Financial Analysis

Note 9 NOTE PAYABLE Grand Woods has a note payable (the Note) that was used for the purchase and development of property. The Note has a 4% interest rate and matures November 23, 2026. The Note has scheduled payments of principal and interest in the amount of $16,034 per month, with a balloon payment of any unpaid principal balance due on November 23, 2026. The balance of the Note at December 31, 2025 is $1,010,873, and $1,010,873 is classified as current. Interest paid on the Note totaled $44,547 in 2025 and $50,274 in 2024. The Note is secured by the underlying property and a $1,200,000 guaranty issued by the Company. Covenants of the Note include a pay down requirement that states that sales of parcels will require a pay down on the loan of 90% of the net proceeds received from the purchaser less capital gains obligation. The remaining 10% shall be held in an operating reserve account for operating expenses and the use in payment of taxes. No distributions to partners, except for taxes, are permitted throughout the term of the loan. The intent of the Grand Woods investment managers and members is that proceeds from the sale of all, or part of, the property will be used to reduce or eliminate the Note. In the event there is not a sale prior to the November 23, 2026 balloon payment due date, the Company expects the investment managers to propose payment of the note by the members or refinancing. We do not anticipate the need to perform on the guarantee of the Note prior to a …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following is an analysis of the components of oil and gas sales: Year Ended December 31, 2025 2024 Oil Sales $ 11,549,413 $ 12,008,568 Natural Gas Sales 4,802,719 2,721,772 Miscellaneous Oil and Gas Product Sales 347,822 409,195 $ 16,699,954 $ 15,139,535

DisaggregationOfRevenueTableTextBlock

"Note 11 FAIR VALUE MEASUREMENTS We use a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3 Unobservable inputs that reflect the Companys own assumptions. During 2024 and 2025, there were no transfers into or out of Level 2 or Level 3. Recurring Fair Value Measurements Certain of the Company's assets are reported at fair value in the accompanying consolidated balance sheets on a recurring basis. The Company determined the fair value of equity securities and available-for-sale debt securities using quoted market prices, public Net Asset Values (""NAV"") and where applicable, securities with similar maturity dates and interest rates. Level 3 assets use NAV as fair value. At December 31, 2025 and 2024, our assets reported at fair value on a recurring basis are summarized as follows: December 31, 2025 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Equity Securities: Domestic Equities $ 4,176,053 $ $ Others 52,512 $ 4,228,5 …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Note 6 INCOME TAXES Components of deferred taxes are as follows: December 31, 2025 2024 Assets: Payables & Other $ 191,131 $ 134,793 Net Operating Loss Carryforward 179,474 172,544 Net Leasehold Reserves 161,861 129,319 Long-Lived Asset Impairment 1,206,259 1,519,834 Investment Impairment 177,745 66,968 Deferred Geological and Geophysical Expense 8,562 12,348 Unrealized Equity Securities and Capital Losses 134,586 Asset Retirement Obligation 499,385 499,245 Total Assets 2,424,417 2,669,637 Liabilities: Receivables 563,739 417,269 Intangible Drilling Costs 3,401,672 2,758,146 Depletion and Depreciation 740,310 821,003 Investments 209,400 203,345 Unrealized Equity Securities and Capital Gains 295,100 Other 120,712 123,831 Total Liabilities 5,330,933 4,323,594 Net Deferred Tax Liability $ (2,906,516) $ (1,653,957) The following table summarizes the current and deferred portions of income tax provision/(benefit): Year Ended December 31, 2025 2024 Current Tax Provision/(Benefit): Federal $ 12,149 $ 65,137 State 427 (184) Total Current Tax Provision 12,576 64,953 Deferred Tax Provision 1,252,559 434,446 Total Income Tax Provision $ 1,265,135 $ 499,399 The total income tax provision expressed as a percentage of income before income tax was 21% for 2025 and 20% for 2024. These amounts differ from the amounts computed by applying the statutory U.S. federal enacted income tax rate of 21% for 2025 and 2024 as summarized in the following reconciliation: Year Ended December 31, 2025 2 …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

