Yangarra Resources Ltd. — Interim / Quarterly Report 2022

Jul 28, 2022

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Yangarra Resources Ltd. Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2022 and 2021

Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

		June 30		December 31
		2022		2021
		(unaudited)		(audited)
Assets
Current
Accounts receivable_(note 10a)_	$	37,136	$	27,536
Prepaid expenses and inventory		6,929		5,022
Commodity contracts_(note 10c iii)_		18		–
Interest rate contracts_(note 10c i)_		–		191
Total current assets		44,083		32,749
Non-current
Property and equipment_(note 2)_		658,103		627,948
Exploration and evaluation assets		22,724		22,342
Interestrate contracts (note 10c i)		–		430
Total assets	$	724,910	$	683,469
Liabilities
Current
Accounts payable and accrued liabilities_(note 10b)_	$	34,892	$	33,930
Commodity contracts_(note 10c iii)_		849		11
Interest rate contracts_(note 10c i)_		–		79
Current portion of decommissioning liability_(note 5)_		210		105
Current portion of lease obligations_(note 4)_		2,159		2,353
Total current liabilities		38,110		36,478
Non-current
Bank debt_(note 3)_		164,562		195,422
Lease obligations_(note 4)_		1,418		2,372
Other liabilities		866		589
Interest rate contracts_(note 10c i)_		–		178
Decommissioning liability_(note 5)_		13,200		13,691
Deferred tax liability		86,906		69,780
Total liabilities		305,062		318,510
Shareholders' equity
Share capital_(note 6)_		179,634		178,110
Contributed surplus		28,156		28,142
Retained earnings		212,058		158,707
Total shareholders’ equity		419,848		364,959
Total liabilities and shareholders’ equity	$	724,910	$	683,469

Contingency (note 14)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd.

Condensed Interim Consolidated Statements of Income and Comprehensive Income For the three and six months ended June 30

(unaudited, in thousands of Canadian dollars, except per share amounts)

	Three months ended June 30 Six months ended June 30	Three months ended June 30 Six months ended June 30
	2022 2021 2022	2021
Revenue Petroleum and natural gas sales_(note 13)_ Royalties	$ 68,545$ 28,529 $ 119,973 (5,605) (1,263) **(8,210) **	$ 57,004 (2,896)
Commodity price risk contracts_(note 10c iii)_ Loss on commodity contract settlement Unrealized change in fair value of commodity contracts	62,940 27,266 111,763 (2,712) (1,545) (2,701) 472 113 (820)	54,108 (3,390) (1,007)
	60,700 25,834 108,242	49,711
Expenses Production Transportation General and administrative Finance_(note 12) Share-based compensation(note 7) Depletion and depreciation(note 2)_	5,714 4,100 10,370 1,194 934 2,311 1,019 637 1,921 2,597 3,694 5,112 181 335 338 9,106 6,044 17,713	7,832 1,797 1,166 3,984 559 12,364
	19,811 15,744 37,765	27,702
Income before tax Deferred tax expense	40,889 10,090 70,477 10,258 2,337 17,126	22,009 5,139
Net income and total comprehensive income	$ 30,631$ 7,753$ 53,351	$ 16,870
Earnings per share(note 8) Basic Diluted	$ 0.35$ 0.09 $ 0.61 $ 0.33$ 0.09 $ 0.58	$ 0.20 $ 0.19

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Changes in Equity For the six months ended June 30

(unaudited, in thousands of Canadian dollars)

		2022		2021
Share capital
Balance, beginning of period	$	178,110	$	176,349
Exercise of stock options_(note 6)_		1,040		217
Contributed surplus transferred on exercise of stock options_(note 6)_		484		109
Balance, end of period		179,634		176,675
Contributed surplus
Balance, beginning of period		28,142		27,218
Share-based compensation_(note 7)_		498		692
Exercise of stock options_(note 6)_		(484)		(109)
Balance, end of period		28,156		27,801
Retained earnings
Balance, beginning of period		158,707		108,693
Netincome		**53,351 **		16,870
Balance, end ofperiod		212,058		125,563
Total shareholders’ equity	$	419,848	$	330,039

