then applicable. 

The Company's organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Tax Receivable Recipients that will not benefit the holders of Subordinate Voting Shares, Multiple Voting Shares or Proportionate Voting Shares to the same extent as it will benefit the Tax Receivable Recipients

The Company's organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Tax Receivable Recipients that will not benefit the holders of Subordinate Voting Shares, Multiple Voting Shares or Proportionate Voting Shares to the same extent as it will benefit the Tax Receivable Recipients. Origination will be a party to the Tax Receivable Agreement with Blocker, and the Tax Receivable Recipients and it will provide for the payment by Blocker to the Tax Receivable Recipients of 85% of the amount of tax benefits, if any, that it actually realizes, or in some circumstances is deemed to realize, as a result of (i) the increases in the tax basis of assets of Origination resulting from any redemptions or exchanges of Class B Non-Voting Units from the holders thereof as described under Article XI of the A&R LLC Agreement, and (ii) certain other tax benefits related to Blocker making payments under the Tax Receivable Agreement.

In certain cases, payments under the Tax Receivable Agreement to the Tax Receivable Recipients may be accelerated or significantly exceed the actual benefits Blocker realizes in respect of the tax attributes subject to the Tax Receivable Agreement

The Tax Receivable Agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control or if, at any time, Blocker elects an early termination of the Tax Receivable Agreement, then its obligations, or its successor's obligations, under the Tax Receivable Agreement to make payments thereunder would be based on certain assumptions, including an assumption that Blocker would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.

As a result of the foregoing, (i) Blocker could be required to make payments under the Tax Receivable Agreement that are greater than the specified percentage of the actual benefits it ultimately realizes in respect of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) if it elects to terminate the Tax Receivable Agreement early, it would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, Blocker's obligations under the Tax Receivable Agreement could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control of the Company. There can be no assurance that Blocker will be able to fund or finance its obligations under the Tax Receivable Agreement.

Blocker will not be reimbursed for any payments made to the Tax Receivable Recipients in the event that any tax benefits are disallowed

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that Blocker determines, and the IRS or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions Blocker takes, and a court could sustain such challenge. If the outcome of any such challenge would reasonably be expected to materially affect a recipient's payments under the Tax Receivable Agreement, then Blocker will not be permitted to settle or fail to contest such challenge without the consent (not to be unreasonably withheld or delayed) of each Tax Receivable Recipient that directly or indirectly owns at least 15% of the outstanding Class B Non-Voting Units. Blocker will not be reimbursed for any cash payments previously made under the Tax Receivable Agreement in the event that any tax benefits initially claimed by Blocker and for which payment has been made are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by Blocker to a Tax Receivable Recipient will be netted against any future cash payments that Blocker might otherwise be required to make under the terms of the Tax Receivable Agreement. However, Blocker might not determine that Blocker has effectively made an excess cash payment to a Tax Receivable Recipient for a number of years following the initial time of such payment and, if any of Blocker's tax reporting positions are challenged by a taxing authority, Blocker will not be permitted to reduce any future cash payments under the Tax Receivable Agreement until any such challenge is finally settled or determined. As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that Blocker realizes in respect of the tax attributes with respect to a Tax Receivable Recipient that are the subject of the Tax Receivable Agreement.

Fluctuations in the Company's tax obligations and effective tax rate and realization of the Company's deferred tax assets may result in volatility of the Company's operating results

The Company will be subject to taxes by the Canadian federal, state, local and foreign tax authorities, and the Company's tax liabilities will be affected by the allocation of expenses to differing jurisdictions. The Company records tax expense based on estimates of future earnings, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these matters. The Company expects that throughout the year there could be ongoing variability in the quarterly tax rates as events occur and exposures are evaluated. The Company's future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

• changes in the valuation of deferred tax assets and liabilities;
• expected timing and amount of the release of any tax valuation allowances;
• tax effects of share-based compensation;
• changes in tax laws, regulations or interpretations thereof; or
• future earnings being lower than anticipated in countries where the Company has lower statutory tax rates and higher than anticipated earnings in countries where the Company has higher statutory tax rates.

In addition, the Company's effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which the Company operates, fluctuations in valuation allowances, deductibility of certain items, or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact the Company's current or future tax structure and effective tax rates. The Company may be subject to audits of income, sales, and other transaction taxes by federal, state, local, and foreign taxing authorities. Outcomes from these audits could have an adverse effect on the Company's operating results and financial condition.

General

Although the Company believes that the above risks fairly and comprehensibly illustrate all material risks facing the Company, the risks noted above do not necessarily comprise all those potentially faced by the Company as it is impossible to foresee all possible risks.

Forward-Looking Statements May Prove Inaccurate

Shareholders and prospective investors are cautioned not to place undue reliance on the Company's forward-looking statements. By its nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking statements or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 2. PROPERTIES

As of December 31, 2022, Alpine’s assets consisted of a total leasehold position of 432,476.81 gross and 312,909.76 net acres, including the Hawkville area, the Giddings area, and the Holbrook Basin area. For the three months ended December 31, 2022, Alpine had 30.9 net wells (37 gross wells) with a net production rate of 14,445 BOE per day (gross production rate of 22,588 BOE per day).  During 2022, Alpine maintained average net production per day of 10,513 BOE during 2022 (gross production rate of 16,145 BOE per day). During 2022, Alpine operated one rig exclusively in the Hawkville area, and one rig exclusively in the Giddings area, and one rig that traveled between the two areas. Approximately 49%, 40%, and 11% of production from Alpine’s assets was attributable to oil, natural gas, and NGLs, respectively, for the year ended December 31, 2022.

