Green Gate Resources Parent, LLC

Table of Contents

 

				Page(s)
Independent Auditor’s Report					F-2
Consolidated and Combined Statements of Operations and Other Comprehensive Income					F-4
Consolidated and Combined Balance Sheets					F-5
Consolidated and Combined Statements of Members’ and Stockholders’ Equity					F-6
Consolidated and Combined Statements of Cash Flows					F-7
Notes to the Consolidated and Combined Financial Statements
1.		Nature of Operations			F-9
2.		Summary of Significant Accounting Policies			F-10
3.		Significant Transactions			F-14
4.		Revenue			F-16
5.		Inventories			F-17
6.		Property, Plant, and Equipment			F-17
7.		Transactions with Related Parties			F-19
8.		Benefit Plans			F-20
9.		Litigation and Other Contingencies			F-25
10.		Leases and Other Commitments			F-27
11.		Fair Value of Financial Instruments			F-29
12.		Derivatives			F-31
13.		Taxes			F-32
14.		Debt			F-33
15.		Subsequent Events			F-37
Supplementary Oil and Gas Information (Unaudited)
Costs and Results of Oil and Gas Producing Activities					F-38
Proved Reserve Estimates					F-39
Standardized Measure					F-42

 

F-1

Independent Auditor’s Report

Board of Managers and Management

Green Gate Resources Parent, LLC

Houston, Texas

Opinion

We have audited the consolidated and combined financial statements of Green Gate Resources Parent, LLC and its subsidiaries (the “Company”), which comprise the consolidated and combined balance sheets as of December 31, 2023 (Successor) and 2022 (Successor) and December 31, 2022 (Predecessor), and the related consolidated and combined statements of operations and other comprehensive income for the year ended December 31, 2023 (Successor) and the 122 days ended December 31, 2022 (Successor) and the 58 days ended February 27, 2023 (Predecessor) and the years ended December 31, 2022 (Predecessor) and 2021 (Predecessor), members’ and stockholders’ equity for the year ended December 31, 2023 (Successor) and the period from inception (August 31, 2022) to December 31, 2022 (Successor) and the 58 days ended February 27, 2023 (Predecessor) and the years ended December 31, 2022 (Predecessor) and 2021 (Predecessor), and cash flows for the year ended December 31, 2023 (Successor) and the 122 days ended December 31, 2022 (Successor) and the 58 days ended February 27, 2023 (Predecessor) and the years ended December 31, 2022 (Predecessor) and 2021 (Predecessor), and the related notes to the consolidated and combined financial statements.

In our opinion, the accompanying consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 (Successor) and 2022 (Successor) and December 31, 2022 (Predecessor), and the results of its operations and its cash flows for the year ended December 31, 2023 (Successor) and the 122 days ended December 31, 2022 (Successor) and the 58 days ended February 27, 2023 (Predecessor) and the years ended December 31, 2022 (Predecessor) and 2021 (Predecessor) in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated and combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated and combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated and combined financial statements are available to be issued.

 

F-2

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated and combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated and combined financial statements.

In performing an audit in accordance with GAAS, we:

 

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

•

Identify and assess the risks of material misstatement of the consolidated and combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated and combined financial statements.

 

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated and combined financial statements.

 

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ BDO USA, P.C.

Houston, Texas

April 16, 2024

 

F-3

Green Gate Resources Parent, LLC

Consolidated and Combined Statements of Operations and Other Comprehensive Income

 

(in thousands of dollars)

 

		Successor								Predecessor
		Year Ended December 31,				122-days Ended December 31,				58-days Ended February 27,				Years Ended December 31,
		2023				2022				2023				2022				2021
Revenue and Other Income
Crude oil, natural gas and NGL sales		$	1,762,721			$	—			$	5,621			$	47,782			$	37,711
Crude oil, natural gas and NGL sales to related parties			—				—				341,218				2,755,581				2,084,423
Other revenue			6,641				—				969				4,506				2,812
Gain/(loss) on acquisition/sale of assets, net			13,287				—				—				1,036				(171	)
(Loss) on commodity derivatives, net			(127,921	)			—				—				—				—
Total Revenue and Other Income			1,654,728				—				347,808				2,808,905				2,124,775
Operating Expenses
Operating costs		$	394,466			$	—			$	68,807			$	463,186			$	396,246
General and administrative expenses			159,717				—				30,474				219,995				240,493
Depreciation, depletion and amortization			291,491				—				76,656				567,728				748,870
Accretion expense on abandonment liability			122,321				—				13,168				86,609				92,793
Exploration expenses including dry hole			273				—				40				315				424
Purchased natural gas marketing expense			170,198				—				228,605				359,680				212,770
Electricity generation expenses			55,338				—				10,393				54,733				46,012
Taxes other than on income			84,443				—				14,435				75,479				71,053
Research expenses			733				—				3				325				112
Other operating expenses			71,733				—				8,208				45,614				3,910
Total Operating Expenses			1,350,713				—				450,789				1,873,664				1,812,683
Operating Income (Loss)			304,016				—				(102,980	)			935,241				312,092
Non-Operating (Expenses) Income
Interest income			4,485								1,114				5,652				—
Interest (expense)			(109,693	)			—				—				—				—
Income/(Loss) from equity investments			6,850				—				501				(162	)			280
Other non-operating (expenses)/income			(2,245	)			—				(144	)			12,074				8,970
Income (Loss) Before Income Taxes			203,413				—				(101,509	)			952,805				321,342
Federal and state income tax benefit/(expense)			1,302				—				264				(11,337	)			1,744
Net Income (Loss)			204,715				—				(101,245	)			941,468				323,086
Other Comprehensive Income (Loss)
Unrealized gain/(loss) on investments			1,002				—				(193	)			(2,131	)			1,454
Amortization of prior service cost			—				—				—				453				908
Amortization of net actuarial gain			988				—				197				1,065				2,999
Net actuarial gain arising during the period			9,069				—				361				6,864				22,279
Comprehensive Income (Loss)		$	215,774			$	—			$	(100,880	)		$	947,719			$	350,726

 

*

All items of other comprehensive income/(loss) are displayed net of a tax benefit of ($4,129) thousand, ($218) thousand, ($3,257) thousand, and ($10,175) thousand for the Successor year ended December 31, 2023, the Predecessor 58-day period ended February 27, 2023, and years ended December 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of these statements.