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Cash Flows For the three and six months ended June 30 (unaudited, in thousands of Canadian dollars)

	Three months ended June 30 Six months ended June 30
	2022 2021 2022 2021
Operating Net income for the period Add back non-cash items: Unrealized change in fair value of commodity contracts Finance expense_(note 12) Share-based compensation(note 7) Depletion and depreciation(note 2) Deferred tax expense Interest and finance costs paid(note 12) Decommissioning costs incurred Change in non-cash working capital(note 9)_	$ 30,631$ 7,753 $ 53,351$ 16,870 (472) (113) 820 1,007 2,597 3,694 5,112 3,984 181 335 338 559 9,106 6,044 17,713 12,364 10,258 2,337 17,126 5,139 (2,273) (2,810) (4,676) (5,592) – (344) – (344) (711) 2,471 (8,236) (1,634)
Net cash flow from operating activities	49,317 19,367 81,548 32,353
Financing Exercise of stock options_(note 6) Bank debt repayment(note 3) Lease obligation repayment(note 4) Lease interest paid(note 12) Realized interest rate contract settlement(note 12)_ Other long-term liabilities advance	919 103 1,040 217 (26,539) (1,894) (31,115) (1,008) (544) (440) (1,053) (866) (84) (92) (173) (188) – – 393 – 216 – 277 –
Net cash flow usedin financing activities	(26,032) (2,323) (30,631) (1,845)
Investing Additions to property and equipment_(note 2) Additions to exploration and evaluation assets Change in non-cash working capital(note 9)_	(26,961) (19,468) (48,226) (38,055) (308) (134) (382) (134) 3,984 2,558 (2,309) 7,681
Net cash flow usedin investing activities	(23,285) (17,044) (50,917) (30,508)
Change in cash Cash, beginning of the period	– – – – – – – –
Cash, end of the period	$ –$ –$ –$ –

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

1. Basis of preparation and statement of compliance and authorization

Yangarra Resources Ltd. (the “Company” or “Yangarra”) is a publicly traded company involved in the production, exploration and development of resource properties in Western Canada. The address of the registered office is 1530, 715 – 5 Avenue SW, Calgary Alberta, T2P 2X6.

These condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Yangarra Resources Corp., after the elimination of intercompany transactions and balances.

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting on a basis consistent with the accounting, estimation and judgement policies described in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2021 (the “Annual Financial Statements”). These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments and stock options which are recognized at fair value. All financial information is reported in Canadian dollars, unless otherwise noted. Certain information and disclosures normally included in the notes to the Annual Financial Statements prepared in accordance with International Financial Reported Standards have been condensed or omitted. These condensed interim consolidated financial statements should be read in conjunction with the Annual Financial Statements.

The condensed interim consolidated financial statements were authorized for issue by the Company’s Board of Directors on July 27, 2022.

2. Property and equipment

	Oil and Natural Gas Interests Well and Plant Equipment Other Assets	Total
Cost Balance, December 31, 2021 Cash additions Share-based compensation_(note 7) Decommissioning liability(note 5)_ Balance, June 30, 2022 Depletion and depreciation Balance, December 31, 2021 Depletion and depreciation ROU asset depreciation Balance, June 30, 2022 At December 31, 2021 At June 30, 2022	$ 712,184 $ 141,291 $ 15,258 42,660 5,259 307 160 – – (518) – –	$ 868,733 48,226 160 (518)
	$ 754,486 $ 146,550 $ 15,565	$ 916,601
	$ 214,946 $ 18,328 $ 7,511 15,188 1,214 126 – – 1,185	$ 240,785 16,528 1,185
	$ 230,134 $ 19,542 $ 8,822	$ 258,498
	$ 497,238 $ 122,963 $ 7,747 $ 524,352 $ 127,008 $ 6,743	$ 627,948 $ 658,103

