Chord Energy Corp 10-K

Item 1A. Risk Factors Our business involves a high degree of risk. If any of the following risks, or any risk described elsewhere in this Annual Report on Form 10-K, actually occurs, our business, financial condition, results of operations or cash flows could suffer. The risks described below are not the only ones facing us. Additional risks not presently known to us or which we currently consider immaterial also may adversely affect us. Risks related to the oil and gas industry and our business Events outside of our control, including a pandemic, epidemic or outbreak of an infectious disease, such as the COVID-19 pandemic, have materially adversely affected, and may further materially adversely affect, our business. We face risks related to pandemics, epidemics, outbreaks or other public health events that are outside of our control, and could significantly disrupt our operations and adversely affect our business and financial condition. For example, the global outbreak of COVID-19 has impacted demand for crude oil and natural gas because of reduced global and national economic activity levels. On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency, and several states, including North Dakota and Montana, and municipalities have declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world. To the extent COVID-19 continues or worsens, governments may impose additional similar restrictions. In addition, the impact of COVID-19 or other public health events may adversely affect our operations or the health of our workforce and the workforces of our customers and service providers by rendering employees or contractors unable to work or unable to access our and their facilities for an indefinite period of time. There can be no assurance that our personnel will not be impacted by these pandemic diseases or ultimately lead to a reduction in our workforce productivity or increased medical costs or insurance premiums as a result of these health risks. Further, the technology required for the corresponding transition to remote work increases our vulnerability to cybersecurity threats, including threats to gain unauthorized access to sensitive information or to render data or systems unusable, the impact of which may have material adverse effects on our business and operations. See “General risk factors—A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss” below. As the potential impact from COVID-19 is uncertain due to the ongoing and dynamic nature of the circumstances, it is difficult to predict the extent to which it may negatively affect our business, including, without limitation, our operating results, financial position and liquidity, the duration of any potential disruption of our business, how and the degree to which the pandemic may impact our customers, supply chain and distribution network, the health of our employees, the productivity and sustainability of our workforce, our insurance premiums, costs attributable to our emergency measures, payments from customers and uncollectible accounts, limitations on travel, the availability of industry experts and qualified personnel and the market for our securities. Any potential impact will depend on future developments and new information that may emerge regarding the severity and duration of COVID-19 and its variants, the actions taken by authorities to contain it or treat its impact, and the availability and acceptance of vaccines, all of which are beyond our control. These potential impacts, while uncertain, could continue to adversely affect global economies and financial markets and result in a persistent economic downturn that could continue to have an adverse effect on the industries in which we and our customers operate and on the demand for our products, our operating results and our future prospects. A substantial or extended decline in commodity prices, for crude oil and, to a lesser extent, natural gas and NGLs, may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments. The prices we receive for our crude oil and, to a lesser extent, natural gas and NGLs, heavily influence our revenue, profitability, cash flow from operations, access to capital and future rate of growth. Crude oil, natural gas and NGLs are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for crude oil, natural gas and NGLs have been volatile, and these markets will likely continue to be volatile in the future. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control. These factors include the following: • worldwide and regional economic conditions impacting the global supply and demand for crude oil, natural gas and NGLs; • the actions of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC oil-producing countries, including Russia; • the price and quantity of imports of foreign crude oil, natural gas and NGLs; 31 Table of Contents • political conditions in or affecting other crude oil, natural gas and NGL producing countries, including the current conflicts in and among the Middle East and conditions in South America, China, India and Russia; • the level of global exploration and production; • the level of global crude oil, natural gas and NGL inventories; • events that impact global market demand, including impacts from global health epidemics and concerns, such as the COVID-19 pandemic; • localized supply and demand fundamentals and regional, domestic and international transportation availability; • weather conditions and natural disasters; • domestic and foreign governmental regulations and policies, including environmental requirements; • speculation as to future commodity prices and the speculative trading of crude oil and natural gas futures contracts; • stockholder activism or activities by non-governmental organizations to limit certain sources of funding for the energy sector or restrict the exploration, development and production of crude oil, natural gas and NGLs and related infrastructure; • price and availability of competitors’ supplies of crude oil, natural gas and NGLs; • technological advances affecting energy consumption; and • the price and availability of alternative fuels. Substantially all of our crude oil and natural gas production is sold to purchasers under short-term (less than 12-month) contracts at market-based prices, and our NGL production is sold to purchasers under long-term (more than 12-month) contracts at market-based prices. Low crude oil, natural gas and NGL prices will reduce our cash flows, borrowing ability, the present value of our reserves and our ability to develop future reserves. See “Risks related to our financial position—Our exploration, development and exploitation projects require substantial capital expenditures. We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to expiration of our leases or a decline in our estimated net crude oil and natural gas reserves.” below. Low crude oil, natural gas and NGL prices may also reduce the amount of crude oil, natural gas and NGLs that we can produce economically and may affect our proved reserves. See also “Our estimated net proved reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves” below. Drilling for and producing crude oil and natural gas are high-risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations. We use some of the latest available horizontal drilling and completion techniques, which involve risk and uncertainty in their application. Our future financial condition and results of operations will depend on the success of our exploitation, exploration, development and production activities. Our crude oil and natural gas E&P activities are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable crude oil or natural gas production. Our decisions to purchase, explore, develop or otherwise exploit drilling locations or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. For a discussion of the uncertainty involved in these processes, see “Our estimated net proved reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves” below. Our cost of drilling, completing and operating wells is often uncertain before drilling commences. Overruns in planned expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel our scheduled drilling projects, including the following: • shortages of or delays in obtaining equipment and qualified personnel; • facility or equipment malfunctions and/or failure; • unexpected operational events, including accidents; • pressure or irregularities in geological formations; • adverse weather conditions, such as blizzards, ice storms and floods; • reductions in crude oil, natural gas and NGL prices; • inflation in exploration and drilling costs; • disruptions in our supply chain for raw materials, chemicals and equipment; 32 Table of Contents • delays imposed by or resulting from compliance with regulatory requirements; • proximity to and capacity of transportation facilities; • contractual disputes; • title problems; and • limitations in the market for crude oil and natural gas. Our operations involve utilizing the latest drilling and completion techniques as developed by us and our service providers in order to maximize cumulative recoveries and therefore generate the highest possible returns. Risks that we face while drilling include, but are not limited to, the following: • spacing of wells to maximize production rates and recoverable reserves; • landing the well bore in the desired drilling zone; • staying in the desired drilling zone while drilling horizontally through the formation; • running the casing the entire length of the well bore; and • the ability to run tools and other equipment consistently through the horizontal well bore. Risks that we face while completing our wells include, but are not limited to, the following: • the ability to fracture stimulate the planned number of stages; • the ability to run tools the entire length of the well bore during completion operations; • the ability to successfully clean out the well bore after completion of the final fracture stimulation stage; and • protecting nearby producing wells from the impact of fracture stimulation. Ultimately, the success of these drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If our drilling results are less than anticipated or we are unable to execute our drilling program because of capital constraints, lease expirations, access to gathering systems and limited takeaway capacity or otherwise, and/or crude oil, natural gas and NGL prices decline, the return on our investment for certain projects may not be as attractive as we anticipate. Further, as a result of any of these developments, we could incur material write-downs of our oil and gas properties and the value of our undeveloped acreage could decline in the future. Our estimated net proved reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves. The process of estimating crude oil and natural gas reserves is complex. It requires interpretations of available technical data and many assumptions, including assumptions relating to current and future economic conditions and commodity prices. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this Annual Report on Form 10-K. See “Item 1. Business—Exploration and Production Operations” for information about our estimated crude oil and natural gas reserves and the PV-10 and Standardized Measure as of December 31, 2021, 2020 and 2019. In order to prepare our estimates, we must project production rates and the timing of development expenditures. We must also analyze available geological, geophysical, production and engineering data. The extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters such as crude oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. Although the reserve information contained herein is reviewed by our independent reserve engineers, estimates of crude oil and natural gas reserves are inherently imprecise. Actual future production, crude oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves will vary from our estimates. Any significant variance could materially affect the estimated quantities and present value of reserves shown in this Annual Report on Form 10-K. In addition, we may adjust estimates of net proved reserves to reflect production history, results of exploration and development, prevailing crude oil and natural gas prices and other factors, many of which are beyond our control. Due to the limited production history of our undeveloped acreage, the estimates of future production associated with such properties may be subject to greater variance to actual production than would be the case with properties having a longer production history. You should not assume that the present value of future net revenues from our estimated net proved reserves is the current market value of our estimated net crude oil and natural gas reserves. In accordance with SEC requirements, we based the estimated discounted future net revenues from our estimated net proved reserves on the unweighted arithmetic average of the 33 Table of Contents first-day-of-the-month price for the preceding 12 months without giving effect to derivative transactions. Actual future net revenues from our oil and gas properties will be affected by factors such as: • actual prices we receive for crude oil and natural gas; • actual cost of development and production expenditures; • the amount and timing of actual production; and • changes in governmental regulations or taxation. The timing of both our production and our incurrence of expenses in connection with the development and production of oil and gas properties will affect the timing and amount of actual future net revenues from estimated net proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net revenues may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural industry in general. Actual future prices and costs may differ materially from those used in the present value estimates included in this Annual Report on Form 10-K. Any significant future price changes will have a material effect on the quantity and present value of our estimated net proved reserves. If crude oil, natural gas and NGL prices decline or for an extended period of time remain at depressed levels, we may be required to take write-downs of the carrying values of our oil and gas properties. We review our proved oil and gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. In addition, we assess our unproved properties periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying value of our oil and gas properties, which may result in a decrease in the amount available under the Oasis Credit Facility. A write-down constitutes a non-cash charge to earnings. The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oilfield services or the unavailability of sufficient transportation for our production could adversely affect our ability to execute our exploration and development plans within our budget and on a timely basis. Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment, supplies or qualified personnel. During these periods, the costs of rigs, equipment, supplies and personnel are substantially greater and their availability to us may be limited. Additionally, these services may not be available on commercially reasonable terms. Shortages or the high cost of drilling rigs, equipment, supplies, personnel or oilfield services or the unavailability of sufficient transportation for our production could delay or adversely affect our development and exploration operations or cause us to incur significant expenditures that are not provided for in our capital plan, which could have a material adverse effect on our business, financial condition or results of operations. Additionally, compliance with new or emerging legal requirements that affect midstream operations in North Dakota or Montana may reduce the availability of transportation for our production. For example, the NDIC adopted regulations in 2013 that impose more rigorous pipeline development standards on midstream operators, some of whom we rely on to construct and operate pipeline infrastructure to transport the crude oil and natural gas we produce. All of our producing properties and operations are located in the Williston Basin, making us vulnerable to risks associated with operating in a concentrated geographic area. Our producing properties are geographically concentrated in the Williston Basin in northwestern North Dakota and northeastern Montana. As a result, we may be disproportionately exposed to the impact of economics in the Williston Basin or delays or interruptions of production from those wells caused by transportation capacity constraints, curtailment of production, availability of equipment, facilities, personnel or services, significant governmental regulation, natural disasters, adverse weather conditions, plant closures for scheduled maintenance or interruption of transportation of crude oil or natural gas produced from the wells in those areas. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic crude oil and natural gas producing areas such as the Williston Basin, which may cause these conditions to occur with greater frequency or magnify the effect of these conditions. Our crude oil, natural gas and NGLs are sold in a limited number of geographic markets and each has a generally fixed amount of storage and processing capacity. As a result, if such markets become oversupplied with crude oil, natural gas and/or NGLs, it could have a material negative effect on the prices we receive for our products and therefore an adverse effect on our financial condition and results of operations. Variances in quality may also cause differences in the value received for our products. 34 Table of Contents Due to the concentrated nature of our portfolio of properties, a number of our properties could experience any of the same conditions at the same time, resulting in a relatively greater impact on our results of operations than they might have on other companies that have a more diversified portfolio of properties. The impact of regional economics or delays or interruptions of production in an area could have a material adverse effect on our financial condition and results of operations. Our operations on the Fort Berthold Indian Reservation of the Three Affiliated Tribes in North Dakota are subject to various federal, state, local and tribal regulations and laws, any of which may increase our costs and have an adverse impact on our ability to effectively conduct our operations. Various federal agencies within the U.S. Department of the Interior (the “Department of the Interior”), particularly the BIA and the Office of Natural Resource Revenue, along with the Three Affiliated Tribes of the Fort Berthold Indian Reservation (“MHA Nation”), promulgate and enforce regulations pertaining to operations on the Fort Berthold Indian Reservation. In addition, the MHA Nation is a sovereign nation having the right to enforce laws and regulations independent from federal, state and local statutes and regulations. These tribal laws and regulations include various taxes, fees, approvals and other conditions that apply to lessees, operators and contractors conducting operations on the Fort Berthold Indian Reservation. Lessees and operators conducting operations on tribal lands may be subject to the MHA Nation’s court system. Recently, on February 4, 2022, the Department of the Interior issued an official opinion stating that the minerals beneath the Missouri River riverbed located on the Fort Berthold Indian Reservation belong to the MHA Nation and not the state of North Dakota, overturning a 2020 Trump-agency decision that gave the state of North Dakota ownership. One or more of these factors may increase our costs of doing business on the Fort Berthold Indian Reservation and may have an adverse impact on our ability to effectively transport products within the Fort Berthold Indian Reservation or to conduct our operations on such lands. We depend upon Crestwood, a third party midstream provider, for a large portion of our midstream services, and our failure to obtain and maintain access to the necessary infrastructure from Crestwood and other midstream providers to successfully