WhiteHawk Minerals closes $96.8M mineral acquisition
The preferred financing carries monthly cash dividends that rise to 14% annually, while aggregate elected commitments and the borrowing base increase to $175 million.
Rhea-AI Filing Summary
WhiteHawk Minerals Corp. (WHK) completed the SJM II Acquisition on September 25, 2026. Its indirect wholly owned subsidiaries acquired certain mineral and related interests from Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC in the Marcellus and Haynesville basins for closing consideration of approximately $96.8 million after customary adjustments, versus an agreed $105.0 million purchase price subject to customary adjustments. WhiteHawk used Series E proceeds, proceeds from its September 21 Class A common stock private placement, and cash on hand.
The sellers’ combined carve-out statements report 2025 net sales of $34.4 million and net income of $24.6 million. On September 23, WhiteHawk issued and sold 50,000 Series E preferred shares for $50.0 million in gross proceeds, including to Chairman, President and CEO Daniel Herz. The shares rank senior to common stock and pay monthly cash dividends at annual rates of 10% through March 31, 2027, 12% from April 1, 2027 through December 31, 2028, and 14% thereafter. A credit amendment raised aggregate elected commitments and borrowing base from $150.0 million to $175.0 million and admitted a new lender.
Positive
- Marcellus/Haynesville acquisition closed for approximately $96.8 million; WhiteHawk expects an accretive impact.
Negative
- Series E monthly cash dividends reach 14% annually after December 31, 2028.
Filing Explained
The disclosed Series E terms include minimum-return and contingent redemption cash claims ahead of common holders.
The amendment details the cash claims attached to the already-issued Series E, which ranks ahead of common: holders have a minimum return on invested capital, counting dividends and other cash payments toward it, and WhiteHawk must redeem all shares upon a defined Deemed Liquidation Event or certain other events. WhiteHawk may also redeem the shares for
The added interim carve-out statements report combined net sales of
8-K Event Classification
Key Figures
Key Terms
overriding royalty interests technical
non-participating royalty interests technical
borrowing base financial
Deemed Liquidation Event financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did WHK pay for the SJM II Acquisition?
How much did WHK raise through its Series E preferred stock?
What are the dividend and redemption terms for WHK’s Series E preferred stock?
What were Three Rivers and Cypress’ reported 2025 financial results?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2026 (
(Exact name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction |
(Commission File Number) |
(IRS Employer |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s Telephone Number, Including Area Code:
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 1.01 Entry into a Material Definitive Agreement.
Purchase and Sale Agreement
As previously reported on August 12, 2026, WhiteHawk Income Marcellus LLC and WhiteHawk Income Haynesville LLC (collectively, the “Buyers”), each indirect wholly owned subsidiaries of WhiteHawk Minerals Corp. (the “Company”), entered into a Purchase and Sale Agreement (the “PSA”) with Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC (collectively, the “Sellers”), pursuant to which the Buyers agreed to acquire certain mineral interests, fee mineral interests, overriding royalty interests, non-participating royalty interests and related assets in the Marcellus and Haynesville shale basins (the “Assets”) for an aggregate purchase price of $105.0 million, subject to customary adjustments (the “SJM II Acquisition”).
On September 25, 2026, the Company completed the SJM II Acquisition. The aggregate consideration paid at closing was approximately $96.8 million, after giving effect to customary adjustments. The Company funded the purchase price with a combination of proceeds from the Series E Preferred Stock offering described below, proceeds from the Company’s previously announced private placement of Class A Common Stock, which closed on September 21, 2026, and cash on hand.
The foregoing description of the PSA does not purport to be complete and is qualified in its entirety by reference to the full text of the PSA, a copy of which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 12, 2026 and is incorporated herein by reference.
Series E Preferred Stock Offering
On September 23, 2026, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors, including Daniel Herz, the Company’s Chairman, President and Chief Executive Officer (collectively, the “Investors”), pursuant to which the Company issued and sold 50,000 shares of the Company’s newly designated Series E Preferred Stock, par value $0.0001 per share (the “Series E Preferred Stock”), for aggregate gross proceeds of $50.0 million.
The Series E Preferred Stock will rank senior to the Company’s Class A common stock, Class B common stock and each other class and series of the Company’s capital stock. The Series E Preferred Stock will pay monthly cash dividends at an annual rate of (i) 10% from issuance through March 31, 2027, (ii) 12% from April 1, 2027 through December 31, 2028, and (iii) 14% thereafter. The Company may redeem the Series E Preferred Stock at any time at a redemption price of $1,000 per share plus accrued and unpaid dividends. In the event of a Deemed Liquidation Event (as defined in the Certificate of Designations) or certain other events, the Company will be required to redeem all outstanding shares of Series E Preferred Stock. Holders of the Series E Preferred Stock are entitled to receive a minimum return of 1.08x of invested capital upon the payment of all dividends thereon and all liquidation, redemption or other cash payments made by the Company to the holders of the Series E Preferred Stock.
The foregoing descriptions of the Securities Purchase Agreement and the Series E Preferred Stock do not purport to be complete and are qualified in their entirety by reference to (i) the form of Securities Purchase Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K/A, and (ii) the Certificate of Designations for the Series E Preferred Stock, a copy of which is filed as Exhibit 3.1 to this Current Report on Form 8-K/A, each of which is incorporated herein by reference.
Second Amendment to Credit Agreement
On September 25, 2026, in connection with the closing of the SJM II Acquisition, WhiteHawk Income Operating Partnership L.P. (the “Borrower”), a wholly owned subsidiary of the Company, entered into the Second Amendment (the “Second Amendment”) to Amended and Restated Credit Agreement, dated as of May 25, 2026 (as amended by that certain First Amendment to Amended and Restated Credit Agreement, dated as of June 10, 2026, and as further amended, the “Credit Agreement”), among the Company, as Parent, the Borrower, Capital One, National Association, as Administrative Agent and Issuing Bank, and the lenders party thereto.
The Second Amendment amends the Credit Agreement to, among other things, (i) increase the aggregate elected commitments and borrowing base from $150.0 million to $175.0 million and (ii) reallocate commitments among the existing lenders and admit a new lender to the revolving credit facility.
The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Second Amendment, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K/A and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On September 25, 2026, the Company completed the SJM II Acquisition. The information set forth under “Item 1.01 Entry into a Material Definitive Agreement—Purchase and Sale Agreement” is incorporated by reference into this Item 2.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement—Second Amendment to Credit Agreement” is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement—Series E Preferred Stock Offering” is incorporated by reference into this Item 3.02.
The Series E Preferred Stock was offered and sold in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and Rule 506(b) of Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering. Each of the Investors represented that it is an “accredited investor” as defined in Regulation D and that it acquired the shares of Series E Preferred Stock for investment only and not with a view toward, or for resale in connection with, the public sale or distribution thereof. The shares of Series E Preferred Stock have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement—Series E Preferred Stock Offering” regarding the terms of the Series E Preferred Stock is incorporated by reference into this Item 5.03. A copy of the Certificate of Designations is filed as Exhibit 3.1 to this Current Report on Form 8-K/A and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On September 25, 2026, the Company issued a press release announcing the closing of the SJM II Acquisition and certain other matters. A copy of the press release is furnished as Exhibit 99.4 to this Current Report on Form 8-K.
The information in this Item 7.01, including Exhibit 99.4 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
The following financial statements of Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC, as required by Rule 3-05 of Regulation S-X, are filed as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K/A: (i) audited carve-out financial statements as of and for the years ended December 31, 2025 and 2024; and (ii) unaudited interim carve-out financial statements as of June 30, 2026 and for the six months ended June 30, 2026 and 2025.
The following unaudited pro forma condensed consolidated combined financial information of the Company, as required by Article 11 of Regulation S-X, is filed as Exhibit 99.3 to this Current Report on Form 8-K/A: (i) unaudited pro forma condensed consolidated combined balance sheet as of June 30, 2026; (ii) unaudited pro forma condensed consolidated combined statement of operations for the year ended December 31, 2025; and (iii) unaudited pro forma condensed consolidated combined statement of operations for the six months ended June 30, 2026.
Exhibit No. |
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Description |
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2.1‡* |
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Purchase and Sale Agreement, dated August 12, 2026, by and among Three Rivers Royalty II, LLC, Cypress Mineral Partners, LLC, WhiteHawk Income Marcellus LLC and WhiteHawk Income Haynesville LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 12, 2026) |
3.1 |
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Certificate of Designations of Series E Preferred Stock of WhiteHawk Minerals Corp. |
10.1* |
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Form of Securities Purchase Agreement |
10.2 |
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Second Amendment to Amended and Restated Credit Agreement, dated as of September 25, 2026, among WhiteHawk Minerals Corp., as Parent, WhiteHawk Income Operating Partnership L.P., as Borrower, Capital One, National Association, as Administrative Agent and Issuing Bank, and the lenders party thereto |
23.1 |
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Consent of Plante & Moran, PLLC |
99.1 |
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Audited Carve-Out Financial Statements of Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC |
99.2 |
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Unaudited Interim Carve-Out Financial Statements of Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC |
99.3 |
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Unaudited Pro Forma Condensed Combined Financial Information |
99.4+ |
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Press Release, dated September 25, 2026 |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
‡ Incorporated by reference.
* Schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
+ Furnished herewith and not filed.
Forward-Looking Statements
This Current Report on Form 8-K/A contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, statements regarding the Company’s expectations with respect to the financial impact of the SJM II Acquisition, including the expected accretive impact of the SJM II Acquisition; the Company’s expectations regarding the production and cash flow contributions of the Assets; the Company’s ability to satisfy its obligations under the Series E Preferred Stock, including dividend and redemption obligations; the Company’s dividend policy, including the declaration and payment of future dividends; and other statements that are not historical facts. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.
Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: changes in commodity prices; the risk that production and cash flow contributions from the Assets may differ materially from expectations due to commodity price fluctuations, operator activity levels, well performance and other factors; the Company’s ability to generate sufficient cash flow to satisfy its obligations under the Series E Preferred Stock, including mandatory dividend payments and potential redemption obligations; operator drilling and completion activity on the Company’s acreage; regulatory changes; general economic and market conditions; and the risks described under “Risk Factors” in the Company’s filings with the U.S. Securities and Exchange Commission. Furthermore, the declaration and payment of any future dividends, including the amount and timing thereof, will be at the sole discretion of the Board of Directors, which may change the Company’s dividend policy at any time and for any reason, including changes in the Company’s financial condition, results of operations, capital requirements, general business conditions or any other factor the Board deems relevant. There can be no assurance that the Company will declare or pay dividends at the current rate, or at all.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update any forward-looking statement, except as required by applicable law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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WhiteHawk Minerals Corp. |
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Date: September 25, 2026 |
By: |
/s/ Daniel Herz |
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Daniel Herz |
Exhibit 99.1
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Financial Report
with Supplemental Information (Unaudited)
December 31, 2025
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Contents
Independent Auditor's Report |
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Combined Financial Statements |
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Balance Sheet |
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4 |
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Statement of Operations |
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5 |
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Statement of Changes in Member's Equity |
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Statement of Cash Flows |
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7 |
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Notes to Combined Financial Statements |
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Supplemental Information (Unaudited) |
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16 |
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Supplemental Oil and Gas Information (Unaudited) |
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17 |
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1
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Plante & Moran, PLLC Suite 600 8181 E. Tufts Avenue Denver, CO 80237 Tel: 303.740.9400 Fax: 303.7400.9009 plantemoran.com |
Independent Auditor's Report
To the Member
Three Rivers Royalty II, LLC and
Cypress Mineral Partners, LLC
Opinion
We have audited the combined financial statements of Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC (collectively, the "Company"), which comprise the combined balance sheet as of December 31, 2025 and 2024 and the related combined statements of operations, changes in member's equity, and cash flows for the years then ended, and the related notes to the combined financial statements.
In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audits of the Combined Financial Statements section of our report. We are required to be independent of the Company and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
We draw attention to Note 2, which describes the basis of presentation of the accompanying combined carve-out financial statements. These combined carve-out financial statements have been derived from the historical accounting records of San Jacinto Minerals II, LLC and its consolidated subsidiaries and reflect the revenue and costs and assets and liabilities directly associated with the Company, as well as allocations of other amounts. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Combined Financial Statements
Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the combined financial statements are issued or available to be issued.
2
To the Member
Three Rivers Royalty II, LLC and
Cypress Mineral Partners, LLC
Auditor’s Responsibilities for the Audits of the Combined Financial Statements
Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that audits conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.
In performing audits in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.
/s/ Plante & Moran, PLLC
Denver, Colorado
September 11, 2026
3
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Balance Sheet
December 31, 2025 and 2024
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2025 |
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2024 |
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Assets |
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Current Assets |
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Cash |
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$ |
1,531,798 |
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$ |
1,299,319 |
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Accounts receivable: |
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Royalty receivable |
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4,725,779 |
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3,946,545 |
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Related party receivable - Net (Note 9) |
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45,361 |
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104,251 |
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Other |
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— |
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109,735 |
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Commodity derivative instruments |
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361,322 |
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1,606,591 |
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Prepaid expenses and other current assets |
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— |
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16,643 |
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Total current assets |
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6,664,260 |
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7,083,084 |
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Oil and Gas Properties - Using the successful efforts method of accounting |
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Proved oil and gas properties |
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89,725,736 |
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83,396,851 |
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Unproved oil and gas properties |
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50,224,530 |
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55,611,458 |
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Less accumulated depreciation, depletion, and amortization |
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38,439,084 |
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31,220,127 |
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Total oil and gas properties |
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101,511,182 |
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107,788,182 |
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Commodity Derivative Instruments |
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90,437 |
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— |
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Deposits |
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1,000 |
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1,000 |
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Total assets |
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$ |
108,266,879 |
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$ |
114,872,266 |
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Liabilities and Member's Equity |
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Current Liabilities - Accounts payable and accrued liabilities |
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$ |
11,581 |
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$ |
28,556 |
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Commodity Derivative Instruments |
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— |
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464,153 |
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Commitments and Contingencies (Note 7) |
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— |
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— |
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Total liabilities |
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11,581 |
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492,709 |
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Member's Equity |
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108,255,298 |
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114,379,557 |
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Total liabilities and member's equity |
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$ |
108,266,879 |
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$ |
114,872,266 |
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See notes to combined financial statements.
4
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Operations
Years Ended December 31, 2025 and 2024
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2025 |
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2024 |
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Net Sales |
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Natural gas royalty revenue |
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$ |
26,676,312 |
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$ |
15,911,728 |
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Natural gas liquids royalty revenue |
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5,793,924 |
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5,604,655 |
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Oil royalty revenue |
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550,506 |
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798,814 |
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Mineral lease bonuses |
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1,419,434 |
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1,703,026 |
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Gain on sale of oil and gas properties |
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— |
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10,698,124 |
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Total net sales |
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34,440,176 |
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34,716,347 |
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Operating Expenses |
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Gathering, processing, and transportation |
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3,751,158 |
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3,677,287 |
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Depreciation, depletion, and amortization |
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7,218,957 |
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7,377,479 |
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General and administrative expenses |
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135,997 |
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128,464 |
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General and administrative expenses - Related party (Note 9) |
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750,655 |
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855,215 |
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Total operating expenses |
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11,856,767 |
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12,038,445 |
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Operating Income |
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22,583,409 |
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22,677,902 |
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Nonoperating Income (Expense) |
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Realized gain on commodity derivative instruments |
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2,540,880 |
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10,056,238 |
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Unrealized loss on commodity derivative instruments |
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(690,679 |
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(9,125,714 |
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Other income |
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131,032 |
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24,703 |
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Other expense |
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(3 |
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(10,638 |
) |
Total nonoperating income |
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1,981,230 |
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944,589 |
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Combined Net Income |
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$ |
24,564,639 |
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$ |
23,622,491 |
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See notes to combined financial statements.
