NOTE 18 — RELATED PARTIES

The Company has entered into transactions with related parties either controlled by the Company’s CEO or in which he has an ownership interest.

On May 15, 2023, the Company acquired a corporate aircraft from a company affiliated with and controlled by the Company’s CEO. The purchase price of the aircraft was $19.1 million, which was paid using $9.0 million of cash on hand and through the assumption of the TVPX Loan (see Note 2 – Debt). The terms of this transaction were reviewed and approved by the Audit Committee of the Company’s board of directors.

The aircraft was purchased as part of a series of transactions pursuant to which the Company restructured the compensation for its Named Executive Officers. In connection with the Company’s efforts to reduce overall executive compensation, including perquisite compensation the CEO was receiving for personal use of the aircraft, the Company entered into an amendment to the employment agreement with the CEO in April 2023. This amendment requires that the Company be reimbursed for personal use of the aircraft in accordance with the Company’s aircraft use policy.

Prior to the Company’s purchase of the aircraft, the Company used this aircraft for business purposes, and the CEO also used the aircraft for personal purposes. Both the Company’s use of the aircraft for business purposes and the CEO’s unlimited use for personal purposes were paid for by the Company pursuant to the CEO’s prior employment agreement. Airplane services transactions were approximately $0.2 million, $1.7 million and $0.6 million for the each of the years ended 2023, 2022 and 2021, respectively.

An entity owned by the Company’s CEO has ownership interests in certain wells in which the Company does not have an ownership interest. These wells are covered under the Company’s insurance policy. The entity reimburses the Company for its proportionate share of insurance premiums related to these wells and, when insurance proceeds are collected related to damage, those costs are disbursed as applicable. In addition, the entity reimburses the Company for certain administrative costs incurred during the year. Reimbursements from such company totaled $0.4 million, $0.2 million and $0.2 million during 2023, 2022 and 2021, respectively, and are included on the Company’s Consolidated Statements of Operations as a reduction to general and administrative expenses.

A company that provides marine transportation and logistics services to the Company employs the spouse of the Company’s CEO. The rates charged for these marine and transportation services were generally either equal to or below rates charged by non-related, third-party companies and/or otherwise determined to be of the best value to the Company. Payments to such company totaled $16.5 million, $20.0 million and $12.0 million during 2023, 2022 and 2021, respectively. The spouse received commissions partially based on services rendered to the Company which were approximately $0.1 million in each of 2023, 2022 and 2021.

An entity controlled by the Company’s CEO was a holder of the Company’s 9.75% Notes in the principal amount of $8.0 million. The 9.75% Notes were redeemed in February 2023.

An entity controlled by the Company’s CEO purchased $21.0 million in aggregate principal amount of the 11.75% Notes on the same terms as the other lenders.

An entity indirectly owned and controlled by the Company’s CEO is the sole lender under the Credit Agreement (see Note 2 – Debt). In relation to the execution of amendments to the Credit Agreement, the Company paid arrangement and extension fees of approximately $1.1 million and $0.8 million in 2022 and 2021, respectively, and paid legal fees on behalf of the entity of approximately $0.1 million and $0.2 million in 2022 and 2021, respectively. No arrangements fees or legal fees were paid in 2023. In addition, during 2023, 2022 and 2021, the entity earned commitment fees of $1.5 million, $1.5 million and $1.0 million, respectively, equal to 3.0% of the unused borrowing base lending commitment.

See Note 6 – Joint Venture Drilling Program for information on related party transactions concerning Monza. 

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