deliver crude oil, natural gas and NGLs to market may adversely affect our earnings, cash flows and results of operations . Our delivery of oil, natural gas and NGLs depends upon the availability, proximity and capacity of pipelines, other transportation facilities and gathering and processing facilities primarily owned by Crestwood as well as other third-parties. The capacity of transmission, gathering and processing facilities may be insufficient to accommodate potential production from existing and new wells, which may result in substantial discounts in the prices we receive for our oil, natural gas and NGLs or result in the shut-in of producing wells or the delay or discontinuance of development plans for properties. Our ability to secure access to pipeline infrastructure on favorable economic terms could affect our competitive position. Historically our ownership interest in and control of OMP allowed us to exercise significant control over the development of midstream infrastructure to service our operations. However, as a result of the OMP Merger, we no longer control those operations and facilities and will be dependent on Crestwood and, to a lesser extent, other third-party providers for these services. Access to midstream assets may be unavailable due to market conditions or mechanical or other reasons. A lack of access to needed infrastructure, or an extended interruption of access to or service from our or third-party pipelines and facilities for any reason, including vandalism, sabotage or cyber-attacks on such pipelines and facilities or service interruptions, could result in adverse consequences to us, such as delays in producing and selling our crude oil, natural gas and NGLs. Our dependence on Crestwood and other third parties for transmission, gathering and processing services makes us dependent on them in order to get our crude oil, natural gas and NGLs to market. To the extent these services are delayed or unavailable, we would be unable to realize revenue from wells served by such facilities until suitable arrangements are made to market our production. Our failure to obtain these services on acceptable terms could materially harm our business. Legal and regulatory challenges to transportation may impact our ability to move volume. In addition, the impact of pending and future legal proceedings on these systems, pipelines and facilities can affect our ability to market our products and have a negative impact on realized pricing. In July 2020, the operator of DAPL was ordered by a U.S. District court to halt oil flow and empty the pipeline within 30 days while an environmental impact study (“EIS”) is completed. Also in July 2020, the U.S. Court of Appeals for the District of Columbia Circuit issued a temporary administrative stay while the court considers the merits of a longer-term emergency stay order through the appeals process. On January 26, 2021, the U.S. Court of Appeals for the District of Columbia Circuit upheld the U.S. District court’s ruling that an EIS is needed and also reaffirmed its earlier decision which allows DAPL to operate through the EIS process. The owners of DAPL appealed the lower court decision to the U.S. Supreme Court in September 2021; however, the appeal was rejected on February 22, 2022. The Corps continues to conduct the EIS, which is estimated to be completed no later than November 2022. Once the EIS is completed, the Corps will determine whether DAPL is safe to operate or must be shut down. We regularly use DAPL in addition to other outlets to market our crude oil to end markets. To mitigate the risks associated with a potential shutdown of DAPL, we have proactively arranged for portions of our crude oil volumes to be sold at alternative outlets at fixed differentials to NYMEX WTI. In the event DAPL were to cease operating, we would anticipate Williston Basin crude oil prices to weaken materially before improving as the market adapts to rail transportation. 35 Table of Contents A portion of our crude oil and NGL production is transported to market centers by rail. Potential crude oil or NGL train derailments or crashes as well as state or federal restrictions on the vapor pressure of crude oil transported by, or loaded on or unloaded from, railcars could also impact our ability to market and deliver our products and cause significant fluctuations in our realized crude oil and natural gas prices due to tighter safety regulations imposed on crude-by-rail transportation and interruptions in service. See “Item 1. Business—Regulation—Regulation of transportation and sales of crude oil” for more information about the regulations relating to the transport of crude oil by rail. Limited takeaway capacity can result in significant discounts to our realized prices. The crude oil business environment has historically been characterized by periods when crude oil production has surpassed local transportation and refining capacity, resulting in substantial discounts in the price received for crude oil versus prices quoted for NYMEX WTI crude oil. In the past, there have been periods when this discount has substantially increased due to the production of crude oil in the area increasing to a point that it temporarily surpasses the available pipeline transportation, rail transportation and refining capacity in the area. Expansions of both rail and pipeline facilities have reduced the prior constraint on crude oil transportation out of the Williston Basin and improved basin differentials received at the lease. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about our realized crude oil prices and average price differentials relative to NYMEX WTI for the years ended December 31, 2021, 2020 and 2019. Additionally, the refining capacity in the U.S. Gulf Coast is insufficient to refine all of the light sweet crude oil being produced in the United States. The United States imports heavy crude oil and exports light crude oil to utilize the U.S. Gulf Coast refineries that have more heavy refining capacity. If light sweet crude oil production remains at current levels or continues to increase, demand for our light crude oil production could result in widening price discounts to the world crude oil prices and potential shut-in or reduction of production due to a lack of sufficient markets despite the lift on prior restrictions on the exporting of crude oil and natural gas from the United States. The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced. Approximately 31% of our estimated net proved reserves were classified as proved undeveloped as of December 31, 2021. Development of these reserves may take longer and require higher levels of capital expenditures than we currently anticipate. The future development of our proved undeveloped reserves is dependent on future commodity prices, costs and economic assumptions that align with our internal forecasts as well as access to liquidity sources, such as capital markets, the Oasis Credit Facility and derivative contracts. Delays in the development of our reserves or increases in costs to drill and develop such reserves will reduce the PV-10 of our estimated proved undeveloped reserves and future net revenues estimated for such reserves and may result in some projects becoming uneconomic. In addition, delays in the development of reserves could cause us to have to reclassify our proved reserves as unproved reserves. Unless we replace our crude oil and natural gas reserves, our reserves and production will decline, which could adversely affect our business, financial condition and results of operations. Unless we conduct successful development, exploitation and exploration activities or acquire properties containing proved reserves, our estimated net proved reserves will decline as those reserves are produced. Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future crude oil and natural gas reserves and production, and therefore our cash flows and income, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, exploit, find or acquire additional reserves to replace our current and future production at acceptable costs. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations could be adversely affected. Our business is subject to operating risks that could result in substantial losses or liability claims, and we may not be insured for, or our insurance may be inadequate to protect us against, these risks. We are not insured against all risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations. Our E&P activities are subject to all of the operating risks associated with drilling for and producing crude oil and natural gas, including the possibility of: • environmental hazards, such as natural gas leaks, c rude oil and produced water spills, pipeline and tank ruptures, encountering naturally occurring radioactive materials and unauthorized discharges of brine, well stimulation and completion fluids, toxic gas, such as hydrogen sulfide, or other pollutants into the environment; • abnormally pressured formations; • shortages of, or delays in, obtaining water for hydraulic fracturing activities; 36 Table of Contents • supply chain disruptions which could delay or halt our development projects; • mechanical difficulties, such as stuck oilfield drilling and service tools and casing failure; • personal injuries and death; and • natural disasters. Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to us as a result of: • injury or loss of life; • damage to and destruction of property, natural resources and equipment; • pollution and other environmental damage; • regulatory investigations and penalties; • suspension of our operations; and • repair and remediation costs. Insurance against all operational risk is not available to us. We are not fully insured against all risks, including development and completion risks that are generally not recoverable from third parties or insurance. In addition, pollution and environmental risks generally are not fully insurable. Also, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations. Drilling locations that we decide to drill may not yield crude oil or natural gas in commercially viable quantities. Our drilling locations are in various stages of evaluation, ranging from a location which is ready to drill to a location that will require substantial additional interpretation. There is no way to predict in advance of drilling and testing whether any particular location will yield crude oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether crude oil or natural gas will be present or, if present, whether crude oil or natural gas will be present in sufficient quantities to be economically viable. Even if sufficient amounts of crude oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. If we drill additional wells that we identify as dry holes in our current and future drilling locations, our drilling success rate may decline and materially harm our business. We cannot assure you that the analogies we draw from available data from other wells, more fully explored locations or producing fields will be applicable to our drilling locations. Further, initial production rates reported by us or other operators in the Williston Basin may not be indicative of future or long-term production rates. In sum, the cost of drilling, completing and operating any well is often uncertain, and new wells may not be productive. Our potential drilling location inventories are scheduled to be drilled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. Our management has identified and scheduled drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. These potential drilling locations, including those without proved undeveloped reserves, represent a significant part of our execution strategy. Our ability to drill and develop these locations is subject to a number of uncertainties, including the availability of capital, seasonal conditions, regulatory approvals, crude oil and natural gas prices, costs and drilling results. In addition, we may not be able to raise the substantial amount of capital that would be necessary to drill a substantial portion of our potential drilling locations. See also “Risks related to our financial position—Our exploration, development and exploitation projects require substantial capital expenditures. We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to expiration of our leases or a decline in our estimated net crude oil and natural gas reserves.” Because of these uncertainties, we do not know if the numerous potential drilling locations we have identified will ever be drilled or if we will be able to produce crude oil or natural gas from these or any other potential drilling locations. Pursuant to existing SEC rules and guidance, subject to limited exceptions, proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years of the date of booking. These rules and guidance may limit our potential to book additional proved undeveloped reserves as we pursue our drilling program. 37 Table of Contents 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, the primary term is extended through continuous drilling provisions or the leases are renewed. Failure to drill sufficient wells in order to hold acreage will result in a substantial lease renewal cost, or if renewal is not feasible, loss of our lease and prospective drilling opportunities . As of December 31, 2021, approximately 99% of our total net acreage in the Williston Basin was held by production. The leases for our net acreage not held by production will expire at the end of their primary term unless production is established in paying quantities under the units containing these leases, the leases are held beyond their primary terms under continuous drilling provisions or the leases are renewed. In the Williston Basin, our acreage must be drilled before lease expiration, generally within three to five years, in order to hold the acreage by production. Unless production is established within the spacing units covering the undeveloped acres on which some of the locations are identified, the leases for such acreage will expire. As of December 31, 2021, we had an aggregate of 1,115 net acres expiring in 2022, 161 net acres expiring in 2023 and 864 net acres expiring in 2024 in the Williston Basin. The cost to renew such leases may increase significantly and we may not be able to renew such leases on commercially reasonable terms or at all. In addition, on certain portions of our acreage, third-party leases become immediately effective if our leases expire. Our ability to drill and develop these locations depends on a number of uncertainties, including crude oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals and other factors. As such, our actual drilling activities may materially differ from our current expectations, which could adversely affect our business. During the period from January 1, 2020 through November 19, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), we recorded non-cash impairment charges of $401.1 million and $5.4 million, respectively, on our unproved properties due to expiring leases, periodic assessments and drilling plan uncertainty on certain acreage of our unproved properties. We did not record any impairment charges on unproved properties during the year ended December 31, 2021 (Successor) or the period from November 20, 2020 through December 31, 2020 (Successor). We will not be the operator on all of our drilling locations, and, therefore, we will not be able to control the timing of exploration or development efforts, associated costs, or the rate of production of any non-operated assets. We may enter into arrangements with respect to existing or future drilling locations that result in a greater proportion of our locations being operated by others. As a result, we may have limited ability to exercise influence over the operations of the drilling locations operated by our partners. Dependence on the operator could prevent us from realizing our target returns for those locations. The success and timing of exploration and development activities operated by our partners will depend on a number of factors that will be largely outside of our control, including: • the timing and amount of capital expenditures; • the operator’s expertise and financial resources; • approval of other participants in drilling wells; • selection of technology; and • the rate of production of reserves, if any. This limited ability to exercise control over the operations of some of our drilling locations may cause a material adverse effect on our results of operations and financial condition. Our operations are subject to environmental and occupational health and safety laws and regulations that may expose us to significant costs and liabilities. Our operations are subject to stringent federal, tribal, regional, state and local laws and regulations governing occupational health and safety aspects, the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may impose numerous obligations that are applicable to our operations and services. The trend of more expansive and stringent environmental and occupational health and safety legislation and regulations applied to the oil and gas industry could continue, resulting in material increases in our costs of doing business and consequently affecting profitability. See “Item 1. Business—Regulation—Environmental and occupational health and safety regulation” for more discussion on these environmental and occupational health and safety matters. Compliance with existing environmental and occupational safety and health laws, regulations, executive orders and other regulatory initiatives, or any other such new legal requirements, could, among other things, require us or our customers to install new or modified emission controls on equipment or processes, incur longer permitting timelines, and incur significantly increased capital or operating expenditures, which costs may be significant. One or more of these developments that impact us or our customers could have a material adverse effect on our business, results of operations and financial condition and reduce demand for our midstream services. 38 Table of Contents Failure to comply with federal, state and local laws and regulations could adversely affect our ability to produce, gather and transport our crude oil and natural gas and may result in substantial penalties. Our operations are substantially affected by federal, state and local laws and regulations, particularly as they relate to the regulation of crude oil and natural gas production and transportation. These laws and regulations include regulation of crude oil and natural gas exploration and production and related operations, including a variety of activities related to the drilling of wells, and the interstate transportation of crude oil and natural gas by federal agencies such as FERC, as well as state agencies. We may incur substantial costs in order to maintain compliance with these laws and regulations. Due to recent incidents involving the release of crude oil and natural gas and fluids as a result of drilling activities in the United States, there have been a variety of regulatory initiatives at the federal and state levels to restrict crude oil and natural gas drilling operations in certain locations. Any increased regulation or suspension of crude oil and natural gas exploration and production, or revision or reinterpretation of existing laws and regulations, that arise out of these incidents or otherwise could result in delays and higher operating costs. Such costs or significant delays could have a material adverse effect on our business, financial condition and results of operations. With regard to our physical purchases and sales of energy commodities, we must also comply with anti-market manipulation laws and related regulations enforced by FERC, the CFTC and the FTC. To the lesser extent we are a shipper on interstate pipelines, we must comply with the FERC-approved tariffs of such pipelines and with federal policies related to the use of interstate capacity. Should we fail to comply with all applicable statutes, rules, regulations and orders of FERC, the CFTC or the FTC, we could be subject