5
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Changes in Member's Equity
Years Ended December 31, 2025 and 2024
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Net Member |
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Retained |
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Total |
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Balance - January 1, 2024 |
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$ |
30,875,086 |
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$ |
115,378,631 |
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$ |
146,253,717 |
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Distributions to member |
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(55,715,953 |
) |
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— |
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(55,715,953 |
) |
Combined net income |
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— |
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23,622,491 |
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23,622,491 |
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Unit-based compensation |
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219,302 |
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— |
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219,302 |
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Balance - December 31, 2024 |
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(24,621,565 |
) |
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139,001,122 |
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114,379,557 |
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Distributions to member |
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(30,948,662 |
) |
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— |
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(30,948,662 |
) |
Combined net income |
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— |
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24,564,639 |
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24,564,639 |
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Unit-based compensation |
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259,764 |
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— |
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259,764 |
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Balance - December 31, 2025 |
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$ |
(55,310,463 |
) |
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$ |
163,565,761 |
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$ |
108,255,298 |
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See notes to combined financial statements.
6
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Cash Flows
Years Ended December 31, 2025 and 2024
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2025 |
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2024 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net income |
|
$ |
24,564,639 |
|
|
$ |
23,622,491 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
||
Depreciation, depletion, and amortization |
|
|
7,218,957 |
|
|
|
7,377,479 |
|
Unrealized loss on derivative instruments |
|
|
690,679 |
|
|
|
9,125,714 |
|
Unit-based compensation |
|
|
259,764 |
|
|
|
219,302 |
|
Gain on sale of oil and gas properties |
|
|
— |
|
|
|
(10,698,124 |
) |
Changes in operating assets and liabilities that (used) provided cash: |
|
|
|
|
|
|
||
Royalty receivable |
|
|
(779,234 |
) |
|
|
(137,804 |
) |
Other receivables |
|
|
109,735 |
|
|
|
(109,735 |
) |
Other assets |
|
|
16,643 |
|
|
|
— |
|
Accounts payable and accrued liabilities |
|
|
(16,975 |
) |
|
|
22,245 |
|
Due to/from related parties |
|
|
58,890 |
|
|
|
(200,096 |
) |
Net cash provided by operating activities |
|
|
32,123,098 |
|
|
|
29,221,472 |
|
|
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Acquisitions of oil and natural gas mineral rights |
|
|
(941,957 |
) |
|
|
(2,940,083 |
) |
Proceeds from sales of oil and gas properties - Net |
|
|
— |
|
|
|
29,168,216 |
|
Net cash (used in) provided by investing activities |
|
|
(941,957 |
) |
|
|
26,228,133 |
|
|
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Distributions to member |
|
|
(30,948,662 |
) |
|
|
(55,715,953 |
) |
Payments on notes payable |
|
|
— |
|
|
|
(315,646 |
) |
Net cash used in financing activities |
|
|
(30,948,662 |
) |
|
|
(56,031,599 |
) |
|
|
|
|
|
|
|
||
Net Increase (Decrease) in Cash |
|
|
232,479 |
|
|
|
(581,994 |
) |
Cash - Beginning of year |
|
|
1,299,319 |
|
|
|
1,881,313 |
|
Cash - End of year |
|
$ |
1,531,798 |
|
|
$ |
1,299,319 |
|
See notes to combined financial statements.
7
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 1 - Nature of Business
Three Rivers Royalty II, LLC (TRR II), a Colorado limited liability company, was formed on April 4, 2017 for the purpose of managing and acquiring mineral and royalty assets for lease and royalty revenue. TRR II owns oil and natural gas mineral and royalty interests in the Appalachian basin in Pennsylvania and West Virginia.
Cypress Mineral Partners, LLC (CMP), a Louisiana limited liability company, was formed on March 23, 2017 for the purpose of managing and acquiring mineral and royalty assets for lease and royalty revenue. CMP owns oil and natural gas mineral and royalty interests in the Haynesville basin in Louisiana.
TRR II and CMP are collectively referred to herein as the "Company."
TRR II and CMP are wholly owned subsidiaries of San Jacinto Minerals II, LLC (SJM II).
SJM II and its affiliated entities, San Jacinto Minerals, LLC (SJM I); San Jacinto Minerals III, LLC (SJM III); and San Jacinto Minerals IV, LLC (SJM IV) (collectively, the "SJM Entities"), share common ownership and common management. Under a management services agreement between SJM II and the other SJM Entities (the "MSA"), SJM II is the named employer of those individuals providing services to the SJM Entities. Labor and other shared expenses are allocated amongst the SJM Entities based on the hours spent of such personnel (see Note 9). Direct costs of each of the individual SJM Entities are recorded based on the actual amounts incurred and recorded to the specific entity for which it relates. In addition to allocating the costs amongst the SJM entities, costs allocable to SJM II are allocated amongst TRR II, CMP, and the other wholly owned subsidiaries of SJM II: Bluebird Energy Partners, LLC (BEP); Old River Royalty, LLC (ORR); and 1836 Mineral Company, LLC (1836), based on their respective proportion of revenue and capital expenditures. In addition, TRR II, CMP, BEP, and 1836 are all guarantors (the "Guarantors") under the SJM II Credit Agreement (see Note 5).
Note 2 - Significant Accounting Policies
Basis of Presentation
The combined carve-out financial statements of the Company are presented in accordance with accounting principles generally accepted in the United States of America (GAAP) are presented on a combined basis which includes the accounts of the commonly controlled and managed entities of TRR II and CMP. All intercompany transactions and balances have been eliminated in combination.
TRR II and CMP have historically operated as part of SJM II and not as stand-alone companies. The accompanying combined carve-out financial statements represent the historical operations of TRR II and CMP and have been derived from SJM II’s historical accounting records. All revenue and costs and assets and liabilities directly associated with TRR II and CMP are included in the combined carve-out financial statements. The combined carve-out financial statements also include allocations of certain general and administrative expenses, including unit-based compensation expense, from SJM II. However, amounts recognized by TRR II and CMP are not necessarily representative of the amounts that would have been reflected in the financial statements had TRR II and/or CMP been operated independently of SJM II. Related party allocations are discussed further in Notes 1, 2, 5, 8, and 9.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.
Depreciation, depletion, and amortization (DD&A) and impairment of proved oil and gas properties are determined using estimates of proved oil and gas reserves. There are numerous uncertainties in estimating the quantity of reserves and in projecting the future rates of production and timing of development expenditures. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way. The recoverability of unproved oil and gas properties, the estimated fair value of commodity derivatives allocable to the Company, and the allocation of certain expenses not specifically identifiable to the Company's revenue-producing activities are also subject to estimation. As a royalty owner, the Company is not responsible for any reclamation costs.
8
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 2 - Significant Accounting Policies (Continued)
Cash
The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of and during the years ended December 31, 2025 and 2024, cash balances were primarily held by one financial institution.
Commodity Derivative Instruments
SJM II and its subsidiaries use commodity derivative instruments to provide a measure of stability to their cash flows in an environment of volatile oil and gas prices and to manage their exposure to oil and gas price volatility. All commodity derivative instruments are initially, and subsequently, measured at estimated fair value and recorded as assets or liabilities on the combined balance sheet.
SJM II is the named counterparty to the commodity derivative contracts pertaining to the Company's natural gas production and natural gas volumes. As these commodity derivative instruments relate to the Company's natural gas volumes, the fair values, and the related realized and unrealized gains/losses attributable thereto, have been pushed down to these combined financial statements for each of the years presented.
SJM II allocates realized and unrealized gains and losses associated with commodity derivative instruments to the Company based on TRR II and CMP's proportionate share of the total monthly production volumes for SJM II.
SJM II and the Company have elected not to designate commodity derivative instruments as cash flow hedges. For commodity derivative instruments that do not qualify as cash flow hedges, changes in the estimated fair value of the contracts are recorded as gains and losses in the combined statement of operations. When commodity derivative instruments are settled, SJM II and the Company recognize realized gains and losses in the combined statement of operations. Derivative cash flows are reported as cash flows from operating activities in the combined statement of cash flows (see Note 4).
Revenue Recognition
The Company's revenue is primarily derived from the sale of its produced oil and natural gas from wells in which the Company has nonoperated royalty interests.
The Company's produced oil and natural gas is produced and sold in the Pennsylvania, West Virginia, and Louisiana geographic areas. Oil sales for the years ended December 31, 2025 and 2024 were $550,506 and $798,814, respectively. Natural gas sales for the years ended December 31, 2025 and 2024 were $26,676,312 and $15,911,728, respectively. Natural gas liquids sales for the years ended December 31, 2025 and 2024 were $5,793,924 and $5,604,655, respectively. Accounts receivable from royalty revenue were $3,808,741 as of January 1, 2024.
The sales of produced oil and natural gas are made under contracts that the operators of the wells have negotiated with customers, which typically include variable consideration based on monthly pricing tied to local indices and volumes delivered. While revenue is typically recorded at the point in time when control of the produced oil and natural gas transfers to the customer, statements and payment may not be received via the operator of the wells for one to three months after the date the produced oil and natural gas are delivered, and, as a result, the amount of production delivered to the customer and the price that will be received for the sale of the product are estimated utilizing production reports, market indices, and estimated differentials. Estimated revenue due to the Company is recorded within accounts receivable in the accompanying combined balance sheet until payment is received. Differences between the estimated amounts and the actual amounts received from the sale of the produced oil and natural gas are recorded when known, which is generally when statements and payment are received.
The Company utilizes the practical expedient in ASC 606, which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. As the Company has determined that each unit of product generally represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to the remaining performance obligations is not required.
The Company also derives revenue from mineral lease bonuses. The Company generates lease bonus revenue by leasing its mineral interests to exploration and production companies. The lease agreements generally transfer the rights to any oil or natural gas discovered, grant the Company a right to a specified royalty interest, and require that drilling and completion operations commence within a specified time period, or the lease will expire. The Company recognizes such lease bonus revenue once the lease agreement has been executed, payment is received, and the Company has no further obligation to refund the payment.
9
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 2 - Significant Accounting Policies (Continued)
Given that the Company does not recognize lease bonus income until a lease agreement has been executed, at which point its performance obligation has been satisfied, and payment is received, the Company does not record revenue for unsatisfied or partially unsatisfied performance obligations as of the end of the reporting period.
Unit-based Compensation
The Company follows authoritative guidance that applies to unit-based awards, which requires entities to recognize compensation expense for awards issued to employees and others. Authoritative guidance also requires unit-based awards to employees and others by a related party or other holder of an economic interest in the entity to be accounted for as unit-based transactions if awards are for services provided by such employees and others (see Note 8).
Concentrations of Credit Risk
The Company's producing properties are all located in Pennsylvania, West Virginia, and Louisiana, and the oil, natural gas, and natural gas liquids production is sold by various operators based on market index prices. For the years ended December 31, 2025 and 2024, three operators accounted for 76 and 81 percent, respectively, of revenue. As of December 31, 2025 and 2024, three operators accounted for 77 and 87 percent, respectively, of oil and gas revenue receivables. The risk of nonpayment by these purchasers is considered minimal, and the Company does not generally obtain collateral for sales. The Company continually monitors the credit standing of the primary purchasers and assesses the recoverability of the receivables to determine their collectibility. As the receivables are primarily with other entities within the oil and gas industry, such concentration may impact the Company's credit risk, as these entities may be similarly impacted by economic or other changes within the oil and gas industry.
The Company accrues a reserve for the allowance for credit losses based on management's current estimate of expected credit losses that includes historical credit loss experience of financial assets with similar risk characteristics, adjusted for management's current expectation of current conditions and reasonable and supportable forecasts. The risk of nonpayment is considered minimal; therefore, an allowance for doubtful accounts has not been recorded as of December 31, 2025 and 2024.
Oil and Gas Properties
The Company uses the successful efforts method of accounting for its oil and gas producing activities. Under this method of accounting, costs associated with the acquisition, drilling, and equipping of successful exploratory wells and costs of successful and unsuccessful development wells are capitalized and depleted, net of estimated salvage value, using the units of production on a field-by-field basis based upon proved oil and gas reserves. The Company’s proved oil and gas reserve information was computed by applying the average first day of the month oil and gas price during the 12-month periods ended December 31, 2025 and 2024. Depletion expense associated with proved oil and gas properties for the years ended December 31, 2025 and 2024 was approximately $7,219,000 and $7,377,000, respectively. Exploration, geological costs, delay rentals, and drilling costs of unsuccessful exploratory wells are charged to expense as incurred.
Costs associated with unevaluated exploratory wells are excluded from the depletable basis until the determination of proved reserves, at which time those costs are reclassified to proved oil and gas properties and subject to depletion. If it is determined that the exploratory well costs were not successful in establishing proved reserves, such costs are expensed at the time of such determination.
The Company reviews its oil and gas properties for impairment whenever events and circumstances indicate a decline in the recoverability of their carrying value. The Company estimates the expected future cash flows of its proved oil and gas properties and compares such cash flows to the carrying amount of the proved oil and gas properties to determine if the amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust its proved oil and gas properties to estimated fair value. The factors used to estimate fair value include estimates of proved reserves, future commodity prices adjusted for basis differentials, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with realizing the projected cash flows. The discount rate is a rate that management believes is representative of current market conditions and includes estimates for a risk premium and other operational risks. There were no proved oil and gas property impairments during the years ended December 31, 2025 and 2024.
Unproved oil and gas properties are assessed at least annually to determine whether they have been impaired by the drilling of dry holes on or near the related acreage or other circumstances that may indicate a decline in value. When unproved property is determined to be impaired, a loss equal to the portion impaired is recognized. If and when leases for unproved properties expire, the costs thereof are removed from the accounts and charged to expense. There were no unproved property impairments during the years ended December 31, 2025 and 2024.
10
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 2 - Significant Accounting Policies (Continued)
Upon the drilling of successful wells on unproved properties, the Company reclassifies cost basis from unproved to proved properties, at which time that cost basis is subject to depletion.
From time to time, the Company may sell its oil and gas properties. The partial sale of proved properties within an existing field is accounted for as a normal retirement, and no gain or loss on divestiture is recognized as long as this treatment does not significantly affect the units-of-production depletion rate. The partial sale of unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to the ultimate recovery of the cost applicable to the interest retained. A gain on divestiture activity is recognized to the extent that the sale price exceeds the carrying amount of the unproved property. A gain or loss is recognized for all other sales of proved and unproved properties. The Company had no material sales of oil and gas properties during the year ended December 31, 2025. The Company had material sales of proved and unproved oil and gas properties during the year ended December 31, 2024 (see Note 6).
Income Taxes
TRR II and CMP are limited liability companies that are disregarded entities for U.S. federal income tax purposes. Accordingly, their taxable income or loss is included in the federal income tax return of SJM II, which is treated as a partnership for U.S. federal income tax purposes. As a partnership, SJM II is not subject to U.S. federal income taxes; rather, its taxable income or loss is allocated to its members, who are responsible for the related income taxes.
Beginning on January 1, 2018, new rules apply to Internal Revenue Service (IRS) audits of partnerships. Under these rules, adjustments resulting from an IRS audit may be assessed at the partnership level on behalf of the members. As of December 31, 2025, the Company has no tax years under audit.
Note 3 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.
Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets and other inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset or liability.
In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
11
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 3 - Fair Value Measurements (Continued)
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024 and the valuation techniques used by the Company to determine those fair values:
|
|
Assets Measured at Fair Value on a Recurring Basis at |
|
|||||||||||||
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Balance at |
|
||||
Commodity derivative instruments asset |
|
$ |
— |
|
|
$ |
451,759 |
|
|
$ |
— |
|
|
$ |
451,759 |
|
|
|
Assets and Liabilities Measured at Fair Value on a |
|
|||||||||||||
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Balance at |
|
||||
Commodity derivative instruments asset |
|
$ |
— |
|
|
$ |
1,606,591 |
|
|
$ |
— |
|
|
$ |
1,606,591 |
|
Commodity derivative instruments liability |
|
$ |
— |
|
|
$ |
(464,153 |
) |
|
$ |
— |
|
|
$ |
(464,153 |
) |
The Company's derivative instruments consist of commodity swaps. The Company estimates the fair values of its commodity swaps under the income valuation technique using a discounted cash flow model. The valuation models require a variety of inputs, including contractual terms, published forward prices, and discount rates, as appropriate. The Company's estimates of the fair value of commodity derivative instruments include consideration of the counterparty's creditworthiness, the Company's creditworthiness, and the time value of money. The consideration of these factors results in an estimated exit price for each derivative asset or liability under a marketplace participant's view. The Company believes that the valuation methods utilized are appropriate and consistent with the fair value standards and with other market participants. All of the significant inputs are observable, either directly or indirectly; therefore, the Company's commodity swap instruments are included within the Level 2 fair value hierarchy.