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The Hawkville Assets are located in Webb and La Salle Counties, Texas, in the core of the Eagle Ford Shale, and include 14,363.96 gross and 14,312.64 net acres. The acreage comprising the Hawkville Assets also includes the Austin Chalk formation overlying the Eagle Ford Shale. The Austin Chalk formation has shown itself to be an independent reservoir from the Eagle Ford Shale and represents a very attractive development target.

The Giddings Assets in the Austin Chalk area are located in Austin, Fayette, Lee, Robertson and Washington Counties, Texas, and include 9,004.14 gross and 7,582.80 net acres. There are several notable producing areas along the Austin Chalk trend, the largest of which is the Giddings area. Recent improvements in drilling and completion technologies have unlocked new development opportunities in the Giddings area. Wells drilled in recent years have helped to substantiate the strong economic viability of new drilling activity across the Austin Chalk formation.

The Giddings Assets in the Eagle Ford area are located in Fayette, Lee and Washington Counties, Texas, and include 134,198.18 gross and 16,103.79 net acres. While development has focused on the Austin Chalk, the Eagle Ford may still be shown to have potential in the future.

The Holbrook Basin Assets are located in Apache, Navajo and Coconino Counties, Arizona, and include 274,910.53 gross and net acres. Development of these assets for Helium is pending further research and planning.

Preparation and Internal Controls Over Reserves Estimates

All the proved oil and natural gas reserves disclosed in this Annual Report on Form 10-K are based on reserve estimates determined and prepared by independent reserve engineers W.D. Von Gonten Engineering, LLC. (“WDVG”), a leader of petroleum property analysis for industry and financial institutions. WDVG performs consulting petroleum engineering services under Texan Board of Professional Engineers Registration No. F-1855. Within WDVG, the technical person primarily responsible for preparing the estimates set forth in the WDVG letter dated February 3, 2023, filed as an exhibit to this Annual Report on Form 10-K, was Mr. William D. Von Gonten, Jr. Mr. Von Gonten has been a practicing consulting petroleum engineer at WDVG since 1995. Mr. Von Gonten is a Registered Professional Engineer in the State of Texas (License No. 73244) and has over 35 years of practical experience in petroleum engineering, with over 35 years of experience in the estimation and evaluation of reserves. He graduated from Texas A&M University in 1988 with a Bachelor of Science degree in Petroleum Engineering. Mr. Von Gonten meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines.

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The proved oil and natural gas reserves disclosed in this Annual Report on Form 10-K are based on reserve estimates determined and prepared by independent reserve engineers primarily using decline curve analysis to determine the reserves of individual producing wells. To establish reasonable certainty with respect to our estimated proved reserves, the independent reserve engineers employed technologies that have been demonstrated to yield results with consistency and repeatability. Reserves attributable to producing wells with limited production history and for undeveloped locations were estimated using volumetric estimates or performance from analogous wells in the surrounding area. These wells were considered to be analogous based on production performance from the same formation and completions using similar techniques. The technologies and economic data used to estimate our proved reserves include, but are not limited to, well logs, geological maps, seismic data, well test data, production data, historical price and cost information and property ownership interests. This data was reviewed by various levels of management for accuracy before consultation with independent reserve engineers. This consultation included review of properties, assumptions and available data. Internal reserve estimates were compared to those prepared by independent reserve engineers to test the estimates and conclusions before the reserves were included in this Annual Report on Form 10-K. The accuracy of the reserve estimates is dependent on many factors, including the following:

• the quality and quantity of available data and the engineering and geological interpretation of that data;

• estimates regarding the amount and timing of future costs, which could vary considerably from actual costs;

• the accuracy of economic assumptions; and

• the judgment of the personnel preparing the estimates.

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The Company’s Chief Operating Officer, Mr. Mike McCoy, is the technical professional primarily responsible for overseeing the preparation of our reserves estimates. He has a Bachelor of Science degree in Petroleum Engineering from Texas A&M University with over 30 years of practical industry experience, including over 30 years of estimating and evaluating reserve information. His qualifications meet or exceed the Society of Petroleum Engineers’ standard requirements to be a professionally qualified Reserve Estimator and Auditor.

We encourage ongoing professional education for our engineers and analysts on new technologies and industry advancements as well as refresher training on basic skill sets. In order to ensure the reliability of reserves estimates, the Company personnel responsible for reserves (“Reserves Personnel”) follows comprehensive SEC-compliant internal controls and policies to determine, estimate and report proved reserves including:

• confirming that we include reserves estimates for all properties owned and that they are based upon proper working and net revenue interests;

• ensuring the information provided by other departments within the Company such as Accounting is accurate;

• communicating, collaborating, and analyzing with technical personnel in our business units;

• comparing and reconciling the internally generated reserves estimates to those prepared by third parties; and

• utilizing experienced reservoir engineers or those under their direct supervision to prepare reserve estimates.

Reserves Personnel works closely with independent petroleum consultants at each fiscal year end to ensure the integrity, accuracy and timeliness of annual independent reserves estimates. These independently developed reserves estimates are presented to the Reserves Committee. In addition to reviewing the independently developed reserve reports, the Reserves Committee also periodically meets with the independent petroleum consultants that prepare estimates of proved reserves.

Drilling Activity

The following table sets forth the number of gross and net productive and non-productive wells drilled in the years ended December 31, 2022, 2021, and 2020 by region.  The number of wells drilled refers to the number of wells completed at any time during the fiscal year, regardless of when drilling was initiated. 

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Acreage and Well Count

The following table summarizes gross and net developed and undeveloped acreage as of December 31, 2022 by region (net acreage is our percentage ownership of gross acreage).