to substantial penalties and fines. Our operations are subject to a series of risks arising out of the threat of climate change, energy conservation measures or initiatives that stimulate demand for alternative forms of energy that could result in increased operating costs, restrictions on drilling and reduced demand for the crude oil and natural gas that we produce. The threat of climate change continues to attract considerable attention in the United States and foreign countries. As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions. As a result, our operations are subject to a series of regulatory, political, litigation and financial risks associated with the production and processing of fossil fuels and emission of GHGs. See “Item 1. Business—Regulation—Environmental and occupational health and safety regulation” for more discussion on the threat of climate change and restriction of GHG emissions. The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory initiatives that impose more stringent standards for GHG emissions from the oil and natural gas industry or otherwise restrict the areas in which this industry may produce crude oil and natural gas or generate GHG emissions could result in increased compliance costs or costs of consuming fossil fuels. Such legislation, executive actions or regulations could result in increased costs of our compliance or costs of consuming, and thereby reduce demand for crude oil and natural gas. Additionally, political, financial and litigation risks may result in us restricting, delaying or canceling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing the ability to continue to operate in an economic manner. The occurrence of one or more of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows. Increasing attention and federal actions in regards to Environmental, Social or Governance (“ESG”) matters may impact our business. Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG practices. Companies which do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected. Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our hydrocarbon products and midstream services, reduced profits, increased governmental investigations and private litigation against us, and negative impacts on our stock price and access to capital markets. As part of our ongoing effort to enhance our ESG practices, our Board of Directors has established the Nominating, Environmental, Social and Governance Committee, which is charged with overseeing our ESG policies. Committee members are expected to review the implementation and effectiveness of our ESG programs and policies. Additionally, to help strengthen our ESG performance, we have implemented compensation practices focused on value creation and aligned with shareholder interests. Additionally, while we may elect to seek out various voluntary ESG targets in the future, such targets are aspirational. We may not be able to meet such targets in the manner or on such a timeline as initially contemplated, including as a result of unforeseen costs or technical difficulties associated with achieving such results. To the extent we elected to pursue such targets and were able to achieve the desired target levels, such achievement may have been accomplished as a result of entering into various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our ESG 39 Table of Contents impact instead of actual changes in our ESG performance. Notwithstanding our election to pursue aspirational targets in the future, we may receive pressure from investors, lenders or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders. Such ratings are used by some investors to inform their investment and voting decisions. Additionally, certain investors use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with companies to require improved ESG disclosure or performance. Moreover, certain members of the broader investment community may consider a company’s sustainability score as a reputational or other factor in making an investment decision. Consequently, a low sustainability score could result in exclusion of our common stock from consideration by certain investment funds, engagement by investors seeking to improve such scores and a negative perception of us by certain investors. Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews of such activities could result in increased costs and additional operating restrictions or delays in the completion of crude oil and natural gas wells and adversely affect our production. Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or crude oil from dense subsurface rock formations. The process involves the injection of water, sand or other proppant and chemical additives under pressure into the targeted subsurface formations to fracture the surrounding rock and stimulate production. We routinely use hydraulic fracturing techniques in many of our drilling and completion programs. Hydraulic fracturing continues to be controversial in certain parts of the country, resulting in increased scrutiny and regulation of the hydraulic fracturing process, including by federal and state agencies and local municipalities. See “Item 1. Business—Regulation—Environmental and occupational health and safety regulation” for more discussion on these hydraulic fracturing matters. The adoption of any federal, state or local laws or the implementation of regulations or issuance of executive orders restricting hydraulic fracturing activities or locations or suspending or delaying the performance of hydraulic fracturing on federal properties or other locations could potentially result in an increase in our compliance costs, and a decrease in the completion of our new crude oil and natural gas wells, which could have a material adverse effect on our liquidity, results of operations, and financial condition. Restrictions, delays or bans on hydraulic fracturing could also reduce the amount of crude oil and natural gas that we are ultimately able to produce in commercial quantities, which adversely impacts our revenues and profitability. Our ability to produce crude oil and natural gas economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling and completion operations or are unable to dispose of or recycle the water we use economically and in an environmentally safe manner. Water is an essential component of shale crude oil and natural gas production during both the drilling and hydraulic fracturing processes. Our access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies. The occurrence of these or similar developments may result in limitations being placed on allocations of water due to needs by third-party businesses with more senior contractual or permitting rights to the water. Our inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could adversely impact our E&P operations and have a corresponding adverse effect on our business, financial condition and results of operations. Additionally, operations associated with our production and development activities generate drilling muds, produced waters and other waste streams, some of which may be disposed of by means of injection into underground wells situated in non-producing subsurface formations. These injection wells are regulated pursuant to the UIC program established under the SDWA. See “Item 1. Business—Regulation—Environmental and occupational health and safety regulation” for more discussion on seismicity matters. Compliance with current and future environmental laws, executive orders, regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing activities, the injection of waste streams into disposal wells, or any inability to secure transportation and access to disposal wells with sufficient capacity to accept all of our flowback and produced water on economic terms may increase our operating costs and cause delays, interruptions or termination of our operations, the extent of which cannot be predicted but that could be materially adverse to our business and results of operations. Competition in the oil and gas industry is intense, making it more difficult for us to acquire properties, market crude oil and natural gas and secure trained personnel. Our ability to acquire additional drilling locations and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment for acquiring 40 Table of Contents properties, market crude oil and natural gas and secure equipment and trained personnel. Also, there is substantial competition for capital available for investment in the oil and gas industry. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours. Those companies may be able to pay more for productive oil and gas properties and exploratory drilling locations or to identify, evaluate, bid for and purchase a greater number of properties and locations than our financial or personnel resources permit. Furthermore, these companies may also be better able to withstand the financial pressures of unsuccessful drilling attempts, sustained periods of volatility in financial markets and generally adverse global and industry-wide economic conditions, and may be better able to absorb the burdens resulting from changes in relevant laws and regulations, which would adversely affect our competitive position. In addition, companies may be able to offer better compensation packages to attract and retain qualified personnel than we are able to offer. The cost to attract and retain qualified personnel has increased in recent years due to competition and may increase substantially in the future. We may also see corporate consolidations among our competitors, which could significantly alter industry conditions and competition within the industry. Further, the COVID-19 pandemic that began in early 2020 provides an illustrative example of how a pandemic or epidemic can also impact our operations and business by affecting the health of these qualified or trained personnel and rendering them unable to work or travel. We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, attracting and retaining qualified personnel and raising additional capital, which could have a material adverse effect on our business. The loss of senior management or technical personnel could adversely affect our operations. To a large extent, we depend on the services of our senior management and technical personnel. The loss of the services of our senior management or technical personnel could have a material adverse effect on our operations. The public health concerns posed by COVID-19 could pose a risk to our personnel and may render our personnel unable to work or travel. The extent to which COVID-19 may impact our personnel, and subsequently our business, cannot be predicted at this time. We continue to monitor impacts of COVID-19, have actively implemented policies and practices to address COVID-19, and may adjust our current policies and practices as more information and guidance become available. We do not maintain, nor do we plan to obtain, any insurance against the loss of any of these individuals. Seasonal weather conditions adversely affect our ability to conduct drilling activities in some of the areas where we operate. Our crude oil and natural gas operations are adversely affected by seasonal weather conditions. In the Williston Basin, drilling and other crude oil and natural gas activities cannot be conducted as effectively during the winter months. Severe winter weather conditions limit and may temporarily halt our ability to operate during such conditions. These constraints and the resulting shortages or high costs could delay or temporarily halt our operations and materially increase our operating and capital costs. We may be subject to risks in connection with acquisitions because of uncertainties in evaluating recoverable reserves, well performance and potential liabilities, as well as uncertainties in forecasting crude oil and natural gas prices and future development, production and marketing costs, and the integration of significant acquisitions may be difficult. We periodically evaluate acquisitions of reserves, properties, prospects and leaseholds and other strategic transactions that appear to fit within our overall business strategy. The successful acquisition of producing properties requires an assessment of several factors, including: • recoverable reserves; • future crude oil and natural gas prices and their appropriate differentials; • development and operating costs; • potential for future drilling and production; • validity of the seller’s title to the properties, which may be less than expected at the time of signing the purchase agreement; and • potential environmental and other liabilities, together with associated litigation of such matters. The accuracy of these assessments is inherently uncertain. In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess their deficiencies and potential recoverable reserves. Inspections may not always be performed on every well, and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems. We often are not entitled to contractual indemnification for environmental liabilities or title defects in excess of the amounts claimed by us before closing and acquire properties on an “as is” basis. Indemnification from the sellers will generally be effective only during a limited time period after 41 Table of Contents the closing and subject to certain dollar limitations and minimums. We may not be able to collect on such indemnification because of disputes with the sellers or their inability to pay. Moreover, there is a risk that we could ultimately be liable for unknown obligations related to acquisitions, which could materially adversely affect our financial condition, results of operations or cash flows. Significant acquisitions and other strategic transactions may involve other risks, including: • diversion of our management’s attention to evaluating, negotiating and integrating significant acquisitions and strategic transactions; • the challenge and cost of integrating acquired operations, information management and other technology systems and business cultures with those of our operations while carrying on our ongoing business; • difficulty associated with coordinating geographically separate organizations; • an inability to secure, on acceptable terms, sufficient financing that may be required in connection with expanded operations and unknown liabilities; and • the challenge of attracting and retaining personnel associated with acquired operations. The process of integrating assets could cause an interruption of, or loss of momentum in, the activities of our business. Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage our business. If our senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer. The success of an acquisition will depend, in part, on our ability to realize anticipated opportunities from combining the acquired assets or operations with those of ours. Even if we successfully integrate the assets acquired, it may not be possible to realize the full benefits we may expect in estimated proved reserves, production volume, cost savings from operating synergies or other benefits anticipated from an acquisition or realize these benefits within the expected time frame. Anticipated benefits of an acquisition may be offset by operating losses relating to changes in commodity prices, in oil and gas industry conditions, by risks and uncertainties relating to the exploratory prospects of the combined assets or operations, failure to retain key personnel, an increase in operating or other costs or other difficulties. If we fail to realize the benefits we anticipate from an acquisition, our results of operations and stock price may be adversely affected. We may incur losses as a result of title defects in the properties in which we invest. It is our practice in acquiring crude oil and natural gas leases or interests not to incur the expense of retaining lawyers to examine the title to the mineral interest. Rather, we rely upon the judgment of crude oil and natural gas lease brokers or landmen who perform the fieldwork in examining records in the appropriate governmental office before attempting to acquire a lease in a specific mineral interest. Prior to the drilling of a crude oil or natural gas well, however, it is the normal practice in our industry for the person or company acting as the operator of the well to obtain a preliminary title review to ensure there are no obvious defects in the title to the well. Frequently, as a result of such examinations, certain curative work must be done to correct defects in the marketability of the title, and such curative work entails expense. Our failure to cure any title defects may adversely impact our ability in the future to increase production and reserves. There is no assurance that we will not suffer a monetary loss from title defects or title failure. Additionally, undeveloped acreage has greater risk of title defects than developed acreage. 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. Disputes or uncertainties may arise in relation to our royalty obligations. Our production is subject to royalty obligations which may be prescribed by government regulation or by contract. These royalty obligations may be subject to changes in interpretation as business circumstances change and the law in jurisdictions in which we operate continues to evolve. For example, in 2019, the Supreme Court of North Dakota issued an opinion indicating a change in its interpretation of how certain gas royalty payments are calculated under North Dakota law with respect to certain state leases, which may require us to make additional royalty payments and reduce our revenues. Such changes in interpretation could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, such changes in interpretation could result in legal or other proceedings. Please see “We are from time to time involved in legal, governmental and regulatory proceedings that could result in substantial liabilities” for a discussion of risks related to such proceedings. 42 Table of Contents Risks related to our financial position Increased costs of capital could adversely affect our business. Our business and operating results can be harmed by factors such as the availability, terms and cost of capital, increases in interest rates or a reduction in credit rating. Changes in any one or more of these factors could cause our cost of doing business to increase, limit our access to capital, limit our ability to pursue acquisition opportunities, reduce our cash flows available for drilling and place us at a competitive disadvantage. Recent and continuing disruptions and volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availability impacting our ability to finance our operations. We require continued access to capital. A significant reduction in the availability of credit could materially and adversely affect our ability to achieve our planned operating results. Our revolving credit facility and the indentures governing our senior unsecured notes contain operating and financial restrictions that may restrict our business and financing activities. Our revolving credit facility and the indentures governing our senior unsecured notes contains a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • sell assets, including equity interests in our subsidiaries; • pay distributions on, redeem or repurchase our common stock or redeem or repurchase our debt; • make investments; • incur or guarantee additional indebtedness or issue preferred stock; • create or incur certain liens; • make certain acquisitions and investments; • redeem or prepay other debt; • enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; • consolidate, merge or transfer all or substantially all of our assets; • engage in transactions with affiliates; • create unrestricted subsidiaries; • enter into sale and leaseback transactions; and • engage in certain business activities. As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. Our ability to comply with some of the covenants and restrictions contained in our revolving credit facility and the indentures governing our senior unsecured notes may be affected by events beyond our control. If