NOTE 6 — JOINT VENTURE DRILLING PROGRAM

During 2018, the Company and other members formed and funded Monza, which jointly participates with the Company in the exploration, drilling and development of certain drilling projects (the “Joint Venture Drilling Program”) in the Gulf of Mexico. The total commitments by all members, including the Company’s commitment to fund its retained interest in Monza projects held outside of Monza, were $361.4 million. The Company contributed 88.94% of its working interest in certain identified undeveloped drilling projects to Monza and retained 11.06% of its working interest. The Joint Venture Drilling Program is structured so that the Company initially receives an aggregate of 30.0% of the revenues less expenses, through both the Company’s direct ownership of its working interest in the projects and the Company’s indirect interest through its interest in Monza, for contributing 20.0% of the estimated total well costs plus associated leases and providing access to available infrastructure at agreed-upon rates. Any exceptions to this structure are approved by the Monza board of directors.

The members of Monza are third-party investors, the Company and an entity owned and controlled by the Company’s CEO. The entity affiliated with the Company’s CEO invested as a minority investor on the same terms and conditions as the third-party investors. Its investment is limited to 4.5% of total invested capital within Monza and it made a capital commitment to Monza of $14.5 million.

Monza is an entity separate from any other entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Monza’s assets prior to any value in Monza becoming available to holders of its equity. The assets of Monza are not available to pay creditors of the Company and its affiliates.

As of December 31, 2023, ten wells have been completed since the inception of the Joint Venture Drilling Program, and the Company is the operator for eight of these wells completed.

Since inception through December 31, 2023, members of Monza have made partner capital contributions, including the Company’s contributions of working interest in the drilling projects, to Monza totaling $302.4 million and received cash distributions totaling $214.9 million. Since inception through December 31, 2023, the Company has made total capital contributions, including the contributions of working interest in the drilling projects, to Monza totaling $68.2 million and received cash distributions totaling $46.4 million.

Consolidation and Carrying Amounts

Monza is considered a variable interest entity that is proportionally consolidated. Through December 31, 2023, there have been no events or changes that would cause a redetermination of the variable interest status. The Company does not fully consolidate Monza because the Company is not considered the primary beneficiary of Monza.

The following table presents the amounts recorded by the Company on the Consolidated Balance Sheets related to the consolidation of the proportional interest in Monza’s operations (in thousands):

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As required, the Company may call on Monza to provide cash to fund its portion of certain Joint Venture Drilling Program projects in advance of capital expenditure spending. As of December 31, 2023 and 2022, the unused advances were $2.7 million and $2.9 million, respectively, which are included in Advances from joint interest parties in the Consolidated Balance Sheets.

The following table presents the amounts recorded by the Company in the Consolidated Statement of Operations related to the consolidation of the proportional interest in Monza’s operations (in thousands):

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