Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

The following discussion is intended to assist in the understanding of the Company's liquidity, capital resources and results of operations. It is suggested that this information be read in conjunction with the Company's interim consolidated financial statements, the related notes to consolidated financial statements and the Company's 2025 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2026.

Liquidity and Capital Resources

The following table summarizes the Company's financial position at September 30, 2026 and December 31, 2025:

Working capital of $39.6 million as of September 30, 2026 represented an increase of $1.2 million from December 31, 2025, due primarily to increases in cash and equivalents and investments and a decrease in accrued expenses, offset somewhat by a decrease in production accounts receivable and an increase in accounts payable. The increase in cash and equivalents is primarily the result of cash provided by operating activities, offset somewhat by cash used in investing and financing activities. The increase in investments is primarily the result of additional purchases of shares in a mutual fund that invests primarily in investment grade, short-term fixed and floating rate debt securities. The decrease in accrued expenses is primarily the effect of all payroll and retirement plan contributions accrued at December 31, 2025 being paid during the nine months ended September 30, 2026. The decrease in production accounts receivable is primarily due to the combined result of a decrease in natural gas volumes produced and lower average natural gas prices received during the current receivable period as compared to the prior comparable period, offset somewhat by higher average crude oil prices received during the current receivable period as compared to the prior comparable period. The decrease in natural gas volumes produced was primarily the result of additional Company operated properties being voluntarily shut-in during the current receivable period as compared to the prior comparable period. The increase in accounts payable is primarily the result of additional production and related other payables at September 30, 2026 as compared to the prior comparable period.

Property and equipment of $5.8 million as of September 30, 2026, represented a decrease of $502,000 from December 31, 2025, due primarily to depreciation, depletion and amortization ("DD&A") recognized during the nine month period ended September 30, 2026.

Long-term liabilities of $23.4 million as of September 30, 2026, represented an increase of $1.1 million from December 31, 2025, due primarily to accretion associated with asset retirement obligations and additional operational advances collected during the nine month period ended September 30, 2026.

The Company generally funds its operations with cash generated by operations and/or existing cash and equivalent balances. The Company has had no borrowings in 2026 or 2025 and no principal indebtedness was outstanding as of November 9, 2026. The Company's cash flow provided by operations before the change in working capital was $3.7 million during the nine months ended September 30, 2026, an increase of $300,000 as compared to $3.4 million of cash flow provided by operations before the change in working capital during the prior comparable period. Changes in working capital from operations other than cash and equivalents increased cash by $696,000 during the nine months ended September 30, 2026. Cash flows provided by operating activities was $4.4 million for the nine months ended September 30, 2026.

Management of the Company believes cash flows and existing cash and equivalents should be sufficient to meet the current funding requirements of ongoing operations, capital investments to develop and/or purchase oil and gas properties and the repurchase of Units pursuant to the 2027 Repurchase Right, if necessary. The Company used existing cash and equivalents to fund the payment of a Unitholder distribution amounting to approximately $2.3 million in April 2026 and to fund the repurchase of Units related to the 2026 Repurchase Right amounting to approximately $69,000 in July 2026.

The Company has multiple contracts with a gas purchaser which obligate the gas purchaser to purchase, and the Company to sell and deliver, certain quantities of natural gas production from the Company's oil and gas properties throughout the contract periods. The Company may elect to lock-in specific volumes of natural gas to be sold in specific months at a mutually agreeable price. The Company has elected to lock-in 270,000 MCF from October 2026 through April 2027 at various monthly weighted-average pricing provisions averaging $3.48 per MCF, net of regional basis adjustments. Pricing provisions with the gas purchaser apply to certain fixed quantities on a monthly basis with excess monthly quantities being priced based on the monthly settlement price, net of a regional basis adjustment. The impact of these contracts on the Company's future oil and gas sales cannot fully be measured until actual production volumes and prices have been determined. Management believes the Company can meet its delivery commitments based on estimated production.