New Accounting Pronouncements Pronouncements Adopted in 2025 In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 intends to provide investors with enhanced information about an entitys income taxes by requiring disclosure of items such as disaggregation of the effective tax rate reconciliation as well as information regarding income taxes paid. This ASU is effective for annual reporting periods beginning after December 15, 2024. The Company adopted this pronouncement effective January 1, 2025 with no significant change to reporting or disclosures. In August 2023, the FASB issued ASU 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements. The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The Company a …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Note 14 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company is affiliated by common management and ownership with Lochbuie LLC (Lochbuie). We also own or have owned interests in certain producing and non-producing oil and gas properties as tenants in common with the affiliate. Lochbuie shares facilities and employees, including executive officers, with the Company. We are reimbursed for services, facilities and miscellaneous business expenses incurred, including the affiliate's share of salaries. Total reimbursement was $216,765 and $227,958 in 2025 and 2024, respectively. Lochbuie's share of salaries included in the reimbursements was $147,492 and $152,761 in 2025 and 2024, respectively. …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

Note 2 BUSINESS SEGMENT INFORMATION The Company identifies components of the business as operating segments when (1) the component engages in business activities from which it may recognize revenue and incur expenses, (2) the components operating results are regularly reviewed by the chief operating decision maker (CODM), and (3) discrete financial information is available for the component. Operating segments are deemed reportable when (1) the operating segments revenue is greater than or equal to 10% of the combined revenues of all operating segments, (2) the operating segments profit or loss is greater than or equal to 10% of the greater of the combined reported profit of all operating segments not reporting a loss or the combined reported loss of all operating segments not reporting a profit, or (3) the operating segments assets are greater than or equal to 10% of the combined assets of all operating segments. The Company has identified Oil and Gas as a reportable segment, which includes oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming. The Company considers the chief executive officer to be the Company's CODM. The CODM allocates resources and assesses performance based on the assets and operating results of oil and gas operations, which is the Company's primary operating and reportable segment. Reportable segment assets include proved and unproved oil and gas mi …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Note 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company's consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC). The consolidated financial statements include the accounts of The Reserve Petroleum Company and our subsidiaries in which we hold a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, the Company consolidates VIEs under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications to the consolidated financial statements are made to prior period financial information to conform to the current year presentation. These reclassifications had no impact on previously reported net income/(loss) or retained earnings. Variable Interest Entities The Company decides at the inception of each arrangement whether an entity in which an investment is made or in which we have other variable interests is considered a VIE. Generally, an entity is a VIE if (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entitys investors lack any characteristics of a controlling financial interest or (3) the entity …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Note 4 COMMON STOCK The following table summarizes the changes in common stock issued and outstanding: Shares Issued Shares of Treasury Stock Shares Outstanding January 1, 2024, $.50 par value stock, 200,000 shares authorized 184,735 29,039 155,696 Purchase of stock 3,758 (3,758) December 31, 2024, $.50 par value stock, 200,000 shares authorized 184,735 32,797 151,938 Purchase of stock 344 (344) December 31, 2025, $.50 par value stock, 200,000 shares authorized 184,735 33,141 151,594 …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

Note 7 NOTE PAYABLE Grand Woods has a note payable (the Note) that was used for the purchase and development of property. The Note has a 4% interest rate and matures November 23, 2026. The Note has scheduled payments of principal and interest in the amount of $16,034 per month, with a balloon payment of any unpaid principal balance due on November 23, 2026. The balance of the Note at September 30, 2025, and December 31, 2024, is $1,048,504 and $1,158,736, respectively, of which $152,726 is classified as current at September 30, 2025. Interest paid on the Note, in the nine months ended September 30, 2025 and 2024 totaled $34,075 and $38,314, respectively. The Note is secured by the underlying property and a $1,200,000 guaranty issued by the Company. Covenants of the Note include a pay down requirement that states that sales of parcels will require a pay down on the loan of 90% of the net proceeds received from the purchaser less capital gains tax obligation. The remaining 10% shall be held in an operating reserve account for operating expenses and the use in payment of taxes. No distributions to partners, except for taxes, are permitted throughout the term of the loan. The intent of the Grand Woods investment manager and members is that proceeds from the sale of all, or part of, the property will be used to reduce or eliminate the Note. The Company does not anticipate the need to perform on the guaranty of the Note. Below is a schedule of future principal payments on the outst …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following is an analysis of the components of oil and natural gas sales: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Oil Sales $ 3,233,521 $ 3,153,936 $ 8,323,128 $ 8,740,819 Natural Gas Sales 1,156,512 572,784 3,217,546 1,717,843 Miscellaneous Oil and Gas Product Sales 76,792 148,076 253,899 264,400 Total $ 4,466,825 $ 3,874,796 $ 11,794,573 $ 10,723,062