The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company's policy is to recognize transfers in and/or out of the fair value hierarchy as of the beginning of the reporting period in which the event or change in circumstances caused the transfer.
The Company's financial instruments consist of accounts receivable. The carrying value of accounts receivable approximates fair value due to the short-term nature of these instruments.
Note 4 - Derivatives
As discussed in Note 2, SJM II periodically enters into various commodity derivative instruments to mitigate a portion of the effect of natural gas price fluctuations. SJM II and its subsidiaries classify the fair value amounts of derivative assets and liabilities as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and counterparty.
12
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 4 - Derivatives (Continued)
At December 31, 2025 and 2024, the fair values attributable to certain commodity derivative instruments in which SJM II was the named counterparty of the derivative agreements have been allocated to the Company based on TRR II's and CMP's proportionate share of SJM II's total estimated monthly production over the duration of the derivative contracts. The fair values as of December 31, 2025 are as follows:
Product and Type of |
|
Total Mcf |
|
|
Settlement |
|
|
Index |
|
Settlement |
|
Estimated |
|
|||
Natural gas |
|
|
313,000 |
|
|
$ |
4.12 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
88,181 |
|
Natural gas |
|
|
461,000 |
|
|
$ |
3.34 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(13,083 |
) |
Natural gas |
|
|
552,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
2026 |
|
$ |
143,994 |
|
Natural gas |
|
|
1,224,000 |
|
|
$ |
3.65 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(122,376 |
) |
Natural gas |
|
|
2,737,500 |
|
|
$ |
2.99 |
|
|
Platts IFERC Tetco M2 |
|
2026 |
|
$ |
264,606 |
|
Natural gas |
|
|
2,190,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
125,463 |
|
Natural gas |
|
|
360,000 |
|
|
$ |
3.85 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
35,965 |
|
Natural gas |
|
|
364,000 |
|
|
$ |
2.59 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
(41,952 |
) |
Natural gas |
|
|
736,000 |
|
|
$ |
2.86 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
(29,039 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
451,759 |
|
||
The fair values as of December 31, 2024 are as follows:
Product and Type of |
|
Total Mcf |
|
|
Settlement |
|
|
Index |
|
Settlement |
|
Estimated |
|
|||
Natural gas |
|
|
428,000 |
|
|
$ |
3.65 |
|
|
NYMEX 1st H Hub |
|
2025 |
|
$ |
(41,694 |
) |
Natural gas |
|
|
1,825,000 |
|
|
$ |
2.56 |
|
|
Platts IFERC Tetco M2 |
|
2025 |
|
$ |
(399,326 |
) |
Natural gas |
|
|
45,000 |
|
|
$ |
3.34 |
|
|
NYMEX 1st H Hub |
|
2025 |
|
$ |
(18,716 |
) |
Natural gas |
|
|
312,000 |
|
|
$ |
3.74 |
|
|
NYMEX 1st H Hub |
|
2025 |
|
$ |
(67,051 |
) |
Natural gas |
|
|
442,000 |
|
|
$ |
3.70 |
|
|
NYMEX 1st H Hub |
|
2025 |
|
$ |
68,872 |
|
Natural gas |
|
|
905,000 |
|
|
$ |
3.85 |
|
|
Platts IFERC Tetco M2 |
|
2025 |
|
$ |
912,973 |
|
Natural gas |
|
|
869,000 |
|
|
$ |
4.63 |
|
|
NYMEX 1st H Hub |
|
2025 |
|
$ |
1,151,533 |
|
Natural gas |
|
|
1,224,000 |
|
|
$ |
3.65 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(293,451 |
) |
Natural gas |
|
|
468,000 |
|
|
$ |
3.34 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(128,254 |
) |
Natural gas |
|
|
313,000 |
|
|
$ |
4.12 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(42,448 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,142,438 |
|
||
As of December 31, 2025, the Company had $496,781 of gross current commodity derivative assets offset by $135,459 of current liabilities, resulting in a net current commodity derivative asset of $361,322. The Company had $161,428 of gross noncurrent commodity derivative assets offset by $70,991 of noncurrent liabilities, resulting in a net noncurrent commodity derivative asset of $90,437.
As of December 31, 2024, the Company had $2,133,378 of gross current commodity instrument assets offset by $526,787 of current liabilities, resulting in a net current commodity derivative asset of $1,606,591. The Company had $464,153 of gross noncurrent commodity derivative liabilities, with no assets offsetting the balance.
Due to the volatility of natural gas prices, the estimated fair values of the Company's allocated commodity derivative instruments are subject to large fluctuations from period to period.
The counterparty to the SJM II derivative instruments is East West Bank. The Company and SJM II are not required to post collateral with East West Bank since the Credit Agreement (see Note 5) is collateralized by SJM II's and the Company's oil and gas assets.
13
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 4 - Derivatives (Continued)
For the years ended December 31, 2025 and 2024, the gains and losses recognized in the combined statement of operations attributable to derivative instruments are as follows:
|
|
Amount of Gain (Loss) |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Realized gain on commodity derivative instruments |
|
$ |
2,540,880 |
|
|
$ |
10,056,238 |
|
Unrealized loss on commodity derivative instruments |
|
|
(690,679 |
) |
|
|
(9,125,714 |
) |
Total |
|
$ |
1,850,201 |
|
|
$ |
930,524 |
|
Note 5 - Member Debt Guarantee
In July 2018, SJM II entered into a credit agreement with East West Bank (the "Credit Agreement") with a maximum commitment of $75,000,000. The borrowing base is redetermined semiannually, with the borrowing base as of December 31, 2025 set at $100,000,000 and a maximum commitment of $200,000,000. Repayment of borrowings is required in the event that the redetermined borrowing base is less than outstanding borrowings or on the maturity date. During 2024, the maturity date was extended to July 2027. In May 2026, the Credit Agreement was amended to extend the maturity date to July 2029. Amounts borrowed bear interest at SOFR or the base rate, as defined, plus a margin ranging from 3.00 to 4.00 percent depending on utilization (7.415 percent at December 31, 2025). Interest is payable monthly.
The Credit Agreement contains financial covenants requiring minimum current, maximum leverage, and minimum interest coverage ratios. As of December 31, 2025, SJM II was in compliance with these financial covenants. The Credit Agreement contains restrictive covenants, including the limitation of paying distributions to the members of SJM II, the transfer of more than 40 percent of the equity interests in SJM II, and incurring additional indebtedness. The Credit Agreement is collateralized by all mineral interests of SJM II and its subsidiaries, including TRR II and CMP. As of December 31, 2025, the outstanding amount borrowed by SJM II under the Credit Agreement was $70,800,000. SJM II is required to enter into and maintain hedge transactions of crude oil and natural gas covering 50 to 90 percent of SJM II's anticipated oil and natural gas production, or anticipated receipt of royalties, from its proved developed producing properties.
In addition, each of the Guarantors (see Note 1) guarantees the amounts owed under the Credit Agreement by SJM II. The Guarantors are not joint and severally liable under the Credit Agreement, and SJM II is the only named borrower under the Credit Agreement. As it is not probable that TRR II and/or CMP will be forced to act upon their guarantees, no amounts outstanding under the Credit Agreement, along with any associated interest costs, have been allocated to the combined carve-out financial statements of the Company.
In addition, as of December 31, 2025 and 2024, SJM II had two interest rate swap derivative instruments, each with $10,000,000 of notional and a maturity date of July 2026 (the "Swaps"). Each of the Swaps had SJM II as the fixed rate payer at 4.45 percent and 3.83 percent, respectively, on the one-month SOFR. As SJM II is the only named counterparty on the Swaps and no amounts outstanding under the Credit Agreement at the SJM II level have been allocated to either TRR II or CMP as discussed above, no amounts related to the Swaps have been pushed down to these combined carve-out financial statements.
Note 6 - Oil and Gas Property Sales
In September 2024, TRR II sold approximately 20 percent of its mineral rights in its Appalachian oil and gas properties to an unrelated third party for net proceeds of approximately $29,168,000. The transaction closed on September 17, 2024. As part of the sale, TRR II sold $11,431,142 of unproved property, which was accounted for as a recovery of basis, and no gain was recognized. Additionally, TRR II sold $7,038,950 of net proved properties, which resulted in a net gain of $10,698,124. The results of the sold oil and gas properties have not been disclosed separately from continued operations within these financial statements because the sale did not represent a strategic shift in operations for TRR II.
Note 7 - Litigation
The Company is occasionally named a party in lawsuits in the normal course of business. In the opinion of management, the resolution of these lawsuits will not have a material adverse effect on the Company's financial position or results of operations.
14
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements
December 31, 2025 and 2024
Note 8 - Member's Equity
TRR II was formed in 2017, pursuant to a limited liability company agreement, as amended (the "TRR II Agreement"). The TRR II Agreement provides for the authorization of one class of common interests, in which SJM II is the sole member.
CMP was formed in 2017, pursuant to a limited liability company agreement, as amended (the "CMP Agreement"). The CMP Agreement provides for the authorization of one class of common interests, in which SJM II is the sole member.
Certain employees of SJM II (see Note 9) who provide management and administrative services to the Company were granted management incentive units of SJM II (the "MIUs"). The MIUs entitle the holders to the right to receive distributions from SJM II upon the attainment of specific payout thresholds. MIUs vest upon service conditions or performance conditions related to monetization events. During 2025 and 2024, there were no grants of MIUs. As of December 31, 2025 and 2024, approximately 99 percent of authorized MIUs were issued and outstanding, of which approximately 83 percent and 79 percent were contractually vested as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, the Company's allocable share (based on the proportion of revenue and capital expenditures; see Note 1) of grant-date fair value recognized as compensation expenses as a component of general and administrative expenses - related party within the combined statement of operations totaled approximately $260,000 and $219,000, respectively. The proportion of unrecognized compensation cost estimated to be allocable to the Company as of December 31, 2025 was approximately $272,000.
Note 9 - Related Party Transactions
As discussed in Note 1, during 2017, SJM II entered into the MSA with SJM I, an entity with common ownership and common management, whereby shared management services and general overhead of the SJM Entities are allocated based on time incurred. SJM III and SJM IV subsequently became parties to the MSA. The MSA is subject to automatic annual renewals.
For the years ended December 31, 2025 and 2024, the Company incurred services and shared general overhead, including unit-based compensation, from SJM II of approximately $750,655 and $855,215, respectively, all of which has been included in general and administrative expenses - related party on the accompanying combined statement of operations of the Company.
The Company had miscellaneous general and administrative amounts due (to) from SJM III totaling $(1,165) and $940 as of December 31, 2025 and 2024, respectively, which are included within related party receivables on the accompanying combined balance sheet.
The Company had miscellaneous general and administrative amounts due from SJM I totaling $46,526 and $103,311 as of December 31, 2025 and 2024, respectively, which is included within related party receivables on the accompanying combined balance sheet.
During 2017, SJM I and SJM II entered into an agreement whereby SJM I and the Company's prospective mineral acquisitions shall be restricted to (1) certain counties within Pennsylvania or within two miles of existing company mineral interests and (2) amounts less than $2.0 million. Furthermore, SJM I and the Company may offer SJM II the right to participate in mineral interest acquisitions.
Note 10 - Subsequent Events
In June 2026, SJM II entered into a new interest rate swap agreement, with an effective date of July 2026, with $20,000,000 of notional and a maturity date of July 2028. Under this agreement, SJM II is the fixed rate payer at 3.99 percent and receives the one-month SOFR.
In August 2026, TRR II and CMP entered into a purchase and sale agreement to sell certain oil and gas properties of TRR II and all of the oil and gas properties of CMP for a purchase price of $105,000,000 (the "Transaction"). As of the date these financial statements were available to be issued, the Transaction had not closed. There can be no assurance that the Transaction will eventually close.
The Company has evaluated all subsequent events up through and including September 11, 2026, which is the date these financial statements were available to be issued.
15
Supplemental Information (Unaudited)
16
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Supplemental Information (Unaudited)
December 31, 2025 and 2024
Supplemental Oil and Gas Information (Unaudited)
Oil and Natural Gas Reserve Quantities
The estimates of proved oil and natural gas reserves and discounted future net cash flows for the Company's oil and gas properties as of December 31, 2025 and 2024 were prepared using historical data and other information by qualified petroleum engineers engaged by the Company. Users of this information should be aware that the process of estimating quantities of proved oil and natural gas reserves is complex, requiring significant subjective decisions to be made in the evaluation of geologic, engineering, and economic data for each reservoir. The data for any given reservoir may also change substantially over time as a result of numerous factors, including, but not limited to, additional development activity, production history, and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time.
The estimated proved net recoverable reserves presented below include only those quantities of oil and natural gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future periods from known reservoirs under existing economic, operating, and regulatory practices. In accordance with the SEC's guidelines, estimates of proved reserves from which present values are derived were based on the unweighted 12-month average price of the first day of the month price for the period and held constant. Proved developed reserves represent only those reserves estimated to be recovered through existing wells. When and if the Company has insight into the development plans for each of the operators in which the Company holds royalty interests, the Company will recognize proved undeveloped reserves. All of the oil and gas reserves set forth herein are in the United States and are proved reserves.
The estimated rounded quantities of proved developed oil and natural gas reserves and changes in net proved reserves are summarized below for the year ended December 31, 2025:
|
|
Oil (Mbbl) |
|
|
Gas |
|
|
Liquids |
|
|
Total |
|
||||
Balance - December 31, 2024 |
|
|
59 |
|
|
|
59,760 |
|
|
|
2,482 |
|
|
|
75,004 |
|
Revisions |
|
|
(6 |
) |
|
|
2,454 |
|
|
|
4 |
|
|
|
2,443 |
|
Extensions |
|
|
14 |
|
|
|
5,601 |
|
|
|
150 |
|
|
|
6,587 |
|
Production |
|
|
(10 |
) |
|
|
(8,791 |
) |
|
|
(241 |
) |
|
|
(10,298 |
) |
Balance - December 31, 2025 |
|
|
57 |
|
|
|
59,024 |
|
|
|
2,395 |
|
|
|
73,736 |
|
Proved developed reserves at December 31, 2024 |
|
|
59 |
|
|
|
59,760 |
|
|
|
2,482 |
|
|
|
75,004 |
|
Proved developed reserves at December 31, 2025 |
|
|
57 |
|
|
|
59,024 |
|
|
|
2,395 |
|
|
|
73,736 |
|
The estimated rounded quantities of proved developed oil and natural gas reserves and changes in net proved reserves are summarized below for the year ended December 31, 2024:
|
|
Oil (Mbbl) |
|
|
Gas |
|
|
Liquids |
|
|
Total |
|
||||
Balance - December 31, 2023 |
|
|
65 |
|
|
|
60,046 |
|
|
|
2,077 |
|
|
|
72,893 |
|
Revisions |
|
|
(1 |
) |
|
|
2,957 |
|
|
|
458 |
|
|
|
5,700 |
|
Extensions |
|
|
14 |
|
|
|
16,106 |
|
|
|
443 |
|
|
|
18,850 |
|
Divestitures of reserves |
|
|
(6 |
) |
|
|
(11,431 |
) |
|
|
(251 |
) |
|
|
(12,974 |
) |
Acquisition of reserves |
|
|
— |
|
|
|
500 |
|
|
|
— |
|
|
|
500 |
|
Production |
|
|
(13 |
) |
|
|
(8,418 |
) |
|
|
(245 |
) |
|
|
(9,965 |
) |
Balance - December 31, 2024 |
|
|
59 |
|
|
|
59,760 |
|
|
|
2,482 |
|
|
|
75,004 |
|
Proved developed reserves at December 31, 2023 |
|
|
65 |
|
|
|
60,046 |
|
|
|
2,077 |
|
|
|
72,893 |
|
Proved developed reserves at December 31, 2024 |
|
|
59 |
|
|
|
59,760 |
|
|
|
2,482 |
|
|
|
75,004 |
|
During the year ended December 31, 2025, the Company's total extensions of 6,587 MMcfe resulted primarily from the drilling of 139 new gross wells (0.354 net wells). The Company's upward revisions of previous estimated quantities of 2,443 MMcfe were primarily attributable to higher natural gas prices.