Delivery Commitments

Alpine Summit has firm transportation commitments for 90 Mcf/day of dry gas for certain of its Hawkville Assets extending through November 2023, increasing to 150 Mcf/day beginning in November 2023 and extending for five years. We view this firm transportation as an asset to the Company given the significant flowback restrictions surrounding our competitors’ ability to access the market.  Independent reservoir analysis has confirmed that the Company’s completed and developable locations are more than sufficient to meet these transportation commitments.

In the event the Company is unable to meet these delivery commitments due to an inability to continue developing locations, we would still be obligated to pay the transportation fees associated with this firm commitment, but we do have the ability to remarket this firm transportation to mitigate this potential risk.

For a further discussion of our oil and natural gas reserves, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data – Supplemental Oil and Gas Information (Unaudited).

ITEM 3. LEGAL PROCEEDINGS

There are no legal proceedings that the Company is or was a party to, or that any of its property is or was the subject of, during its most recently completed financial year, that were or are material to it, and there are no such material legal proceedings that the Company is currently aware of that are contemplated.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.   

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company's Subordinate Voting Shares are listed on the TSX-V under the symbol "ALPS.U" and on the Nasdaq under the symbol "ALPS".

Shareholders

As of March 21, 2023, there were 139 holders of record of our Subordinate Voting Shares.

Dividends

The Company declared monthly dividends totaling approximately $12.4 million for the year ended December 31, 2022. The cash dividends were declared for all issued and outstanding Subordinate Voting Shares, Multiple Voting Shares, and Proportionate Voting Shares. Dividends are approved at the sole discretion of the Company's Board, and the Company's Corporate Credit Facility can limit the dividends the Company is able to pay unless the Company meets certain covenants in accordance with its credit agreement.

On February 23, 2023, the Board deemed it prudent to suspend its monthly dividend payments, beginning in March 2023, until further notice. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board. Our Board's determination of any such dividends, including the record date, the payment date and the actual amount of the dividend, will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the Board deems relevant at the time of such determination.

Equity Compensation Plans

The following table sets forth the number of Subordinate Voting Shares to be issued upon exercise of outstanding convertible securities, the weighted-average exercise price of such outstanding convertible securities and the number of Subordinate Voting Shares remaining available for future issuance under our equity compensation plans as at December 31, 2022, which have been approved by the Company’s shareholders. The Company does not have any equity compensation plans that have not been approved by shareholders.

Recent Sales of Unregistered Securities

The following information represents securities sold by the Company for the period covered by this Annual Report which were not registered under the Securities Act. Included are new issues, securities issued upon conversion from other share classes, and securities issued in exchange for property, services, or other securities.

On January 19, 2022, Origination issued 826,063 Class B non-voting units of Origination (“HB2 Units”) in connection with the exercise by ten partners of their put right provided to them by the second development partnership of the Company (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company). The HB2 Units were issued on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

On May 19, 2022, Origination issued 894,929 HB2 Units in connection with the exercise by twelve partners of their put right provided to them by the third development partnership of the Company (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company). The HB2 Units were issued on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

On June 1, 2022, the Company granted 1,214,321 restricted stock units (“RSUs”) to certain officers, directors and employees of the Company pursuant to the terms of its equity incentive plan (the “Equity Incentive Plan”) and 88,694 deferred share units (“DSUs”) to certain non-executive directors of the Company pursuant to the terms of its deferred share unit plan (the “DSU Plan”). Each RSU entitles the holder to acquire one subordinate voting share in certain circumstances, subject to vesting requirements, provided that such RSU may also be settled in cash, all in accordance with the Equity Incentive Plan, and each DSU entitles the holder to acquire one subordinate voting share in certain circumstances, subject to vesting requirements, provided that such DSU may also be settled in cash, all in accordance with the DSU Plan. The grants were made on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

On July 26, 2022, 706,975 HB2 Units were issued in connection with the exercise by nine partners of their put right provided to them by the Fourth Development Partnership of the Company (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company). The Class B non-voting units were issued on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

On November 30, 2022, 617,103 HB2 Units were issued in connection with the exercise by twelve partners of their put right provided to them by the Red Dawn 1 development partnership (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company). The Class B non-voting units were issued on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

On February 3, 2023, 499,794 HB2 Units were issued in connection with the exercise by six partners of their put right provided to them by the Fifth Development Partnership. The Class B non-voting units were issued on a private placement basis in accordance with an exemption from the registration requirements of the Securities Act under Rule 506(b), as a transaction not involving any public offering. The sale was made only to “accredited investors” was not made by any general solicitation or advertising.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with other sections of this Annual Report, including but not limited to "Forward-Looking Statements", Part 1. Item 1A Risk Factors, and our consolidated financial statements and the accompanying notes included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report.

The Company historically prepared its consolidated financial statements under International Financial Reporting Standards. For the year ended and as at December 31, 2022 the consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). US GAAP has been applied retrospectively.

This section of our Annual Report discusses 2022 and 2021 items and year-over-year comparisons between those periods. Amounts are stated in US dollars unless otherwise noted.

OVERVIEW AND HIGHLIGHTS

The Company is a U.S. oil and natural gas development company focused on maximizing return on equity.  The Company has focused its drilling activity in two main areas, the Austin Chalk and Eagle Ford formations in the Giddings Field in Austin, Fayette, Lee, Robertson and Washington Counties, TX (the "Giddings Assets") and the Hawkville Field in Webb and LaSalle Counties, TX (the "Hawkville Assets").

For future periods, the Company plans to continue to develop its existing and adjacent footprint over the next several years while also evaluating additional development projects that fit its investment criteria.

As of December 31, 2022, the Company's assets consisted of a total leasehold position of 432,477 gross and 312,910 net acres, including the Hawkville area, the Giddings area, and the Holbrook Basin area, as follows:

• Giddings Assets: (a) in the Austin Chalk area include 9,004  gross and 7,583 net acres, and (b) in the Eagle Ford area include 134,198 gross and 16,104 net acres.

• Hawkville Assets: include 14,364 gross and 14,313 net acres.

• The Holbrook basin assets are located in Apache, Navajo and Coconino Counties, Arizona, and include 274,911 gross and net acres. Development of these assets for Helium is pending further research and planning.

2022 Highlights

• Oil and natural gas sales (net of royalties) of $195.6 million for the year ended December 31, 2022 (December 31, 2021 - $70.8 million).

• Reported net income and comprehensive income of $44.4 million for the year ended December 31, 2022 (December 31, 2021 - loss of $32.6 million).  Adjusted EBITDA¹ (defined below) of $140.1 million for the same period (December 31, 2021 - $46.2 million).

• Reported net income and comprehensive income attributable to the Company's common shareholders of $7.4 million for the year ended December 31, 2022 (December 31, 2021 - loss of $32.3 million)

• 18 new wells were brought onto production during 2022.

• For the three months ended December 31, 2022, Alpine had 30.9 net wells (37 gross wells) with a net production rate of 14,445 BOE per day (gross production rate of 22,588 BOE per day).

• Average net production per day of 10,513 BOE during 2022 (gross production rate of 16,145 BOE per day) an increase of 156% year over year due to extensive drilling activity.

• Development projects continued to be funded via the development partnership structures, to facilitate continued drilling initiatives.

• Entered into the ABS Facility for total borrowings of $135 million. As of December 31, 2022, approximately $110 million was outstanding on the ABS Facility.

• Expanded the size of the Corporate Credit Facility to a maximum size of $65 million. As of December 31, 2022 $41.5 million was drawn under the Corporate Credit Facility.

• Listing on the Nasdaq Stock Market of the Company's Class A Subordinate Voting Shares on September 28, 2022, trading under the ticker symbol "ALPS".

• Implemented a dividend distribution policy, starting January 2022, where monthly dividends of $0.03 per share for each of the subordinated voting shares and proportionate voting shares and $3.00 per each share of the multiple voting shares were declared each month, with aggregate dividends declared and paid in 2022 of $12,416,759 (2021 - $nil).

Subsequent Event Highlights

• The Company continued with its monthly dividend program, $0.03 per SVS ($3.00 per MVS and $0.03 per PVS) for January and February 2023.

• On January 20, 2023, the Company successfully completed the payout and liquidation of its development partnership five and concurrently formed development partnership seven.

• On February 23, 2023, the Company announced the suspension of the monthly dividend payments commencing in March 2023.

• The Company announced the commencement of a strategic review of assets on February 23, 2023.

• On March 3, 2023, the Company announced the resignation of Darren Tangen from the Board of Directors and subsequent hiring of James Russo as his replacement.

• On March 8, 2023, the Company announced the hiring of Stephens Inc. as its financial advisor to pursue an asset sale.

• In March 2023, the Company received covenant waivers on the Corporate Credit Facility and the ABS Facility until July 1, 2023 for potential future covenant breaches.

Oil and Natural Gas Reserves

The Company's year-end reserve evaluation as of January 1, 2023, was prepared by W.D. VonGonten & Co. in a report dated February 3, 2023 (the "Reserves Report"). The Reserve Report evaluates all of the Company's oil, natural gas, and NGL reserves, and uses pricing estimates in accordance with guidelines established by the United States Securities and Exchange Commission. Under these guidelines, oil and natural gas reserves are estimated using then-current operating and economic conditions.

Highlights of the Reserves Report include:

• Proved developed producing reserves (“PDP”) were 15.8 million BOE and total proved reserves (“1P”) were 24.0 million BOE.

• The PDP reserves have a composition of 24% oil and 76% natural gas and NGL, whereas the 1P reserves were composed of 18% oil and 82% natural gas and NGL.

• Net future development costs were $4.0 million for PDP and $75.5 million for 1P.

For details on the reserves data and estimates, as well as changes, refer to Item 8. Financial Statements and Supplementary Data - Supplemental Oil and Gas Information (Unaudited).

OPERATIONAL AND FINANCIAL RESULTS

Net Oil and Gas Revenues

Our revenues vary from year to year primarily as a result of changes in commodity prices and production volumes. In 2022, oil and gas revenues increased by $124,852,168, an increase of 176.4% from 2021, driven by an 155.7% increase in production volumes and an increase in the average per BOE realized selling price of 8.1%, excluding the effect of commodity derivatives.

Production volumes:

The higher production in 2022 is a result of the addition of 18 new wells, with a primary focus on Hawkville gas wells attributing to the change in sales mix.

The production for the years ended December 31, 2022 and 2021, reflecting the Company's working interests and net of royalties, are as follows:

¹ Natural gas is converted to a barrel of oil equivalent ("BOE") at the rate of one barrel equaling six Mcf (defined as one thousand cubic feet) based upon the approximate relative energy content of oil and natural gas, which is not necessarily indicative of the relationship of oil and natural gas prices.

Average sales price:

On a per-BOE basis, the Company's average realized price for the year ended December 31, 2022 increased compared to the same period of 2021 by $3.82 per BOE, reflecting a 8.1% increase. The increase in sales prices is primarily due to the increase in the commodity price indices for oil, natural gas, and NGL. However, the realized average sales price per BOE also reflects the increased production of natural gas and NGLs at a lower overall per BOE price.

The average realized sales prices for the years ended December 31, 2022 and 2021, are as follows:

Commodity Derivative Instruments

The future results of the Company's oil and natural gas operations will be affected by market prices of oil and natural gas which is affected by numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and natural gas liquid products, economic disruptions, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.

The Company enters into various commodity price derivative instruments to manage the price risk attributable to part of its future production. As the Company's derivatives are not designated for hedge accounting, the changes in fair value of the derivatives are recognized in income (loss) each period, creating earnings volatility in connection with outstanding derivatives. As commodity prices increase or decrease, such changes will have the opposite effect on the fair value of the derivatives.

At December 31, 2022, the net fair value of the open commodity derivatives was an asset position of $3,077,079 (2021 - liability position of $20,424,601). The change from 2021 is primarily due to the volume of outstanding derivatives as well as changes in the forward commodity prices relatively to the fixed price of the derivatives.

The Company's net loss on commodity derivatives for the year ended December 31, 2022 was $10,023,495 (2021 - $33,525,453). This amount consists of an unrealized gain of $26,246,351 (2021 - loss of $15,903,217) and realized losses of $36,269,846 million (2021 - loss of $17,622,236).

Refer to Note 18 of the financial statements for additional details.

Management of cash flow variability is an integral component of the Company's business strategy. Business conditions are monitored regularly and reviewed by the Company to establish risk management guidelines in carrying out the Company's strategic risk management program.

Expenses

The following table summarizes the Company's expenses and other income (expenses) for the periods indicated:sss

Production and Transportation Costs

Total production and transportation costs for the year ended December 31, 2022, increased by $29,408,486, an increase of 243% when compared to the same period of 2021, primarily due to the overall increased production noted above. On a per BOE basis, the production and transportation costs increased by $2.76, an increase of 34%, due to higher operating costs for wells brought online in 2022, primarily relating to higher water disposal, fuel, and trucking costs, as well as overall market increases for service costs. The higher service costs are mainly due to inflation and market availability.

General and Administrative Costs

General and administrative costs for the year ended December 31, 2022, remained relatively consistent with an increase of $1,069,043 or 4%, when compared to the same period of 2021. This increase was primarily due to an increase in employee salaries and benefits of $3,709,863, an increase in professional, legal and advisory costs of $1,042,547, and office and administrative costs of $735,312, as well as increases in other items such as software, and lease expenses, and partially offset by the reduction to stock-based compensation of $4,281,056. From a per BOE perspective, the general and administrative costs reduced by $9.87 per BOE, a reduction of 59%, as a result of increased production levels noted above.

Depreciation, Depletion, and Amortization

The depreciation, depletion, and amortization expense consist of depletion on the Company's evaluated oil and gas properties. Depletion expense increased for the year ended December 31, 2022, by $38,584,756, an increase of 164% as compared to the same period of 2021 due to an increase in production, as well as an increase in the evaluated properties that are part of the depletion base. Depletion expense on a BOE basis also increased by $0.52 per BOE, an increase of 3%, reflecting the higher costs incurred on the new wells, due to inflation and market availability.

Finance and Interest Expense

Finance and interest expense for the year ended December 31, 2022, increased by $7,700,789, an increase of 134%, as compared to the same period of 2021 due to the increase in overall borrowings. The main increase relates to the financing and interest costs on the ABS Facility, as well as the Corporate Credit Facility, as defined in the financial statements. On a per BOE basis, the finance and interest expense has decreased by $0.32 per BOE, a decrease of 8%, due to the increased production in 2022.

Income Tax Expense (Benefit)

For the year ended December 31,2022, the Company recognized an income tax benefit of $1,928,319, resulting in an effective tax benefit of 4.5%, compared to an income tax expense of $1,928,319 for the year ended December 31, 2021, resulting in an effective tax rate of 5.9%. The overall change in the Company’s effective tax rate for the year ended December 31, 2022, from the previous year is primarily due to: (i) changes in amounts of income (loss) not subject to corporate tax and, (ii) current year activity causing the reversal of a previously recorded deferred tax expense resulting from temporary differences in recognition of items related to cost recovery of oil and natural gas properties.  

Additionally, the Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes that recovery is more likely than not, it does not establish a valuation allowance reserve against the recorded net deferred tax assets. As of December 31, 2022, the Company recorded a valuation allowance on its net deferred tax assets after reflecting the reversal of previously recorded deferred tax liabilities due to current year activity. Refer to Note 15 of the financial statements for additional details.

Non-GAAP Financial Measures:

Within this report, references are made to terms which are not recognized under GAAP. Specifically, "field operating netbacks", "adjusted EBITDA", and measurements "per commodity unit" and "per BOE" do not have any standardized meaning as prescribed by GAAP and are regarded as non-GAAP measures. These non-GAAP measures may not be comparable to the calculation of similar amounts for other entities and readers are cautioned that use of such measures to compare enterprises may not be valid. The Company's management uses these non-GAAP supplemental measures to benchmark operations against prior periods and peer group companies and believes they provide useful supplemental information that can be used by investors, lenders, analysts and other parties to analyze the Company's performance and financial results.

Field Operating Netbacks

Field operating netbacks are used by management to assess operational performance of assets. Field operating netbacks are calculated by deducting depletion and commodity derivatives from the gross margin and is presented on a per BOE basis.

The Field Operating Netback for the years ended December 31, 2022 and 2021 are as follows:

For the year ended December 31, 2022, the Field Operating Netback per BOE remained relatively consistent, with an increase of $1.06 per BOE when compared to 2021. This reflects an offset of the $2.76 per BOE increase in production costs and transportation, with the increase in the average realized sales price per BOE of $3.82.

Adjusted EBITDA

Adjusted earnings before interest, taxes, depletion and amortization (“Adjusted EBITDA”), is a non-GAAP measure that is used to supplement the Company’s reported financial performance or position. The Company believes that Adjusted EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to our operating performance and provides management and investors with additional information for comparison of our operating results to the operating results of other companies. All figures presented do not reflect any potential impact of non-controlling interests or redeemable non-controlling interests. The Company’s calculation of Adjusted EBITDA is net income/(loss) adding back finance and interest expense, depletion and depreciation, impairment, gains/losses on commodity derivatives, and non-recurring costs.