DisaggregationOfRevenueTableTextBlock

"Note 9 FAIR VALUE MEASUREMENTS The Company uses a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3 Unobservable inputs that reflect the Companys own assumptions. Recurring Fair Value Measurements Certain assets of the Company are reported at fair value in the accompanying Consolidated Balance Sheets on a recurring basis. The Company determined the fair value of equity securities using quoted market prices, public Net Asset Values (""NAV"") and where applicable, securities with similar maturity dates and interest rates. Level 3 assets use NAV as fair value. At September 30, 2025, and December 31, 2024, the Companys assets reported at fair value on a recurring basis are summarized as follows: September 30, 2025 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Equity Securities: Domestic Equities $ 2,563,392 $ $ International Equities 35,760 Others 64,775 Total $ 2,663,927 $ $ December 31, 2024 Level 1 Inputs Level 2 Inpu …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

New Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 intends to provide investors with enhanced information about an entitys income taxes by requiring disclosure of items such as disaggregation of the effective tax rate reconciliation as well as information regarding income taxes paid. This ASU is effective for annual reporting periods beginning after December 15, 2024. The Company does not anticipate the adoption of this update to have a material impact on our financial position, results of operations or cash flow. In August 2023, the FASB issued ASU 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements. The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The Company adop …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Note 3 REVENUE RECOGNITION A portion of oil and natural gas sales recorded in the Consolidated Statements of Income are the result of estimated volumes and pricing for oil and natural gas payments not yet received for the period. For the nine months ended September 30, 2025 and 2024, that estimate represented $3,042,142 and $2,787,041, respectively, of oil and natural gas sales included in the Consolidated Statements of Income. The Companys disaggregated revenue has two primary revenue sources, which are oil sales and natural gas sales. The following is an analysis of the components of oil and natural gas sales: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Oil Sales $ 3,233,521 $ 3,153,936 $ 8,323,128 $ 8,740,819 Natural Gas Sales 1,156,512 572,784 3,217,546 1,717,843 Miscellaneous Oil and Gas Product Sales 76,792 148,076 253,899 264,400 Total $ 4,466,825 $ 3,874,796 $ 11,794,573 $ 10,723,062 …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

Note 2 SEGMENT REPORTING The Company has identified Oil and Gas as a reportable segment, which includes oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming. This reportable segment's assets consist of oil and gas properties, net, presented on the Consolidated Balance Sheets. In our reconciliation to income before income taxes, in addition to segment information, we include Other Operating Income, Equity Income in Investees, Interest Expense and Other Income categories to reconcile segment revenues, segment profit and other business activities to our operating results. Components in these categories do not meet the criteria to be considered reportable segments. The following table presents financial information for our reportable segment and a reconciliation to income before income taxes: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Segment Revenues Oil and Gas Sales, Lease Bonuses and Other $ 4,467,628 $ 4,171,492 $ 12,273,333 $ 11,019,758 Reportable Segment Expenses: Production 1,209,401 1,041,694 3,303,281 3,083,457 Exploration 76,497 42,735 295,197 370,810 Depreciation, Depletion, Amortization and Valuation Provision 881,996 469,753 2,687,400 1,824,905 Asset Retirement Obligation Accretion 44,172 42,297 131,564 124,940 Gain on Disposition of Oil and Gas Properties (149,430) (764,805) Total Reportable Segment Expenses 2,062,636 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing