−Removed: COVID-19 Risk Factors
−Removed: Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.
−Removed: In 2020, in response to the novel coronavirus (COVID-19) pandemic governments around the world, including U.S.
−Removed: federal and state governments, imposed restrictions intended to limit the extent and spread of the virus, including travel restrictions, quarantines and business closures.
−Removed: The COVID-19 outbreak and governmental restrictions significantly impacted economic activity and markets and dramatically reduced current and anticipated demand for oil and natural gas, adversely impacting the prices we receive for our production, resulting in us temporarily shutting in producing wells.
−Removed: During 2021, widespread availability of COVID-19 vaccines in the United States and elsewhere combined with accommodative governmental monetary and fiscal policies and other factors, led to a rebound in demand for oil and natural gas and increases in oil and natural gas prices.
−Removed: However, there remains the potential for demand for oil and natural gas to be adversely impacted by the economic effects of the ongoing COVID-19 pandemic, including as a consequence of the circulation of more infectious “variants” of the disease, vaccine hesitancy, waning vaccine effectiveness or other factors.
−Removed: As a consequence, we are unable to predict the impact of these factors which may negatively impact our business in numerous ways, including, but not limited to, the following:
−Removed: ● reducing our revenues if the outbreak results in a substantial or prolonged decrease in demand for oil and natural gas due to an economic downturn or recession;
−Removed: ● disrupting our operations if our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to measures designed to contain the outbreak;
−Removed: ● disrupting the operations of our midstream service providers, on whom we rely for the gathering, processing and transportation of our production, due to measures designed to contain the outbreak, and/or the difficult economic environment may lead to capital spending constraints, bankruptcy, the closing of facilities or inability to maintain infrastructure, which may adversely affect our ability to market our production, increase our costs, lower the prices we receive, or result in the shut-in of our producing wells or a delay or discontinuation of our development plans;
−Removed: ● the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to access capital, monetize assets and successfully execute our plans.
−Removed: The ongoing COVID-19 pandemic may also have the effect of heightening many of the other risks set forth below.
−Removed: Any of these factors could have a material adverse effect on our business, operations, financial results and liquidity.
−Removed: In 2020, oil and natural gas prices declined to historically low levels and we reduced our planned capital expenditures, delayed our drilling and completion plans and temporarily shut-in some of our producing wells, among other responses.
−Removed: We are unable to predict the ultimate adverse impact of the ongoing COVID-19 on our business, which will continue to depend on numerous evolving factors and future developments, including the length of time that the pandemic continues, its ongoing effect on the demand for oil and natural gas and the response of the overall economy and the financial markets after governmental restrictions are eased.
−Removed: A financial downturn could negatively affect our business, results of operations, financial condition and liquidity.
−Removed: Actual or anticipated declines in domestic or foreign economic growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the U.S.
−Removed: or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from current efforts to contain the ongoing COVID-19 coronavirus or other factors, could materially affect our business and financial condition and impact our ability to finance operations by worsening the actual or anticipated future drop in worldwide oil demand, negatively impacting the price we receive for our oil and natural gas production.
−Removed: Negative economic conditions could also adversely affect the collectability of our trade receivables or performance by our vendors and suppliers or cause our commodity hedging arrangements to be ineffective if our counterparties are unable to perform their obligations.
−Removed: All of the foregoing may adversely affect our business, financial condition, results of operations and cash flows.
−Removed: Operational Risk Factors
−Removed: We are substantially dependent upon our drilling success on our Delaware Basin properties.
−Removed: We are a pure-play, single- basin operator in the Delaware Basin in West Texas.
−Removed: As a consequence of this geographical concentration, we may have greater exposure to the impact of regional supply and demand factors, delays or interruptions in production from governmental regulation, processing or transportation capacity constraints, market limitations, water shortages, or other conditions adversely impacting our ability to produce or market our production.
−Removed: Such events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
−Removed: Our exploration and development drilling efforts and the operation of our wells may not be profitable or achieve our targeted rates of return.
−Removed: Exploration, development, drilling and production activities are subject to many risks, including the risk that commercially productive reservoirs will not be discovered.
−Removed: We invest in property, including undeveloped leasehold acreage, which we believe will result in projects that will add value over time.
−Removed: However, we cannot guarantee that our leasehold acreage will be profitably developed, that new wells drilled by us will be productive or that we will recover all or any portion of our investment in such leasehold acreage or wells.
−Removed: Drilling for oil and natural gas may involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting operating and other costs.
−Removed: In addition, wells that are profitable may not achieve our targeted rate of return.
−Removed: Our ability to achieve our target results is dependent upon current and future market prices for our oil and natural gas, costs associated with producing oil and natural gas and our ability to add reserves at an acceptable cost.
−Removed: The costs of drilling and completing a well are often uncertain, and are affected by many factors, including:
−Removed: ● unexpected drilling conditions;
−Removed: ● pressure or irregularities in formations;
−Removed: ● equipment failures or accidents and shortages or delays in the availability of drilling and completion equipment and services;
−Removed: ● adverse weather conditions;
−Removed: ● compliance with governmental requirements.
−Removed: If we are unable to accurately predict and control the costs of drilling and completing a well, we may be forced to limit, delay or cancel drilling operations.
−Removed: Increasing attention to environmental, social and corporate governance (ESG) matters may impact our business.
−Removed: Companies conducting oil and natural gas activities, along with companies across other industries, are facing increased scrutiny from stakeholders related to their ESG policies and practices.
−Removed: Stakeholder expectations and standards around ESG are evolving and companies that do not adapt or comply with those expectations and standards, regardless of whether there is a legal requirement to do so, may be adversely impacted.
−Removed: Increased attention to ESG matters may
−Removed: impact our business by increasing costs, reducing demand for oil and natural gas, reducing profits, increasing regulations and litigation, and impending our access to capital or may negatively impact our stock price.
−Removed: In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their ESG approaches.
−Removed: Currently, there are no universal standards for scores or ratings;
−Removed: however, the importance of sustainability evaluations is becoming more broadly accepted and utilized by investors and stockholders.
−Removed: Unfavorable ratings or assessment of our ESG practices may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to capital.
−Removed: We could experience periods of higher costs for various reasons, including due to higher commodity prices, increased drilling activity in the Delaware Basin and trade disputes or inflation that affect the costs of steel and other raw materials that we and our vendors rely upon, which could adversely affect our ability to execute our exploration and development plans on a timely basis and within budget.
−Removed: Our industry is cyclical.
−Removed: When oil, natural gas and natural gas liquids prices increase, shortages of drilling rigs, equipment, supplies, water or qualified personnel may result.
−Removed: During these periods, the costs and delivery times of rigs, equipment and supplies are substantially greater.
−Removed: In addition, the demand for, and wage rates of, qualified drilling rig crews rise as the number of active rigs in service increases.
−Removed: Increasing levels of exploration and production, particularly in the Delaware Basin, likewise may increase demand for oilfield services and equipment, and the costs of these services and equipment may increase, while the quality of these services and equipment may suffer.
−Removed: Cost increases may also result from a variety of factors beyond our control, such as increases in the cost of electricity, steel and other materials that we and our vendors rely upon and increases in the cost of services to process, treat and transport our production.