 

F-4

Green Gate Resources Parent, LLC

Consolidated and Combined Balance Sheets

 

(in thousands of dollars)

 

		Successor								Predecessor
		December 31, 2023				December 31, 2022				December 31, 2022
Assets
Current Assets
Cash		$	29,376			$	—			$	343,681
Restricted cash			15,840				—				—
Accounts receivable
Due from related parties			50,000				—				191,102
Trade			174,532				—				6,049
Other			1,760				—				9,155
Inventories
Crude oil and condensate			389				—				934
Materials and supplies			17,101				—				15,241
Other current assets, net			4,542				—				—
Total Current Assets			293,541				—				566,162
Equity investments			34,865				—				8,140
Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization			2,923,569				—				4,508,315
Deferred income tax asset, net			14,687				—				18,108
Other assets, net			98,867				169,000				163,903
Total Assets		$	3,365,528			$	169,000			$	5,264,628
Liabilities and Members’ & Stockholders’ Equity
Current Liabilities
Accounts payable
Trade		$	140,860			$	—			$	172,716
Taxes payable			14,589				—				14,476
Fair value of derivative contracts			31,032				—				—
Accrued liabilities			161,304				—				88,596
Current portion of long term debt			100,000				—				—
Accrued restoration, removal and environmental costs			82,320				—				149,374
Total Current Liabilities			530,106				—				425,162
Accrued restoration, removal and environmental costs			1,022,265				—				1,078,771
Long term debt, net			811,419				—				—
Long term - fair value of derivative instruments			79,366				—				—
Other long term liabilities			56,888				—				77,989
Total Liabilities			2,500,044				—				1,581,922
Commitments and Contingencies (Note 9 and Note 10)
Members’ and Stockholders’ Equity
Common stock, $1.00 par value for the predecessor (2,000 shares authorized and outstanding)			—				—				2
Retained earnings			854,425				169,000				3,714,630
Accumulated other comprehensive income (loss)			11,059				—				(31,926	)
Total Members’ & Stockholders’ Equity			865,484				169,000				3,682,706
Total Liabilities and Members’ & Stockholders’ Equity		$	3,365,528			$	169,000			$	5,264,628

The accompanying notes are an integral part of these statements.

 

F-5

Green Gate Resources Parent, LLC

Consolidated and Combined Statements of Members’ and Stockholders’ Equity

 

(in thousands)

 

		Predecessor
		Common Stock								Retained Earnings				Accumulated Other Comprehensive Loss				Total Members’ and Stockholders’ Equity
		Shares				Amount
Balance as of December 31, 2020			2			$	2			$	4,600,076			$	(65,817	)		$	4,534,261
Net income											323,086				—				323,086
Distributions											(900,000	)			—				(900,000	)
Other comprehensive gain											—				27,640				27,640
Balance as of December 31, 2021			2			$	2			$	4,023,162			$	(38,177	)		$	3,984,987
Net income										$	941,468			$	—			$	941,468
Distributions											(1,250,000	)			—				(1,250,000	)
Other comprehensive gain											—				6,251				6,251
Balance as of December 31, 2022			2			$	2			$	3,714,630			$	(31,926	)		$	3,682,706
Net loss										$	(101,245	)		$	—			$	(101,245	)
Other comprehensive gain											—				365				365
Balance as of February 27, 2023			2			$	2			$	3,613,385			$	(31,561	)		$	3,581,826

 

 

 

		Successor
		Retained Earnings				Accumulated Other Comprehensive Loss				Total Members’ and Stockholders’ Equity
Balance as of August 31, 2022 (Inception)		$	—			$	—			$	—
Net income			—				—				—
Contributions			169,000				—				169,000
Balance as of December 31, 2022		$	169,000			$	—			$	169,000
Net income		$	204,715			$	—			$	204,715
Distributions			(135,290	)			—				(135,290	)
Contributions			616,000				—				616,000
Other comprehensive gain			—				11,059				11,059
Balance as of December 31, 2023		$	854,425			$	11,059			$	865,484

The accompanying notes are an integral part of these statements.

 

F-6

Green Gate Resources Parent, LLC

Consolidated and Combined Statements of Cash Flows

 

(in thousands of dollars)

 

		Successor								Predecessor
		Year Ended December 31,				122-days Ended December 31,				58-days Ended February 27,				Years Ended December 31,
		2023				2022				2023				2022				2021
Cash Flows From Operating Activities
Net income (loss)		$	204,715			$	—			$	(101,245	)		$	941,468			$	323,086
Adjustments for non-cash items
Depreciation, depletion and amortization			291,492				—				76,656				567,728				748,870
Accretion expense on abandonment liability			122,321				—				13,168				86,609				92,793
Amortization of debt issuance costs			9,529				—				—				—				—
Loss on commodity derivatives			127,921				—				—				—				—
(Gain)/loss on sale of assets			(13,278	)			—				—				(1,036	)			171
Deferred income tax charges			(1,152	)			—				446				9,089				(3,189	)
Cash payments on derivative settlements, net			(18,666	)			—				—				—				—
Dismantlement, restoration and abandonment expenditures			(64,431	)			—				(13,598	)			(112,665	)			(93,749	)
Change in fair value of contingent consideration			1,518				—				—				—				—
Dividends from equity income			2,287				—				(501	)			5,483				(1,249	)
Changes in operating working capital
Accounts receivable - due from related parties			116,679				—				24,422				(5,221	)			(49,872	)
Accounts receivable			(140,952	)			—				(14,882	)			(8,738	)			—
Inventories			(602	)			—				(712	)			215				1,488
Accounts payable and accrued liabilities			58,436				—				(81,254	)			78,363				21,670
Taxes payable			5,162				—				(5,048	)			3,880				(1,008	)
Other accrued liabilities			(71,979	)			—				9,589				4,042				(46,056	)
All other items, net			50,393				—				65,025				(84,506	)			54,410
Net Cash Provided/(Used) by Operating Activities			679,393				—				(27,935	)			1,484,711				1,047,365
Cash Flows From Investing Activities
Additions to property, plant and equipment			(215,060	)			—				(38,620	)			(263,877	)			(107,757	)
Proceeds from sale of assets			8,434				—				256				52,321				3,839
Investment in equity companies			—				—				—				(1,143	)			(1,589	)
Deposits paid to Sellers			—				(169,000	)			—				—				—
Business Combination, net			(1,791,133	)			—				—				—				—
Payments of acquisition related contingent consideration			(8,933	)			—				—				—				—
Net Cash Used in Investing Activities			(2,006,691	)			(169,000	)			(38,364	)			(212,699	)			(105,507	)