At June 30, 2022, all of the Company’s properties are pledged as security for the bank debt (see note 3). The calculation of depletion for the six months ended June 30, 2022, included estimated future development costs of $609,806 (December 31, 2021 – $658,037) associated with the development of the Company’s proved plus probable reserves.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

2. Property and equipment (continued)

Cash additions for the six months ended June 30, 2022, include $701 (2021 – $654) of recoveries related to the Company's working interest in operated capital expenditure programs on which overhead has been charged in accordance with standard industry operating agreements and $221 (2021 – $215) of capitalized salaries and consulting expenses directly related to geological, drilling and completions.

Included in property and equipment as at June 30, 2022 is $3,974 (December 31, 2021 – $5,159) of right-of-use (“ROU”) assets associated with the Company’s lease obligations.

3. Bank debt

As at June 30, 2022, the maximum amount available under the syndicated credit facility was $210,000 (December 31, 2021 – $210,000) comprised of a $185,000 (December 31, 2021 – $185,000) extendable revolving term credit facility and a $25,000 (December 31, 2021 – $25,000) operating facility. The amount available under these facilities is re-determined at least twice a year and is primarily based on the Company’s oil and gas reserves, the lending institution’s forecast commodity prices, the current economic environment and other factors as determined by the syndicate of lending institutions (the “Borrowing Base”). If the total advances made under the credit facilities are greater than the re-determined Borrowing Base, the Company has 60 days to repay any shortfall. The facility lasts for a 183-day period and will be subject to its next 364-day extension by November 26, 2022. If not extended by November 26, 2022, the Facility will cease to revolve and all outstanding balances will become repayable one year from that date.

Balance, December 31, 2021	$	195,422
Repayment		(31,115)
Accretionofdebt transactioncosts		255
Balance, June 30, 2022	$	164,562

As at June 30, 2022, the $164,562 (December 31, 2021 – $195,422) reported amount of bank debt was comprised of $5,801 (December 31, 2021 – $11,564) drawn on the operating facility, $159,283 (December 31, 2021 – $184,373) drawn on the extendible revolving term credit facility and net of unamortized transaction costs of $522 (December 31, 2021 – $515).

The Company is subject to a single financial covenant requiring an adjusted working capital ratio above 1:1 (current assets plus the undrawn availability under the revolving facility, divided by the current liabilities less the drawn portion of the revolving facility and excluding unrealized commodity contracts). The Company was in compliance with this covenant as June 30, 2022 and December 31, 2021. The facility is secured by a general security agreement over all assets of the Company. The total standby fees range, depending on the debt to EBITDA ratio, between 200 bps to 400 bps on bank prime borrowings and between 300 bps and 500 bps on bankers’ acceptances. The undrawn portion of the credit facility is subject to a standby fee in the range of 75 bps to 125 bps.

During the six months ended June 30, 2022, the weighted average effective interest rate for the bank debt was approximately 5.35% (2021 – 5.42%).

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

4. Lease obligations

The Company incurs lease payments related to the oil hauling fleet, operator/crew trucks and the head office. Leases are entered into and exited in coordination with specific business requirements which includes the assessment of the appropriate durations for the related leased asset.

Balance, December 31, 2021	$	4,725
Lease payments		(1,053)
Accretion		(95)
Balance, June 30, 2022	$	3,577
Current	$	2,159
Non-current	$	1,418

Maturity analysis at June 30, 2022 – contractual undiscounted cash flows
Less than one year	$	2,159
One to six years		2,407
Total undiscounted lease obligations		4,566
Unrecognized imputed interest		(989)
Total lease obligation	$	3,577

5. Decommissioning liability

The following table presents the reconciliation of the carrying amount of the liability associated with the decommissioning of the Company’s property and equipment:

Balance, December 31, 2021	$	13,796
Liabilities incurred		837
Effect of change in estimates		(1,355)
Accretion		132
Balance, June 30, 2022	$	13,410
Current	$	210
Non-current	$	13,200

The current portion of decommissioning liability relates to wells the Company plans to abandon and reclaim in the next 12 months as a result of the grant received under phase 5 of the Alberta Site Rehabilitation Program (“SRP”).