market or other economic conditions deteriorate or if crude oil, natural gas and NGL prices decline substantially or for an extended period of time from their current levels, our ability to comply with these covenants may be impaired. A failure to comply with the covenants, ratios or tests in our revolving credit facility, our senior unsecured notes or any future indebtedness could result in an event of default under which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. If an event of default occurs and remains uncured, the lenders under our revolving credit facility: • would not be required to lend any additional amounts to us; • could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable; • may have the ability to require us to apply all of our available cash to repay these borrowings; or • may prevent us from making debt service payments under our other agreements. A payment default or an acceleration under our revolving credit facility could result in an event of default and an acceleration under the indentures for our senior unsecured notes. If the indebtedness under our senior unsecured notes were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full. Our obligations under our revolving credit facility are collateralized by perfected first priority liens and security interests on substantially all of our oil and gas assets, including mortgage liens on oil and gas properties having at least 90% of the 43 Table of Contents reserve value as determined by reserve reports, and if we are unable to repay our indebtedness under the revolving credit facility, the lenders could seek to foreclose on our assets. Our level of indebtedness may increase and reduce our financial flexibility. As of December 31, 2021, we had no outstanding borrowings and $2.4 million of outstanding letters of credit under our revolving credit facility and $400.0 million of 6.375% senior unsecured notes outstanding. In the future, we may incur significant indebtedness in order to make future acquisitions or to develop our properties. An increase in our level of indebtedness could affect our operations in several ways, including the following: • a significant portion of our cash flows could be used to service our indebtedness; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; • the covenants contained in the agreements governing our outstanding indebtedness limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments; • our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore, may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; • a high level of debt may make it more likely that a reduction in our borrowing base under the Oasis Credit Facility following a periodic redetermination could require us to repay a portion of our then-outstanding bank borrowings; and • a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes. A high level of indebtedness would increase the risk that we may default on our debt obligations. Our ability to meet our debt obligations and to maintain or reduce our level of indebtedness depends on our future performance. General economic conditions, crude oil, natural gas and NGL prices and financial, business and other factors affect our operations and our future performance. Many of these factors are beyond our control. If crude oil, natural gas and NGL prices decline substantially or for an extended period of time from their current levels, we may not be able to generate sufficient cash flows to pay the interest on our debt and future working capital, and borrowings or equity financing may not be available to pay or refinance such debt. Factors that will affect our ability to raise cash through an offering of our capital stock or a refinancing of our debt include financial market conditions, the value of our assets and our performance at the time we need capital. In addition, the revolving credit facility borrowing base is subject to periodic redeterminations. We could be forced to repay a portion of our bank borrowings under the revolving credit facility due to redeterminations of our borrowing base. If we are forced to do so, we may not have sufficient funds to make such repayments. If we do not have sufficient funds and are otherwise unable to negotiate renewals of our borrowings or arrange new financing, we may have to sell significant assets. Any such sale could have a material adverse effect on our business and financial results. We may not be able to generate enough cash flows to meet our debt obligations. We expect our earnings and cash flows to vary significantly from year to year due to the nature of our industry. As a result, the amount of debt that we can manage in some periods may not be appropriate for us in other periods. Additionally, our future cash flows may be insufficient to meet our debt obligations and other commitments. Any insufficiency could negatively impact our business. A range of economic, competitive, business and industry factors will affect our future financial performance, and, as a result, our ability to generate cash flows from operations and to pay our debt obligations. Many of these factors, such as crude oil, natural gas and NGL prices, economic and financial conditions in our industry and the global economy and initiatives of our competitors, are beyond our control. If we do not generate enough cash flows from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as: • selling assets; • reducing or delaying capital investments; • seeking to raise additional capital; or • refinancing or restructuring our debt. If for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of the agreements governing our debt, which would allow our creditors at that time to declare all outstanding indebtedness to be due and payable, and our lenders could compel us to apply all of our available cash to repay our borrowings. If amounts 44 Table of Contents outstanding under our revolving credit facility were to be accelerated, we cannot be certain that our assets would be sufficient to repay in full the money owed to the lenders or to our other debt holders. Please see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” We own Crestwood common units and are exposed to the volatility, liquidity and other risks inherent in holding such units. As a result of the closing of the OMP Merger, we hold approximately 21.7% of Crestwood’s issued and outstanding common units, which are publicly traded on the New York Stock Exchange. The fair value of the units is subject to fluctuation in the future due to the volatility of the stock market, changes in general economic conditions, and the performance of Crestwood. While there is an established trading market for Crestwood’s common units, there are limitations on our ability to dispose of some or all of the units. In connection with the closing of the OMP Merger, we entered into a registration rights agreement with Crestwood, which enables us to sell our Crestwood common units but contains customary restrictions on our ability to do so. Future sales of Crestwood units would impact our ability to designate directors to Crestwood GP’s Board of Directors. Pursuant to the director nomination agreement entered into with Crestwood, we may designate two directors so long as we own at least 15% of Crestwood’s issued and outstanding common units, and we may designate one director if we hold at least 10% (but less than 15%) of Crestwood’s issued and outstanding common units. Our derivative activities could result in financial losses or could reduce our income. To achieve more predictable cash flows and to reduce our exposure to adverse fluctuations in the prices of crude oil and natural gas, we currently, and may in the future, enter into derivative arrangements for a portion of our crude oil and natural gas production, including collars and fixed-price swaps. We have not designated any of our derivative instruments as hedges for accounting purposes and record all derivative instruments on our balance sheet at fair value. Changes in the fair value of our derivative instruments are recognized in earnings. Accordingly, our earnings may fluctuate significantly as a result of changes in the fair value of our derivative instruments. Derivative arrangements also expose us to the risk of financial loss in some circumstances, including when: • production is less than the volume covered by the derivative instruments; • the counterparty to the derivative instrument defaults on its contract obligations; or • there is an increase in the differential between the underlying price in the derivative instrument and actual price received. In addition, some of these types of derivative arrangements limit the benefit we would receive from increases in the prices for crude oil and natural gas and may expose us to cash margin requirements. Our exploration, development and exploitation projects require substantial capital expenditures. We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to expiration of our leases or a decline in our estimated net crude oil and natural gas reserves. Our exploration and development activities are capital intensive. We make and expect to continue to make substantial capital expenditures in our business for the development, exploitation, production and acquisition of crude oil and natural gas reserves. DeGolyer and MacNaughton projects that we will incur capital costs of $1.2 billion over the next five years to develop the proved undeveloped reserves in the Williston Basin covered by its December 31, 2021 reserve report. Please see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for more information about our capital expenditures. The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, commodity prices, inflation in costs, actual drilling results, the availability of drilling rigs and other services and equipment, and regulatory, technological and competitive developments. We intend to finance our future capital expenditures primarily through cash flows provided by operating activities; however, our financing needs may require us to alter or increase our capitalization substantially through the issuance