5. OIL AND NATURAL GAS PRODUCING ACTIVITIES

Full Cost Method Ceiling Test and Impairment

The reserves used in the ceiling test incorporate assumptions regarding pricing and discount rates over which management has no influence in the determination of present value. In the calculation of the ceiling test as of June 30, 2025, the Company used $70.48 per barrel for oil and $2.86 per one million British Thermal Units for natural gas (as further adjusted for property, specific gravity, quality, local markets and distance from markets) to compute the future cash flows of the Company’s producing properties. The discount factor used was 10%. The Company recorded a $2.8 million ceiling test write-down of its oil and natural gas properties during the three months ended June 30, 2025, due to the reduction in the value of proved oil and natural gas reserves primarily as a result of a decrease in crude oil prices and reserve reductions from recent divestitures.

The Company recorded a $5.4 million ceiling test write-down of its oil and natural gas properties during the six months ended June 30, 2024, due to a reduction in the value of proved oil and natural gas reserves primarily as a result of a decrease in crude oil and natural gas prices, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and updates to the decline curves for certain wells.