The following significant assumptions were used to estimate the decommissioning liability at June 30, 2022:

Undiscounted cash flows	$	17,268
Discount rate		2.27% - 3.23%
Inflation rate		2%
Weighted average expected timing of cash flows		6.6 years

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

6. Share capital

Common shares issued

Common shares issued
	Number of shares	Amount
Balance, December 31, 2021	86,649 $	178,110
Exercise of stock options	1,302	1,040
Contributed surplus transferred on exercise of stock options	**– **	484
Balance, June 30, 2022	87,951$	179,634

7. Share-based compensation

During the six months ended June 30, 2022, the Company granted options to purchase 901 common shares exercisable at a weighted average price of $2.65 per share for a period of five years, with 50% vesting one year after the grant date and 50% vesting two years after the grant date. The fair value of the options was estimated at $1.29 using the Black-Scholes option pricing model.

During the six months ended June 30, 2022, the Company recognized $338 (2021 – $559) of share-based compensation in the condensed interim consolidated statement of income and comprehensive income and capitalized $160 (2021 - $134) of share-based compensation to property and equipment.

The following table provides a continuity of stock options outstanding as at:

	Number of	Weighted –
	stock	average
	options	exercise price
Balance, December 31, 2021	8,287	$0.86
Granted	901	2.65
Exercised	(1,302)	(0.80)
Cancelled	(439)	(2.15)
Balance, June 30, 2022	7,447	$1.01

The following provides a summary of the stock options outstanding as at June 30, 2022:

Range of exercise price	Number outstanding Weighted-average remaining contractual life (years) Weighted- average exercise price	Number exercisable Weighted- average exercise price
$ 0.45 – $ 0.49 $ 0.50 – $ 1.00 $ 1.01 – $ 1.50 $ 1.51 – $ 2.00 $ 2.00 – $ 2.50 $ 2.51 – $ 3.00 $ 3.01 – $ 3.50	60 3.25 $ 0.45 4,840 3.20 0.57 1,218 3.91 1.35 432 4.38 1.66 599 4.73 2.45 28 4.75 2.90 270 4.89 3.05	60 $ 0.45 4,840 0.57 870 1.34 216 1.66 – – – – – –
	7,447 3.58 $ 1.01	5,986 $ 0.72

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

7. Share-based compensation (continued)

The Black-Scholes pricing model was used to estimate the fair value of stock options granted during the six months ended June 30, 2022 based on the following significant assumptions:

June 30, 2022 based on the following significant assumptions:
Weighted average exercise price per stock option	$2.65
Risk-free interest rate	2.18% - 2.70%
Expected volatility	66%
Weighted average expected life	4 years
Forfeiture rate	5%
Weighted average fair value per stock option	$1.29

8. Earnings per common share

Basic earnings per share was calculated as follows:

Basic earnings per share was calculated as follows:
		Three	months ended			Six months ended
				June 30			June 30
		2022		2021		2022	2021
Net income for the period	$	30,631	$	7,753	$	53,351$	16,870
Weighted average number of shares (basic)
Issued common shares at beginning of period		86,874		85,530		86,649	85,380
Stockoptions exercised		221		107		236	147
Weighted average number of common shares-basic		87,095		85,637		86,885	85,527
Net income per share-basic		0.35		0.09		0.61	0.20
Diluted earnings per share was calculated as follows:
Weighted average number of shares (diluted)
Weighted average number of shares (basic)		87,095		85,637		86,885	85,527
Effect of outstanding options		4,992		3,461		4,603	3,148
Weighted average number of common shares-diluted		92,087		89,098		91,488	88,675
Net income per share-diluted		0.33		0.09		0.58	0.19