The following table provides a reconciliation of net income/(loss) before redeemable non-controlling interest and non-controlling interest to Adjusted EBITDA:

FINANCING, LIQUIDITY AND CAPITAL RESOURCES

Companies operating in the upstream oil and gas industry require sufficient cash in order to fund capital programs that maintain and increase production and reserves, to acquire strategic oil and gas assets, to repay current liabilities and debt and ultimately to provide a return to shareholders. The Company's capital programs are funded by existing working capital, various lending facilities and redeemable non-controlling interests (discussed below) and cash provided from operating activities.  Fluctuations in commodity prices, product demand, interest rates and various other risks may impact capital resources and capital expenditures.

During 2022, the main financing related transactions included the following:

• Asset backed securitization facility (the "ABS Facility"):

The Company entered into two tranches of borrowings under the ABS Facility, for a total size of $135 million.

On April 27, 2022, Tranche 1 of the ABS Facility was drawn for $80 million and carries an interest rate of LIBOR+6% (with a 1% LIBOR floor) for the initial year, LIBOR +12% for the second year. Tranche 1 has an initial maturity date of one year, with the Company having the option to extend an additional year to an ultimate maturity date of April 2024.

On September 12, 2022, Tranche 2 of the ABS Facility was drawn for an additional $55 million and carries an interest rate of LIBOR+8% (with a 1% LIBOR floor) for the initial year, LIBOR +14% for the second year. Tranche 2 has an initial maturity date of one year, with the Company having the option to extend an additional year to an ultimate maturity date of September 2024.

All borrowings under the ABS Facility are secured by working interests in a subset of the Company's producing assets. 

As at December 31, 2022, the Company had $109,982,677 of principal outstanding under the ABS Facility. 

• Corporate Credit Facility:

During the first quarter of 2022, the Company replaced its previous credit facility, which had a $12,500,000 borrowing capacity. The new corporate credit facility had a borrowing capacity of $30,000,000, which was subsequently increased in October 2022 to $65,000,000, subject to quarterly borrowing base determinations by the lender. The facility charges interest at prime +2.25% and had a one-year maturity.  A subset of certain Company working interests in producing assets have been secured in connection with the Corporate Credit Facility.

As at December 31, 2022, the Company ad drawn $41,500,000 under the Corporate Credit Facility (2021 - $2,200,000). The borrowing base as at December 31, 2022 was $64,435,764 (2021- $6,579,750).

• Goldman Facility

The Company had borrowings under a credit facility with Goldman Sachs (the "Goldman Facility"), which carried an interest rate of LIBOR+6% (with a 1% LIBOR floor) and a maturity date of December 22, 2031. All borrowings under the Goldman Facility were secured by the Company's oil and gas producing wells as well as all assets of three of the Company's subsidiaries. 

In April 2022, in connection with the ABS Facility (above), the Company repaid the Goldman Facility in full. The principal borrowing under this facility as at December 31, 2022 was $nil (2021 - $25,237,409).

• Asset Backed Preferred Instruments:

The Company had previously issued mandatorily redeemable instruments as part of a share buy-back structure. These instruments were fully repaid and settled in 2022.

• Development Partnerships:

The Company utilizes development partnerships as a mechanism to partially finance its development projects and activities. As part of the development partnerships, investors will provide funding to be used for the development of specific wells, in return, the investors will receive partnership units that provide a specified return, plus participation in the residual of those wells that can be realized via redemption.

Due to the redemption feature, the development partnership interests issued to external investors are accounted for as redeemable non-controlling interest.

For the year ended December 31, 2022, the redeemable non-controlling interests provided cash inflows of $53,728,933 (2021 - $41,042,693), and cash outflows for the distribution and settlement of $10,369,504 (2021 - $6,388,870). Of the total redeemable non-controlling interest that received distributions and/or was settled, the remaining non-cash balance related to settlements via the issuance of redeemable non-controlling interests for a new development partnership, via non-controlling interest shares, or via oil and gas property dispositions

As at December 31, 2022, the redemption value of the redeemable non-controlling interest was $107,583,737 (2021 - $46,552,839).

Refer to Note 2 and Note 9 of the financial statements for additional details.

Working Capital and Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with the financial liabilities as they become due.

At December 31, 2022 the Company had a working capital deficit of $162,980,101, compared to a deficit of $36,148,466 as at December 31, 2021. Current assets increased by $12,104,044 compared to 2021, primarily due to an increase in accounts receivables due to higher oil and gas revenues, as well as increases in restricted cash and derivative assets, and partially offset by a reduction in cash and cash equivalents. This was offset by an increase in current liabilities of $138,935,679 primarily due to increases in accounts payable and accrued liabilities as well as current portions of borrowings, due to increased capital expenditures on oil and natural gas properties, and partially offset by a reduction to the current portion of the derivative liabilities.

Due to the working capital deficit, the Company does not currently have the cash resources to meet its current liabilities for the next twelve months. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The Company's ability to continue as a going concern is dependent on its ability to generate sufficient cash flows from operations, as well as its ability to obtain financing via an asset sale and/or the issuances of debt and/or equity in the short term. While the Company believes it has sufficient forecasted funds to meet foreseeable obligations, there can be no assurance that the Company will be successful in its efforts to raise additional funds in the short term and its ability to generate sufficient operating cash flows.

Due to these factors, the Company may be unable to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern, and such adjustments could be material.