The accompanying notes are an integral part of these statements.

 

F-7

Green Gate Resources Parent, LLC

Consolidated and Combined Statements of Cash Flows

 

(in thousands of dollars)

 

		Successor								Predecessor
		Year Ended December 31,				122-days Ended December 31,				58-days Ended February 27,				Years Ended December 31,
		2023				2022				2023				2022				2021
Cash Flows From Financing Activities
Distributions to Aera Member Companies:
Regular Distribution		$	(50,000)			$	—			$	—			$	(1,250,000	)		$	(900,000	)
Tax based			(85,290	)			—				—				—				—
Contributions from Aera Member Companies			616,000				169,000				—				—				—
Debt issuance costs			(48,110	)			—				—				—				—
Finance lease obligations - reduction			(1,422	)			—				—				(1,365	)			(1,099	)
Proceeds from Term Loan			600,000				—				—				—				—
Repayments of Term Loan			(50,000	)			—				—				—				—
Proceeds from RBL Facility			445,000				—				—				—				—
Repayments of RBL Facility			(45,000	)			—				—				—				—
Payments of acquisition related contingent consideration			(8,665	)															—
Net Cash (Used)/Provided in Financing Activities			1,372,513				169,000				—				(1,251,365	)			(901,099	)
Net Increase/(decrease) in Cash and Restricted Cash			45,216				—				(66,299	)			20,647				40,759
Cash and Restricted Cash
Beginning of the period			—				—				343,681				323,034				282,275
End of the period		$	45,216			$	—			$	277,382			$	343,681			$	323,034
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes		$	197			$	—			$	—			$	1,421			$	1
Interest paid, net of amount capitalized, included in cash flows from operating activities			89,161				—				—				—				—
Capitalized interest paid, included in cash flows from investing activities			6,646				—				—				—				—
Supplemental Disclosure of Non-cash Investing and Financing
Accrued capital expenditures			9,106				—				14,764				17,277				9,488
Changes in asset retirement obligations			(36,590	)			—				—				(78,247	)			(94,188	)
Right of use assets obtained in exchange for operating lease liabilities			5,367				—				1,035				6,197				5,951
Right of use assets obtained in exchange for finance lease liabilities			397				—				182				98				338

The accompanying notes are an integral part of these statements.

 

F-8

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

1.	Nature of Operations

Green Gate Resources Parent, LLC (“GGRP”) is the sole member of Green Gate Resources Holdings LLC (“GGRH”) and is held 49% by CPPIB Vedder US Holdings LLC, an affiliate of Canada Pension Plan Investment Board and 51% by Green Gate COI LLC which is held 18.75% by OCM Aera E Holdings, LLC (“OCM AE”) and 81.25% by Green Gate ICOI LLC (“GG ICOI”). OCM AE is an affiliate of Oaktree Capital Group Holdings and Green Gate ICOI is an affiliate of IKAV SICAV – FIS SCA – IEII. The ownership group of GGRP will collectively be referred to as the “Member Companies”. The Member Companies respective shares in each item of income, gain, loss and deduction is in accordance with their respective sharing ratios. GGRH is the sole member of each of Green Gate Resources E LLC (“GGRE”) and Green Gate Resources S LLC (“GGRS”). GGRE and GGRS hold Green Gate Intermediate LLC (“GGI”) by 48.2% and 51.8%, respectively.

On February 28, 2023, GGRH acquired (the “Acquisition”) Aera Energy LLC and Aera Energy Services Company (collectively, “Aera Companies”). After the Acquisition, Aera Companies’ sole member company is GGI.

Aera Energy LLC, a California limited liability company (“Aera LLC”), is primarily engaged in the exploration, development, and production of crude oil, condensate, natural gas, and natural gas liquids in California. Prior to the Acquisition, Aera LLC’s member companies were Shell Onshore Ventures Inc. (“SOVI”) and Mobil California Exploration & Producing Asset Company (“MCEPAC”). SOVI is an affiliate of Shell plc and MCEPAC is an affiliate of ExxonMobil Corporation (collectively the “Prior Member Companies”). The Prior Member Companies’ respective sharing ratios were: SOVI – 51.8% and MCEPAC – 48.2%.

Aera Energy Services Company (“Aera Services”), a Delaware corporation, was formed in May 1997 for the purpose of providing the human resource needs of Aera LLC. Prior to the Acquisition, SOVI and MCEPAC equally owned the voting shares of Aera Services.

In connection with the change of control, as a result of the Acquisition, Aera Companies assets and liabilities were adjusted to fair value on the closing date of the Acquisition. The consolidated financial statements distinguish between the predecessor periods (“Predecessor”) relating to the combined activity of the Aera Companies for periods prior to the Acquisition on February 28, 2023 and the successor period (“Successor”) relating to GGRH for periods subsequent to the incorporation of GGRH on August 31, 2022.

GGRH was reorganized in a common control transaction under GGRP on December 28, 2023 resulting in a change in reporting entity. As this was a reorganization under common control, the assets and liabilities were recognized on a carryover basis and therefore GGRP is also considered the Successor.