The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding. For the three months ended June 30, 2022, no (2021 – 1,762) options were excluded based on an average share price of $3.14 (2021 – $1.22) for the period. For the six months ended June 30, 2022, 298 (2021 – 1,954) options were excluded as they were out of the money based on an average share price of $2.61 (2021 – $1.11) for the period.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

9. Change in non-cash working capital

	Three months ended June 30 Six months ended June 30
	2022 2021 2022 2021
Accounts receivable Prepaid expenses and inventory Accounts payable and accrued liabilities	$ (4,448)$ 2,109 $ (9,600)$ (2,065) (2,123) 464 (1,907) 641 9,844 2,456 962 7,471
	$ 3,273$ 5,029 $ (10,545)$ 6,047

The changes in non-cash working capital has been allocated to the following activities:

Operating Investing	$ (711) $ 2,471 $ (8,236)$ (1,634) 3,984 2,558 (2,309) 7,681
	$ 3,273 $ 5,029 $ (10,545)$ 6,047

10. Financial instruments and financial risk management

a. Accounts receivable and credit risk

Purchasers of the Company’s natural gas and liquids are subject to credit review to minimize the risk of non-payment. As at June 30, 2022, the maximum credit exposure is the carrying amount of the accounts receivable of $37,136 (December 31, 2021 – $27,536).

The maximum exposure to credit risk for accounts receivable by type of customer was:

	June 30, 2022 December 31, 2021
Natural gas and liquids marketers Partners on joint operations Other	$ 25,833$ 16,186 8,970 8,638 2,333 2,712
	$ 37,136$ 27,536

The Company historically has not experienced any significant collection issues with its natural gas and liquids marketers. The majority of the revenue accruals and receivables from natural gas and liquids marketers were received in July 2022.

The Company’s receivables are aged as follows:

As at	June 30, 2022 December 31, 2021
Under 30 days 30 to 60 days 60 to 90 days Over 90 days	$ 27,227$ 18,453 382 50 1,336 888 8,191 8,145
	$ 37,136$ 27,536

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

a. Accounts receivable and credit risk (continued)

98% (December 31, 2021 – 99%) of the over 90-day receivables are made up of three (December 31, 2021 – three) industry partners, for which a significant portion of the balances are in dispute (note 14). The Company has performed an analysis of each partner’s financial situation and have determined they have the ability to pay.

b. Liquidity risk

As June 30, 2022, the contractual maturities of the Company’s obligations are as follows:

		Carrying Amount	Contractual Cash Flows	Less than 1 year	1-2 Years	2-5 Years
Accounts payable and accrued liabilities		$ 34,892	$ 34,892	$ 34,892	$ –	$ –
Bank debt		164,562	165,084	–	165,084	–
Lease obligations		3,577	4,566	2,159	1,393	1,014
Other liabilities		864	864	–	–	864
Commoditycontracts		849	849	849	–	–
		$204,744	$206,255	$37,900	$166,477	$1,878

c. Market risk

The Company has exposure to the following market risks:

i. Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate fluctuations on its bank debt which bears interest at a floating rate and to mitigate this risk, the Company has entered into interest rate contracts. For the six months ended June 30, 2022, if interest rates had been 1% lower with all other variables held constant, net income would have been $853 (2021 - $945) higher, due to lower interest expense. An equal and opposite impact would have occurred had interest rates been higher by the same amount. The Company had no interest rate contracts in place as at June 30, 2022.

ii. Currency risk

Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. All of the Company’s petroleum and natural gas sales are denominated in Canadian dollars, however, the underlying market prices in Canada for petroleum and natural gas are impacted by changes in the exchange rate between the Canadian and United States dollar. The sensitivity of the fair value of a 10% change in foreign exchange rates would have an immaterial impact the consolidated statements of income and comprehensive income.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

c. Market risk (continued)

iii. Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices.

