Chord Energy Corp 10-K

Item 9A. Controls and Procedures Evaluation of disclosure controls and procedures As required by Rule 13a-15(b) of the Exchange Act, management, under the supervision and with the participation of our Chief Executive Officer (“CEO”), our principal executive officer, and our Chief Financial Officer (“CFO”), our principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2020 at the reasonable assurance level. Management’s report on internal control over financial reporting Management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of December 31, 2020, management assessed the effectiveness of our internal control over financial reporting. In making this assessment, management, including our CEO and CFO, used the criteria set forth by the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our CEO and CFO have concluded that our internal control over financial reporting was effective as of December 31, 2020. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this annual report on Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of December 31, 2020 and has issued an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2020. Please see their “Report of Independent Registered Public Accounting Firm” included in “Item 8. Financial Statements and Supplementary Data.” Changes in internal control over financial reporting There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 153 T able of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Pursuant to General Instruction G(3) to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2021 Annual Meeting of Stockholders. The Company’s Code of Business Conduct and Ethics and the Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller (the “Code of Ethics”) can be found on the Company’s website located at http://www.oasispetroleum.com, under “Investor Relations — Corporate Governance.” Any stockholder may request a printed copy of the Code of Ethics by submitting a written request to the Company’s Corporate Secretary. If the Company amends the Code of Ethics or grants a waiver, including an implicit waiver, from the Code of Ethics, the Company will disclose the information on its website. The waiver information will remain on the website for at least 12 months after the initial disclosure of such waiver. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Ethics applicable to such persons by posting such information on our website. Item 11. Executive Compensation Pursuant to General Instruction G(3) to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2021 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Pursuant to General Instruction G(3) to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2021 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions, and Director Independence Pursuant to General Instruction G(3) to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2021 Annual Meeting of Stockholders. Item 14. Principal Accountant Fees and Services Pursuant to General Instruction G(3) to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2021 Annual Meeting of Stockholders. 154 T able of Contents PART IV Item 15. Exhibits, Financial Statement Schedules a. The following documents are filed as a part of this Annual Report on Form 10-K or incorporated herein by reference: (1) Financial Statements: See Item 8. Financial Statements and Supplementary Data. (2) Financial Statement Schedules: None. (3) Exhibits: The following documents are included as exhibits to this report: Exhibit No. Description of Exhibit 2.1 Joint Chapter 11 Plan of Reorganization of Oasis Petroleum Inc. and its Debtor Affiliates (Technical Modifications) (filed as Exhibit 2.1 to Oasis’s Current Report on Form 8-K filed on November 13, 2020, and incorporated herein by reference). 3.1 Conformed version of Amended and Restated Certificate of Incorporation of Oasis Petroleum Inc., as amended by amendment filed on July 25, 2018 (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q on August 7, 2018, and incorporated herein by reference). 3.2 Amended and Restated Certificate of Incorporation of Oasis Petroleum Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 3.3 Amended and Restated Bylaws of Oasis Petroleum Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on February 28, 2019, and incorporated herein by reference). 3.4 Amended and Restated Bylaws of Oasis Petroleum Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 3.5 Second Amended and Restated Bylaws of Oasis Petroleum Inc. adopted as of December 15, 2020 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on December 18, 2020, and incorporated herein by reference). 4.1 Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A on May 19, 2010, and incorporated herein by reference). 4.2 Registration Rights Agreement, dated February 14, 2018, between the Oasis Petroleum Inc. and Forge Energy, LLC (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on February 16, 2018, and incorporated herein by reference). 4.3 Description of Registrant’s Securities Registered Under Section 12 of the Exchange Act (filed as Exhibit 4.23 to the Company’s Annual Report on Form 10-K on February 27, 2020, and incorporated herein by reference). 10.1 ** Form of Indemnification Agreement between Oasis Petroleum Inc. and each of the directors and executive officers thereof (filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K on February 27, 2014, and incorporated herein by reference). 10.2 ** Amended and Restated 2010 Annual Incentive Compensation Plan of Oasis Petroleum Inc. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on August 6, 2014, and incorporated herein by reference). 10.3 ** Amended and Restated Executive Change in Control and Severance Benefit Plan dated as of March 1, 2012 (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K on March 2, 2012, and incorporated herein by reference). 10.4 Letter Agreement dated as of March 4, 2015 between the Company and SPO Advisory Corp. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on March 9, 2015, and incorporated herein by reference). 10.5 ** Third Amended and Restated Employment Agreement effective as of March 20, 2015 between Oasis Petroleum Inc. and Thomas B. Nusz (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on March 20, 2015, and incorporated herein by reference). 155 T able of Contents Exhibit No. Description of Exhibit 10.6 ** Fourth Amended and Restated Employment Agreement effective as of March 20, 2015 between Oasis Petroleum Inc. and Taylor L. Reid (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on March 20, 2015, and incorporated herein by reference). 10.7 ** Second Amended and Restated Employment Agreement effective as of March 20, 2015 between Oasis Petroleum Inc. and Michael H. Lou (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K on March 20, 2015, and incorporated herein by reference). 10.8 ** Second Amended and Restated Employment Agreement effective as of March 20, 2015 between Oasis Petroleum Inc. and Nickolas J. Lorentzatos (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K on March 20, 2015, and incorporated herein by reference). 10.9 Contribution Agreement, dated as of September 25, 2017, by and among Oasis Midstream Partners LP, Oasis Petroleum LLC, OMS Holdings LLC, Oasis Midstream Services LLC, OMP GP LLC and OMP Operating LLC (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K on September 29, 2017, and incorporated herein by reference). 10.10 Omnibus Agreement, dated as of September 25, 2017, by and among Oasis Midstream Partners LP, the Company, Oasis Petroleum LLC, OMS Holdings LLC, Oasis Midstream Services LLC, OMP GP LLC and OMP Operating LLC (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K on September 29, 2017, and incorporated herein by reference). 10.11 Services and Secondment Agreement, dated as of September 25, 2017, by and between Oasis Midstream Partners LP and the Company (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K on September 29, 2017 and incorporated herein by reference). 10.12 Third Amended and Restated Credit Agreement, dated as of October 16, 2018, by and among Oasis Petroleum Inc., as parent, Oasis Petroleum North America LLC, as borrower, the other credit parties thereto, Wells Fargo Bank, N.A., as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 19, 2018, and incorporated herein by reference). 10.13 First Amendment to the Third Amended and Restated Credit Agreement, dated as of April 15, 2019, among Oasis Petroleum Inc., as parent, Oasis Petroleum North America LLC, as borrower, the other credit parties party thereto, Wells Fargo Bank, N.A., as administrative agent and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on May 8, 2019, and incorporated herein by reference). 10.14 Second Amendment to the Third Amended and Restated Credit Agreement, dated as of July 2, 2019, among Oasis Petroleum Inc., as parent, Oasis Petroleum North America LLC, as borrower, the other credit parties party thereto, Wells Fargo Bank, N.A., as administrative agent and the lenders party thereto (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q on August 9, 2019, and incorporated herein by reference). 10.15 Third Amendment to the Third Amended and Restated Credit Agreement, dated as of November 4, 2019, among Oasis Petroleum Inc., as parent, Oasis Petroleum North America LLC, as borrower, the other credit parties party thereto, Wells Fargo Bank, N.A., as administrative agent and the lenders party thereto (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on November 6, 2019, and incorporated herein by reference). 10.16 ** Fourth Amended and Restated Employment Agreement effective as of March 20, 2018 between Oasis Petroleum Inc. and Thomas B. Nusz (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on March 22, 2018, and incorporated herein by reference). 10.17 ** Fifth Amended and Restated Employment Agreement effective as of March 20, 2018 between Oasis Petroleum Inc. and Taylor L. Reid (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on March 22, 2018, and incorporated herein by reference). 