The Successor financial information includes the activity and accounts of GGRP, together with its consolidated subsidiaries (collectively, “GGRP Companies”), as of and for the year ended December 31, 2023, which includes the activity and accounts of Aera Companies, prospectively for the 307-day period following completion of the Acquisition, beginning on February 28, 2023. The accounts and operating activity for the Successor periods from August 31, 2022 to December 31, 2022 and from January 1, 2023 to February 28, 2023 consist solely of the activity of GGRH prior to the close of the Acquisition, which primarily related to a capital contribution made in order to finance the Acquisition.

The Predecessor financial information represents the historical basis of presentation for the Aera Companies for all periods prior to the Acquisition. As a result of the valuation of assets acquired and liabilities assumed at fair value at the time of the Acquisition, the financial statements for the Successor period are presented on a measurement basis different than the Predecessor period (Aera Companies’ historical cost) and are, therefore, not comparable.

 

F-9

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

2.	Summary of Significant Accounting Policies

The GGRP Companies have adopted accounting practices that are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation and Combination – The accompanying consolidated and combined financial statements include the consolidated accounts of GGRP together with all its consolidated subsidiaries. Combined financial statements are provided herein due to common ownership, management, and the nature of Aera Services’ operations as they relate to Aera LLC. All significant inter-company and intracompany accounts and transactions have been eliminated.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management of the GGRP Companies to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates and assumptions may differ from those of an individual Member Company. Actual results could differ from these estimates.

Subsequent Events – Subsequent events have been evaluated through April 16, 2024, which is the date these consolidated and combined financial statements were available to be issued. The detailed disclosure is included in Note 15, Subsequent Events.

Business Combinations – The GGRP Companies evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the GGRP Companies have acquired inputs and processes that have the ability to create outputs, which would meet the requirements of a business. If determined to be a business combination, the GGRP Companies account for the transaction under the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the GGRP Companies recognize assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, the GGRP Companies recognize and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

The consideration for the GGRP Companies’ business acquisitions may include future payments that are contingent upon the occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded in the Consolidated and Combined Statement of Operations and Other Comprehensive Income in the amount of $5.9 million for the Successor year ended December 31, 2023.

If determined to be an asset acquisition, the GGRP Companies account for the transaction under ASC 805-50, which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given. No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s books.

 

F-10

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Consideration transferred that is non-cash will be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of the assets acquired and liabilities assumed, whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

Cash – Cash from time-to-time may exceed the amount of deposit insurance available and which are subject to an insignificant risk of changes in value or loss.

Restricted Cash – As of the Successor year ended December 31, 2023, cash included restricted cash of $15.8 million which represents funds held in escrow in connection with abandonment and remediation obligations as required under terms of the Newport Banning Ranch land sale.

Accounts Receivable – Accounts receivable are from both non-affiliates and affiliates for the Successor as of December 31, 2023 and primarily from affiliates of the Prior Member Companies for the Predecessor as of December 31, 2022. Accounts receivable are generally collected within 20 days after the end of the month. Aera LLC reviews all outstanding accounts receivable balances and records a reserve for amounts that are not expected to be fully recovered. As of the Successor year ended December 31, 2023 and the Predecessor combined year ended December 31, 2022, no expected credit losses were recorded.

Inventories – Inventories of crude oil and condensate are carried at the lower of cost or market, on a last-in, first-out (“LIFO”) basis, and include certain costs directly related to the production process. Materials and supplies are carried at average cost and did not exceed replacement cost.

Equity Investments – Aera LLC’s equity investments consist primarily of land development and cogeneration facility partnerships. Aera LLC accounts for its corporate joint ventures under the equity method of accounting in accordance with FASB ASC Topic 323 “Investments – Equity Method and Joint Ventures”. Aera LLC applies the equity method of accounting to investments over which Aera LLC exercises significant influence but does not have control. Under the equity method of accounting, Aera LLC’s share of the investee’s earnings or losses are recognized in the Consolidated and Combined Statements of Operations and Other Comprehensive Income.

In December 2022, Aera LLC sold its’ ownership in the Newport Banning Ranch land asset. As a result, Newport Banning Ranch Limited Liability Company (“NBR LLC”), wrote off its’ assets associated with the development of that land and investment in the equity company. Aera LLC recognized a net gain of $1.1 million for the year 2022, which was comprised of $45.8 million of proceeds less the land value of $19.5 million and investment of $12.4 million at the time of sale, and the associated asset retirement obligation of $12.6 million. As the part of the Purchase Sale Agreement, Aera LLC maintained the remediation obligation. In September 2023, Aera LLC purchased the partnership interest from Cherokee Newport Beach, LLC representing an additional interest including an additional $7.9 million in an escrow account related to the land sale. Because Aera LLC now owns 99% of the remaining remediation obligation and related $15.8 million escrow account, NBR LLC is now consolidated and not accounted for as an equity investment.

For the Successor year ended December 31, 2023 and the Predecessor combined year ended December 31, 2022, $1.8 million and $5.5 million of dividends in excess of equity income were received relating to equity investments, respectively.

 

F-11

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Revenue Recognition – Revenues associated with the sales of crude oil, natural gas, and other products are recognized at a point in time when Aera LLC’s performance obligation under these contracts is satisfied, which generally occurs when control of oil and natural gas transfers to the customer and collection of the consideration is considered probable.

Concentration of Customers – Aera LLC sells crude oil, natural gas and NGLs to marketers, refineries and other customers that have access to transportation and storage facilities. Considering the ongoing energy deficit in California and strong demand for in-state crude oil production, we do not believe that the loss of any single customer would have a material adverse effect on our consolidated and combined financial statements taken as a whole. If multiple significant customers were to discontinue purchasing our production abruptly, we believe we would have the resources needed to access alternative customers or markets and avoid or materially mitigate associated sales disruptions.

For the Successor year ended December 31, 2023, two customers each accounted for at least 10%, and collectively 96% of our sales (before the effects of hedging). For the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022, and year ended December 31, 2021 all sales were to related parties and our Prior Member Companies accounted for 100% of our sales. We continue to sell crude oil and natural gas to affiliates of our Prior Member Companies. The detailed disclosure is included in Note 7, Transactions with Related Parties.