−Removed: Any escalation or expansion of tariffs could result in higher costs and affect a greater range of materials we rely upon in our business.
−Removed: The unavailability or high cost of drilling rigs, pressure pumping equipment, tubulars and other supplies, and of qualified personnel can materially and adversely affect our operations and profitability.
−Removed: In order to secure drilling rigs and pressure pumping equipment and related services, we may enter into contracts that extend over several months or years.
−Removed: If demand for drilling rigs and pressure pumping equipment subside during the period covered by these contracts, the price we are required to pay may be significantly more than the market rate for similar services.
−Removed: We may not be able to drill wells on a substantial portion of our acreage.
−Removed: We may not be able to drill on a substantial portion of our acreage for various reasons.
−Removed: We may not generate enough cash flow from operations or be able to raise sufficient capital to do so.
−Removed: Commodities pricing may also make drilling some acreage uneconomic.
−Removed: Our actual drilling activities and future drilling budget will depend on drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, lease expirations, gathering system and pipeline transportation constraints, regulatory approvals and other factors.
−Removed: In addition, any drilling activities we conduct may not be successful or result in additional proved reserves, which could have a material adverse effect on our future business, financial condition and results of operations.
−Removed: Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.
−Removed: As of December 31, 2021, we owned leasehold interests in approximately 40,400 net acres in the Delaware Basin in West Texas of which approximately 11,100 net acres are undeveloped.
−Removed: Unless production in paying quantities is established on units containing these leases during their terms or unless we pay (to the extent we have the contractual right to pay) delay rentals or obtain other extensions to maintain the leases, these leases will expire.
−Removed: If our leases expire, we will lose our right to develop the related properties.
−Removed: We have no current plans to drill on acreage in other areas outside of our core area of operations.
−Removed: Our drilling plans are subject to change based upon various factors, many of which are beyond our control, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system and pipeline transportation constraints, and regulatory approvals.
−Removed: Further, some of our acreage is located in sections where we do not hold the majority of the acreage and
−Removed: therefore it is likely that we will not be named operator of these sections.
−Removed: As a non-operating leaseholder we have less control over the timing of drilling and are therefore subject to additional risk of expirations.
−Removed: Our oil and natural gas activities are subject to various risks that are beyond our control.
−Removed: Our operations are subject to many risks and hazards incident to exploring and drilling for, producing, transporting, marketing and selling oil and natural gas.
−Removed: Although we take precautionary measures, many of these risks and hazards are beyond our control and unavoidable under the circumstances.
−Removed: Many of these risks or hazards could materially and adversely affect our revenues and expenses, the ability of certain of our wells to produce oil and natural gas in commercial quantities, the rate of production and the economics of the development of, and our investment in, the prospects in which we have or will acquire an interest.
−Removed: Such risks and hazards include:
−Removed: ● human error, accidents and other events beyond our control that may cause personal injuries or death to persons and destruction or damage to equipment and facilities;
−Removed: ● blowouts, fires, adverse weather events, pollution and equipment failures that may result in damage to or destruction of wells, producing formations, production facilities and equipment;
−Removed: ● accidental leaks of natural gas, including gas with high levels of hydrogen sulfide (H2S), and other hydrocarbons or toxic or hazardous materials in the environment as a result of human error or the malfunction of equipment or facilities, which can result in personal injury and loss of life, pollution, damage to equipment and suspension of operations;
−Removed: ● well-on-well interference that may reduce recoveries;
−Removed: ● unavailability of materials and equipment;
−Removed: ● engineering and construction delays;
−Removed: ● unanticipated transportation costs and delays;
−Removed: ● unfavorable weather conditions;
−Removed: ● hazards resulting from unusual or unexpected geological or environmental conditions;
−Removed: ● changes in laws and regulations, including laws and regulations applicable to oil and natural gas activities or markets for the oil and natural gas produced;
−Removed: ● fluctuations in supply and demand for oil and natural gas causing variations of the prices we receive for our oil and natural gas production;
−Removed: ● the availability of alternative fuels and the price at which they become available.
−Removed: Some of these risks may be exacerbated by other risks that we face.
−Removed: For instance, certain of our wells produce high levels of H2S, a highly toxic, naturally-occurring gas frequently associated with oil and natural gas production.
−Removed: Safely handling H2S gas requires highly skilled operations and field personnel as well as specialized infrastructure, treating facilities, disposal facilities, and/or third party sour gas takeaway.
−Removed: If we are unable to attract and retain qualified and highly skilled personnel our ability to effectively manage this and other risks may be adversely impacted.
−Removed: Additionally, if we are unable to successfully operate our specialized treating facilities or secure adequate sour gas takeaway capacity from third parties when and if necessary, our ability to effectively manage the H2S levels we see in our natural gas production may be adversely impacted.
−Removed: As a result, our production, revenues, operating costs and liabilities and expenses may be materially and adversely affected and may differ materially from those anticipated by us.
−Removed: Our ability to sell our production and/or receive market prices for our production may be adversely affected by transportation capacity constraints and interruptions.
−Removed: If the amount of natural gas, condensate or oil being produced by us and others exceeds the capacity of the various transportation pipelines and gathering systems available in our operating areas, it may be necessary for new transportation pipelines and gathering systems to be built.
−Removed: Or, in the case of oil and condensate, it will be necessary for us to rely more heavily on trucks or trains to transport our production, which is more expensive and less efficient than transportation via pipeline.
−Removed: The construction of new pipelines and gathering systems is capital intensive and construction may be postponed, interrupted or cancelled in response to changing economic conditions, the availability and cost of capital, public opposition, regulatory restrictions and judicial challenges.
−Removed: In addition, capital constraints could limit our ability to build gathering systems to transport our production to transportation pipelines.
−Removed: In such event, costs to transport
−Removed: our production may increase materially or we might have to shut in our wells awaiting a pipeline connection or capacity and/or sell our production at much lower prices than market or than we currently expect, which would adversely affect our results of operations.
−Removed: A portion of our production may also be interrupted, or shut in, from time to time for numerous other reasons, including as a result of weather conditions (which may worsen due to climate changes), accidents, loss of pipeline or gathering system access, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions.
−Removed: If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flow.
−Removed: Our strategy involves drilling in shale formations, using horizontal drilling and modern completion techniques.
−Removed: The results of our drilling program using these techniques may be subject to more uncertainties than conventional drilling programs.
−Removed: These uncertainties could result in an inability to meet our expectations for reserves and production.
−Removed: The drilling of long horizontal laterals and the use of modern completion techniques with multi-stage fracture stimulation in shale formations involves certain risks and complexities that do not exist in conventional wells.
−Removed: Such risks include, but are not limited to, landing the horizontal wellbore in the desired drilling zone, maintaining the desired drilling zone while drilling horizontally through the wellbore formation, running casing through the full span of the wellbore, and being able to run tools and other necessary equipment consistently throughout the horizontal wellbore.
−Removed: Additionally, horizontal drilling and completion techniques may result in faster production decline rates relative to conventional drilling methods.