In an effort to increase liquidity, the Company has during and subsequent to the year ended December 31, 2022: (i) continued its drilling program to bring wells online and to increase cash flows from operating activities, (ii) raised funds through development partnerships, (iii) entered into a strategic review of assets and engaged Stephens Inc. for a potential asset sale, (iv) commenced the suspension of monthly dividends starting March 2023, (v) obtained waivers for covenant breaches on the Corporate Credit Facility and ABS Facility until July 1, 2023 in the event of a covenant breach, and (vi) obtained an extension to the initial maturity date of the first tranche of the ABS Facility until July 1, 2023.

Sources and Uses of Cash

The Company's sources and uses of cash are summarized as follows:

Cash Flows from Operating Activities

The net cash from operating activities in 2022 increased by $59,905,356, an increase of 182% from 2021. The increase was driven by the increase in production, as well as changes to working capital and timing of cash receipts and disbursements.

Cash Flows used for Investing Activities

During the year ended December 31, 2022, the Company’s cash flows used for investing activities increased by $155,532,335, an increased of 274% when compared to 2021, due to increased drilling and development of its oil and gas properties. For the evaluated oil and gas properties, the majority of the activity related to the drilling of horizontal wells in the Giddings and Hawkville Fields. The expenditures on unevaluated properties focused on the acquisition, exploration and development of those unevaluated assets.

Our cash flows used in investing activities reflects actual cash spending, which can lag several months from when the related costs were incurred. As a result, our actual cash spending is not always reflective of current levels of development activity.

Cash Flows from Financing Activities

During the year ended December 31, 2022, cash provided by and used in financing activities increased by $91,769,372, an increase of 312% when compared to 2021, primarily due to the increased net borrowings under the external debt facilities, as well as increases in the net proceeds from the issuance of redeemable non-controlling interests.

The net cash proceeds from the debt issuances were in part offset by the use of cash for the payments of dividends of $18,969,442, to both the Company's common shareholders, and dividends paid to its non-controlling interest holders, as well as the use of $4,324,915 in cash to repurchase and cancel the Company's shares. 

Refer to the statements of cash flows of the financial statements for further details.

Off-Balance-Sheet Arrangements

The Company does not have any special-purpose entities nor is it a party to any arrangements that would be excluded from the consolidated balance sheet.

CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND POLICIES

The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP), which require management to make estimates, judgments and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain accounting policies are identified as critical because they require management to make judgments and estimates based on conditions and assumptions that are inherently uncertain, and because the estimates are of material magnitude to revenue, expenses, cash flows from operations, income or loss and/or other important financial results. These accounting policies could result in materially different results should the underlying conditions change or the assumptions prove incorrect.

We consider the following to be our most critical accounting policies and estimates involving significant judgment or estimates. See Note 2 to the financial statements in this Annual Report for further details on our accounting policies as at December 31, 2022.

Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

Oil and Natural Gas Properties

The Company uses the full-cost method of accounting for its oil and natural gas properties. Under this method, all costs associated with the acquisition, exploration and development of oil and natural gas properties and reserves, including unproved and unevaluated property costs, are capitalized as incurred and accumulated in a single cost center representing the Company's activities, which are undertaken exclusively in the United States. Such costs include lease acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties, costs of drilling both productive and non-productive wells, and general and administrative expenses directly related to acquisition, exploration and development activities, but does not include any costs related to production, selling or general corporate administrative activities.

In determining the depletion capitalized costs of oil and natural gas properties are amortized using the unit-of-production method. Under this method, depletion is calculated at the end of each period by multiplying total production for the period by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base plus estimates of future development costs by estimates of proved reserves quantities. Unproved and unevaluated property costs and related carrying costs are excluded from the depletion base until the properties associated with these costs are considered proved or impaired. The Company reviews its unproved and unevaluated properties at the end of each quarter to determine whether the costs incurred should be transferred to the full cost pool and thereby subject to amortization.

As a result, the determination of depletion can be significantly impacted by the costs identified as being part of the depletion base, and the proved reserves volumes and future development costs.

Similarly, the assessment of impairment of evaluated oil and gas properties is subject to the ceiling test. This ceiling test determines a limit, or ceiling, on the net capitalized costs of oil and natural gas properties. The net capitalized costs are limited to the lower of unamortized costs less related deferred income taxes or the cost center ceiling. The cost center ceiling is defined as the sum of: (a) the present value, discounted at 10%, of future net revenues of proved oil and natural gas reserves, reduced by the estimated costs of developing these reserves, plus (b) unproved and unevaluated property costs not being amortized, plus (c) the lower of cost or estimated fair value of unproved and unevaluated properties included in the costs being amortized, if any, less (d) any income tax effects related to the properties involved.

Therefore, changes in oil and natural gas production rates, oil and natural gas prices, reserves estimates, future development costs and other factors will determine the Company's actual ceiling test computation and impairment analyses in future periods.

Oil and Natural Gas Reserves Quantities and Standardized Measure of Future Net Revenue

Engineers and technical staff prepare the estimates of oil and natural gas reserves and associated future net revenues. While the Company has proved, probable and possible reserves, the Company has elected to present only proved reserves in this report. Proved reserves are defined as the quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible-from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations-prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project within a reasonable time.

The assessment of reported recoverable quantities of proved reserves includes estimates regarding production volumes, commodity prices, remediation costs, timing and amount of future development costs, and production, transportation and marketing costs for future cash flows. It also requires interpretation of geological and geophysical models in anticipated recoveries. The economical, geological and technical factors used to estimate reserves may change from period to period. Accordingly, reserves estimates are generally different from the quantities of oil and natural gas that are ultimately recovered. Any significant variance could materially and adversely affect the future reserves estimates, financial condition, results of operations and cash flows. The Company cannot predict the amounts or timing of future reserves revisions. If such revisions are significant, they could significantly affect future depletion of capitalized costs and result in an impairment of assets that may be material.