Exploration and Development – The “successful efforts” method of accounting is used for crude oil and natural gas exploration, development, production, and acquisition activities.

Property Acquisition Costs – Costs of acquiring proved reserves including lease bonus, brokerage, and other fees are capitalized. The costs of non-producing properties that become productive are transferred to a producing property account.

Exploratory Costs – Costs of exploratory wells are initially capitalized but, should efforts be determined to be unsuccessful, they are then charged against income. All other exploratory costs are charged to expense as incurred.

Development Costs – Costs of development wells, including dry holes, well equipment, and attendant production facilities are capitalized.

Depreciation, Depletion, and Amortization – Depreciation, depletion, and amortization of the capitalized cost of producing properties, both tangible and intangible, are provided on a unit of production basis. On a field basis, proved developed oil and natural gas reserve volumes are used for depreciating drilling and development costs, and total proved oil and natural gas reserve volumes are used for depleting producing leasehold costs. Amortization of non-producing leasehold costs from the date of acquisition is based primarily upon experience in establishing rates to fully amortize the cost of those leases that may be unproductive over the holding period. Estimated dismantlement, restoration, abandonment costs, and residual salvage values are considered in determining amortization and depreciation rates.

Other plant and equipment and management information systems are depreciated on a straight-line basis over their estimated useful lives. Gains or losses are not recognized for normal retirements of plant and equipment subject to the composite or group method. Gains or losses from abnormal retirements or sales are recognized in current income. Expenditures for maintenance and repairs are expensed as incurred.

 

F-12

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Impairment – Aera LLC evaluates proved and unproved properties for indicators of impairment. Proved and unproved properties are evaluated for indicators of impairment when facts and circumstances indicate that their carrying value may not be recoverable, or at least annually. If a triggering event is deemed to have occurred, an impairment assessment is undertaken. In general, the Aera LLC does not view temporarily low prices or margins an indication of impairment. Management believes that prices over the long term must be sufficient to generate investments in energy supply to meet global demand. Although prices will occasionally drop significantly, industry prices over the long term will continue to be driven by market supply and demand fundamentals. Because the lifespan of most of the Aera LLC major assets are measure in decades, the future cash flows of these assets are predominantly based on long-term oil and natural gas commodity prices and industry margins, development costs, and production costs. Aera LLCs assesses impairment of proved oil and natural gas properties by comparing net capitalized costs, on a field-by-field basis, to estimated undiscounted future net cash flows using management’s expectations of future oil and natural gas prices. If an impairment is indicated, a charge is recognized in the period in which the impairment occurred based on estimated fair value, which considers estimated future discounted cash flows. Unproved properties are assessed for impairment at least annually on a property-by-property basis and any impairment is charged to income. If the unproved properties are determined to be productive, the related costs are transferred to a producing property account.

Asset Retirement Obligations – Aera LLC incurs retirement obligations related to its exploration and production assets. The fair values of these obligations are recorded as liabilities on a discounted basis adjusted annually. Due to the large number of wells being placed in and removed from service, the fair value of the obligations is reviewed and updated annually, based on the most current information available. The costs associated with these liabilities are capitalized as part of the related assets and depreciated as the reserves are produced. Over time, the liabilities are accreted for the change in present value, based on Aera LLC’s risk-adjusted discount rate. Liabilities for environmental costs are recorded when the costs are considered probable and can be reasonably estimated. Specified environmental liabilities are retained by the Prior Member Companies specified in terms and conditions of the preceding Aera Master Agreement.

Capitalized Interest – Interest from external borrowings is capitalized on capital projects using the weighted average borrowing rate of outstanding borrowings until the project is substantially complete and ready for its intended use. Capitalized interest is determined by multiplying our weighted average borrowing cost on debt by the average amount of qualifying costs incurred. Capitalized interest is depreciated in the same manner as the depreciation of the underlying assets.

Income Taxes – Income taxes relate only to GGRP Companies’ incorporated subsidiaries and Aera Services. Aera LLC does not report income taxes since the income or loss before income taxes is allocated to the Member Companies for inclusion in their respective income tax returns. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

Other Assets, Net – Other assets, net is comprised primarily of prepaid pension assets and Greenhouse Gas Cap-and-Trade Program Compliance Instruments. Aera LLC’s operating facilities subject to California’s Cap-and-Trade Program must obtain compliance instruments (allowances) for ultimate surrender to meet program compliance obligations. Aera LLC manages its holding of compliance instruments as part of its annual business planning activities and adjusts throughout the year.

Other Long Term Liabilities – Other long term liabilities are comprised primarily of the post-retirement plan benefit obligation, derivative liabilities, and lease liabilities.

Leases – Aera LLC accounts for leases according to Leases (Topic 842). The detailed disclosure is included in Note 10, Leases and Other Commitments.

 

F-13

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Fair Value of Financial Instruments – Financial instruments consist of cash, crude oil and natural gas receivables, joint interest billing (“JIB”) receivables, accounts payable, debt and derivatives. The carrying amounts of cash, crude oil and natural gas receivables, JIB receivables, and accounts payable approximate fair value due to the highly liquid nature of these short-term instruments. The detailed disclosure is included in Note 11, Fair Value of Financial Instruments).

Derivative Instruments – Aera LLC utilizes derivative instruments, primarily swaps, to manage its exposure to fluctuations in the underlying commodity prices of crude oil sold and natural gas purchased by Aera LLC. Aera LLC nets derivative assets and liabilities for counter parties where it has a legal right to offset. The derivative transactions are not designated as cash flow hedges. Accordingly, these derivative contracts are marked-to-market and any changes in the estimated value of derivative contracts held at the balance sheet date are recognized in the Consolidated and Combined Statements of Operations and Other Comprehensive Income as net gains or losses on commodity derivatives. Unless otherwise indicated, we use the term “hedge” to describe derivatives instruments that are designed to achieve our hedging program goals, even though they are not accounted for as cash-flow or fair-value hedges. The detailed disclosure is included in Note 12, Derivatives.