−Removed: The ultimate success of our drilling and completion strategies and techniques will be better evaluated over time as more wells are drilled and production profiles are better established.
−Removed: If our drilling results are less than anticipated, our investment in these areas may not be as attractive as we anticipate and could result in material write-downs of unevaluated properties and future declines in the value of our undeveloped acreage.
−Removed: Title to the properties in which we have an interest may be impaired by title defects.
−Removed: We generally obtain title opinions on significant properties that we drill or acquire.
−Removed: However, there is no assurance that we will not suffer a monetary loss from title defects or title failure.
−Removed: Additionally, undeveloped acreage has greater risk of title defects than developed acreage.
−Removed: Generally, under the terms of the operating agreements affecting our properties, any monetary loss is to be borne by all parties to any such agreement in proportion to their interests in such property.
−Removed: If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we will suffer a financial loss.
−Removed: We depend substantially on the continued presence of key personnel for critical management decisions and industry contacts.
−Removed: Our success depends upon the continued contributions of our executive officers and key employees, particularly with respect to providing the critical management decisions and contacts necessary to manage and maintain growth within a highly competitive industry.
−Removed: Competition for qualified personnel can be intense, particularly in the oil and natural gas industry, and there are a limited number of people with the requisite knowledge and experience.
−Removed: Under these conditions, we could be unable to attract and retain these personnel.
−Removed: The loss of the services of any of our executive officers or other key employees for any reason could have a material adverse effect on our business, operating results, financial condition and cash flows.
Financial and Liquidity Risk Factors
1 unchanged sentence
Our revenues, profitability, future growth and the carrying value of our properties depend substantially on prevailing oil and natural gas prices.
−Removed: Prices also affect the amount of cash flow we have available for capital expenditures and our
−Removed: ability to borrow and raise additional capital.
+Added: Prices also affect the amount of cash flow we have available for capital expenditures and our ability to borrow and raise additional capital.
Lower prices may also reduce the amount of oil and natural gas that we can economically produce and have an adverse effect on the value of our properties.
9 unchanged sentences
● the price and availability of foreign imports and domestic exports;
−Removed: ● worldwide and regional economic and political conditions impacting the global supply and demand for oil and natural gas, which may be driven by many factors, including health epidemics (such as the current global COVID-19 coronavirus outbreak).
+Added: ● worldwide and regional economic and political conditions impacting the global supply and demand for oil and natural gas, which may be driven by many factors, including health epidemics (such as the global COVID-19 coronavirus outbreak).
These external factors and the volatile nature of the energy markets make it difficult to estimate future prices of oil and natural gas.
1 unchanged sentence
Our business requires substantial capital expenditures primarily to fund our drilling program.
−Removed: We may also continue to selectively increase our core acreage position, which would require capital in addition to the capital necessary to drill on our existing acreage.
+Added: We may also continue to selectively increase our acreage position, which would require capital in addition to the capital necessary to drill on our existing acreage.
It is possible that we will acquire acreage in other areas that we believe are prospective for oil and natural gas production and expend capital to develop such acreage.
−Removed: We expect to use borrowings under our Term Loan Agreement and proceeds from potential future capital markets transactions, if necessary, and which may be difficult or limited to access, to fund capital expenditures that are in excess of our operating cash flow and cash on hand.
−Removed: Our Term Loan Agreement limits our borrowings.
−Removed: As of December 31, 2021, our Term Loan Agreement had an initial borrowing availability of $200.0 million.
−Removed: As of December 31, 2021, we had $200.0 million of indebtedness outstanding, approximately $0.3 million of letters of credit outstanding and approximately $35.0 million in delayed draw term loans available to be drawn under our Term Loan Agreement, subject to the satisfaction of certain conditions defined in the agreement.
−Removed: Under the Term Loan Agreement, we are required to make scheduled amortization payments in the aggregate amount of $120.0 million from the fiscal quarter ending March 31, 2023 through the fiscal quarter ending September 30, 2025.
−Removed: Our Term Loan Agreement also contains certain financial covenants, including the maintenance of (i) an Asset Coverage Ratio, (ii) a Total Net Leverage Ratio and (iii) a Current Ratio, each as defined in the Term Loan Agreement.
−Removed: We have periodically sought amendments to the covenants under our revolving credit agreements, including the financial covenants, where we have anticipated difficulty in maintaining compliance.
−Removed: In the event we have difficulty in the future meeting the covenants under our Term Loan Agreement, we would be required to seek additional relief, and there is no assurance that it would be granted.
−Removed: Failure to comply with the covenants in our Term Loan Agreement may limit our ability to borrow, result in an event of default and cause amounts outstanding under our Term Loan Agreement to become immediately due and payable.
−Removed: Additionally, certain segments of the investor community have developed negative sentiment towards investing in our industry, with some investors and investment advisors adopting policies negatively impacting investment in the oil and gas sector based on social and environmental considerations.
+Added: We expect to use proceeds from potential future capital markets transactions, if necessary, and which may be difficult or limited to access, to fund capital expenditures that are in excess of our operating cash flow and cash on hand.
+Added: Additionally, certain segments of the investor community have negative sentiment towards investing in our industry, with some investors and investment advisors adopting policies negatively impacting investment in the oil and gas sector
+Added: based on social and environmental considerations.
Commercial and investment banks have also come under pressure to stop financing oil and gas production and related infrastructure projects.
−Removed: Such developments, including
−Removed: environmental activism and initiatives aimed at limiting climate change and reducing air pollution, could potentially result in a reduction of available capital funding for development projects, thus impacting future financial results.
−Removed: If borrowings under our Term Loan Agreement become insufficient and we are unable to raise sufficient capital to fund our capital expenditures, we may be required to curtail our drilling, development, land acquisitions and other activities, which could result in a decrease in our production of oil and natural gas, forfeiture of leasehold interests if we are unable or unwilling to renew them, and the sale of some of our assets on an unfavorable basis, each of which could have a material adverse effect on our results and future operations.
+Added: Such developments, including environmental activism and initiatives aimed at limiting climate change and reducing air pollution, could potentially result in a reduction of available capital funding for development projects, thus impacting future financial results.
+Added: If we are unable to raise sufficient capital to fund our capital expenditures, we may be required to curtail our drilling, development, land acquisitions and other activities, which could result in a decrease in our production of oil and natural gas, forfeiture of leasehold interests if we are unable or unwilling to renew them, and the sale of some of our assets on an unfavorable basis, each of which could have a material adverse effect on our results and future operations.
+Added: Failure to comply with the covenants in our Amended Term Loan Agreement may limit our ability to borrow, result in an event of default and cause amounts outstanding under our Amended Term Loan Agreement to become immediately due and payable.
+Added: On November 24, 2021, the Company and its wholly owned subsidiary, Halcón Holdings, LLC (Borrower) entered into an Amended and Restated Senior Secured Credit Agreement (Term Loan Agreement) with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders.
+Added: On November 14, 2022, the Company entered into a further Amended Credit Agreement (the “Amended Term Loan Agreement”) with its lenders which modified certain provisions of its original Term Loan Agreement.
+Added: Our Amended Term Loan Agreement limits our borrowings.
+Added: As of December 31, 2022, we had approximately $235.0 million of indebtedness outstanding and approximately $1.4 million of letters of credit outstanding under the Amended Term Loan Agreement.
+Added: As of December 31, 2022, we have no additional borrowing capacity under the Amended Term Loan.
+Added: Additionally, our Amended Term Loan Agreement contains certain covenants (namely our Current Ratio covenant) as well as a mandatory repayment schedule requiring us to make scheduled amortization payments in the aggregate amount of $35.0 million in 2023 and $120.0 million in the aggregate from the fiscal quarter ending March 31, 2023 through the fiscal quarter ending September 30, 2025.
+Added: In November 2022, anticipated non-compliance with our Current Ratio covenant required us to amend our Term Loan Agreement which reduced our Current Ratio requirement through March 31, 2023.
+Added: Additionally, in order to provide sufficient liquidity in 2023 to address upcoming debt maturities and covenant compliance while funding our operating and capital programs, we obtained approximately $24.4 million of additional equity funding from certain of our existing equity shareholders in March 2023.
+Added: For a further discussion of these actions, refer to Item 7 , Management’s Discussion and Analysis, “Capital Resources and Liquidity” and Item 9B.
+Added: Other Information.
+Added: Our Amended Term Loan Agreement contains the following financial covenants (as defined), including the maintenance of the following ratios:
+Added: ● an Asset Coverage Ratio of not less than 1.80 to 1.00 as of December 31, 2022 and each fiscal quarter thereafter
+Added: ● a Total Net Leverage Ratio of not greater than 3.00 to 1.00 as of December 31, 2022, 2.75 to 1.00 as of March 31, 2023, and 2.50 to 1.00 as of each fiscal quarter thereafter, and
+Added: ● a Current Ratio of not less than 1.00 to 1.00, each determined as of the last day of any fiscal quarter period, other than as amended in November 2022 to 0.70 to 1.00 as of December 31, 2022, and to 0.75 to 1.00 as of March 31, 2023
+Added: As of December 31, 2022, the Company was in compliance with its financial covenants.
+Added: As described above and in other historical periods, we have periodically sought amendments to the covenants under our revolving credit agreements, including the financial covenants, where we have anticipated difficulty in maintaining compliance.
+Added: In the event we have difficulty in the future meeting the covenants under our Amended Term Loan Agreement, we would be required to seek additional relief, and there is no assurance that it would be granted.
+Added: comply with the covenants in our Amended Term Loan Agreement may limit our ability to borrow, result in an event of default and cause amounts outstanding under our Amended Term Loan Agreement to become immediately due and payable.
Unless we replace our reserves, our reserves and production will decline, which would adversely affect our financial condition, results of operations and cash flows.
10 unchanged sentences
As a result of our indebtedness, we will need to use a portion of our cash flow to pay interest, and outstanding principal beginning in the fiscal quarter ending March 31, 2023, which will reduce the amount of cash flow we will have available to finance our operations and other business activities and could limit our flexibility in planning for or reacting to changes or adverse developments in our business or economic downturns impacting the industry in which we operate.
−Removed: Indebtedness under our Term Loan Agreement is at a variable interest rate, and so a rise in interest rates will generate greater interest expense to the extent we do not have hedging arrangements that are effective in offsetting interest rate fluctuations.
−Removed: Currently, borrowings under our Term Loan Agreement bear interest at a margin over LIBOR.
−Removed: Financial regulators are working to transition away from LIBOR as a benchmark, and in March 2021, confirmed that the publication of the one-week and two-month LIBOR would cease after December 31, 2021, and all remaining LIBOR tenors will cease after June 30, 2023.
−Removed: If a published LIBOR rate is unavailable, the interest rate on our Term Loan Agreement will be determined using another applicable reference rate and the impact on our borrowing costs, if any, under the alternative rate is uncertain and could have an adverse effect on our cash flows.
+Added: Indebtedness under our Amended Term Loan Agreement is at a variable interest rate, and so a rise in interest rates will generate greater interest expense to the extent we do not have hedging arrangements that are effective in offsetting interest rate fluctuations.
+Added: A rise in interest rates could impact on our borrowing costs and could have an adverse effect on our cash flows.
+Added: In conjunction with the amendment of our Term Loan Agreement in November 2022, we (i) converted our benchmark interest rate from LIBOR to a Secured Overnight Financing Rate (SOFR) plus 0.15% and (ii) increased the applicable margin on borrowings by 0.50%.
+Added: Borrowings under the Amended Term Loan Agreement will now bear interest at a rate per annum equal to the SOFR plus 7.65%.
We may incur substantially more debt in the future.
−Removed: At December 31, 2021, we had approximately $35.0 million of delayed draw term loans available to be drawn under our Term Loan Agreement, subject to the satisfaction of certain conditions defined in the agreement.
Our ability to meet our debt obligations and other expenses will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors, many of which we are unable to control.
16 unchanged sentences
Estimated proved reserves as of December 31, 2022 assume that we will make future capital expenditures of approximately $633.3 million in the aggregate primarily from 2023 through 2027, which are necessary to develop and realize the value of proved reserves on our properties.
−Removed: The estimates of these oil and natural gas reserves and the costs associated with development of these reserves have been prepared in accordance with SEC regulations, however, actual capital expenditures will likely vary from estimated capital expenditures, development may not occur as scheduled and actual results may not be as estimated.
+Added: The estimates of these oil and natural gas reserves and the costs associated with development of these reserves have been prepared in accordance with SEC regulations;
+Added: however, actual capital expenditures will likely vary from estimated capital expenditures, development may not occur as scheduled and actual results may not be as estimated.
We are subject to various contractual limitations that affect the discretion of our management in operating our business.
−Removed: Our Term Loan Agreement contains various provisions that may limit our management’s discretion in certain respects.
−Removed: In particular, the Term Loan Agreement limits our and our subsidiaries’ ability to, among other things:
+Added: Our Amended Term Loan Agreement contains various provisions that may limit our management’s discretion in certain respects.
+Added: In particular, the Amended Term Loan Agreement limits our and our subsidiaries’ ability to, among other things:
● pay dividends on, redeem or repurchase shares of our common stock and any other capital stock we may issue;
11 unchanged sentences
Compliance with these and other limitations may limit our ability to operate and finance our business and engage in certain transactions in the manner we might otherwise.
−Removed: In addition, if we fail to comply with the limitations under our Term Loan Agreement, our creditors, to the extent the agreement so provides, may accelerate the related indebtedness as well as any other indebtedness to which a cross-acceleration or cross-default provision applies.
+Added: In addition, if we fail to comply with the limitations under our Amended Term Loan Agreement, our creditors, to the extent the agreement so provides, may accelerate the related indebtedness as well as any other indebtedness to which a cross-acceleration or cross-default provision applies.
In addition, lenders may be able to terminate any commitments they had made to make further funds available to us.
22 unchanged sentences
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (NOLs), and realized built in losses (RBILS), to offset future taxable income.
−Removed: In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through rules) increases by
−Removed: more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years).
+Added: In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through rules) increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years).
We experienced ownership changes in December 2018 and October 2019 and we may experience additional ownership changes in the future.
Limitations imposed on our ability to use NOLs and RBILS to offset future taxable income may cause U.S.
−Removed: federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect and could cause such NOLs and RBILS to expire unused, in each case reducing or eliminating the benefit of such NOLs and RBILS.
+Added: federal income taxes to be paid earlier than otherwise would be paid if such limitations were not
+Added: in effect and could cause such NOLs and RBILS to expire unused, in each case reducing or eliminating the benefit of such NOLs and RBILS.
Similar rules and limitations may apply for state income tax purposes.
5 unchanged sentences
If the net book value of oil and natural gas properties (reduced by any related net deferred income tax liability and asset retirement obligation) exceeds the ceiling limitation, SEC regulations require us to impair or “write-down” the book value of our oil and natural gas properties.
−Removed: During the year ended December 31, 2020, we recorded cumulative full cost ceiling impairments of $215.1 million, primarily driven by a decline in the average pricing used in the valuation of our reserves.
−Removed: As ceiling test computations depend upon the calculated unweighted arithmetic average prices, it is impossible to predict the likelihood, timing and magnitude of any future impairments.
−Removed: Depending on the magnitude, a ceiling test write-down could negatively affect our results of operations.
Costs associated with unevaluated properties, which were approximately $62.6 million at December 31, 2022, are not initially subject to the ceiling test limitation.
4 unchanged sentences
Hedging transactions may limit our potential gains and increase our potential losses.
−Removed: In order to manage our exposure to price risks in the marketing of our oil, natural gas, and natural gas liquids production and comply with the requirements of our Term Loan Agreement, we have entered into oil and natural gas hedging arrangements with respect to a portion of our anticipated production and we may enter into additional hedging transactions in the future.
+Added: In order to manage our exposure to price risks in the marketing of our oil, natural gas, and natural gas liquids production and comply with the requirements of our Amended Term Loan Agreement, we have entered into oil and natural gas hedging arrangements with respect to a portion of our anticipated production and we may enter into additional hedging transactions in the future.
While intended to reduce the effects of volatile commodity prices, such transactions may limit our potential gains and increase our potential losses if commodity prices were to rise substantially over the price established by the hedge.
3 unchanged sentences
● the counterparties to our hedging agreements fail to perform under the contracts.
+Added: Operational Risk Factors
+Added: We are substantially dependent upon our drilling success on our Delaware Basin properties.
+Added: We are a pure-play, single- basin operator in the Delaware Basin in West Texas.
+Added: As a consequence of this geographical concentration, we may have greater exposure to the impact of regional supply and demand factors, delays or interruptions in production from governmental regulation, processing or transportation capacity constraints, market limitations, water shortages, or other conditions adversely impacting our ability to produce or market our production.
+Added: Such events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
+Added: Our exploration and development drilling efforts and the operation of our wells may not be profitable or achieve our targeted rates of return.
+Added: Exploration, development, drilling and production activities are subject to many risks, including the risk that commercially productive reservoirs will not be discovered.
+Added: We invest in property, including undeveloped leasehold acreage, which we believe will result in projects that will add value over time.
+Added: However, we cannot guarantee that our leasehold acreage will be profitably developed, that new wells drilled by us will be productive or that we will recover all or any portion of our investment in such leasehold acreage or wells.
+Added: Drilling for oil and natural gas may involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting operating and other costs.
+Added: In addition, wells that are profitable may not achieve our targeted rate of return.
+Added: Our ability to achieve our target results is dependent upon current and future market prices for our oil and natural gas, costs associated with producing oil and natural gas and our ability to add reserves at an acceptable cost.
+Added: The costs of drilling and completing a well are often uncertain, and are affected by many factors, including:
+Added: ● unexpected drilling conditions;
+Added: ● pressure or irregularities in formations;
+Added: ● equipment failures or accidents and shortages or delays in the availability of drilling and completion equipment and services;
+Added: ● adverse weather conditions;
+Added: ● compliance with governmental requirements.
+Added: If we are unable to accurately predict and control the costs of drilling and completing a well, we may be forced to limit, delay or cancel drilling operations.
+Added: Increasing attention to environmental, social and corporate governance (ESG) matters may impact our business.
+Added: Companies conducting oil and natural gas activities, like many firms in other industries, are facing increased scrutiny from stakeholders related to their ESG policies and practices.
+Added: Stakeholder expectations and standards around ESG are evolving and companies that do not adapt or comply with those expectations and standards, regardless of whether there is a legal requirement to do so, may be adversely impacted.
+Added: Increased attention to ESG matters may impact our business by increasing costs, reducing demand for oil and natural gas, reducing profits, increasing regulations and litigation, or impeding our access to capital and may negatively impact our stock price.
+Added: In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their ESG approaches.
+Added: Currently, there are no universal standards for scores or ratings;
+Added: however, the importance of sustainability evaluations is becoming more broadly accepted and utilized by investors and stockholders.
+Added: Unfavorable ratings or assessment of our ESG practices may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to capital.
+Added: We could experience periods of higher costs for various reasons, including due to higher commodity prices, increased drilling activity in the Delaware Basin and trade disputes or inflation that affect the costs of steel and other raw materials that we and our vendors rely upon, which could adversely affect our ability to execute our exploration and development plans on a timely basis and within budget.
+Added: Our industry is cyclical.
+Added: When oil, natural gas and natural gas liquids prices increase, shortages of drilling rigs, equipment, supplies, water or qualified personnel may result.
+Added: During these periods, the costs and delivery times of rigs, equipment and supplies are substantially greater.
+Added: In addition, the demand for, and wage rates of, qualified drilling rig crews rise as the number of active rigs in service increases.
+Added: Increasing levels of exploration and production, particularly in the Delaware Basin, likewise may increase demand for oilfield services and equipment, and the costs of these services and equipment may increase, while the quality of these services and equipment may suffer.
+Added: Cost increases may also result from a variety of factors beyond our control, such as increases in the cost of electricity, steel and other materials that we and our vendors rely upon and increases in the cost of services to process, treat and transport our production.
+Added: Any escalation or expansion of tariffs could result in higher costs and affect a greater range of materials we rely upon in
+Added: our business.
+Added: The unavailability or high cost of drilling rigs, pressure pumping equipment, tubulars and other supplies, and of qualified personnel can materially and adversely affect our operations and profitability.
+Added: In order to secure drilling rigs and pressure pumping equipment and related services, we may enter into contracts that extend over several months or years.
+Added: If demand for drilling rigs and pressure pumping equipment subside during the period covered by these contracts, the price we are required to pay may be significantly more than the market rate for similar services.
+Added: We may not be able to drill wells on a substantial portion of our acreage.
+Added: We may not be able to drill on a substantial portion of our acreage for various reasons.
+Added: We may not generate enough cash flow from operations or be able to raise sufficient capital to do so.
+Added: Commodities pricing may also make drilling some acreage uneconomic.
+Added: Our actual drilling activities and future drilling budget will depend on drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, lease expirations, gathering system and pipeline transportation constraints, regulatory approvals and other factors.
+Added: In addition, any drilling activities we conduct may not be successful or result in additional proved reserves, which could have a material adverse effect on our future business, financial condition and results of operations.
+Added: Certain of our undeveloped leasehold acreage could expire if we are unable to meet continuous development clauses or similar provisions in our leases requiring development of our undeveloped acreage and/or maintaining production on units containing the acreage.
+Added: As of December 31, 2022, we owned leasehold interests in approximately 40,400 net acres in the Delaware Basin in West Texas of which approximately 9,700 net acres are undeveloped.
+Added: Generally, our oil and natural gas leases remain in force as long as production in paying quantities is maintained.
+Added: Currently, our leases on undeveloped oil and natural gas properties are either categorized as “held by production” or perpetuated by continuous development clauses contained in our leases or tolling agreements.
+Added: We continually review our leases on acreage subject to these clauses or agreements when planning for our future drilling programs.
+Added: If our leases on acreage subject to these provisions are not maintained by production in paying quantities or continuous development, our leases could expire and we would lose our right to develop the related properties.
+Added: Our drilling plans are subject to change based upon various factors, many of which are beyond our control, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system and pipeline transportation constraints, and regulatory approvals.
+Added: Further, while not material, some of our acreage is located in sections where we do not hold the majority of the acreage and therefore it is likely that we will not be named operator of these sections.
+Added: As a non-operating leaseholder we have less control over the timing of drilling and are therefore subject to additional risk of expirations.
+Added: Our oil and natural gas activities are subject to various risks that are beyond our control.
+Added: Our operations are subject to many risks and hazards incident to exploring and drilling for, producing, transporting, marketing and selling oil and natural gas.
+Added: Although we take precautionary measures, many of these risks and hazards are beyond our control and unavoidable under the circumstances.
+Added: Many of these risks or hazards could materially and adversely affect our revenues and expenses, the ability of certain of our wells to produce oil and natural gas in commercial quantities, the rate of production and the economics of the development of, and our investment in, the prospects in which we have or will acquire an interest.
+Added: Such risks and hazards include:
+Added: ● human error, accidents and other events beyond our control that may cause personal injuries or death to persons and destruction or damage to equipment and facilities;
+Added: ● blowouts, fires, adverse weather events, pollution and equipment failures that may result in damage to or destruction of wells, producing formations, production facilities and equipment;
+Added: ● accidental leaks of natural gas, including gas with high levels of hydrogen sulfide (H2S), and other hydrocarbons or toxic or hazardous materials in the environment as a result of human error or the malfunction of equipment or facilities, which can result in personal injury and loss of life, pollution, damage to equipment and suspension of operations;
+Added: ● well-on-well interference that may reduce recoveries;
+Added: ● unavailability of materials and equipment;
+Added: ● engineering and construction delays;
+Added: ● unanticipated transportation costs and delays;
+Added: ● unfavorable weather conditions;
+Added: ● hazards resulting from unusual or unexpected geological or environmental conditions;
+Added: ● changes in laws and regulations, including laws and regulations applicable to oil and natural gas activities or markets for the oil and natural gas produced;
+Added: ● fluctuations in supply and demand for oil and natural gas causing variations of the prices we receive for our oil and natural gas production;
+Added: ● the availability of alternative fuels and the price at which they become available.
+Added: Some of these risks may be exacerbated by other risks that we face.
+Added: For instance, certain of our wells produce high levels of H2S, a highly toxic, naturally-occurring gas frequently associated with oil and natural gas production.
+Added: Safely handling H2S gas requires highly skilled operations and field personnel as well as specialized infrastructure, treating facilities, disposal facilities, and/or third party sour gas takeaway.
+Added: If we are unable to attract and retain qualified and highly skilled personnel our ability to effectively manage this and other risks may be adversely impacted.
+Added: Additionally, if we are unable to successfully operate our specialized treating facilities or secure adequate sour gas takeaway capacity from third parties when and if necessary, our ability to effectively manage the H2S levels we see in our natural gas production may be adversely impacted.
+Added: As a result, our production, revenues, operating costs and liabilities and expenses may be materially and adversely affected and may differ materially from those anticipated by us.
+Added: Our ability to sell our production and/or receive market prices for our production may be adversely affected by transportation capacity constraints and interruptions.
+Added: If the amount of natural gas, condensate or oil being produced by us and others exceeds the capacity of the various transportation pipelines and gathering systems available in our operating areas, it may be necessary for new transportation pipelines and gathering systems to be built.
+Added: Or, in the case of oil and condensate, it will be necessary for us to rely more heavily on trucks or trains to transport our production, which is more expensive and less efficient than transportation via pipeline.
+Added: The construction of new pipelines and gathering systems is capital intensive and construction may be postponed, interrupted or cancelled in response to changing economic conditions, the availability and cost of capital, public opposition, regulatory restrictions and judicial challenges.
+Added: In addition, capital constraints could limit our ability to build gathering systems to transport our production to transportation pipelines.
+Added: In such event, costs to transport our production may increase materially or we might have to shut-in our wells awaiting a pipeline connection or capacity and/or sell our production at much lower prices than market or than we currently expect, which would adversely affect our results of operations.
+Added: A portion of our production may also be interrupted, or shut-in, from time to time for numerous other reasons, including as a result of weather conditions (which may worsen due to climate changes), accidents, loss of pipeline or gathering system access, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions.
+Added: If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flow.
+Added: Our strategy involves drilling in shale formations, using horizontal drilling and modern completion techniques.
+Added: The results of our drilling program using these techniques may be subject to more uncertainties than conventional drilling programs.
+Added: These uncertainties could result in an inability to meet our expectations for reserves and production.
+Added: The drilling of long horizontal laterals and the use of modern completion techniques with multi-stage fracture stimulation in shale formations involves certain risks and complexities that do not exist in conventional wells.
+Added: Such risks include, but are not limited to, landing the horizontal wellbore in the desired drilling zone, maintaining the desired drilling zone while drilling horizontally through the wellbore formation, running casing through the full span of the wellbore, and being able to run tools and other necessary equipment consistently throughout the horizontal wellbore.
+Added: Additionally, horizontal drilling and completion techniques may result in faster production decline rates relative to
+Added: conventional drilling methods.
+Added: The ultimate success of our drilling and completion strategies and techniques will be better evaluated over time as more wells are drilled and production profiles are better established.
+Added: If our drilling results are less than anticipated, our investment in these areas may not be as attractive as we anticipate and could result in material write-downs of unevaluated properties and future declines in the value of our undeveloped acreage.
+Added: Title to the properties in which we have an interest may be impaired by title defects.
+Added: We generally obtain title opinions on significant properties that we drill or acquire.
+Added: However, there is no assurance that we will not suffer a monetary loss from title defects or title failure.
+Added: Additionally, undeveloped acreage has greater risk of title defects than developed acreage.
+Added: Generally, under the terms of the operating agreements affecting our properties, any monetary loss is to be borne by all parties to any such agreement in proportion to their interests in such property.
+Added: If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we will suffer a financial loss.
+Added: We depend substantially on the continued presence of key personnel for critical management decisions and industry contacts.
+Added: Our success depends upon the continued contributions of our executive officers and key employees, particularly with respect to providing the critical management decisions and contacts necessary to manage and maintain growth within a highly competitive industry.
