Annual report pursuant to Section 13 and 15(d)

REVENUE RECOGNITION

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REVENUE RECOGNITION
12 Months Ended
Dec. 31, 2021
REVENUE RECOGNITION  
REVENUE RECOGNITION

NOTE 2 – REVENUE RECOGNITION

Oil sales

Under the Company’s oil sales contracts, the Company sells oil production at the point of delivery and collects an agreed upon index price, net of pricing differentials. The Company recognizes revenue when control transfers to the purchaser at the point of delivery at the net price received.

Natural gas sales

Under the Company’s natural gas sales processing contracts for our Central Basin Platform properties, Delaware Basin properties and part of our Northwest Shelf assets, the Company delivers unprocessed natural gas to a midstream processing entity at the wellhead. The midstream processing entity obtains control of the natural gas at the wellhead. The midstream processing entity gathers and processes the natural gas and remits proceeds to the Company for the resulting sale of natural gas. Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery. As such, the Company accounts for any fees and deductions as a reduction of the transaction price.

Under the Company natural gas sales processing contracts for the bulk of our Northwest Shelf assets, the Company delivers unprocessed natural gas to a midstream processing entity at the wellhead. However, the Company maintains ownership of the gas through processing and receives proceeds from the marketing of the resulting products. Under this processing agreement, the Company recognizes the fees associated with the processing as an expense rather than netting these costs against revenue.

Disaggregation of Revenue. The following table presents revenues disaggregated by product:

For the years ended December 31,

    

2021

    

2020

    

2019

Operating revenues

 

  

 

  

 

  

Oil

$

181,533,093

$

109,113,557

$

191,891,314

Natural gas

14,772,873

3,911,581

3,811,517

Total operating revenues

$

196,305,966

$

113,025,138

$

195,702,831