Cash Distributions – Aera LLC periodically make cash distributions of excess earnings to the Member Companies as requested by the Member Companies.

Recently Adopted Accounting Standards – Effective January 1, 2023, the GGRP Companies adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on a prospective basis. Under this ASU, contract assets and contract liabilities acquired in a business combination are measured in accordance with ASC 606, Revenue from Contracts with Customers instead of at fair value. The GGRP Companies’ application of this ASU for the measurement of contract assets and contract liabilities did not have a material impact on the GGRP Companies’ financial position and results of operations.

The GGRP Companies adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”) on current expected credit losses on January 1, 2023. The new rules changed the measurement of credit losses for financial assets and certain other instruments, including trade and other receivables with a right to receive cash, and require the use of a new forward-looking expected loss model that results in the earlier recognition of an allowance for losses. The adoption of these new rules did not have a significant impact on our consolidated and combined financial statements.

Recently Issued but not Adopted Accounting Standards – In December 2023, the Financial Accounting Standard Board (FASB) issued new disclosure requirements for Income Taxes (ASC 740). The rule is effective for annual periods beginning after December 15, 2024, but early adoption is permitted. We do not expect the adoption of these rules to have a significant impact on our consolidated and combined financial statements.

Reclassifications – Certain items in the 2022 and 2021 financial statements have been reclassified for comparability purposes with the 2023 financial statements. These reclassifications had no effect on previously reported net income or equity.

 

3.	Significant Transactions

Purchase of Aera Companies

On February 28, 2023, GGRH acquired 100% of the issued and outstanding membership interests of Aera LLC, and 100% of the issued and outstanding membership interests of Aera Energy Services. The Acquisition allows GGRH to assist the Aera Companies with energy transition efforts while balancing the need to continue meeting California’s conventional energy demands by investing in a renewable energy portfolio that will power Aera Companies’ existing operations. Over time, renewable power will be deployed across Aera Companies’ land holdings, while selected legacy oil and gas infrastructure will be repurposed to create carbon capture and storage capability. The Acquisition was accounted for as a business combination. There was no goodwill, measured as the excess of the fair value of the consideration paid over the fair value of the identified net assets, resulting from the Acquisition.

 

F-14

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

The following table summarizes the consideration paid for the Aera Companies:

 

Consideration
(in thousands of dollars)
Cash		$	1,280,000
Contingent Consideration			45,187
Deferred Payments and Price Adjustments not paid at close			1,009,943
Fair value of total consideration transferred		$	2,335,130

The contingent consideration arrangement requires the GGRP Companies to make a series of payments to the Prior Member Companies based on separate calculations for hedged and unhedged oil volumes. The hedged contingent consideration payments are calculated as 70% of the difference between hedged price, adjusted for the delta in local market pricing and brent index price, and the reference brent price, multiplied by the reference hedged oil volumes. The unhedged contingent consideration payments are calculated as 35% of the difference between actual brent index price, adjusted for the delta in local market pricing and brent index price, and the reference brent price, multiplied by the volume of unhedged oil. Unhedged oil is calculated as the lesser of actual produced oil volume or the reference production floor volume, minus reference hedged oil volumes. Reference prices and volumes set per the purchase agreements. All contingent consideration payments were measured at fair value at the Acquisition date based on the ICE brent price futures. As of the Acquisition date, the potential undiscounted amount of all future payments that GGRH could be required to make under the contingent consideration arrangement is between $44.5 million and $55.4 million.

During the period ended December 31, 2023, GGRH paid $17.6 million to settle contingent consideration as it came due under the terms of the membership purchase agreements.

For the period ended December 31, 2023, the loss recognized for changes in the fair value of contingent consideration arrangement in the amount of $1.5 million is included in Other Non-Operating Expense in the Consolidated and Combined Statement of Operations and Other Comprehensive Income.

As of December 31, 2023, the range of outcomes that GGRH could be required to make under the contingent consideration arrangement is between $24.6 million and $30.6 million. The assumptions used to develop the estimates have not changed. Contingent consideration is split between Accrued Liabilities and Other Long-term Liabilities in the Balance Sheet. See note 11 for details.

Fair Value of total consideration transferred

Acquisition-related costs of $43.9 million were included in Other Operating Expenses in the Consolidated and Combined Statement of Operations and Other Comprehensive Income for the Successor year ended December 31, 2023.

 

F-15

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed
(in thousands of dollars
Purchase Price Allocation:
Current Assets		$	491,035
Equity investments			34,023
Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization			3,049,853
Deferred income tax asset			23,943
Other assets, net			141,162
Current Liabilities			(186,972	)
Accrued restoration, removal and environmental costs			(1,083,279	)
Other long term liabilities			(128,287	)
Deferred income tax liability			(6,348	)
Net assets acquired		$	2,335,130

 

4.

Revenue

Aera LLC and its subsidiaries sell crude oil, natural gas, natural gas liquids and other products under long-term agreements, with periodic price adjustments to reflect market conditions. Revenue is recognized upon transfer of control, based on the terms of delivery and collectability of the consideration is considered probable. Production is priced on the average monthly prevailing index prices less certain deductions related to quality and physical location. Payment for revenue transactions is typically due within 20 days.