17
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Supplemental Information (Unaudited)
December 31, 2025 and 2024
Supplemental Oil and Gas Information (Unaudited) (Continued)
During the year ended December 31, 2024, the Company divested 12,974 MMcfe of reserves through the sale of a 20 percent interest in certain assets comprising 1,343 gross wells, and acquired 0.5 MMcfe of reserves. The Company's total extensions of 18,850 MMcfe resulting primarily from the drilling of 230 new gross wells (0.826 net wells). The Company's upward revisions of previous estimated quantities of 5,700 MMcfe were primarily attributable to increases in the Company's ownership interests in certain wells due to unit modifications and other reserve quantity revisions.
Standardized Measure
A standardized measure of future net cash flows and changes therein relating to estimated proved reserves is computed in accordance with authoritative accounting guidance. The assumptions used to compute the standardized measure are those prescribed by the Financial Accounting Standards Board and the SEC. These assumptions do not necessarily reflect expectations of actual revenue to be derived from those reserves nor their present value amount. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process.
Future cash inflows are determined by applying prices and costs, including transportation, quantity, and basis differentials, to the year-end estimated future reserve quantities. The following prices, as adjusted for transportation, quality, and basis differentials, were used in the calculation of the standardized measure:
|
|
2025 |
|
|
2024 |
|
||
Oil (per Bbl) |
|
$ |
53.09 |
|
|
$ |
69.95 |
|
Gas (per Mcf) |
|
|
2.86 |
|
|
|
1.62 |
|
Liquids (per Bbl) |
|
|
17.76 |
|
|
|
24.03 |
|
Future operating costs are determined based on estimates of expenditures to be incurred in producing the proved reserves in place at the end of the period using year-end costs and assuming continuation of existing economic conditions. The standardized measure presented here does not include the effects of federal income taxes, as the Company is taxed as a partnership and not subject to federal or state income taxes. The resulting future net cash flows are reduced to present value amounts by applying a 10 percent annual discount factor.
The standard measure of discounted net cash flows related to the Company's proved oil and natural gas reserves as of December 31, 2025 and 2024 is as follows:
|
|
2025 |
|
|
2024 |
|
||
Future cash inflows |
|
$ |
214,065,000 |
|
|
$ |
161,786,000 |
|
Future production cost |
|
|
(2,472,000 |
) |
|
|
(1,918,000 |
) |
Future net cash flows |
|
|
211,593,000 |
|
|
|
159,868,000 |
|
10 percent annual discount for estimated timing of cash flows |
|
|
(105,124,000 |
) |
|
|
(79,171,000 |
) |
Standardized measure of discounted future net cash flows |
|
$ |
106,469,000 |
|
|
$ |
80,697,000 |
|
18
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Supplemental Information (Unaudited)
December 31, 2025 and 2024
Supplemental Oil and Gas Information (Unaudited) (Continued)
The changes in the standardized measure of the future net cash flows related to proved oil and natural gas reserves for the years ended December 31, 2025 and 2024 are as follows:
|
|
2025 |
|
|
2024 |
|
||
Balance - Beginning of year |
|
$ |
80,697,000 |
|
|
$ |
82,695,000 |
|
Net change in prices and production costs |
|
|
30,533,000 |
|
|
|
(7,422,000 |
) |
Sales of oil and gas produced - Net of production costs |
|
|
(29,270,000 |
) |
|
|
(18,638,000 |
) |
Extensions |
|
|
11,133,000 |
|
|
|
21,435,000 |
|
Acquisition of reserves |
|
|
— |
|
|
|
448,000 |
|
Divestitures of reserves |
|
|
— |
|
|
|
(13,479,000 |
) |
Revisions of previous quantity estimates |
|
|
4,178,000 |
|
|
|
5,815,000 |
|
Accretion of discount |
|
|
8,070,000 |
|
|
|
8,269,000 |
|
Changes in timing and other |
|
|
1,128,000 |
|
|
|
1,574,000 |
|
Standardized measure of future net cash flows - End of year |
|
$ |
106,469,000 |
|
|
$ |
80,697,000 |
|
19
Exhibit 99.2
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Financial Report
June 30, 2026
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Contents
Independent Auditor's Review Report |
2 |
Balance Sheet as of June 30, 2026 and December 31, 2025 (unaudited) |
4 |
Statement of Operations for the six months ended June 30, 2026 and 2025 (unaudited) |
5 |
Statement of Changes in Member’s Equity for the six months ended June 30, 2026 and 2025 (unaudited) |
6 |
Statement of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited) |
7 |
Notes to Financial Statements (unaudited) |
8 |
1
|
|
Plante & Moran, PLLC Suite 600 8181 E. Tufts Avenue Denver, CO 80237 Tel: 303.740.9400 Fax: 303.7400.9009 plantemoran.com |
Independent Auditor’s Review Report
To the Member
Three Rivers Royalty II, LLC and
Cypress Mineral Partners, LLC
Results of Reviews of Interim Financial Information
We have reviewed the accompanying combined financial statements of Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC (collectively, the “Company”), which comprise the combined balance sheet as of June 30, 2026 and the related combined statements of operations, member’s equity, and cash flows for the six-month periods ended June 30, 2026 and 2025, and the related notes to the combined financial statements.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.
Basis for Review Results
We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expression of an opinion regarding the financial information as a whole, and, accordingly, we do not express such an opinion. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our reviews. We believe that the results of the review procedures provide a reasonable basis for our conclusion.
Emphasis of Matter
We draw attention to Note 2, which describes the basis of presentation of the accompanying combined carve-out financial statements. These combined carve-out financial statements have been derived from the historical accounting records of San Jacinto Minerals II, LLC and its consolidated subsidiaries and reflect the revenue and costs as well as assets and liabilities directly associated with the Company, as well as allocations of other amounts. Our conclusion is not modified with respect to this matter.
Responsibilities of Management for the Interim Financial Information
Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.
2
To the Member
Three Rivers Royalty II, LLC and
Cypress Mineral Partners, LLC
Report on Combined Balance Sheet as of December 31, 2025
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the combined balance sheet as of December 31, 2025 and the related combined statements of operations, member’s equity, and cash flows for the year then ended (not presented herein), and we expressed an unmodified opinion on those audited combined financial statements on our report dated September 11, 2026. That report included an emphasis of matter paragraph describing the basis of presentation of the combined carve-out financial statements. In our opinion, the accompanying combined balance sheet of the Company as of December 31, 2025 is consistent, in all material respects, with the audited combined financial statements from which it has been derived.
/s/ Plante & Moran, PLLC
Denver, Colorado
September 11, 2026
3
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Balance Sheet (Unaudited)
June 30, 2026 and December 31, 2025
|
|
2026 |
|
|
2025 |
|
||
Assets |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash |
|
$ |
1,876,689 |
|
|
$ |
1,531,798 |
|
Accounts receivable: |
|
|
|
|
|
|
||
Royalty receivable |
|
|
6,014,531 |
|
|
|
4,725,779 |
|
Related party receivable - Net (Note 8) |
|
|
— |
|
|
|
45,361 |
|
Commodity derivative instruments |
|
|
1,722,089 |
|
|
|
361,322 |
|
Total current assets |
|
|
9,613,309 |
|
|
|
6,664,260 |
|
Oil and Gas Properties - Using the successful efforts method of accounting |
|
|
|
|
|
|
||
Proved oil and gas properties |
|
|
94,649,323 |
|
|
|
89,725,736 |
|
Unproved oil and gas properties |
|
|
45,367,548 |
|
|
|
50,224,530 |
|
Less accumulated depreciation, depletion, and amortization |
|
|
(41,881,305 |
) |
|
|
(38,439,084 |
) |
Total oil and gas properties |
|
|
98,135,566 |
|
|
|
101,511,182 |
|
Commodity Derivative Instruments |
|
|
776,824 |
|
|
|
90,437 |
|
Deposits |
|
|
1,000 |
|
|
|
1,000 |
|
Total assets |
|
$ |
108,526,699 |
|
|
$ |
108,266,879 |
|
|
|
|
|
|
|
|
||
Liabilities and Member's Equity |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable and accrued liabilities |
|
$ |
22,393 |
|
|
$ |
11,581 |
|
Related party payable (Note 8) |
|
|
9,343 |
|
|
|
— |
|
Total current liabilities |
|
|
31,736 |
|
|
|
11,581 |
|
Commitments and Contingencies (Notes 5 and 6) |
|
|
|
|
|
|
||
Member's Equity |
|
|
108,494,963 |
|
|
|
108,255,298 |
|
Total liabilities and member's equity |
|
$ |
108,526,699 |
|
|
$ |
108,266,879 |
|
See notes to combined financial statements and independent auditor's review report.
4
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Operations (Unaudited)
Six-month Periods Ended June 30, 2026 and 2025
|
|
2026 |
|
|
2025 |
|
||
Net Sales |
|
|
|
|
|
|
||
Natural gas royalty revenue |
|
$ |
14,015,196 |
|
|
$ |
15,432,696 |
|
Natural gas liquids royalty revenue |
|
|
3,461,171 |
|
|
|
3,419,539 |
|
Oil royalty revenue |
|
|
785,342 |
|
|
|
360,813 |
|
Mineral lease bonuses |
|
|
1,295,698 |
|
|
|
709,300 |
|
Total net sales |
|
|
19,557,407 |
|
|
|
19,922,348 |
|
Operating Expenses |
|
|
|
|
|
|
||
Gathering, processing, and transportation |
|
|
1,673,001 |
|
|
|
2,099,263 |
|
Depreciation, depletion, and amortization |
|
|
3,442,221 |
|
|
|
3,745,627 |
|
General and administrative expenses |
|
|
83,276 |
|
|
|
113,909 |
|
General and administrative expenses - Related party (Note 8) |
|
|
264,302 |
|
|
|
351,516 |
|
Total operating expenses |
|
|
5,462,800 |
|
|
|
6,310,315 |
|
|
|
|
|
|
|
|
||
Operating Income |
|
|
14,094,607 |
|
|
|
13,612,033 |
|
|
|
|
|
|
|
|
||
Nonoperating (Expense) Income |
|
|
|
|
|
|
||
Realized (loss) gain on commodity derivative instruments |
|
|
(707,635 |
) |
|
|
1,586,923 |
|
Unrealized gain (loss) on commodity derivative instruments |
|
|
2,047,154 |
|
|
|
(2,911,990 |
) |
Other income |
|
|
11,886 |
|
|
|
154,528 |
|
Other expense |
|
|
— |
|
|
|
(36,618 |
) |
Total nonoperating income (expense) |
|
|
1,351,405 |
|
|
|
(1,207,157 |
) |
Combined Net Income |
|
$ |
15,446,012 |
|
|
$ |
12,404,876 |
|
See notes to combined financial statements and independent auditor's review report.
5
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Member's Equity (Unaudited)
Six-month Periods Ended June 30, 2026 and 2025
|
|
Net Member |
|
|
Retained |
|
|
Total |
|
|||
Balance - December 31, 2024 |
|
$ |
(24,621,565 |
) |
|
$ |
139,001,122 |
|
|
$ |
114,379,557 |
|
Distributions to member |
|
|
(16,117,171 |
) |
|
|
— |
|
|
|
(16,117,171 |
) |
Combined net income |
|
|
— |
|
|
|
12,404,876 |
|
|
|
12,404,876 |
|
Unit-based compensation |
|
|
129,882 |
|
|
|
— |
|
|
|
129,882 |
|
Balance - June 30, 2025 |
|
$ |
(40,608,854 |
) |
|
$ |
151,405,998 |
|
|
$ |
110,797,144 |
|
Balance - December 31, 2025 |
|
|
(55,310,463 |
) |
|
|
163,565,761 |
|
|
|
108,255,298 |
|
Distributions to member |
|
|
(15,213,337 |
) |
|
|
— |
|
|
|
(15,213,337 |
) |
Combined net income |
|
|
— |
|
|
|
15,446,012 |
|
|
|
15,446,012 |
|
Unit-based compensation |
|
|
6,990 |
|
|
|
— |
|
|
|
6,990 |
|
Balance - June 30, 2026 |
|
$ |
(70,516,810 |
) |
|
$ |
179,011,773 |
|
|
$ |
108,494,963 |
|
See notes to combined financial statements and independent auditor's review report.
6
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Combined Statement of Cash Flows (Unaudited)
Six-month Periods Ended June 30, 2026 and 2025
|
|
2026 |
|
|
2025 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Combined net income |
|
$ |
15,446,012 |
|
|
$ |
12,404,876 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
||
Depreciation, depletion, and amortization |
|
|
3,442,221 |
|
|
|
3,745,627 |
|
Unrealized (gain) loss on derivative instruments |
|
|
(2,047,154 |
) |
|
|
2,911,990 |
|
Unit-based compensation |
|
|
6,990 |
|
|
|
129,882 |
|
Changes in operating assets and liabilities that (used) provided cash: |
|
|
|
|
|
|
||
Royalty receivable |
|
|
(1,288,752 |
) |
|
|
(888,601 |
) |
Other receivable |
|
|
— |
|
|
|
109,735 |
|
Other assets |
|
|
— |
|
|
|
16,643 |
|
Accounts payable and accrued liabilities |
|
|
10,812 |
|
|
|
(16,002 |
) |
Due to/from related parties |
|
|
54,704 |
|
|
|
37,493 |
|
Net cash provided by operating activities |
|
|
15,624,833 |
|
|
|
18,451,643 |
|
Cash Flows Used in Investing Activities - Acquisition of oil and natural gas |
|
|
(66,605 |
) |
|
|
(174,891 |
) |
Cash Flows Used in Financing Activities - Distributions to member |
|
|
(15,213,337 |
) |
|
|
(16,117,171 |
) |
Net Increase in Cash |
|
|
344,891 |
|
|
|
2,159,581 |
|
Cash - Beginning of period |
|
|
1,531,798 |
|
|
|
1,299,319 |
|
Cash - End of period |
|
$ |
1,876,689 |
|
|
$ |
3,458,900 |
|
See notes to combined financial statements and independent auditor's review report.
7
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 1 - Nature of Business
Three Rivers Royalty II, LLC (TRR II), a Colorado limited liability company, was formed on April 4, 2017 for the purpose of managing and acquiring mineral and royalty assets for lease and royalty revenue. TRR II owns oil and natural gas mineral and royalty interests in the Appalachian basin in Pennsylvania and West Virginia.
Cypress Minerals Partners, LLC (CMP), a Louisiana limited liability company, was formed on March 23, 2017 for the purpose of managing and acquiring mineral and royalty assets for lease and royalty revenue. CMP owns oil and natural gas mineral and royalty interests in the Haynesville basin in Louisiana.
TRR II and CMP are collectively referred to herein as the "Company."
TRR II and CMP are wholly owned subsidiaries of San Jacinto Minerals II, LLC (SJM II).
SJM II and its affiliated entities, San Jacinto Minerals, LLC (SJM I); San Jacinto Minerals III, LLC (SJM III); and San Jacinto Minerals IV, LLC (SJM IV) (collectively, the "SJM Entities") share common ownership and common management. Under a management services agreement between SJM II and the other SJM Entities (the "MSA"), SJM II is the named employer of those individuals providing services to the SJM Entities. Labor and other shared expenses are allocated amongst the SJM Entities based on the hours spent of such personnel (see Note 8). Direct costs of each of the individual SJM Entities are recorded based on the actual amounts incurred and recorded to the specific entity for which it relates. In addition to allocating the costs amongst the SJM entities, costs allocable to SJM II are allocated amongst TRR II, CMP, and the other wholly owned subsidiaries of SJM II: Bluebird Energy Partners, LLC (BEP); Old River Royalty, LLC (ORR); and 1836 Mineral Company, LLC (1836), based on their respective proportion of revenue and capital expenditures. In addition, TRR II, CMP, BEP, and 1836 are all guarantors (the "Guarantors") under the SJM II Credit Agreement (see Note 5).
