8. COMMITMENTS AND CONTINGENCIES

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.

Environmental Matters

Subsequent to June 30, 2026, the Company identified a release of produced fluids from a gathering line. Response and remediation activities were initiated promptly, and the Company is coordinating with the applicable regulatory authorities. Based on information currently available, remediation activities are expected to be substantially completed within approximately one week, although environmental testing and monitoring may continue thereafter. Gross remediation and related costs are currently estimated to be up to approximately $500,000.

The Company has submitted a claim under its general liability insurance policy, which provides coverage for pollution clean-up costs subject to a $100,000 per-occurrence deductible. If the claim is accepted, the Company's costs would generally be limited to the deductible; however, the amount and timing of any insurance recovery cannot be assured, and no insurance receivable has been recognized. Because the release occurred subsequent to June 30, 2026, and does not relate to conditions that existed as of that date, no liability has been recognized as of that date.