Revenue is recognized at the point in time when Aera LLC’s performance obligation under these contracts is satisfied, which generally occurs when control of crude oil and natural gas transfers to the customer and collection of the consideration is considered probable. In accordance with Revenue from Contracts with Customers (Topic 606), Aera LLC considers the indicators of the transfer of control to determine the point in time. Aera LLC does not believe that significant judgements are required with respect to the determination of transfer of control or transaction price. Aera LLC’s performance obligations arise upon the production of produced crude oil, natural gas, and natural gas liquids from wells in which the Company has an ownership interest. Disaggregated revenue sales of crude oil, natural gas and natural gas liquids (NGLs) to customers includes the following:

 

Crude oil, natural gas and NGL sales
(in thousands of dollars)		Successor								Predecessor
		Year Ended December 31,				122-days Ended December 31,				58-days Ended February 27,				Years Ended December 31,
		2023				2022				2023				2022				2021
Crude oil		$	1,759,631			$	—			$	5,168			$	40,708			$	30,484
Natural gas			(1,195	)			—				(1,452	)			(3,128	)			(2,192	)
NGLs			4,284				—				1,904				10,202				9,419
Crude oil, natural gas and NGL sales		$	1,762,721			$	—			$	5,621			$	47,782			$	37,711

 

F-16

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Crude oil, natural gas and NGL sales to related parties
(in thousands of dollars)		Successor								Predecessor
		Year Ended December 31,				122-days Ended December 31,				58-days Ended February 27,				Years Ended December 31,
		2023				2022				2023				2022				2021
Crude oil		$	—			$	—			$	341,218			$	2,755,581			$	2,084,423
Crude oil, natural gas and NGL sales to related parties		$	—			$	—			$	341,218			$	2,755,581			$	2,084,423

For the Successor year ended December 31, 2023, the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022 and year ended December 31, 2021, “Crude oil, natural gas and NGL sales” primarily arise from contracts with customers. For the Successor year ended December 31, 2023, “Accounts receivable – Trade” and “Accounts receivable – Other” are primarily from customers.

For the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022 and year ended December 31, 2021, “Crude oil, natural gas and NGL sales to related parties” primarily arise from contracts with related parties. For the Predecessor combined year ended December 31, 2022, “Accounts receivable – Due from related parties” are primarily from related parties (see further discussion in Note 7, Transactions with Related Parties).

 

5.	Inventories

Crude oil and condensate inventories are carried on a LIFO basis. Replacement cost exceeded LIFO by $1.5 million and $3.2 million at the Successor year ended December 31, 2023 and the Predecessor combined year ended December 31, 2022, respectively.

 

6.	Property, Plant, and Equipment and Asset Retirement Obligations

Property, plant, and equipment consist of the following:

(in thousands of dollars)

		Successor												Predecessor
		2023												2022
		Cost				Reserve*				Net				Cost				Reserve*				Net
Exploration and production		$	12,549,918			$	9,648,112			$	2,901,806			$	13,926,839			$	9,439,064			$	4,487,775
Land held for development			21,552				—				21,552				20,329				—				20,329
Other			1,634				1,422				211				1,633				1,422				211
		$	12,573,104			$	9,649,534			$	2,923,569			$	13,948,801			$	9,440,486			$	4,508,315

 

*	Accumulated depreciation, depletion, amortization, retirements and impairments

Exploration and production costs of $417.3 million, $380.3 million, and $355.0 million consisting primarily of assets under construction and land were not subject to depletion for the Successor year ended December 31, 2023 and the Predecessor combined 58-day period ended February 27, 2023 and year ended December 31, 2022, respectively.

 

F-17

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

Amounts capitalized related to information systems are amortized on a straight-line basis over a period of three to fourteen years. Aera LLC amortized $10.8 million, $2.3 million, $10.9 million and $9.1 million in software costs for the Successor year ended December 31, 2023 and the Predecessor combined 58-day period ended February 27, 2023 and years ended December 31, 2022 and 2021, respectively. These amounts are recorded in the table above in Exploration and Production.

The analysis for impairments of long-lived assets is conducted under the authoritative guidance on accounting for the impairment or disposal of long-lived assets. For the Successor consolidated year ended December 31, 2023 and the Predecessor combined year ended December 31, 2021, Aera LLC did not incur an impairment loss. For the Predecessor combined year ended December 31, 2022, $0.1 million of impairment losses were incurred.

Under the authoritative guidance for asset retirement obligations (“AROs”), the fair values of AROs are recorded as liabilities on a discounted basis when they are incurred, which is typically at the time the assets are installed. Amounts recorded for the related assets will be increased by the amount of these obligations. In the estimation of fair value, Aera LLC uses assumptions and judgments regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, discount rates, and inflation rates. AROs incurred in the current period were Level 3 (unobservable inputs) fair value measurements. Over time, the liabilities are accreted for the change in their present value and the initial capitalized costs are depreciated as the reserves are produced.

The below table summarizes the ARO activity for the Successor year ended December 31, 2023, and the Predecessor combined 58-day period ended February 27, 2023 and year ended December 31, 2022:

 

(in thousands of dollars)		Successor
		December 31, 2023
Balance at February 28, 2023		$	1,083,285
Accretion expense on abandonment liability			122,321
Dismantlement, restoration and abandonment expenditures			(64,431	)
Liabilities incurred			238
Revisions in estimated cash flows			(36,828	)
Balance at December 31			1,104,585
Less: current portion			(82,320	)
Long-term obligations		$	1,022,265

 

(in thousands of dollars)		Predecessor
		February 27, 2023				December 31, 2022
Balance at January 1		$	1,228,145			$	1,332,448
Accretion expense on abandonment liability			13,168				86,609
Dismantlement, restoration and abandonment expenditures			(13,598	)			(112,665	)
Liabilities incurred			—				609
Revisions in estimated cash flows			—				(78,856	)
Balance at December 31			1,227,715				1,228,145
Less: current portion			(133,685	)			(149,374	)
Long-term obligations		$	1,094,030			$	1,078,771

 

F-18

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

7.	Transactions with Related Parties

Prior to the sale of the Aera Companies on February 28, 2023, Shell Treasury Center (West) Inc. (“STCW”) and Exxon Overseas Corporation (“EOC”), affiliates of the Prior Member Companies, provided cash management services to Aera LLC and Aera Services. Prior to February 28, 2023, excess cash was held by STCW and EOC, proportionally, based on the respective sharing ratios of the Prior Member Companies. There were no restrictions on access to cash held by STCW and EOC. STCW and EOC paid interest on the cash they held based on a defined market index rate. For the Predecessor combined 58-day period ended February 27, 2023 and year ended December 31, 2022, the Aera Companies earned approximately $2.2 million and $6.8 million in interest income attributable to the cash management agreement. For the Predecessor combined year ended December 31, 2021, no interest income was earned. The cash balance held by STCW and EOC, including interest, was $350.8 million as of the Predecessor combined year ended December 31, 2022. After the sale, the cash on deposit within accounts managed by STCW and EOC including accumulated interest, totaling $231.7 million was transferred to accounts managed by Aera LLC on March 1, 2023 and February 28, 2023, respectively.