Note 2 - Significant Accounting Policies
Basis of Presentation
The combined carve-out financial statements of the Company have been prepared on the basis of accounting principles generally accepted in the United States of America (GAAP) and are presented on a combined basis, which includes the accounts of the commonly controlled and managed entities of TRR II and CMP. All intercompany transactions and balances have been eliminated in combination.
TRR II and CMP have historically operated as part of SJM II and not as stand-alone companies. The accompanying combined carve-out financial statements represent the historical operations of TRR II and CMP and have been derived from SJM II’s historical accounting records. All revenue and costs and assets and liabilities directly associated with TRR II and CMP are included in the combined carve-out financial statements. The combined carve-out financial statements also include allocations of certain general and administrative expenses, including unit-based compensation expense, from SJM II. However, amounts recognized by TRR II and CMP are not necessarily representative of the amounts that would have been reflected in the financial statements had TRR II and/or CMP been operated independently of SJM II. Related party allocations are discussed further in Notes 1, 2, 5, 7, and 8.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.
Depreciation, depletion, and amortization (DD&A) and impairment of proved oil and gas properties are determined using estimates of proved oil and gas reserves. There are numerous uncertainties in estimating the quantity of reserves and in projecting the future rates of production and timing of development expenditures. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way. The recoverability of unproved oil and gas properties, the estimated fair value of commodity derivatives allocable to the Company, and the allocation of certain expenses not specifically identifiable to the Company's revenue-producing activities are also subject to estimation. As a royalty owner, the Company is not responsible for any reclamation costs.
8
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 2 - Significant Accounting Policies (Continued)
Cash
The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of and during the six-month periods ended June 30, 2026 and 2025, cash balances were primarily held by one financial institution.
Commodity Derivative Instruments
SJM II and its subsidiaries use commodity derivative instruments to provide a measure of stability to their cash flows in an environment of volatile oil and gas prices and to manage their exposure to oil and gas price volatility. All commodity derivative instruments are initially, and subsequently, measured at estimated fair value and recorded as assets or liabilities on the combined balance sheet.
SJM II is the named counterparty to the commodity derivative contracts pertaining to the Company's natural gas production and natural gas volumes. As these commodity derivative instruments relate to the Company's natural gas volumes, the fair values, and the related realized and unrealized gains/losses attributable thereto, have been pushed down to these combined financial statements for each of the years presented.
SJM II allocates realized and unrealized gains and losses associated with commodity derivative instruments to the Company based on TRR II and CMP's proportionate share of the total monthly production volumes for SJM II.
SJM II and the Company have elected not to designate commodity derivative instruments as cash flow hedges. For commodity derivative instruments that do not qualify as cash flow hedges, changes in the estimated fair value of the contracts are recorded as gains and losses in the combined statement of operations. When commodity derivative instruments are settled, SJM II and the Company recognize realized gains and losses in the combined statement of operations. Derivative cash flows are reported as cash flows from operating activities in the combined statement of cash flows (see Note 4).
Revenue Recognition
The Company's revenue is primarily derived from the sale of its produced oil and natural gas from wells in which the Company has nonoperated royalty interests.
The Company's produced oil and natural gas is produced and sold in the Pennsylvania, West Virginia, and Louisiana geographic areas. Oil sales for the six-month periods ended June 30, 2026 and 2025 were $785,342 and $360,813, respectively. Natural gas sales for the six-month periods ended June 30, 2026 and 2025 were $14,015,196 and $15,432,696, respectively. Natural gas liquids sales for the six-month periods ended June 30, 2026 and 2025 were $3,461,171 and $3,419,539, respectively. Accounts receivable from royalty revenue were $3,946,545 as of January 1, 2025.
The sales of produced oil and natural gas are made under contracts that the operators of the wells have negotiated with customers, which typically include variable consideration based on monthly pricing tied to local indices and volumes delivered. While revenue is typically recorded at the point in time when control of the produced oil and natural gas transfers to the customer, statements and payment may not be received via the operator of the wells for one to three months after the date the produced oil and natural gas are delivered, and, as a result, the amount of production delivered to the customer and the price that will be received for the sale of the product are estimated utilizing production reports, market indices, and estimated differentials. Estimated revenue due to the Company is recorded within accounts receivable in the accompanying combined balance sheet until payment is received. Differences between the estimated amounts and the actual amounts received from the sale of the produced oil and natural gas are recorded when known, which is generally when statements and payment are received.
The Company utilizes the practical expedient in ASC 606, which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. As the Company has determined that each unit of product generally represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to the remaining performance obligations is not required.
9
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 2 - Significant Accounting Policies (Continued)
The Company also derives revenue from mineral lease bonuses. The Company generates lease bonus revenue by leasing its mineral interests to exploration and production companies. The lease agreements generally transfer the rights to any oil or natural gas discovered, grant the Company a right to a specified royalty interest, and require that drilling and completion operations commence within a specified time period, or the lease will expire. The Company recognizes such lease bonus revenue once the lease agreement has been executed, payment is received, and the Company has no further obligation to refund the payment.
Given that the Company does not recognize lease bonus income until a lease agreement has been executed, at which point its performance obligation has been satisfied, and payment is received, the Company does not record revenue for unsatisfied or partially unsatisfied performance obligations as of the end of the reporting period.
Unit-based Compensation
The Company follows authoritative guidance that applies to unit-based awards, which requires entities to recognize compensation expense for awards issued to employees and others. Authoritative guidance also requires unit-based awards to employees and others by a related party or other holder of an economic interest in the entity to be accounted for as unit-based transactions if awards are for services provided by such employees and others (see Note 7).
Credit Risk, Major Customers, and Suppliers
The Company's producing properties are all located in Pennsylvania, West Virginia, and Louisiana, and the oil, natural gas, and natural gas liquids production is sold by various operators based on market index prices. For the six-month periods ended June 30, 2026 and 2025, three operators accounted for 83 and 75 percent, respectively, of revenue. As of June 30, 2026 and December 31, 2025, three operators accounted for 93 and 77 percent, respectively, of oil and gas revenue receivables. The risk of nonpayment by these purchasers is considered minimal, and the Company does not generally obtain collateral for sales. The Company continually monitors the credit standing of the primary purchasers and assesses the recoverability of the receivables to determine their collectibility. As the receivables are primarily with other entities within the oil and gas industry, such concentration may impact the Company's credit risk, as these entities may be similarly impacted by economic or other changes within the oil and gas industry.
The Company accrues a reserve for the allowance for credit losses based on management's current estimate of expected credit losses that includes historical credit loss experience of financial assets with similar risk characteristics, adjusted for management's current expectation of current conditions and reasonable and supportable forecasts. The risk of nonpayment is considered minimal; therefore, an allowance for doubtful accounts has not been recorded as of June 30, 2026 and December 31, 2025.
Oil and Gas Properties
The Company uses the successful efforts method of accounting for oil and gas activities. Under this method of accounting, costs associated with the acquisition, drilling, and equipping of successful exploratory wells and costs of successful and unsuccessful development wells are capitalized and depleted, net of estimated salvages values, using the units-of-production on a field-by-field basis based upon proved oil and gas reserves. The Company’s proved oil and gas reserve information was computed by applying the average first-day-of-the-month oil and gas price during the 12-month periods ended June 30, 2026 and 2025. Depletion expense for the 6-month periods ended June 30, 2026 and 2025 was $3,442,221 and $3,745,627, respectively. Exploration, geological costs, delay rentals, and drilling costs of unsuccessful exploratory wells are charged to expense as incurred.
Costs associated with unevaluated exploratory wells are excluded from the depletable basis until the determination of proved reserves, at which time those costs are reclassified to proved oil and gas properties and subject to depletion. If it is determined that the exploratory well costs were not successful in establishing proved reserves, such costs are expensed at the time of such determination.
The Company reviews its oil and gas properties for impairment whenever events and circumstances indicate a decline in the recoverability of their carrying value. The Company estimates the expected future cash flows of its proved oil and gas properties and compares such cash flows to the carrying amount of the proved oil and gas properties to determine if the amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust its proved oil and gas properties to estimated fair value. The factors used to estimate fair value include estimates of proved reserves, future commodity prices adjusted for basis differentials, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with realizing the projected cash flows. The discount rate is a rate that management believes is representative of current market conditions and includes estimates for a risk premium and other operational risks. There were no proved oil and gas property impairments during the six-month periods ended June 30, 2026 and 2025.
10
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 2 - Significant Accounting Policies (Continued)
Unproved oil and gas properties are assessed at least annually to determine whether they have been impaired by the drilling of dry holes on or near the related acreage or other circumstances that may indicate a decline in value. When unproved property is determined to be impaired, a loss equal to the portion impaired is recognized. When leases for unproved properties expire, the costs thereof are removed from the accounts and charged to expense. There were no unproved property impairments during the six-month periods ended June 30, 2026 and 2025.
Upon the drilling of successful wells on unproved properties, the Company reclassifies cost basis from unproved to proved properties, at which time that cost basis is subject to depletion.
From time to time, the Company may sell its oil and gas properties. The partial sale of proved properties within an existing field is accounted for as a normal retirement, and no gain or loss on divestiture is recognized as long as this treatment does not significantly affect the units-of-production depletion rate. The partial sale of unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to the ultimate recovery of the cost applicable to the interest retained. A gain on divestiture activity is recognized to the extent that the sales price exceeds the carrying amount of the unproved property. A gain or loss is recognized for all other sales of proved and unproved properties. The Company had no material sales of oil and gas properties during the six-month periods ended June 30, 2026 and 2025.
Income Taxes
TRR II and CMP are limited liability companies that are disregarded entities for U.S. federal income tax purposes. Accordingly, their taxable income or loss is included in the federal income tax return of SJM II, which is treated as a partnership for U.S. federal income tax purposes. As a partnership, SJM II is not subject to U.S. federal income taxes; rather, its taxable income or loss is allocated to its members, who are responsible for the related income taxes.
Beginning on January 1, 2018, new rules apply to Internal Revenue Service (IRS) audits of partnerships. Under these rules, adjustments resulting from an IRS audit may be assessed at the partnership level on behalf of the members. As of June 30, 2026, the Company has no tax years under audit.
Note 3 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.
Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets that the Company has the ability to access.
Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets in active markets and other inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset.
In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.
11
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 3 - Fair Value Measurements (Continued)
The following tables present information about the Company’s assets measured at fair value on a recurring basis at June 30, 2026 and December 31, 2025 and the valuation techniques used by the Company to determine those fair values:
|
|
Assets Measured at Fair Value on a Recurring Basis at |
|
|||||||||||||
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Balance at |
|
||||
Commodity derivative instruments asset |
|
$ |
— |
|
|
$ |
2,498,913 |
|
|
$ |
— |
|
|
$ |
2,498,913 |
|
|
|
Assets Measured at Fair Value on a Recurring Basis at |
|
|||||||||||||
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Balance at |
|
||||
Commodity derivative instruments asset |
|
$ |
— |
|
|
$ |
451,759 |
|
|
$ |
— |
|
|
$ |
451,759 |
|
The Company's derivative instruments consist of commodity swaps. The Company estimates the fair values of its commodity swaps under the income valuation technique using a discounted cash flow model. The valuation models require a variety of inputs, including contractual terms, published forward prices, and discount rates, as appropriate. The Company's estimates of the fair value of commodity derivative instruments include consideration of the counterparty's creditworthiness, the Company's creditworthiness, and the time value of money. The consideration of these factors results in an estimated exit price for each derivative asset or liability under a marketplace participant's view. The Company believes that the valuation methods utilized are appropriate and consistent with the fair value standards and with other market participants. All of the significant inputs are observable, either directly or indirectly; therefore, the Company's commodity swap instruments are included within the Level 2 fair value hierarchy.
The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company's policy is to recognize transfers in and/or out of the fair value hierarchy as of the beginning of the reporting period in which the event or change in circumstances caused the transfer.
The Company's financial instruments consist of accounts receivable. The carrying value of accounts receivable approximates fair value due to the short-term nature of these instruments.
Note 4 - Derivatives
As discussed in Note 2, SJM II periodically enters into various commodity derivative instruments to mitigate a portion of the effect of natural gas price fluctuations. SJM II and the Company classify the fair value amounts of derivative assets and liabilities as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and counterparty.
12
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 4 - Derivatives (Continued)
At June 30, 2026 and December 31, 2025, the fair values attributable to certain commodity derivative instruments in which SJM II was the named counterparty of the derivative agreements have been allocated to the Company based on TRR II's and CMP's proportionate share of SJM II's total estimated monthly production over the duration of the derivative contracts. The fair values as of June 30, 2026 are as follows:
Product and Type of |
|
Total Mcf |
|
|
Settlement |
|
|
Settlement Index |
|
Period |
|
Estimated |
|
|||
Natural gas |
|
|
736,000 |
|
|
$ |
3.65 |
|
|
NYMEX 1st H Hub |
|
Q3/Q4 2026 |
|
$ |
192,808 |
|
Natural gas |
|
|
1,380,000 |
|
|
$ |
2.99 |
|
|
Platts IFERC Tetco M2 |
|
Q3/Q4 2026 |
|
$ |
646,047 |
|
Natural gas |
|
|
360,000 |
|
|
$ |
3.85 |
|
|
Platts IFERC Tetco M2 |
|
Q1 2027 |
|
$ |
143,555 |
|
Natural gas |
|
|
1,638,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
Q1/Q2 2027 |
|
$ |
623,742 |
|
Natural gas |
|
|
364,000 |
|
|
$ |
2.99 |
|
|
Platts IFERC Tetco M2 |
|
Q2 2027 |
|
$ |
115,937 |
|
Natural gas |
|
|
1,104,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
Q3/Q4 2027 |
|
$ |
554,229 |
|
Natural gas |
|
|
736,000 |
|
|
$ |
2.86 |
|
|
Platts IFERC Tetco M2 |
|
Q3/Q4 2027 |
|
$ |
185,165 |
|
Natural gas |
|
|
273,000 |
|
|
$ |
3.88 |
|
|
Platts IFERC Tetco M2 |
|
Q1 2028 |
|
$ |
37,430 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
2,498,913 |
|
||
The fair values as of December 31, 2025 are as follows:
Product and Type of |
|
Total Mcf |
|
|
Settlement |
|
|
Index |
|
Settlement |
|
Estimated |
|
|||
Natural gas |
|
|
313,000 |
|
|
$ |
4.12 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
88,181 |
|
Natural gas |
|
|
461,000 |
|
|
$ |
3.34 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(13,083 |
) |
Natural gas |
|
|
552,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
2026 |
|
$ |
143,994 |
|
Natural gas |
|
|
1,224,000 |
|
|
$ |
3.65 |
|
|
NYMEX 1st H Hub |
|
2026 |
|
$ |
(122,376 |
) |
Natural gas |
|
|
2,737,500 |
|
|
$ |
2.99 |
|
|
Platts IFERC Tetco M2 |
|
2026 |
|
$ |
264,606 |
|
Natural gas |
|
|
2,190,000 |
|
|
$ |
3.13 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
125,463 |
|
Natural gas |
|
|
360,000 |
|
|
$ |
3.85 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
35,965 |
|
Natural gas |
|
|
364,000 |
|
|
$ |
2.59 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
(41,952 |
) |
Natural gas |
|
|
736,000 |
|
|
$ |
2.86 |
|
|
Platts IFERC Tetco M2 |
|
2027 |
|
$ |
(29,039 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
451,759 |
|
||
As of June 30, 2026, the Company had $1,722,089 of gross current commodity derivative assets with no offsetting current liabilities. The Company had $776,824 of gross noncurrent commodity derivative assets, with no offsetting noncurrent liabilities.