Estimates of proved oil and natural gas reserves are key inputs used for the calculations of depletion and the ceiling test. The estimated present value of future net cash flows from proved oil and natural gas reserves is highly dependent upon the quantities of proved reserves, the estimation of which requires substantial judgment. Oil and natural gas reserves are estimated using then-current operating and economic conditions, with no provision for price and cost escalations in future periods except by contractual arrangements. The associated commodity prices and the applicable discount rate used in estimates for depletion and the ceiling test are in accordance with guidelines established by the United States Securities and Exchange Commission. Under these guidelines, future net revenues are calculated using prices that represent the arithmetic averages of the first day-of-the-month oil and natural gas prices for the previous 12-month period, and a 10% discount factor is used to determine the present value of future net revenues.

The reserve assessment was completed by an external third-party engineering firm for the years ended December 31, 2022 and 2021 and reserves are internally updated for interim periods.

2023 OBJECTIVES AND OUTLOOK

During 2023, the Company plans on continuing to manage production of its primary assets in the Giddings and Hawkville fields.  As previously disclosed, the Company expects to bring seven wells onto production by the end of the first quarter of 2023, with a pause in activity until the sales process is complete.

The Board has formed a sub-committee, led by independent directors, to lead discussions with the various stakeholders of the Company as it assesses alternatives following the conclusion of the sales process.

SUBSEQUENT EVENTS

Dividends

On January 3, 2023, the Company's board of directors (the "Board") declared a dividend of $0.0315 per SVS and PVS, and $3.15 per MVS. Payable on January 31, 2023, to shareholders of record on the close of business on January 17, 2023.

On February 1, 2023, the Company's Board declared a dividend of $0.0315 per SVS and PVS, and $3.15 per MVS. Payable on February 28, 2023, to shareholders of record on the close of business on February 14, 2023.

On February 23, 2023, it was announced that monthly dividends would be suspended beginning in March 2023, in connection with the strategic review of assets. 

Completion of the Fifth Development Partnership and creation of Development Partnership Seven

On January 20, 2023, the Company redeemed redeemable non-controlling interests with a redemption value of $36,354,869. As part of this redemption, the development partnership five units with a redemption value of $2,505,631 were exchanged for 499,794 Class B non-voting units of the Company's operating subsidiary.

On January 20, 2023, the Company also formed the development partnership seven program, with 24 external limited partners and the Company's operating subsidiary as a limited partner and the general partner. The intention of the program is to finance the drilling and completion of five wells, with external partners funding approximately 60% and the Company funding 40%. The Company raised $34,262,236 from external limited partners of which $4,946,981 was raised from officers and directors of the Company. 

Strategic Review of Assets

On February 23, 2023, the Company announced that the Board had commenced a strategic review of its assets. The Company is seeking to facilitate a timely and orderly response to unsolicited inquiries by other upstream oil and gas companies who have expressed interest in acquiring various assets of the Company.

Director Resignation

On March 3, 2023, the Company announced that Darren Tangen had resigned from its Board, including its Compensation, Audit and Operations and Reserves Committees, effective March 2, 2023. In connection with the resignation, James Russo was appointed as a member of the Board as well as a member of the Compensation, Audit and Operations and Reserves Committees to fill the vacancy created by Darren Tangen's resignation.

Engagement of Stephens Inc.

On March 8, 2023, the Company announced that it had engaged Stephens Inc. as its financial advisor to pursue an asset sale for various strategic, high producing assets recently developed and proven by the Company. Proceeds of such sale are expected to retire existing liabilities as well as place additional capital on the Company's balance sheet.

Debt Amendments and Covenant Waiver`

In March 2023, the Company received a waiver of all covenants on the Corporate Credit Facility until July 1, 2023, and received a waiver on certain covenants on the ABS Facility until July 1, 2023. The Company also received an extension on the initial maturity date of Tranche 1 under the ABS Facility until July 1, 2023. In the absence of a covenant waiver, a breach of the covenant would result in the Corporate Credit Facility and/or ABS Facility to be due on demand.

Additional Information

Additional information relating to the Company is contained in the Company's Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial information required by Item 8 is located beginning on page F-1 of this Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management of the Company, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the year covered by this Form 10-K. The term "disclosure controls and procedures" means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period ended December 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective as of December 31, 2022.

The Company, including its CEO and CFO, does not expect that its internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

Our management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). We have evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this report, with the participation of our CEO and CFO, as well as other key members of our management. Based on this assessment, management concluded that, as of December 31, 2022, the Company's internal control over financial reporting was effective.

Attestation Report of the Registered Public Accounting Firm

This Annual Report does not include an attestation report of the Company's registered independent public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered independent public accounting firm as the Company qualifies as an "emerging growth company" under the Jumpstart Our Business Start-ups Act of 2012.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the fourth quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required in response to this item will be set forth in the Company's 2023 Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required in response to this item will be set forth in the Company's 2023 Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required in response to this item will be set forth in the Company's 2023 Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required in response to this item will be set forth in the Company's 2023 Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required in response to this item will be set forth in the Company's 2023 Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The financial statements listed in the accompanying index (page F-1) are filed as part of this Annual Report.

(a)(2) Financial Statement Schedules

Schedules have been omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.

(a)(3) Exhibits

The exhibits are incorporated by reference from the Exhibit Index attached hereto.

ITEM 16. FORM 10-K SUMMARY

None.

EXHIBIT INDEX

*  Filed herewith.

‡ Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

# Management contract, compensatory plan or arrangement required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K

♦ Certain identified information has been omitted from this exhibit because it is both (1) not material and (2) the type that the Company treats as private or confidential. 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 27, 2023.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Craig Perry and Craig Perry, jointly and severally, his or her attorney-in-fact, each with the full power of substitution, for such person, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might do or could do in person hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his or her substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.