+Added: Competition for qualified personnel can be intense, particularly in the oil and natural gas industry, and there are a limited number of people with the requisite knowledge and experience.
+Added: Under these conditions, we could be unable to attract and retain these personnel.
+Added: The loss of the services of any of our executive officers or other key employees for any reason could have a material adverse effect on our business, operating results, financial condition and cash flows.
Investment in Securities Risk Factors
1 unchanged sentence
Funds advised by Luminus Management, LLC, Oaktree Capital Management, LP, and LSP Investment Advisors, LLC held approximately 37.4%, 24.2% and 14.4%, respectively, of our common stock as of March 27, 2023.
−Removed: Circumstances may arise in which these stockholders may have an interest in pursuing or preventing acquisitions, divestitures or other transactions, including the issuance of additional equity securities or debt, that, in their judgment, could enhance their investment in us or another company in which they invest.
+Added: Circumstances may arise in which these stockholders may have an interest in pursuing or preventing acquisitions, divestitures, or the issuance of additional equity securities or debt, that, in their judgment, could enhance their investment in us or another company in which they invest.
Such transactions might adversely affect us or other holders of our common stock.
4 unchanged sentences
We are currently authorized to issue 100.0 million shares of common stock and 1.0 million shares of preferred stock, with such designations, rights, preferences, privileges and restrictions as determined by the Board.
−Removed: As of March 3, 2022, we had outstanding approximately 16.3 million shares of common stock, and warrants, options and restricted stock units to purchase or receive an aggregate of 8.1 million shares of our common stock.
−Removed: As of March 3, 2022, we have also reserved an additional 0.5 million shares for future issuance to our directors, officers and employees under our 2020 Long-Term Incentive Plan.
+Added: As of March 27, 2023, we had approximately 16.5 million shares of common stock outstanding and options and restricted stock units to purchase or receive an aggregate of 1.1 million shares of our common stock.
+Added: As of March 27, 2023, we have also
+Added: reserved an additional 0.3 million shares for future issuance to our directors, officers and employees under our 2020 Long-Term Incentive Plan.
The potential issuance of such additional shares of common stock may create downward pressure on the trading price of our common stock.
+Added: Additionally, on March 28, 2023, we sold an aggregate of 25,000 shares of Series A Convertible Preferred Stock (the “preferred stock”) that is convertible into shares of our common stock, as further described in Item 9B.
+Added: Other Information .
We may issue common stock or other equity securities senior to our common stock in the future for a number of reasons, including to finance acquisitions, to adjust our leverage ratio, and to satisfy our obligations upon the exercise of warrants and options, or for other reasons.
We cannot predict the effect, if any, that future sales or issuances of shares of our common stock or other equity securities, or the availability of shares of common stock or such other equity securities for future sale or issuance, will have on the trading price of our common stock.
+Added: We may choose to delist our securities from NYSE American and deregister our common stock under the Exchange Act, which could negatively affect the liquidity and trading prices of our common stock and would result in less disclosure about the Company.
+Added: As further discussed in Item 7.
+Added: Management’s Discussion and Analysis, “Capital Resources and Liquidity,” we are exploring strategic transactions and looking at opportunities to significantly reduce expenses in the near term to bolster liquidity.
+Added: Given the cost and resource demands of being a public company, we may decide to “go dark,” or discontinue our obligation to make periodic filings with the SEC, by delisting our securities with NYSE American and deregistering our securities with the SEC.
+Added: While no decision has been made, should we ultimately make the decision to go dark, there would be a substantial decrease in disclosure by us of our operations and prospects, and a potential decrease in the liquidity in our common stock even though stockholders may still continue to trade our common stock on an over-the-counter (OTC) market.
+Added: As a result of going dark, investors may find it more difficult to dispose of or obtain accurate quotations as to the market value of our common stock, and the ability of our stockholders to sell our common stock in the secondary market may be materially limited.
Regulatory Risk Factors
We are subject to complex federal, state, local and other laws and regulations that frequently are amended to impose more stringent requirements that could adversely affect the cost, manner or feasibility of doing business.
−Removed: Companies that explore for and develop, produce, sell and transport oil and natural gas in the United States are subject to extensive federal, state and local laws and regulations, including complex tax and environmental, health and safety laws and corresponding regulations, and are required to obtain various permits and approvals from federal, state and local agencies.
+Added: Companies that explore for, develop, produce, sell and transport oil and natural gas in the United States are subject to extensive federal, state and local laws and regulations, including complex tax and environmental, health and safety laws and corresponding regulations, and are required to obtain various permits and approvals from federal, state and local agencies.
If these permits are not issued or unfavorable restrictions or conditions are imposed on our activities, we may not be able to conduct our operations as planned.
22 unchanged sentences
Part of the regulatory environment in which we operate includes, in some cases, federal requirements for performing or preparing environmental assessments, environmental impact studies and/or plans of development before commencing exploration and production activities.
−Removed: In addition, our activities are subject to regulation by oil and natural gas producing states relating to conservation practices and protection of correlative rights.
+Added: In addition, our activities are subject to regulation relating to conservation practices and protection of correlative rights.
Such regulations affect our operations and limit the quantity of oil and natural gas we may produce and sell.
1 unchanged sentence
Additionally, the oil and natural gas regulatory environment could change in ways that might substantially increase the financial and managerial costs to comply with the requirements of these laws and regulations and, consequently, adversely affect our profitability.
−Removed: By way of example, in 2015 the EPA lowered the primary national ambient air quality standard for ozone from 75 parts per billion to 70 parts per billion.
+Added: By way of example, in 2015 the EPA lowered the primary national ambient air quality standard for ozone from 75 parts per billion to 70 parts per billion and is reconsidering whether an even stricter standard is warranted.
Implementation eventually could result in more stringent emissions controls and additional permitting obligations for our operations.
6 unchanged sentences
Other governmental reviews have also been conducted that focus on environmental aspects of hydraulic fracturing.
−Removed: Such activities eventually could result in additional regulatory scrutiny
−Removed: that could make it more difficult to perform hydraulic fracturing and increase our costs of compliance and doing business.
+Added: Such activities eventually could result in additional regulatory control.
Certain states, including Texas where we conduct our operations, likewise are considering or have adopted more stringent requirements for various aspects of hydraulic fracturing operations, such as permitting, disclosure, air emissions, well construction, seismic monitoring, waste disposal and water use.
10 unchanged sentences
Meanwhile, several countries, including those comprising the European Union, have established greenhouse gas regulatory systems.
−Removed: In the United States, many states, either individually or through multi-state regional initiatives, have been implementing legal measures to reduce emissions of greenhouse gases, primarily through emission inventories, emission targets, greenhouse gas cap and trade programs or incentives for renewable energy generation, while others have considered adopting such greenhouse gas programs.
+Added: In the United States, many states, either individually or through multi-state regional initiatives, have been implementing legal measures to reduce emissions of greenhouse gases, primarily through emission inventories, emission targets, product bans, greenhouse gas cap and trade programs or incentives for renewable energy generation, while others have considered adopting such greenhouse gas programs.