Results of Operations

The following table and discussion is a review of the results of operations of the Company for the three and nine month periods ended September 30, 2026 and 2025. All items in the table are calculated as a percentage of total revenues. This table should be read in conjunction with the discussions of select items below:

Revenues for the nine month period ended September 30, 2026 increased $764,000, or 14%, as compared to the prior comparable period. The increase was primarily the result of increases in crude oil and natural gas sales.

Crude oil and natural gas sales increased $768,000, or 15%, during the nine month period ended September 30, 2026 as compared to the prior comparable period. The increase was primarily the result of higher average natural gas and crude oil prices received and additional crude oil volumes sold, offset somewhat by less natural gas volumes produced during the nine month period ended September 30, 2026 as compared to the prior comparable period. The decrease in natural gas volumes produced was primarily the result of normal production decline associated with existing oil and gas properties.

Depreciation, depletion and amortization ("DD&A") increased $104,000, or 126%, during the three month period ended September 30, 2026 as compared to the prior comparable period. DD&A increased $325,000, or 134%, during the nine month period ended September 30, 2026, as compared to the prior comparable period. Both increases are primarily due to additional oil and gas properties being depleted during the three and nine month periods ended September 30, 2026 as compared to the prior comparable periods. The Company recognized $417,000 of additions to proved properties at December 31, 2025 in association with revisions made to estimates of plugging costs in association with asset retirement obligations.

Accretion expense increased $40,000, or 18%, during the three month period ended September 30, 2026 as compared to the prior comparable period. Accretion expense increased $121,000, or 16%, during the nine month period ended September 30, 2026 as compared to the prior comparable period. Both increases were due to the recognition of additional liabilities at December 31, 2025 resulting from revisions made to estimates of plugging costs associated with asset retirement obligations.

General and administrative expense increased $123,000, or 8%, during the nine month period ended September 30, 2026 as compared to the prior comparable period. The increase was primarily the result of increased legal fees as well as other miscellaneous administrative costs.

Other income decreased $112,000, or 27%, during the three month period ended September 30, 2026 as compared to the prior comparable period. The decrease was primarily the result of a decrease in investment income during the three month period ended September 30, 2026 as compared to the prior comparable period, offset somewhat by gain on disposal of property and equipment during the three month period ended September 30, 2026. Other income decreased $444,000, or 34%, for the nine month period ended September 30, 2026 as compared to the prior comparable period. The decrease was primarily the result of decreases in investment income and gain on disposal of property and equipment during the nine month period ended September 30, 2026 as compared to the prior comparable period. The decreases in investment income were primarily due to unrealized losses on investments recognized by the Company during the three and nine month periods ended September 30, 2026 as compared to unrealized gains on investments recognized by the Company during the prior comparable periods.

The Company reported net income of $29,000 and $337,000 during the three month periods ended September 30, 2026 and 2025, respectively, representing 2% and 24% of total revenues during the three month periods ended September 30, 2026 and 2025, respectively. The decrease in net income was primarily the result of increases in DD&A and accretion expense and a decrease in other income during the three month period ended September 30, 2026 as compared to the prior comparable period. The Company reported net income of $2.0 million and $2.2 million during the nine month periods ended September 30, 2026 and 2025, respectively, representing 32% and 40% of total revenues during the nine month periods ended September 30, 2026 and 2025, respectively. The decrease in net income was primarily the result of increases in DD&A, accretion expense and general and administrative expense and a decrease in other income, offset somewhat by an increase in crude oil and natural gas sales during the nine month period ended September 30, 2026 as compared to the prior comparable period.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The critical accounting policies that affect the Company's more complex judgments and estimates are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Forward-Looking Statements

Except for historical financial information contained in this Form 10-Q, the statements made in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). In addition, words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include price fluctuations in the gas market in the Appalachian Basin, actual oil and gas production and the ability to locate economically productive oil and gas prospects for development by the Company. In addition, any forward-looking statements speak only as of the date on which such statement is made and the Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.