As of December 31, 2025, the Company had $496,781 of gross current commodity derivative assets offset by $135,459 of current liabilities, resulting in a net current commodity derivative asset of $361,322. The Company had $161,428 of gross noncurrent commodity derivative assets offset by $70,991 of noncurrent liabilities, resulting in a net noncurrent commodity derivative asset of $90,437.
Due to the volatility of natural gas prices, the estimated fair value of the Company's allocated commodity derivative instruments are subject to large fluctuations from period to period.
The counterparty to the SJM II derivative instruments is East West Bank. The Company and SJM II are not required to post collateral with East West Bank since the Credit Agreement (see Note 5) is collateralized by SJM II's and the Company's oil and gas assets.
13
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 4 - Derivatives (Continued)
For the six-month periods ended June 30, 2026 and 2025, the gains and losses recognized in the combined statement of operations attributable to derivative instruments are as follows:
|
|
Amount of Gain (Loss) |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Realized (loss) gain on commodity derivative instruments |
|
$ |
(707,635 |
) |
|
$ |
1,586,923 |
|
Unrealized gain (loss) on commodity derivative instruments |
|
|
2,047,154 |
|
|
|
(2,911,990 |
) |
Total |
|
$ |
1,339,519 |
|
|
$ |
(1,325,067 |
) |
Note 5 - Member Debt Guarantee
In July 2018, SJM II entered into a credit agreement with East West Bank (the "Credit Agreement") with a maximum commitment of $75,000,000. The borrowing base is redetermined semiannually, with the borrowing base as of June 30, 2026 set at $90,000,000 and a maximum commitment of $200,000,000. Repayment of borrowings is required in the event that the redetermined borrowing base is less than outstanding borrowings or on the maturity date. During 2024, the maturity date was extended to July 2027. In May 2026, the Credit Agreement was amended to extend the maturity date to July 2029. Amounts borrowed bear interest at SOFR or the base rate, as defined, plus a margin ranging from 3.00 to 4.00 percent depending on utilization (7.72 percent at June 30, 2026). Interest is payable monthly.
The Credit Agreement contains financial covenants requiring minimum current, maximum leverage, and minimum interest coverage ratios. As of June 30, 2026, SJM II was in compliance with these financial covenants. The Credit Agreement contains restrictive covenants, including the limitation of paying distributions to the members of SJM II, the transfer of more than 40 percent of the equity interests in SJM II, and incurring additional indebtedness. The Credit Agreement is collateralized by all mineral interests of SJM II and its subsidiaries, including TRR II and CMP. As of June 30, 2026, the outstanding amount borrowed by SJM II under the Credit Agreement was $72,800,000. SJM II is required to enter into and maintain hedge transactions of crude oil and natural gas covering 50 to 90 percent of SJM II's anticipated oil and natural gas production, or anticipated receipt of royalties, from its proved developed producing properties.
In addition, each of the Guarantors (see Note 1) guarantees the amounts owed under the Credit Agreement by SJM II. The Guarantors are not joint and severally liable under the Credit Agreement, and SJM II is the only named borrower under the Credit Agreement. As it is not probable that TRR II and/or CMP will be forced to act upon their guarantees, no amounts outstanding under the Credit Agreement, along with any associated interest costs, have been allocated to the combined carve-out financial statements of the Company.
In addition, as of June 30, 2026 and December 31, 2025, SJM II had two interest rate swap derivative instruments, each with $10,000,000 of notional and a maturity date of July 2026 (the "Swaps"). Each of the Swaps had SJM II as the fixed rate payer at 4.45 percent and 3.83 percent, respectively, on the one-month SOFR. As SJM II is the only named counterparty on the Swaps and no amounts outstanding under the Credit Agreement at the SJM II level have been allocated to either TRR II or CMP as discussed above, no amounts related to the Swaps have been pushed down to these combined carve-out financial statements.
Note 6 - Litigation
The Company is occasionally named a party in lawsuits in the normal course of business. In the opinion of management, the resolution of these lawsuits will not have a material adverse effect on the Company's financial position or results of operations.
Note 7 - Member's Equity
TRR II was formed in 2017, pursuant to a limited liability company agreement, as amended (the "TRR II Agreement"). The TRR II Agreement provides for the authorization of one class of common interests, in which SJM II is the sole member.
Cypress Mineral Partners was formed in 2017, pursuant to a limited liability company agreement, as amended (the "CMP Agreement"). The CMP Agreement provides for the authorization of one class of common interests, in which SJM II is the sole member.
14
Three Rivers Royalty II, LLC and Cypress Mineral Partners, LLC
Notes to Combined Financial Statements (Unaudited)
June 30, 2026 and 2025
Note 7 - Member's Equity (Continued)
Certain employees of SJM II (see Note 8) who provide management and administrative services to the Company were granted management incentive units of SJM II (the "MIUs"). The MIUs entitle the holders to the right to receive distributions from SJM II upon the attainment of specific payout thresholds. MIUs vest upon service conditions or performance conditions related to monetization events. During the six-month periods ended June 30, 2026 and 2025, there were no grants of MIUs. As of June 30, 2026 and December 31, 2025, approximately 99 percent of authorized MIUs were issued and outstanding, of which approximately 83 percent were contractually vested. For the six-month periods ended June 30, 2026 and 2025, the Company's allocable share (based on the proportion of revenue and capital expenditures; see Note 1) of grant-date fair value recognized as compensation expenses as a component of general and administrative expenses - related party within the combined statement of operations totaled approximately $7,000 and $130,000, respectively. The proportion of unrecognized compensation cost estimated to be allocable to the Company as of June 30, 2026 was approximately $265,000.
Note 8 - Related Party Transactions
The following is a description of transactions between the Company and related parties:
Management Fees
As discussed in Note 1, during 2017, SJM II entered into the MSA with SJM I, an entity with common ownership and common management, whereby shared management services and general overhead of the SJM Entities are allocated based on time incurred. SJM III and SJM IV subsequently became parties to the MSA. The MSA is subject to automatic annual renewals.
For the six-month periods ended June 30, 2026 and 2025, the Company incurred services and shared general overhead, including unit-based compensation, from SJM II of approximately $264,000 and $352,000, respectively, all of which has been included in general and administrative expenses - related party on the accompanying combined statement of operations of the Company. As of June 30, 2026 and December 31, 2025, the Company had a payable due to SJM II totaling approximately $9,343 and $0, respectively, which has also been recorded on the Company's accompanying combined balance sheet.
There were no amounts due to/from SJM I, SJM III, or SJM IV as of June 30, 2026. The Company had miscellaneous general and administrative amounts due to SJM III totaling $1,165 as of December 31, 2025, which is included within related party receivables on the accompanying combined balance sheet.
Additionally, the Company had miscellaneous general and administrative amounts due from SJM I totaling $46,526 as of December 31, 2025, which are included within related party receivables on the accompanying combined balance sheet.
During 2017, SJM I and SJM II entered into an agreement whereby SJM I and the Company's prospective mineral acquisitions shall be restricted to (1) certain counties within Pennsylvania or within two miles of existing company mineral interests and (2) amounts less than $2.0 million. Furthermore, SJM I and the Company may offer SJM II the right to participate in mineral interest acquisitions.
Note 9 - Subsequent Events
In June 2026, SJM II entered into a new interest rate swap agreement, with an effective date of July 2026, with $20,000,000 of notional and a maturity date of July 2028. Under this agreement, SJM II is the fixed rate payer at 3.99 percent and receives the one-month SOFR.
In August 2026, TRR II and CMP entered into a purchase and sale agreement to sell certain oil and gas properties of TRR II and all of the oil and gas properties of CMP for a purchase price of $105,000,000 (the "Transaction"). As of the date these financial statements were available to be issued, the Transaction had not closed. There can be no assurance that the Transaction will eventually close.
The Company has evaluated all subsequent events up through and including September 11, 2026, which is the date these financial statements were available to be issued.
15
Exhibit 99.3
The following unaudited pro forma condensed consolidated combined financial statements (the “pro forma financial statements”) present the historical consolidated financial statements of the Company, the historical financial statements of PHX and the historical carve-out financial statements of the SJM II Sellers, adjusted to give effect to the PHX Acquisition, the SJM II Acquisition and the related financing thereof and the Transactions. Additionally, the pro forma financial statements include adjustments associated with the Three Rivers Acquisition completed by WhiteHawk prior to the PHX Acquisition. On March 31, 2025, the Company purchased mineral and royalty interests in the Marcellus Shale from the TRR Seller. On June 23, 2025, WH Acquisition Corp. and Merger Sub closed on the PHX Merger Agreement and WH Acquisition Corp. fully acquired all of PHX, with PHX continuing as the surviving entity and a wholly owned indirect subsidiary of the Company. Pursuant to the SJM II Acquisition, the Company, through certain of its subsidiaries, will acquire the SJM II Assets from the SJM II Sellers for an aggregate purchase price of $105.0 million, subject to customary adjustments.
The financing related to the SJM II Acquisition consists of the issuance of shares of Series E Preferred Stock for aggregate proceeds of up to $50.0 million pursuant to the Equity Commitment Letters entered into on August 12, 2026 with certain investors, including Daniel Herz, our Chairman, President and Chief Executive Officer, and the issuance of shares of Series A Common Stock for aggregate proceeds of $75.0 million pursuant to a Securities Purchase Agreement entered into on September 16, 2026 ("Securities Purchase Agreement Financing"). See “Certain Relationships and Related Party Transactions—Series E Preferred Stock Financing.”
The unaudited pro forma condensed consolidated combined balance sheet gives effect to the SJM II Acquisition and the related financing thereof as if they had occurred on June 30, 2026. The PHX Acquisition, the Three Rivers Acquisition and the Transactions are reflected in the historical consolidated balance sheet of WhiteHawk as of June 30, 2026, and, as such, no pro forma adjustments are made for such transactions in the unaudited pro forma condensed consolidated combined balance sheet. The unaudited pro forma condensed consolidated combined statement of operations for the year ended December 31, 2025 gives effect to the PHX Acquisition, the Three Rivers Acquisition, the SJM II Acquisition and the Transactions as if each had occurred on January 1, 2025 (the “assumed date”). The pro forma financial statements contain certain reclassification adjustments to (i) conform the historical PHX financial statement presentation and the historical carve-out financial statement presentation of the SJM II Sellers to the Company’s financial statement presentation and (ii) conform certain of the Company’s historical amounts to PHX’s financial statement presentation. The unaudited pro forma condensed consolidated combined statement of operations for the six months ended June 30, 2026 gives effect to the SJM II Acquisition and the Transactions as if they had occurred on January 1, 2025.
The unaudited pro forma financial statements have been prepared in accordance with Article 11 of Regulation S‑X as amended by the final rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using assumptions set forth in the notes to the unaudited pro forma financial statements. The pro forma financial statements have been adjusted to include transaction accounting adjustments in accordance with GAAP, linking the effects of the PHX Acquisition, the Three Rivers Acquisition, the SJM II Acquisition and the Transactions and the adjustments to the PHX historical financial statements, the TRR Seller consolidated carve-out financial statement presentation and the SJM II Sellers carve-out financial statement presentation to the historical consolidated financial statements of the Company. The Company has finalized purchase accounting for the PHX and TRR Seller acquisitions and conformed their accounting policies to those of the Company, and the accompanying unaudited pro forma condensed combined financial information reflects the final purchase price allocations recorded in the Company’s audited consolidated financial statements for the year ended December 31, 2025, with only transaction accounting adjustments presented. The Company has not finalized purchase accounting for the SJM II Acquisition, and the pro forma adjustments related to the SJM II Acquisition are based on preliminary estimates of the fair values of the assets to be acquired and the liabilities to be assumed, which are subject to change upon completion of the final purchase price allocation. The Company expects to account for the SJM II Acquisition as an asset acquisition in accordance with GAAP. The pro forma financial statements and related notes are presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that the Company would have achieved if the PHX Acquisition, the Three Rivers Acquisition, the SJM II Acquisition and the Transactions had taken place on the assumed date.
The pro forma financial statements do not reflect future events that may have occurred after the consummation of the PHX Acquisition, the Three Rivers Acquisition, the SJM II Acquisition and the Transactions, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings or economies of scale that may be achieved with respect to the combined operations. In addition, the consummation of the SJM II Acquisition remains subject to the satisfaction of customary closing conditions, and the SJM II Acquisition may not be consummated on the terms, or within the time period, reflected in the pro forma financial statements. As a result, future results may vary significantly from the results reflected in the pro forma financial statements and should not be relied on as an indication of the Company’s post-combination future results.