At the federal level, the Obama Administration addressed climate change through a variety of administrative actions.
4 unchanged sentences
Consistent with that strategy, the EPA issued final rules in 2016 for new and modified oil and gas production sources (including hydraulically fractured oil wells, natural gas well sites, natural gas processing plants, natural gas gathering and boosting stations and natural gas transmission sources) to reduce emissions of methane as well as volatile organic compound and toxic pollutants.
−Removed: In addition, the BLM promulgated standards for reducing venting and flaring on public lands.
+Added: In addition, the BLM promulgated standards for reducing venting and flaring on public lands (which were eventually vacated).
The Trump Administration tried to roll back many of the Obama-era climate change policies and rules.
−Removed: But shortly after his inauguration, President Biden accepted the Paris Agreement on behalf of the United States, declared climate considerations an essential part of the United States’ foreign policy, issued a moratorium on new oil and gas leases on federal lands, and directed federal agencies to incorporate climate change considerations in their operation.
−Removed: Thus, new federal programs relating to climate change appear to be likely through at least 2024.
+Added: But shortly after his inauguration, President Biden accepted the Paris Agreement on behalf of the United States, declared climate considerations an essential part of the United States’ foreign policy, limited new oil and gas leases on federal lands, and directed federal agencies to incorporate climate change considerations in their operation.
+Added: New federal programs relating to climate change appear to be likely through at least 2024.
+Added: For example, EPA has proposed to update, strengthen and revise the greenhouse gas and volatile organic compound emission standards for the oil and natural gas industries, while BLM has proposed new rules to reduce venting, flaring and leaks from oil and gas production on public lands.
+Added: Aside from new controls, the 2022 Inflation Reduction Act creates incentives meant to promote use of electric cars and fuels other than oil and natural gas.
In the courts, several decisions have been issued that may increase the risk of claims being filed by governments and private parties against companies that cause or contribute to significant greenhouse gas emissions.
8 unchanged sentences
Any new environmental initiatives or regulations that restrict injection of fluids, including, but not limited to, produced water, drilling fluids and other wastes associated with the exploration, development or production of oil and gas, or that limit the withdrawal, storage or use of surface water or ground water necessary for hydraulic fracturing of our wells, could increase our operating costs and cause delays, interruptions or cessation of our operations, the extent of which cannot be predicted, and all of which would have an adverse effect on our business, financial condition, results of operations and cash flows.
+Added: COVID-19 Risk Factors
+Added: Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.
+Added: In 2020, in response to the novel coronavirus (COVID-19) pandemic governments around the world, including U.S.
+Added: federal and state governments, imposed restrictions intended to limit the extent and spread of the virus, including travel restrictions, quarantines and business closures.
+Added: The COVID-19 outbreak and governmental restrictions significantly impacted economic activity and markets and dramatically reduced demand for oil and natural gas, adversely impacting the prices we receive for our production, resulting in us temporarily shutting in producing wells.
+Added: During 2021, widespread availability of COVID-19 vaccines in the United States and elsewhere combined with accommodative governmental monetary and fiscal policies and other factors, led to a rebound in demand for oil and natural gas and increases in oil and natural gas prices.
+Added: However, there remains the potential for demand for oil and natural gas to be adversely impacted by the economic effects of the COVID-19 pandemic, including as a consequence of the circulation of more infectious “variants” of the disease, vaccine hesitancy, waning vaccine effectiveness or other factors.
+Added: As a consequence, we are unable to predict the impact of these factors which may negatively impact our business in numerous ways, including, but not limited to, the following:
+Added: ● reducing our revenues if the outbreak results in a substantial or prolonged decrease in demand for oil and natural gas due to an economic downturn or recession;
+Added: ● disrupting our operations if our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to measures designed to contain the outbreak;
+Added: ● disrupting the operations of our midstream service providers, on whom we rely for the gathering, processing and transportation of our production, due to measures designed to contain the outbreak, and/or the difficult economic environment may lead to capital spending constraints, bankruptcy, the closing of facilities or inability to maintain infrastructure, which may adversely affect our ability to market our production, increase our costs, lower the prices we receive, or result in the shut-in of our producing wells or a delay or discontinuation of our development plans;
+Added: ● the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to access capital, monetize assets and successfully execute our plans.
+Added: The COVID-19 pandemic may also have the effect of heightening many of the other risks set forth below.
+Added: Any of these factors could have a material adverse effect on our business, operations, financial results and liquidity.
+Added: In 2020, oil and natural gas prices declined to historically low levels and we reduced our planned capital expenditures, delayed our drilling and completion plans and temporarily shut-in some of our producing wells, among other responses.
+Added: We are unable to predict the ultimate adverse impact of the COVID-19 on our business, which will continue to depend on numerous evolving factors and future developments, including the length of time that the pandemic continues, its effect
+Added: on the demand for oil and natural gas and the response of the overall economy and the financial markets after governmental restrictions are eased.
+Added: A financial downturn could negatively affect our business, results of operations, financial condition and liquidity.
+Added: Actual or anticipated declines in domestic or foreign economic growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the U.S.
+Added: or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from efforts to contain the COVID-19 coronavirus or other factors, could materially affect our business and financial condition and impact our ability to finance operations by worsening the actual or anticipated future drop in worldwide oil demand, negatively impacting the price we receive for our oil and natural gas production.
+Added: Negative economic conditions could also adversely affect the collectability of our trade receivables or performance by our vendors and suppliers or cause our commodity hedging arrangements to be ineffective if our counterparties are unable to perform their obligations.
+Added: All of the foregoing may adversely affect our business, financial condition, results of operations and cash flows.
Cybersecurity Risk Factors
9 unchanged sentences
We generally do not maintain insurance coverage for the costs associated with cyber-security events.
−Removed: Risk Factors Relating to Our Prior Restructuring
−Removed: Our actual financial results may vary materially from the projections that we filed with the bankruptcy court in connection with the confirmation of our plan of reorganization.
−Removed: In connection with the disclosure statement we filed with the bankruptcy court, and the hearing to consider confirmation of our plan of reorganization, we prepared projected financial information to demonstrate to the bankruptcy
−Removed: court the feasibility of the plan of reorganization and our ability to continue operations upon our emergence from bankruptcy.
−Removed: Those projections were prepared solely for the purpose of the bankruptcy proceedings and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors.
−Removed: At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance and with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize.
−Removed: Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects.
−Removed: As a result, investors should not rely on these projections.
−Removed: Our historical financial information may not be indicative of our future financial performance.
−Removed: Our capital structure was significantly altered under the plan of reorganization.
−Removed: We adopted fresh-start accounting effective October 1, 2019, as an accounting convenience date to coincide with the timing of our normal fourth quarter reporting, and as a result, our assets and liabilities were adjusted to fair values and our accumulated deficit was restated to zero.
−Removed: Further, as a result of the implementation of our plan of reorganization and the transactions contemplated thereby, our historical financial information may not be indicative of our future financial performance.
−Removed: Accordingly, our financial condition and results of operations following our emergence from chapter 11 are not comparable to the financial condition and results of operations reflected in our historical financial statements.
UNRESOLVED STAFF COMMENTS
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.