10.18 ** Third Amended and Restated Employment Agreement effective as of March 20, 2018 between Oasis Petroleum Inc. and Michael H. Lou (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K on March 22, 2018, and incorporated herein by reference). 10.19 ** Third Amended and Restated Employment Agreement effective as of March 20, 2018 between Oasis Petroleum Inc. and Nickolas J. Lorentzatos (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K on March 22, 2018, and incorporated herein by reference). 10.20 ** Amended and Restated 2010 Long Term Incentive Plan of Oasis Petroleum Inc. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on May 4, 2018, and incorporated herein by reference). 10.21 ** First Amendment to the Amended and Restated 2010 Long Term Incentive Plan of Oasis Petroleum Inc. (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K on May 3, 2019, and incorporated herein by reference). 156 T able of Contents Exhibit No. Description of Exhibit 10.22 ** Form of Phantom Unit Award Grant Notice (filed as Exhibit 10.43 to the Company’s Annual Report on Form 10-K on March 1, 2019, and incorporated herein by reference). 10.23 ** Form of Phantom Unit Award Agreement (filed as Exhibit 10.44 to the Company’s Annual Report on Form 10-K on March 1, 2019, and incorporated herein by reference). 10.24 ** Second Amendment to the Amended and Restated 2010 Long Term Incentive Plan of Oasis Petroleum Inc. (filed as Exhibit 10.46 to the Company’s Annual Report on Form 10-K on February 27, 2020, and incorporated herein by reference). 10.25 ** Third Amendment to the Amended and Restated 2010 Long Term Incentive Plan of Oasis Petroleum Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on April 28, 2020, and incorporated herein by reference). 10.26 Limited Waiver and Fourth Amendment to the Third Amended and Restated Credit Agreement, dated as of April 24, 2020, among Oasis Petroleum North America LLC, as borrower, the guarantors thereto, Wells Fargo Bank, N.A., as administrative agent and issuing bank and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on April 30, 2020, and incorporated herein by reference). 10.27 ** Form of Incentive Clawback Agreement (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q on August 5, 2020, and incorporated herein by reference). 10.28 Direction Letter and Specified Swap Liquidation Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on September 21, 2020, and incorporated herein by reference) 10.29 Restructuring Support Agreement, dated September 29, 2020 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.30 DIP Commitment Letter, dated September 29, 2020 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.31 Exit Commitment Letter, dated September 29, 2020 (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.32 ** Amendment to Fourth Amended and Restated Employment Agreement effective as of September 29, 2020 between Oasis Petroleum Inc. and Thomas B. Nusz (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.33 ** Amendment to Fifth Amended and Restated Employment Agreement effective as of September 29, 2020 between Oasis Petroleum Inc. and Taylor L. Reid (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.34 ** Amendment to Third Amended and Restated Employment Agreement effective as of September 29, 2020 between Oasis Petroleum Inc. and Michael H. Lou (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.35 ** Amendment to Third Amended and Restated Employment Agreement effective as of September 29, 2020 between Oasis Petroleum Inc. and Nickolas J. Lorentzatos (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K on September 30, 2020, and incorporated herein by reference). 10.36 Senior Secured Superpriority Debtor-in-Possession Revolving Credit Agreement, dated as of October 2, 2020, by and among Oasis Petroleum Inc., Oasis Petroleum North America LLC, the Guarantors party thereto, the Lenders party from time to time thereto, and Wells Fargo Bank, National Association (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q on November 5, 2020, and incorporated herein by reference). 10.37 † Credit Agreement dated as of November 19, 2020, among Oasis Petroleum Inc., as parent, Oasis Petroleum North America LLC, as borrower, the other credit parties party hereto, Wells Fargo Bank, N.A., as administrative agent, issuing bank and swingline lender and the lenders party hereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 10.38 Warrant Agreement, dated as of November 19, 2020, by and between Oasis Petroleum Inc., and Computershare Trust Company, N.A. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 157 T able of Contents Exhibit No. Description of Exhibit 10.39 Registration Rights Agreement, dated as of November 19, 2020, by and between the Oasis Petroleum Inc. and the holders party thereto (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 10.40 ** Form of Indemnification Agreement, by and between Oasis Petroleum Inc. and its officers and directors (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 10.41 ** Oasis Petroleum Inc. 2020 Long Term Incentive Plan (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K on November 20, 2020, and incorporated herein by reference). 10.42 ** Employment Agreement dated December 22, 2020 between Oasis Petroleum Inc. and Douglas E. Brooks (filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K on December 28, 2020, and incorporated herein by reference). 21.1(a) List of Subsidiaries of Oasis Petroleum Inc. 23.1(a) Consent of DeGolyer and MacNaughton. 31.1(a) Sarbanes-Oxley Section 302 certification of Principal Executive Officer. 31.2(a) Sarbanes-Oxley Section 302 certification of Principal Financial Officer. 32.1(b) Sarbanes-Oxley Section 906 certification of Principal Executive Officer. 32.2(b) Sarbanes-Oxley Section 906 certification of Principal Financial Officer. 99.1 Report of DeGolyer and MacNaughton (filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K on February 25, 2021, and incorporated herein by reference). 101(a) The following financial information from Oasis’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to the Consolidated Financial Statements. 104(a) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). __________________ (a) Filed herewith. (b) Furnished herewith. ** Management contract or compensatory plan or arrangement. † Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided to the SEC upon request. Item 16. Form 10-K Summary None. 158 T able of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on March 8, 2021. OASIS PETROLEUM INC. By: /s/ Douglas E. Brooks Douglas E. Brooks Board Chair and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated: Signature Title Date /s/ Douglas E. Brooks Board Chair and Chief Executive Officer (Principal Executive Officer) March 8, 2021 Douglas E. Brooks /s/ Taylor L. Reid President and Chief Operating Officer March 8, 2021 Taylor L. Reid /s/ Michael H. Lou Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 8, 2021 Michael H. Lou /s/ Samantha Holroyd Director March 8, 2021 Samantha Holroyd /s/ John Jacobi Director March 8, 2021 John Jacobi /s/ N. John Lancaster, Jr. Director March 8, 2021 N. John Lancaster, Jr. /s/ Robert McNally Director March 8, 2021 Robert McNally /s/ Cynthia L. Walker Director March 8, 2021 Cynthia L. Walker 159 T able of Contents GLOSSARY OF TERMS The terms defined in this section are used throughout this Annual Report on Form 10-K: “ Basin .” A large natural depression on the earth’s surface in which sediments generally brought by water accumulate. “ Bbl .” One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate, natural gas liquids or fresh water. “ Bcf .” One billion cubic feet of natural gas. “ Boe .” Barrels of oil equivalent, with 6,000 cubic feet of natural gas being equivalent to one barrel of crude oil. “Boepd.” Barrels of oil equivalent per day. “ British thermal unit .” The heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit. “ Completion .” The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency. “ Developed acreage .” The number of acres that are allocated or assignable to productive wells or wells capable of production. “ Developed reserves .” Reserves of any category that can be expected to be recovered through existing wells with existing equipment and operating methods or for which the cost of required equipment is relatively minor when compared to the cost of a new well. “ Development well .” A well drilled within the proved area of a natural gas or crude oil reservoir to the depth of a stratigraphic horizon known to be productive. “ Dry hole .” A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes. “ Economically producible .” A resource that generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. “ Environmental assessment .” An environmental assessment, a study that can be required pursuant to federal law to assess the potential direct, indirect and cumulative impacts of a project. “ Exploratory well .” A well drilled to find and produce natural gas or oil reserves not classified as proved, to find a new reservoir in a field previously found to be productive of natural gas or crude oil in another reservoir or to extend a known reservoir. “ Field .” An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations. “ Formation .” A layer of rock which has distinct characteristics that differ from nearby rock. “ Horizontal drilling .” A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval. “ MBbl .” One thousand barrels of crude oil, condensate, natural gas liquids or fresh water. “ MBoe .” One thousand barrels of oil equivalent. “ Mcf .” One thousand cubic feet of natural gas. “ MMBbl .” One million barrels of crude oil, condensate, natural gas liquids or fresh water. “ MMBoe .” One million barrels of oil equivalent. “ MMBtu .” One million British thermal units. “ MMcf .” One million cubic feet of natural gas. “ Net acres .” The percentage of total acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres. “NGL.” Natural gas liquids. “ NYMEX .” The New York Mercantile Exchange. “Plug.” A down-hole packer assembly used in a well to seal off or isolate a particular formation for testing, acidizing, cementing, etc.; also a type of plug used to seal off a well temporarily while the wellhead is removed. 