Aera LLC purchases natural gas from Shell Energy North America, an affiliate of the Prior Member Companies. Aera LLC did not pay any natural gas purchases for the Predecessor combined 58-day period ended February 27, 2023 and paid approximately $86.2 million and $81.6 million for the Predecessor combined year ended December 31, 2022 and year ended December 31, 2021. After the sale, Aera LLC continues to purchase natural gas from Shell Energy North America as a non-related party. Aera LLC did not have any related party payable balances with Shell Energy North America for the Successor year ended December 31, 2023 or the Predecessor combined year ended December 31, 2022.

Aera LLC sells natural gas to Mobil Pacific Pipeline Company (“MPPCO”), which is an affiliate of the Prior Member Companies. Aera LLC earned approximately $ 0.17 million, $0.27 million and $0.22 million for natural gas sales for the Predecessor combined 58-day period ended February 28, 2023, year ended December 31, 2022 and year ended December 31, 2021, respectively. After the sale, Aera LLC no longer sells natural gas to MPPCO. Aera LLC did not have any related party receivable balance from MPPCO for the Successor consolidated period ended December 31, 2023 or the Predecessor combined year ended December 31, 2022.

Aera LLC sold 100% of its operated crude oil and condensate production for the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022 and year ended December 31, 2021, to affiliates of the Prior Member Companies, Shell Trading (US) Company and ExxonMobil Oil Corporation. The volume of crude oil and condensate sold is split in proportion to the respective sharing ratios that the Prior Member Companies held in Aera LLC. For the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022 and year ended December 31, 2021, Aera LLC realized approximately $341 million, $2,756 million and $2,084 million respectively, in gross crude and condensate sales to these related parties. Aera LLC’s related party receivable balance for crude and condensate sales was $190.1 million for the Predecessor combined year ended December 31, 2022. After the sale, Aera continues to sell a portion of its operated crude oil and condensate to Shell Trading (US) Company as a non-related party and no longer sells its operated crude oil and condensate to ExxonMobil Oil Corporation.

The Prior Member Companies and their affiliates provide various services to the Aera Companies. For the Predecessor combined 58-day period ended February 27, 2023, year ended December 31, 2022 and year ended December 31, 2021, the Aera Companies incurred approximately $1.0 million, $3.7 million and $4.4 million, respectively, for these services. After the sale, Shell performed various services for Aera LLC as a non-related party. Aera LLC did not have any related party payable balances with the Prior Member Companies for the Successor year ended December 31, 2023 and the Predecessor combined year ended December 31, 2022.

 

F-19

Green Gate Resources Parent, LLC

Notes to Consolidated and Combined Financial Statements

 

 

8.	Benefit Plans

Aera Services provides defined benefit pension plans and other post-retirement benefit plans for employees. The benefit obligations and plan assets associated with these plans are measured at December 31.

Obligations and Funded Status

Weighted-average assumptions used to determine benefit obligations are as follows:

 

		Successor																Predecessor
		Year Ended December 31, 2023								122-days Ended December 31, 2022								58-days Ended February 27, 2023								Year Ended December 31, 2022								Year Ended December 31, 2021
		Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits
Discount rate			5.01	%			4.99	%			—				—				5.01	%			4.99	%			5.21	%			5.19	%			2.77	%			2.68	%
Long term rate of compensation increase			5.00	%			—				—				—				5.00	%			—				4.00	%			—				4.00	%			—

The changes in benefit obligation are as follows:

 

(in thousands of dollars)		Successor																Predecessor
		Year Ended December 31, 2023								122-days Ended December 31, 2022								58-days Ended February 27, 2023								Year Ended December 31, 2022								Year Ended December 31, 2021
		Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits
Benefit obligation-beginning balance		$	264,910			$	69,007			$	—			$	—			$	265,209			$	69,384			$	336,814			$	89,173			$	336,814			$	89,173
Service cost			8,667				2,148				—				—				1,733				430				15,193				4,308				15,193				4,308
Interest cost			11,048				2,952				—				—				2,210				590				9,077				2,348				9,077				2,348
Benefits paid*			(30,996	)			(4,530	)			—				—				(6,199	)			(906	)			(22,921	)			(3,687	)			(22,921	)			(3,687	)
Actuarial loss/(gain)			9,787				(2,455	)			—				—				1,957				(491	)			(72,954	)			(22,758	)			(72,954	)			(22,758	)
Benefit obligation-ending balance		$	263,416			$	67,122			$	—			$	—			$	264,910			$	69,007			$	265,209			$	69,384			$	265,209			$	69,384
Accumulated benefit obligation at end of period		$	263,416				—				—				—			$	264,910				—			$	265,209				—			$	336,814				—

 

*	Benefit payments for funded and unfunded plans.

The changes in plan assets are as follows:

 

(in thousands of dollars)		Successor																Predecessor
		Year Ended December 31, 2023								122-days Ended December 31, 2022								58-days Ended February 27, 2023								Year Ended December 31, 2022								Year Ended December 31, 2021
		Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits
Fair value at beginning of period		$	315,277			$	48,511			$	—			$	—			$	315,445			$	47,978			$	348,369			$	58,172			$	335,162			$	54,824
Actual return on plan assets			28,500				4,407				—				—				5,700				881				(52,028	)			(8,548	)			27,413				4,950
Company contribution			1,655				1,043				—				—				331				209				42,025				395				9,729				426
Benefits paid			(30,996	)			(2,787	)			—				—				(6,199	)			(557	)			(22,921	)			(2,041	)			(23,935	)			(2,028	)
Fair value at end of period		$	314,436			$	51,174			$	—			$	—			$	315,277			$	48,511			$	315,445			$	47,978			$	348,369			$	58,172

 

F-20