PRIMEENERGY RESOURCES CORP Revenue Disclosure

Revenue recognition:

The majority of the Company’s production is operated by third party operators where we elect to market our products under the joint operating agreements. Accordingly, we receive our proportionate share of revenue proceeds for production sold by the operator under the operator’s marketing agreements. The Company recognizes revenue net of any costs incurred by the operator or its purchasers in the related period of production. Revenues are also received net of production taxes which are recorded separately in other production and ad valorem taxes.

The Company recognizes revenue related to production from properties operated by the Company when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenues are recorded net to our interest and subject to royalties. Each unit of production typically represents a separate performance obligation; therefore, future volumes are wholly unsatisfied therefore the transaction price allocated to a remaining performance obligation is not required. The Company believes that the disaggregation of revenue into these three products as presented in the consolidated financial statements of income appropriately depicts how the nature, amount, timing and uncertainty of revenue and cashflows are affected by economic factors based on its geographic location.

Oil sales. The Company recognizes oil sales revenue when (i) control/custody transfers to the purchaser and (ii) the agreed-upon index price, net of any price differentials, is fixed and determinable. Any costs incurred prior to the transfer of control to the customer, such as gathering and transportation costs, are recognized as oil and gas production costs.

NGL and gas sales. Under the majority of the Company’s gas processing contracts, gas is delivered to a midstream processing entity and the Company recognizes revenue when the products are delivered to the midstream gathering or processing entity at a specified index price, net of downstream gathering and processing fees.

Field service income. The majority of the Company’s services are performed under Master Service Agreements. The Company recognizes revenue when the products and services are provided to the customer.