This article first appeared on GuruFocus .
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Revenue:$22.5 million in Q2 2026, a 109% increase year-over-year, marking the highest quarterly revenue in company history.
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Production:Average production rose 46% to 4,690 BOE per day, up from 3,220 BOE per day in the prior year quarter.
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Net Income:$8.5 million, or $0.24 basic EPS, compared to $2.9 million and $0.08 per share in Q2 2025, an increase of nearly 200%.
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Adjusted EBITDA:$16.4 million, up 114% from $7.7 million in the prior year quarter.
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Netback from Operations:$43.92 per BOE, a 48% increase from $29.66 per BOE in Q2 2025.
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Production and Operating Expense:Averaged $8.90 per BOE, up 24% from $7.15 per BOE, due to workover costs and higher water hauling costs.
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Year-to-Date Revenue:$42.1 million for the first half of 2026, up 55% from $27.2 million in the prior year period.
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Year-to-Date Net Income:$12.5 million, or $0.35 basic EPS, compared to $8.6 million and $0.24 per share in the prior year period.
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Year-to-Date Adjusted EBITDA:$31.3 million, up 52% from $20.5 million in the prior year period.
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Year-to-Date Netback from Operations:$41.18 per BOE, a 21% increase from $34.05 per BOE.
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Borrowing Base:Increased by 15% to $75 million from $65 million following a credit facility redetermination.
Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record quarterly revenue of $22.5 million, up 109% year-over-year, driven by a 46% increase in production and a 41% increase in average prices.
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Adjusted EBITDA reached an all-time high of $16.4 million, a 114% increase from the prior year quarter.
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Net income surged nearly 200% to $8.5 million, with basic EPS of $0.24 per share.
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Borrowing base increased by 15% to $75 million, providing greater financial flexibility and reflecting growing asset value.
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Exciting growth catalysts: drilling of the first False Caney well (Lovina 8-5-1HF) and completion of three Clifton Mack wells, expected to boost production in Q4.
Negative Points
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Three wells were shut in for one-third of the quarter due to drilling proximity to existing wells, temporarily reducing production.
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Production and operating expenses increased 24% to $8.90 per BOE, driven by workover costs on a non-operated well and higher water hauling costs.
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Realized losses on commodity contracts negatively impacted adjusted EBITDA and net income.
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Higher operating expenses, depletion, and interest expenses partially offset revenue gains.
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Cost pressures from rising chemical costs and higher drilling costs for the Clifton Mack wells due to unexpected pressure intervals, though management expects these to be isolated.
Q & A Highlights
Q: Can you explain the strength in 2Q production, which showed virtually no sequential decline despite no new wells being added in the first half of the year? A: Wolf Regener, President and CEO, explained that the wells are performing well. When new wells are brought online, they flow for a period before being put on artificial lift. The transition to gas lift provided a temporary production boost, reversing some of the natural decline. He cautioned that production will not stay flat until the new wells are brought online, which will push volumes back up.
Q: What factors could cause production to come in at the higher end of the updated guidance range? A: Wolf Regener stated that the performance of the four new wells being completed is the biggest variable. Since these wells have high initial production rates, their performance will significantly impact the forecast. He noted that bringing on four wells at once "really moves the needle a lot one way or another" and is the primary factor that could push results to the higher end of the guidance.
Q: What is the rationale for drilling the Lovina 8-5-1HF well as a two-mile lateral, and what are the expectations for the False Caney formation test? A: Wolf Regener explained that the two-mile lateral is possible because the area is geologically "quiet" with less faulting and dip, and the company has good well control. He is highly optimistic about the False Caney test, citing a whole core showing high oil saturation and excellent log characteristics. He believes a successful well could open the door to many more locations and significant reserve additions, potentially comparable to the Caney formation's 40 million barrels of proved reserves, even if the zone is thinner.
Q: How will you evaluate the success of the False Caney well, and how might its initial production rates compare to the existing Caney wells? A: Wolf Regener stated that success will be determined by the flow rates, the 30-day production rate, and subsequent decline rates. He hopes the well will be "very definitive right off the bat." While he hopes it will produce at least as much as the Caney wells and potentially have higher IPs, he was cautious not to lead expectations too much, preferring to let the production data speak for itself.
Q: Are there any concerns about the performance of the Alicia Renee wells that were shut in during drilling, and what is expected when they are brought back online? A: Wolf Regener clarified that the shut-ins were a precautionary measure due to the need to drill the new Clifton Mack wells close to the existing wellbores to navigate around faults. He noted that even if the new wells intersect the old ones, it would only be at the very heel and should not significantly affect either. He anticipates a "bunch of flush production" from the Alicia Renee wells when they are brought back online, as they do not produce much water.
Q: Can you provide more details on the casing issues and higher pressures encountered on the Clifton Mack wells, and what was the resulting cost impact? A: Wolf Regener clarified it was not a casing failure but a need for extra casing strings. The wells encountered a shallower, lower-pressure interval not seen elsewhere in the field, requiring an additional string to isolate it, and higher pressures at the bottom required another string before drilling the lateral. He declined to specify the exact cost overrun, stating it would require a new press release to disseminate that information, but confirmed the wells were more expensive than normal. He added that the company's guidance for standard Caney well costs remains unchanged for the rest of the field.
Q: Was the lower oil cut in the second quarter a one-off event or a sign that base wells are getting gassier? A: Gary Johnson, CFO, explained that the low oil cut was skewed by the gas purchaser volume adjustment. In May and June, the oil cut was tracking at 70%. Wolf Regener added that the 74% oil cut in Q1 was due to new wells coming on with a higher oil percentage. While oil production is tracking as expected, the new wells have brought in more associated gas than anticipated, which has lowered the overall oil cut on a BOE basis.
Q: Do you expect the higher water hauling costs and workover expenses to continue through the rest of the year? A: Gary Johnson stated that the workover costs on the non-operated well, which were incurred in both Q1 and Q2, should now stop. Regarding water hauling costs, he expects them to "temper down" throughout the year, though they may still be slightly higher than last year. Wolf Regener added that the company is implementing physical solutions to reduce rising chemical costs.
Q: Are you seeing general cost pressures in the field? A: Wolf Regener acknowledged some cost escalation, particularly in chemical costs, which have increased. The company is taking steps to mitigate this by implementing physical measures to reduce chemical usage. He characterized the overall cost increases as "nothing too bad."
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