1
Unaudited Pro Forma Condensed Consolidated Combined Balance Sheet
As of June 30, 2026
(in thousands, except par value and share amounts)
|
|
Historical |
|
|
|
|
|
|
|
|
|
|
||||
|
|
WhiteHawk |
|
|
|
|
|
As Adjusted for |
|
|
|
|
||||
|
|
Minerals |
|
|
SJM II |
|
|
SJM II |
|
|
Pro Forma |
|
||||
|
|
Corp. |
|
|
Adjustments |
|
|
Acquisition |
|
|
Combined |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
13,229 |
|
|
$ |
49,500 |
|
A |
$ |
27,104 |
|
|
$ |
27,104 |
|
|
|
|
|
|
|
72,225 |
|
B |
|
|
|
|
|
|||
|
|
|
|
|
|
(107,850 |
) |
C |
|
|
|
|
|
|||
Accounts receivable |
|
|
8,637 |
|
|
|
— |
|
|
|
8,637 |
|
|
|
8,637 |
|
Short-term derivative asset |
|
|
8,532 |
|
|
|
— |
|
|
|
8,532 |
|
|
|
8,532 |
|
Other current assets |
|
|
2,150 |
|
|
|
— |
|
|
|
2,150 |
|
|
|
2,150 |
|
Total current assets |
|
|
32,548 |
|
|
|
13,875 |
|
|
|
46,423 |
|
|
|
46,423 |
|
Natural gas and oil mineral interests, net - successful efforts method |
|
|
477,633 |
|
|
|
107,850 |
|
C |
|
585,483 |
|
|
|
585,483 |
|
Other property and equipment, net |
|
|
215 |
|
|
|
— |
|
|
|
215 |
|
|
|
215 |
|
Other assets |
|
|
7,892 |
|
|
|
— |
|
|
|
7,892 |
|
|
|
7,892 |
|
Total assets |
|
$ |
518,288 |
|
|
$ |
121,725 |
|
|
$ |
640,013 |
|
|
$ |
640,013 |
|
Liabilities, mezzanine equity and shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable |
|
$ |
9,020 |
|
|
$ |
— |
|
|
$ |
9,020 |
|
|
$ |
9,020 |
|
Accrued liabilities |
|
|
3,300 |
|
|
|
— |
|
|
|
3,300 |
|
|
|
3,300 |
|
Earnout liability, current portion |
|
|
10,841 |
|
|
|
— |
|
|
|
10,841 |
|
|
|
10,841 |
|
Operating lease liabilities, current portion |
|
|
179 |
|
|
|
— |
|
|
|
179 |
|
|
|
179 |
|
Total current liabilities |
|
|
23,340 |
|
|
|
— |
|
|
|
23,340 |
|
|
|
23,340 |
|
Senior notes, net of unamortized debt issuance costs |
|
|
68,070 |
|
|
|
— |
|
|
|
68,070 |
|
|
|
68,070 |
|
Operating lease liabilities, net of current portion |
|
|
31 |
|
|
|
— |
|
|
|
31 |
|
|
|
31 |
|
Earnout liability, net of current portion |
|
|
15,076 |
|
|
|
— |
|
|
|
15,076 |
|
|
|
15,076 |
|
Long-term derivative liability |
|
|
801 |
|
|
|
— |
|
|
|
801 |
|
|
|
801 |
|
Asset retirement obligation |
|
|
329 |
|
|
|
— |
|
|
|
329 |
|
|
|
329 |
|
Total liabilities |
|
|
107,647 |
|
|
|
- |
|
|
|
107,647 |
|
|
|
107,647 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mezzanine equity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series B Preferred stock, $0.0001 par value; 400,000 shares authorized; 46,483 shares issued and |
|
|
34,763 |
|
|
|
— |
|
|
|
34,763 |
|
|
|
34,763 |
|
Series E Preferred stock, $0.0001 par value; 50,000 shares authorized; 0 shares issued and |
|
|
— |
|
|
|
49,500 |
|
A |
|
49,500 |
|
|
|
49,500 |
|
Series F Preferred stock, $0.0001 par value; 100,000 shares authorized; 0 shares issued and |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A common stock, $0.0001 par value; 250,000,000 shares authorized ; 23,795,450 shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Class B common stock; $0.0001 par value; 100,000,000 shares authorized ; 3,750,000 shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Additional paid in capital |
|
|
333,792 |
|
|
|
72,225 |
|
B |
|
406,017 |
|
|
|
406,017 |
|
Accumulated deficit |
|
|
(55,299 |
) |
|
|
— |
|
|
|
(55,299 |
) |
|
|
(55,299 |
) |
Stockholders equity in WhiteHawk Minerals Corp. |
|
|
278,493 |
|
|
|
72,225 |
|
|
|
350,718 |
|
|
|
350,718 |
|
Non-controlling interest |
|
|
97,385 |
|
|
|
— |
|
|
|
97,385 |
|
|
|
97,385 |
|
Total equity |
|
|
375,878 |
|
|
|
72,225 |
|
|
|
448,103 |
|
|
|
448,103 |
|
Total liabilities, mezzanine equity and equity |
|
$ |
518,288 |
|
|
$ |
121,725 |
|
|
$ |
640,013 |
|
|
$ |
640,013 |
|
2
Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations
For the Six Months Ended June 30, 2026
(in thousands, except per share data)
|
|
|
|
|
Historical |
|
|
|
|
|
|
|
||||
|
|
WhiteHawk |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Minerals |
|
|
|
|
|
SJM II |
|
|
Pro Forma |
|
||||
|
|
Corp. |
|
|
SJM II |
|
|
Adjustments |
|
|
Combined |
|
||||
Revenues: |
|
|
|
|
M |
|
|
|
|
|
|
|
||||
Royalty revenue |
|
$ |
43,429 |
|
|
$ |
— |
|
|
$ |
6,965 |
|
|
$ |
50,394 |
|
Natural gas royalty revenue |
|
|
— |
|
|
|
6,501 |
|
|
|
(6,501 |
) |
N |
|
- |
|
Natural gas liquids royalty revenue |
|
|
— |
|
|
|
1,069 |
|
|
|
(1,069 |
) |
N |
|
- |
|
Oil royalty revenue |
|
|
— |
|
|
|
286 |
|
|
|
(286 |
) |
N |
|
- |
|
Gain (loss) on commodity derivative instruments |
|
|
5,675 |
|
|
|
— |
|
|
|
623 |
|
O |
|
6,298 |
|
Lease bonus and other revenue |
|
|
797 |
|
|
|
648 |
|
|
|
— |
|
|
|
1,445 |
|
Total revenue |
|
|
49,901 |
|
|
|
8,504 |
|
|
|
(268 |
) |
|
|
58,137 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gathering, processing, and transportation |
|
|
— |
|
|
|
891 |
|
|
|
(891 |
) |
N |
|
— |
|
General and administrative |
|
|
7,971 |
|
|
|
151 |
|
|
|
— |
|
|
|
8,122 |
|
Management fees |
|
|
18,822 |
|
|
|
— |
|
|
|
— |
|
|
|
18,822 |
|
Depletion, depreciation and accretion |
|
|
19,863 |
|
|
|
1,390 |
|
|
|
2,003 |
|
S |
|
23,256 |
|
Total operating expenses |
|
|
46,656 |
|
|
|
2,432 |
|
|
|
1,112 |
|
|
|
50,200 |
|
Operating income (loss) |
|
|
3,245 |
|
|
|
6,072 |
|
|
|
(1,380 |
) |
|
|
7,937 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
21,722 |
|
|
|
— |
|
|
|
— |
|
|
|
21,722 |
|
Change in fair value of earnout liability |
|
|
1,694 |
|
|
|
— |
|
|
|
— |
|
|
|
1,694 |
|
Interest expense, net |
|
|
11,031 |
|
|
|
— |
|
|
|
(5 |
) |
P |
|
11,026 |
|
Realized loss on commodity derivative instruments |
|
|
— |
|
|
|
324 |
|
|
|
(324 |
) |
O |
|
— |
|
Unrealized gain on commodity derivative instruments |
|
|
— |
|
|
|
(947 |
) |
|
|
947 |
|
O |
|
— |
|
Other income |
|
|
— |
|
|
|
(5 |
) |
|
|
5 |
|
P |
|
— |
|
Income (loss) before income taxes |
|
|
(31,202 |
) |
|
|
6,700 |
|
|
|
(2,003 |
) |
|
|
(26,505 |
) |
Provision for (benefit from) income taxes |
|
|
9,066 |
|
|
|
— |
|
|
|
1,621 |
|
H |
|
10,687 |
|
Net income (loss) |
|
|
(40,268 |
) |
|
|
6,700 |
|
|
|
(3,624 |
) |
|
|
(37,192 |
) |
Net (income) loss attributable to non-controlling interests |
|
|
115 |
|
|
|
— |
|
|
|
579 |
|
Q |
|
694 |
|
Earnings allocated to participating securities |
|
|
(5,507 |
) |
|
|
— |
|
|
|
(2,500 |
) |
R |
|
(8,007 |
) |
Net income (loss) attributable to common stockholders |
|
$ |
(45,660 |
) |
|
$ |
6,700 |
|
|
$ |
(5,545 |
) |
|
$ |
(44,505 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income (loss) per common share attributable to common |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common shares - basic and diluted |
|
$ |
(2.86 |
) |
|
|
|
|
|
|
|
$ |
(2.36 |
) |
||
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common shares - basic and diluted |
|
|
15,948 |
|
|
|
|
|
|
|
|
|
18,822 |
|
||
3
Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations
For the Year Ended December 31, 2025
(in thousands, except per share data)
|
Historical |
|
|
|
|
|
|
Historical |
|
|
|
|
|
|
Historical |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
WhiteHawk |
|
Three Rivers |
|
As Adjusted |
|
|
PHX |
|
|
PHX |
|
As Adjusted |
|
SJM II |
|
|
SJM II |
|
|
As Adjusted |
|
Transaction |
|
|
Pro Forma |
|
|||||||||||
|
(As restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenues: |
|
|
A |
|
|
|
|
B |
|
|
|
|
|
|
M |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Royalty revenue |
$ |
50,075 |
|
$ |
5,616 |
|
$ |
55,691 |
|
|
$ |
19,569 |
|
|
$ |
(3,421 |
) |
$ |
71,839 |
|
$ |
— |
|
|
$ |
13,746 |
|
|
$ |
85,585 |
|
$ |
— |
|
|
$ |
85,585 |
|
Natural gas royalty revenue |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
13,777 |
|
|
$ |
(13,777 |
) |
N |
|
— |
|
|
— |
|
|
|
— |
|
Natural gas liquids royalty revenue |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
1,901 |
|
|
$ |
(1,901 |
) |
N |
|
— |
|
|
— |
|
|
|
— |
|
Oil royalty revenue |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
164 |
|
|
$ |
(164 |
) |
N |
|
— |
|
|
— |
|
|
|
— |
|
Gain (loss) on commodity |
|
16,648 |
|
|
— |
|
|
16,648 |
|
|
|
(596 |
) |
|
|
— |
|
|
16,052 |
|
|
— |
|
|
|
865 |
|
O |
|
16,917 |
|
|
— |
|
|
|
16,917 |
|
Lease bonus revenue |
|
872 |
|
|
— |
|
|
872 |
|
|
|
471 |
|
|
|
— |
|
|
1,343 |
|
|
790 |
|
|
|
— |
|
|
|
2,133 |
|
|
— |
|
|
|
2,133 |
|
Total revenue |
|
67,595 |
|
|
5,616 |
|
|
73,211 |
|
|
|
19,444 |
|
|
|
(3,421 |
) |
|
89,234 |
|
|
16,632 |
|
|
|
(1,231 |
) |
|
|
104,635 |
|
|
— |
|
|
|
104,635 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Lease operating expenses |
|
— |
|
|
— |
|
|
— |
|
|
|
560 |
|
C |
|
(560 |
) |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
Transportation, gathering |
|
— |
|
|
— |
|
|
— |
|
|
|
2,138 |
|
C |
|
(2,138 |
) |
|
— |
|
|
2,096 |
|
|
|
(2,096 |
) |
N |
|
— |
|
|
— |
|
|
|
— |
|
Production and ad valorem |
|
— |
|
|
— |
|
|
— |
|
|
|
723 |
|
C |
|
(723 |
) |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
General and administrative |
|
16,585 |
|
|
— |
|
|
16,585 |
|
|
|
10,854 |
|
|
|
— |
|
|
27,439 |
|
|
419 |
|
|
|
— |
|
|
|
27,858 |
|
|
— |
|
|
|
27,858 |
|
Management fees |
|
9,966 |
|
|
— |
|
|
9,966 |
|
E |
|
— |
|
|
|
— |
|
|
9,966 |
|
|
— |
|
|
|
— |
|
|
|
9,966 |
|
|
13,555 |
|
J |
|
23,521 |
|
Depletion, depreciation and |
|
24,237 |
|
|
— |
|
|
24,237 |
|
|
|
4,907 |
|
D |
|
7,307 |
|
|
36,451 |
|
|
3,603 |
|
|
|
3,058 |
|
S |
|
43,112 |
|
|
- |
|
|
|
43,112 |
|
Total operating expenses |
|
50,788 |
|
|
— |
|
|
50,788 |
|
|
|
19,182 |
|
|
|
3,886 |
|
|
73,856 |
|
|
6,118 |
|
|
|
962 |
|
|
|
80,936 |
|
|
13,555 |
|
|
|
94,491 |
|
Operating income (loss) |
|
16,807 |
|
|
5,616 |
|
|
22,423 |
|
|
|
262 |
|
|
|
(7,307 |
) |
|
15,378 |
|
|
10,514 |
|
|
|
(2,193 |
) |
|
|
23,699 |
|
|
(13,555 |
) |
|
|
10,144 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss on extinguishment of |
|
3,839 |
|
|
— |
|
|
3,839 |
|
|
|
— |
|
|
|
— |
|
|
3,839 |
|
|
— |
|
|
|
— |
|
|
|
3,839 |
|
|
17,600 |
|
F |
|
24,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
3,440 |
|
G |
|
|
|||||||||
Loss (gain) on sale of assets |
|
123 |
|
|
— |
|
|
123 |
|
|
|
(6,429 |
) |
|
|
— |
|
|
(6,306 |
) |
|
— |
|
|
|
— |
|
|
|
(6,306 |
) |
|
— |
|
|
|
(6,306 |
) |
Interest expense, net |
|
19,070 |
|
|
— |
|
|
19,070 |
|
|
|
659 |
|
|
|
— |
|
|
19,729 |
|
|
— |
|
|
|
(55 |
) |
P |
|
19,674 |
|
|
— |
|
|
|
19,674 |
|
Realized (gain) loss on commodity |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
(1,449 |
) |
|
|
1,449 |
|
O |
|
- |
|
|
— |
|
|
|
— |
|
Unrealized (gain) loss on commodity |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
584 |
|
|
|
(584 |
) |
O |
|
- |
|
|
— |
|
|
|
— |
|
Other income |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
(55 |
) |
|
|
55 |
|
P |
|
- |
|
|
— |
|
|
|
— |
|
Income (loss) before income |
|
(6,225 |
) |
|
5,616 |
|
|
(609 |
) |
|
|
6,032 |
|
|
|
(7,307 |
) |
|
(1,884 |
) |
|
11,434 |
|
|
|
(3,058 |
) |
|
|
6,492 |
|
|
(34,595 |
) |
|
|
(28,103 |
) |
Provision for (benefit from) |
|
(2,640 |
) |
|
— |
|
|
(2,640 |
) |
|
|
1,297 |
|
|
|
— |
|
|
(1,343 |
) |
|
— |
|
|
|
2,767 |
|
H |
|
1,424 |
|
|
(2,806 |
) |
H |
|
(1,382 |
) |
Net income (loss) |
|
(3,585 |
) |
|
5,616 |
|
|
2,031 |
|
|
|
4,735 |
|
|
|
(7,307 |
) |
|
(541 |
) |
|
11,434 |
|
|
|
(5,825 |
) |
|
|
5,068 |
|
|
(31,789 |
) |
|
|
(26,721 |
) |
Net (income) loss attributable |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
- |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
3,464 |
|
I |
|
3,464 |
|
Earnings allocated to |
|
(7,341 |
) |
|
— |
|
|
(7,341 |
) |
|
|
— |
|
|
|
— |
|
|
(7,341 |
) |
|
— |
|
|
|
(5,000 |
) |
R |
|
(12,341 |
) |
|
(2,100 |
) |
L |
|
(14,441 |
) |
Net income (loss) attributable |
$ |
(10,926 |
) |
$ |
5,616 |
|
$ |
(5,310 |
) |
|
$ |
4,735 |
|
|
$ |
(7,307 |
) |
$ |
(7,882 |
) |
$ |
11,434 |
|
|
$ |
(10,825 |
) |
|
$ |
(7,273 |
) |
$ |
(30,425 |
) |
|
$ |
(37,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings(loss) per common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares - basic and diluted |
$ |
(1.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2.16 |
) |
|||||||||
Weighted average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares - basic and |
|
8,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,611 |
|
|||||||||
4
Notes to unaudited pro forma condensed consolidated combined financial statements
1. Basis of Presentation, the Offering and Reorganization
The pro forma financial statements have been derived from the historical financial statements of WhiteHawk (in the case of financial information as of and for the six months ended June 30, 2026 and for the year ended December 31, 2025 as restated in the Restatement). The unaudited pro forma condensed consolidated combined balance sheet gives effect to the SJM II Acquisition as if it had occurred on June 30, 2026. The PHX Acquisition, Three Rivers Royalty Acquisition, and the Transactions are reflected in the historical consolidated balance sheet of WhiteHawk as of June 30, 2026, and, as such no pro forma adjustments are made for such transactions in the unaudited pro forma condensed combined balance sheet. The unaudited pro forma condensed consolidated combined statement of operations for the year ended December 31, 2025 gives effect to the PHX Acquisition, the Three Rivers Royalty Acquisition, the SJM II Acquisition and the Transactions as if each had occurred on January 1, 2025. The unaudited pro forma condensed consolidated combined statement of operations for the six months ended June 30, 2026 gives effect to the Transactions and SJM II Acquisition as if each had occurred on January 1, 2025. The pro forma financial statements reflect pro forma adjustments that are based on available information and certain assumptions that management believes are reasonable. However, actual results may differ from those reflected in these statements. In management’s opinion, all adjustments known to date that are necessary to present fairly the pro forma information have been made. The pro forma financial statements do not purport to represent what WhiteHawk’s post-combination financial position or results of operations would have been if the transactions had actually occurred on the dates indicated above, nor are they indicative of the Company’s post-combination future financial position or results of operations. These pro forma financial statements should be read in conjunction with the historical financial statements, and related notes thereto, of WhiteHawk, PHX, SJM II, and TRR for the periods presented, which are included or incorporated by reference in this Registration Statement.
2. Unaudited Pro Forma Condensed Consolidated Combined Balance Sheet
SJM II Acquisition Adjustments
The unaudited pro forma condensed consolidated combined balance sheet as of June 30, 2026 reflects the historical consolidated balance sheet of WhiteHawk, which already includes the effects of the PHX Acquisition, Three Rivers Royalty Acquisition, and the Transactions. Accordingly, no pro forma adjustments are presented for these transactions in the balance sheet. Transaction accounting adjustments related to the SJM II Acquisition are described further below:
A. Reflects the adjustment for proceeds raised in Series E Preferred Stock Financing, net of fees.
B. Reflects the adjustment for proceeds raised under the Securities Purchase Agreement Financing, net of fees.
C. Reflects the aggregate purchase price of $107.9 million cash paid at closing (inclusive of an estimate of $2.9 million in transaction related fees) for the SJM II Assets in the SJM II Acquisition. The Company expects to account for the SJM II Acquisition as an asset acquisition in accordance with GAAP. The preliminary purchase price noted above will be allocated to the assets acquired, which consists of oil and gas properties.