160 T able of Contents “ Productive well .” A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes. “Proppant.” Sized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment. In addition to naturally occurring sand grains, man-made or specially engineered proppants, such as resin-coated sand or high-strength ceramic materials like sintered bauxite, may also be used. Proppant materials are carefully sorted for size and sphericity to provide an efficient conduit for production of fluid from the reservoir to the wellbore. “ Proved developed reserves .” Proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. “ Proved reserves .” Those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible — from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. The area of the reservoir considered as proved includes (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible crude oil or gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons, LKH, as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a highest known oil, HKO, elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. “ Proved undeveloped reserves .” Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. “ PV-10 .” When used with respect to oil and natural gas reserves, PV-10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property-related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the Securities and Exchange Commission. “ Reasonable certainty .” If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical and geochemical) engineering, and economic data are made to estimated ultimate recovery with time, reasonably certain estimated ultimate recovery is much more likely to increase or remain constant than to decrease. “ Recompletion .” The process of re-entering an existing wellbore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production. “ Reserves .” Estimated remaining quantities of crude oil and natural gas and related substances anticipated to be economically producible as of a given date by application of development prospects to known accumulations. “ Reservoir .” A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or crude oil that is confined by impermeable rock or water barriers and is separate from other reservoirs. “Resource play.” An expansive contiguous geographical area with known accumulations of crude oil or natural gas reserves that has the potential to be developed uniformly with repeatable commercial success due to advancements in horizontal drilling and completion technologies. 161 T able of Contents “ Spacing .” The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies. “Throughput.” The volume of product passing through a pipeline, plant, terminal or other facility. “Unconventional resource.” An umbrella term for crude oil and natural gas that is produced by means that do not meet the criteria for conventional production. What has qualified as “unconventional” at any particular time is a complex function of resource characteristics, the available E&P technologies, the economic environment, and the scale, frequency and duration of production from the resource. Perceptions of these factors inevitably change over time and often differ among users of the term. At present, the term is used in reference to crude oil and natural gas resources whose porosity, permeability, fluid trapping mechanism, or other characteristics differ from conventional sandstone and carbonate reservoirs. Coalbed methane, gas hydrates, shale gas, fractured reservoirs and tight gas sands are considered unconventional resources. “ Unit .” The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement. “Well stimulation.” A treatment performed to restore or enhance the productivity of a well. Stimulation treatments fall into two main groups, hydraulic fracturing treatments and matrix treatments. Fracturing treatments are performed above the fracture pressure of the reservoir formation and create a highly conductive flow path between the reservoir and the wellbore. Matrix treatments are performed below the reservoir fracture pressure and generally are designed to restore the natural permeability of the reservoir following damage to the near-wellbore area. Stimulation in shale gas reservoirs typically takes the form of hydraulic fracturing treatments. “ Wellbore .” The hole drilled by the bit that is equipped for crude oil or gas production on a completed well. Also called well or borehole. “ Working interest .” The right granted to the lessee of a property to explore for and to produce and own crude oil, gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis. “Workover.” The repair or stimulation of an existing productive well for the purpose of restoring, prolonging or enhancing the production of hydrocarbons. 162