As at June 30, 2022, the Company was committed to the following commodity price risk contracts:

	Year Volume	Term	Reference **Type **	Strike Price	Fair Value
	Natural Gas
	2022 2,500 GJ/d	Apr - Oct	AECO - Monthly 5A Swap	CAD $4.49/GJ	$ (147)
	2022 5,000 GJ/d	Apr - Oct	AECO - Monthly 7A Swap	CAD $4.50/GJ	$ (702)
	Propane
	2022 200 bbl/d	Jan to Dec	Conway - C3 to Mont Belvieu C3 Basis Swap	Plus USD 0.0025/Gallon	$ 18
	Total				$(831)

As the Company had a limited number of derivatives in place as at June 30, 2022, the sensitivity of the fair value of a 10% volatility in commodity prices would have an immaterial impact on unrealized gains (losses) reported in the consolidated statements of income and comprehensive income.

d. Fair value of financial instruments

The following table summarizes the carrying value and fair value of the Company’s risk management assets and liabilities.

Financial Assets At fair value through profit or loss: Interest rate contracts Commodity contracts Financial Liabilities At fair value through profit or loss: Interest rate contracts Commodity contracts	Measurement Level	June 30, 2022 December 31, 2021
		Carrying Amount Fair Value Carrying Amount Fair Value
	2 $ 2 $ 2 $ 2 $	18 $ 18$ 621 $ 621 – $ –$ – $ – – $ –$ 257 $ 257 849 $ 849$ 11 $ 11

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

d. Fair value of financial instruments (continued)

The fair values of financial instruments have been determined by various valuation methods as defined below:

• Level 1: fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: fair value is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and,

• Level 3: fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between levels in the fair value hierarchy during the six months ended June 30, 2022.

11. Capital disclosures

The Company considers its capital structure to include shareholders equity and debt:

		June 30, 2022		December 31, 2021
Shareholders’ equity	$	419,848	$	364,959
Bank debt	$	164,562	$	195,422

The Company monitors capital based on annual cash from operations before changes in non-cash working capital and capital expenditure budgets, which are updated as necessary and are reviewed and periodically approved by the Board of Directors.

At June 30, 2022 and December 31, 2021, the Company’s capital structure was subject to the banking covenant disclosed in note 3. No changes were made to the capital policy in 2022.

12. Finance expense

	Three months ended June 30 Six months ended June 30
	2022 2021 2022 2021
Cash interest and finance costs Interest on lease obligations Realized gain on interest rate contracts Change in fair value of interest rate contracts Accretion of decommissioning liability_(note 5) Accretion of debt transaction costs(note 3) Accretion of lease obligations(note 4)_	$ 2,273 $ 2,810 $ 4,676$ 5,592 84 92 173 188 – 202 (393) 202 – 490 364 (2,189) 81 43 132 67 117 99 255 209 42 (42) (95) (85)
	$ 2,597 $ 3,694 $ 5,112$ 3,984

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

13. Revenue

The Company derives its revenue from contracts with customers primarily through the transfer of commodities at a point in time representing the following major product types:

	Three months ended June 30 Six months ended June 30
	2022 2021 2022 2021
Crude Oil Natural Gas Natural Gas Liquids	$ 28,665 $ 14,557 $ 54,164$ 29,308 26,129 8,026 40,693 15,956 13,751 5,946 25,116 11,740
	$ 68,545 $ 28,529 $119,973$ 57,004

At June 30, 2022, receivables from contracts with customers, which are included in trade accounts receivable, were $29,454 (December 31, 2021 – $16,620).

14. Contingency

In the normal conduct of operations, there are other pending claims by and against the Company. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. In the opinion of management, based on the advice and information provided by its legal counsel, the final determination of these other litigations will not materially affect the Company’s financial position or results of operations.

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