3. Unaudited Pro Forma Condensed Consolidated Combined Statements of Operations
Three Rivers Royalty Acquisition Adjustments
A. Reflects natural gas and oil operations of properties acquired in the Three Rivers Royalty Transaction for the period of January 1, 2025 and March 31, 2025 (date of acquisition).
5
PHX Adjustments
B. Reflects combination of the historical statement of operations of PHX for the period January 1, 2025 through March 31, 2025 and the PHX Minerals Stub Period results of operations for the stub period between April 1,2025 through June 23, 2025 (date of acquisition). A reconciliation of the adjustments is below (in thousands):
|
|
PHX Minerals Historical |
|
|
PHX Minerals Stub Period |
|
|
Adjusted PHX Minerals |
|
|||
Revenues: |
|
|
|
|
|
|
|
|
|
|||
Natural gas, oil and NGL sales |
|
$ |
10,433 |
|
|
$ |
9,135 |
|
|
$ |
19,568 |
|
Gain (loss) on commodity derivative instruments |
|
|
(3,163 |
) |
|
|
2,568 |
|
|
|
(595 |
) |
Lease bonus revenue |
|
|
328 |
|
|
|
143 |
|
|
|
471 |
|
Total revenue |
|
|
7,598 |
|
|
|
11,846 |
|
|
|
19,444 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Lease operating expenses |
|
|
274 |
|
|
|
286 |
|
|
|
560 |
|
Transportation, gathering and marketing |
|
|
1,104 |
|
|
|
1,034 |
|
|
|
2,138 |
|
Production and ad valorem taxes |
|
|
423 |
|
|
|
301 |
|
|
|
724 |
|
Depreciation, depletion and amortization |
|
|
2,430 |
|
|
|
2,477 |
|
|
|
4,907 |
|
Interest expense |
|
|
452 |
|
|
|
207 |
|
|
|
659 |
|
General and administrative |
|
|
3,754 |
|
|
|
7,100 |
|
|
|
10,854 |
|
Losses (gain) on asset sales and other |
|
|
(6,520 |
) |
|
|
90 |
|
|
|
(6,430 |
) |
Total operating expenses |
|
|
1,917 |
|
|
|
11,495 |
|
|
|
13,412 |
|
Income (loss) before provision for income taxes |
|
|
5,681 |
|
|
|
351 |
|
|
|
6,032 |
|
Provision for income taxes |
|
|
1,297 |
|
|
|
- |
|
|
|
1,297 |
|
Net income |
|
$ |
4,384 |
|
|
$ |
351 |
|
|
$ |
4,735 |
|
C. Reflects a pro forma adjustment to reclassify lease operating expenses, transportation, gathering and marketing, and production and ad valorem taxes to conform to WhiteHawk’s presentation.
D. Reflects the pro forma impact to depletion expense associated with the change in fair value adjustment to oil and gas properties as a result of the PHX Acquisition. Pro forma depletion expense was calculated on a consolidated basis as though all such properties were owned for the entire period. This number was then offset by the historical depletion expense related to PHX Minerals. The adjustment under Transaction Adjustments was calculated using the units-of-production method under the successful efforts method of accounting (in thousands):
For the year ended December 31, 2025 |
|
|
|
Depletion expense related to the fair value of oil and gas properties of PHX |
$ |
12,214 |
|
Less PHX historical depletion expense |
|
4,907 |
|
Transaction Adjuistments to depletion expense |
$ |
7,307 |
|
E. Reflects the management fees expense of WhiteHawk that were paid as compensation for services rendered in the management of the Company. The management fee expenses represent the charge for managing the Company and did not include general and administrative expenses related to operating the business. While a pro forma adjustment has not been made to eliminate the management fees, the Company will no longer incur any management fees after completion of the Transaction. Based upon management estimates in connection with the analysis of the Internalization, the Company expects to incur $1.7 million of incremental compensation expense per year after the closing of the offering.
6
Transaction adjustments
F. Reflects prepayment fees related to the partial extinguishment of the Senior Notes.
G. Reflects deferred financing fees expensed due to partial extinguishment of the Senior Notes.
H. Represents the income tax impact of the pro forma adjustments from the Three Rivers Royalty Acquisition, the PHX Acquisition, SJM II Acquistion, and the Transactions based on a blended federal and state statutory tax rate of 24.2% for the year ended December 31, 2025 and for the SJIM II Acquisition for the six months ended June 30, 2026.
I. Reflects allocation of net income (loss) to non-controlling interest as a part of the Internalization.
J. Reflects payment of Liquidity Incentive Fee to WhiteHawk Minerals LLC.
K. Reflects basic and diluted loss per common share as shown below for the applicable period, computed using the two-class method (in thousands, except per share data):
For the year ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
Pro forma net loss attributable to WhiteHawk Income Corporation |
|
$ |
(23,257 |
) |
Less: Earnings allocated to particpating securities |
|
|
(14,441 |
) |
Net loss attributable to common stockholders - basic and diluted |
|
$ |
(37,698 |
) |
|
|
|
|
|
Denominator: |
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
|
17,485 |
|
|
|
|
|
|
Net loss per common share - basic and diluted |
|
$ |
(2.16 |
) |
For the six months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
Pro forma net loss attributable to WhiteHawk Income Corporation |
|
$ |
(36,498 |
) |
Less: Earnings allocated to particpating securities |
|
|
(8,007 |
) |
Net loss attributable to common stockholders - basic and diluted |
|
$ |
(44,505 |
) |
|
|
|
|
|
Denominator: |
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
|
18,822 |
|
|
|
|
|
|
Net loss per common share - basic and diluted |
|
$ |
(2.36 |
) |
L. Reflects payment of minimum return to Series D Preferred Stock as a part of the extinguishment.
SJM II Acquisition Adjustments
M. Reflects the historical statement of operations of SJM II as shown below for the applicable period, and a pro forma adjustment for the percentage of SJM II that WhiteHawk will acquire in the SJM II Transaction. A reconciliation of the adjustments is below (in thousands):
7
For the year ended December 31, 2025
|
|
|
|
SJM II |
|
|
|
|
|||
|
SJM II |
|
|
Transaction |
|
|
Adjusted |
|
|||
|
Historical |
|
|
Adjustments |
|
|
SJM II |
|
|||
Net Sales |
|
|
|
|
|
|
|
|
|||
Natural gas royalty revenue |
$ |
26,676 |
|
|
$ |
12,899 |
|
|
$ |
13,777 |
|
Natural gas liquids royalty revenue |
|
5,794 |
|
|
|
3,893 |
|
|
|
1,901 |
|
Oil royalty revenue |
|
551 |
|
|
|
387 |
|
|
|
164 |
|
Mineral lease bonuses |
|
1,419 |
|
|
|
629 |
|
|
|
790 |
|
Total net sales |
|
34,440 |
|
|
|
17,808 |
|
|
|
16,632 |
|
|
|
|
|
|
|
|
|
|
|||
Operating Expenses |
|
|
|
|
|
|
|
|
|||
Gathering, processing, and transportation |
|
3,751 |
|
|
|
1,655 |
|
|
|
2,096 |
|
Depreciation, depletion, and amortization |
|
7,219 |
|
|
|
3,616 |
|
|
|
3,603 |
|
General and administrative expenses |
|
887 |
|
|
|
468 |
|
|
|
419 |
|
Total operating expenses |
|
11,857 |
|
|
|
5,739 |
|
|
|
6,118 |
|
|
|
|
|
|
|
|
|
|
|||
Operating Income |
|
22,583 |
|
|
|
12,069 |
|
|
|
10,514 |
|
|
|
|
|
|
|
|
|
|
|||
Nonoperating Income (Expense) |
|
|
|
|
|
|
|
|
|||
Realized gain on commodity derivative instruments |
|
2,541 |
|
|
|
1,092 |
|
|
|
1,449 |
|
Unrealized loss on commodity derivative instruments |
|
(691 |
) |
|
|
(107 |
) |
|
|
(584 |
) |
Other income |
|
131 |
|
|
|
76 |
|
|
|
55 |
|
Total nonoperating income |
|
1,981 |
|
|
|
1,061 |
|
|
|
920 |
|
|
|
|
|
|
|
|
|
|
|||
Combined Net Income |
$ |
24,564 |
|
|
$ |
13,130 |
|
|
$ |
11,434 |
|
For the six months ended June 30, 2026
|
|
|
|
SJM II |
|
|
|
|
|||
|
SJM II |
|
|
Transaction |
|
|
Adjusted |
|
|||
|
Historical |
|
|
Adjustments |
|
|
SJM II |
|
|||
Net Sales |
|
|
|
|
|
|
|
|
|||
Natural gas royalty revenue |
$ |
14,015 |
|
|
$ |
7,514 |
|
|
$ |
6,501 |
|
Natural gas liquids royalty revenue |
|
3,461 |
|
|
|
2,392 |
|
|
|
1,069 |
|
Oil royalty revenue |
|
785 |
|
|
|
499 |
|
|
|
286 |
|
Mineral lease bonuses |
|
1,296 |
|
|
|
648 |
|
|
|
648 |
|
Total net sales |
|
19,557 |
|
|
|
11,053 |
|
|
|
8,504 |
|
|
|
|
|
|
|
|
|
|
|||
Operating Expenses |
|
|
|
|
|
|
|
|
|||
Gathering, processing, and transportation |
|
1,672 |
|
|
|
781 |
|
|
|
891 |
|
Depreciation, depletion, and amortization |
|
3,442 |
|
|
|
2,052 |
|
|
|
1,390 |
|
General and administrative expenses |
|
348 |
|
|
|
197 |
|
|
|
151 |
|
Total operating expenses |
|
5,462 |
|
|
|
3,030 |
|
|
|
2,432 |
|
|
|
|
|
|
|
|
|
|
|||
Operating Income |
|
14,095 |
|
|
|
8,023 |
|
|
|
6,072 |
|
|
|
|
|
|
|
|
|
|
|||
Nonoperating Income (Expense) |
|
|
|
|
|
|
|
|
|||
Realized loss on commodity derivative instruments |
|
(708 |
) |
|
|
(384 |
) |
|
|
(324 |
) |
Unrealized gain on commodity derivative instruments |
|
2,047 |
|
|
|
1,100 |
|
|
|
947 |
|
Other income |
|
12 |
|
|
|
7 |
|
|
|
5 |
|
Total nonoperating income |
|
1,351 |
|
|
|
723 |
|
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|||
Combined Net Income |
$ |
15,446 |
|
|
$ |
8,746 |
|
|
$ |
6,700 |
|
8
N. Reflects a pro forma adjustment to royalty revenue and gathering, processing, and transportation to conform to WhiteHawk's presentation.
O. Reflects a pro forma adjustment to realized loss on commodity derivatives and unrealized gain on commodity derivatives to conform to WhiteHawk's presentation.
P. Reflects a pro forma adjustment to other income to conform to WhiteHawk's presentation.
Q. Reflects allocation of net income from the SJM II Acquisition to non-controlling interest.
R. Reflects pro forma adjustment for dividends paid to Series E Preferred Stock.
S. Reflects the pro forma impact to depletion expense associated with the change in fair value adjustment to oil and gas properties as a result of the SJM II Acquisition. Pro forma depletion expense was calculated on a consolidated basis as though all such properties were owned for the entire period. This number was offset by the historical depletion expense related to the SJM II Assets. The adjustment was calculated using the units-of-production method under the successful efforts method of accounting (in thousands):
For the year ended December 31, 2025 |
|
|
|
Depletion expense related to the fair value of oil and gas properties of SJM II |
$ |
6,661 |
|
Less SJM II historical depletion expense |
|
3,603 |
|
Transaction Adjuistments to depletion expense |
$ |
3,058 |
|
For the six months ended June 30, 2026 |
|
|
|
Depletion expense related to the fair value of oil and gas properties of SJM II |
$ |
3,393 |
|
Less SJM II historical depletion expense |
|
1,390 |
|
Transaction Adjuistments to depletion expense |
$ |
2,003 |
|
9
Exhibit 99.4
WhiteHawk Minerals Corp. Announces Closing of $111.8 Million of Acquisitions and Related Financings; Revolving Credit Facility Borrowing Base Increased to $175.0 Million
PHILADELPHIA—September 25, 2026—(BUSINESS WIRE)-- WhiteHawk Minerals Corp. (NYSE: WHK) (“WhiteHawk” or the “Company”) today announced the closing of approximately $111.8 million of acquisitions (the “Acquisitions”), including the approximately $105.0 million purchase of Marcellus, Utica and Haynesville Shale natural gas mineral and royalty assets from San Jacinto Minerals II (“SJM II”), previously announced on August 12, 2026. The Acquisitions were funded with proceeds from a $50.0 million issuance of shares of our newly created Series E Preferred Stock, which closed on September 23, 2026, and the previously announced $75.0 million private placement of our Class A common stock, which closed on September 21, 2026. In connection with the closing of the Acquisitions, the Company also completed its fall redetermination of its reserve-based revolving credit facility with an increase to $175.0 million in borrowing capacity, which remains fully undrawn.
Acquisition Closing Summary
The Acquisitions, including SJM II’s Appalachia and Haynesville assets, cover approximately 700,000 gross unit acres and 11,810 net royalty acres (normalized to 1/8th) at an average net revenue interest of 0.21%, including more than 1,700 producing wells, 245 wells in process and permits, and 2,500 undeveloped locations. The Appalachia interests span approximately 600,000 gross unit acres anchored by EQT Corporation (NYSE: EQT), Range Resources Corporation (NYSE: RRC), CNX Resources Corporation (NYSE: CNX) and Antero Resources Corporation (NYSE: AR), and the Haynesville interests span approximately 100,000 gross unit acres anchored by Expand Energy Corporation (NASDAQ: EXE), Apex Energy LLC and Adamas Energy LLC.
Management Commentary
“The closing of the Acquisitions and related equity financings reflects our continued execution of WhiteHawk’s business strategy, and deepens our exposure to the core of Appalachia and the Haynesville under the basins’ leading operators,” said Daniel Herz, Chairman, President and Chief Executive Officer of WhiteHawk. “Along with the Acquisitions, increasing our borrowing capacity under our revolving credit facility to $175.0 million, which remains fully undrawn, gives us significant liquidity and flexibility to continue pursuing disciplined, accretive growth while maintaining our low-leverage profile.”
About WhiteHawk Minerals Corp.
WhiteHawk Minerals Corp. (NYSE: WHK) is a natural gas-focused mineral and royalty company positioned in the core of the Marcellus, Utica and Haynesville Shales. WhiteHawk owns mineral and royalty interests across approximately 3.6 million gross unit acres with exposure to the industry’s premier natural gas operators. The Company holds royalty interests in wells representing approximately 13% of total 2025 U.S. dry gas production. The Company was
Exhibit 99.4
founded in 2022 by a management team with over 125 years of combined experience and is focused on accretively consolidating the fragmented natural gas mineral and royalty space. For more information, please visit www.whitehawkminerals.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, statements regarding the expected benefits of the Acquisitions; the Company’s business strategy and the accretive nature of the Acquisitions; expectations regarding future growth and the Company’s leverage profile; the Company’s liquidity and financial flexibility; expected production; free cash flow; operator development activity on the Company’s acreage; the Company’s acquisition pipeline; and other statements that are not historical facts. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.
Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: changes in commodity prices; production and cash flow contributions from acquired assets differing materially from expectations due to commodity price fluctuations, operator activity levels, well performance and other factors; the Company’s ability to successfully integrate acquired assets; the Company’s ability to identify and consummate additional acquisitions on favorable terms and to obtain financing therefor; operator drilling and completion activity on the Company’s acreage; regulatory changes; general economic and market conditions; and the risks described under “Risk Factors” in the Company’s filings with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update any forward-looking statement, except as required by applicable law.
Investor and Media Contact
John Ragozzino Jr., CFA
investors@whitehawkenergy.com