of additional debt or equity securities or the sale of non-strategic assets. The issuance of additional debt or equity may require that a portion of our cash flows provided by operating activities be used for the payment of principal and interest on our debt, thereby reducing our ability to use cash flows to fund working capital, capital expenditures and acquisitions or to pay dividends. The issuance of additional equity securities could have a dilutive effect on the value of our common stock. In addition, upon the issuance of certain debt securities (other than on a borrowing base redetermination date), our borrowing base under our revolving credit facility will be automatically reduced by an amount equal to 25% of the aggregate principal amount of such debt securities. Our cash flows provided by operating activities and access to capital are subject to a number of variables, including: • our estimated net proved reserves; • the level of crude oil, natural gas and NGLs we are able to produce from existing wells and new projected wells; 45 Table of Contents • the prices at which our crude oil, natural gas and NGLs are sold; • the costs of developing and producing our crude oil and natural gas production; • our ability to acquire, locate and produce new reserves; • the ability and willingness of our banks to lend; and • our ability to access the equity and debt capital markets. If the borrowing base under our revolving credit facility or our revenues decrease as a result of low crude oil, natural gas or NGL prices, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at current levels. If additional capital is needed, we may not be able to obtain debt or equity financing on terms favorable to us, or at all. If cash generated by operations or cash available under the revolving credit facility is not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our drilling locations, which in turn could lead to a possible expiration of our leases and a decline in our estimated net proved reserves, and could adversely affect our business, financial condition and results of operations. We may maintain material balances of cash and cash equivalents for extended periods of time at commercial banks in excess of amounts insured by government agencies such as the Federal Deposit Insurance Corporation. We may maintain material balances of cash and cash equivalents for extended periods of time at commercial banks in excess of amounts insured by government agencies such as the Federal Deposit Insurance Corporation (“FDIC”). A failure of our commercial banks could result in us losing any funds we have deposited in excess of amounts insured by the FDIC. Any losses we sustain on our cash deposits could materially adversely affect our financial position. The inability of one or more of our customers or affiliates to meet their obligations to us may adversely affect our financial results. Our principal exposures to credit risk are through receivables resulting from the sale of our crude oil and natural gas production, which we market to energy marketing companies, other producers, power generators, local distribution companies, refineries and affiliates, and joint interest receivables. We are subject to credit risk due to the concentration of our crude oil and natural gas receivables with several significant customers. This concentration of customers may impact our overall credit risk since these entities may be similarly affected by changes in economic and other conditions. We do not require all of our customers to post collateral. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. See “Part II. Item 8.—Financial Statements and Supplementary Data—Note 21—Significant Concentrations” for additional information on significant concentrations with major customers. Joint interest receivables arise from billing entities who own a partial interest in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we choose to drill. We have limited ability to control participation in our wells. For the year ended December 31, 2021 (Successor), we recorded an immaterial charge for changes in our estimate of expected credit losses. In addition, our crude oil and natural gas derivative arrangements expose us to credit risk in the event of nonperformance by counterparties. Derivative assets and liabilities arising from derivative contracts with the same counterparty are reported on a net basis, as all counterparty contracts provide for net settlement. At December 31, 2021, we had commodity derivatives in place with eight counterparties and a total net derivative liability of $204.7 million. Potential future legislation or the imposition of new or increased taxes or fees may generally affect the taxation of oil and natural gas exploration and development companies and may adversely affect our operations and cash flows. In past years, U.S. federal and state level legislation has been proposed that would, if enacted into law, make significant changes to U.S. tax laws, including to certain key U.S. federal and state income tax provisions currently available to oil and natural gas exploration and development companies. Such proposals include, but are not limited to, (i) an increase in the U.S. income tax rate applicable to corporations such as us and (ii) the elimination of tax subsidies for fossil fuels. The U.S. Congress could consider, and could include, some or all of these proposals in connection with future legislation or tax reform. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. Additionally, states in which we operate or own assets may impose new or increased taxes or fees on oil and natural gas extraction. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws or the imposition of new or increased taxes or fees on natural gas and oil extraction could adversely affect our operations and cash flows. 46 Table of Contents We may not be able to utilize all or a portion of our net operating loss carryforwards or other tax benefits to offset future taxable income for U.S. federal or state tax purposes, which could adversely affect our financial position, results of operations and cash flows. We may be limited in the portion of our net operating loss carryforwards (“NOLs”) that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. Utilization of these NOLs depends on many factors, including our future taxable income, which cannot be assured. Under Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation experiences an “ownership change,” any NOLs, losses or deductions attributable to a “net unrealized built-in loss” and other tax attributes (“Tax Benefits”) could be substantially limited, and timing of the usage of such Tax Benefits could be substantially delayed. A corporation generally will experience an ownership change if one or more stockholders (or group of stockholders) who are each deemed to own at least 5% of the corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Determining the limitations under Section 382 is technical and highly complex, and no assurance can be given that upon further analysis our ability to take advantage of our NOLs or other Tax Benefits may be limited to a greater extent than we currently anticipate. Upon our emergence from bankruptcy in November 2020, we experienced an ownership change. However, we believe that we qualified for and, as a result, utilized an exception under Section 382(l)(5) (the “Section 382(l)(5) Exception”) from the limitation that would otherwise be imposed under Section 382. However, if we were to experience a subsequent ownership change within the two-year period immediately following our emergence from bankruptcy, we would be precluded from utilizing any remaining pre-emergence NOLs following such subsequent ownership change. If we are limited in our ability to utilize our NOLs or other Tax Benefits in future years in which we have taxable income, we will pay more taxes than if we were able to utilize our NOLs and Tax Benefits fully, which could have a negative impact on our financial position, results of operations and cash flows. Additionally, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our NOLs and Tax Benefits, which could adversely affect our financial position, results of operations and cash flows. The enactment of derivatives legislation and regulation could have an adverse effect on our ability to use derivative instruments to reduce the negative effect of commodity price changes, interest rate and other risks associated with our business. In 2010, new comprehensive financial reform legislation, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), was enacted that establishes federal oversight and regulation of the over-the-counter derivatives market and entities, such as us, that participate in that market. The Dodd-Frank Act requires the CFTC, the SEC and other regulators to promulgate rules and regulations implementing the new legislation. In its rulemaking under the Dodd-Frank Act, the CFTC has proposed new regulations to set position limits for certain futures, options and swap contracts in designated physical commodities, including, among others, crude oil and natural gas. The Dodd-Frank Act and CFTC rules have also designated certain types of swaps (thus far, only certain interest rate swaps and credit default swaps) for mandatory clearing and exchange trading, and may designate other types of swaps for mandatory clearing and exchange trading in the future. To the extent that we engage in such transactions or transactions that become subject to such rules in the future, we will be required to comply with the clearing and exchange trading requirements or to take steps to qualify for an exemption to such requirements. In addition, certain banking regulators and the CFTC have adopted final rules establishing minimum margin requirements for uncleared swaps. Although we expect to qualify for the non-financial end-user exception from margin requirements for swaps to other market participants, such as swap dealers, these rules may change the cost and availability of the swaps we use for hedging. If any of our swaps do not qualify for the non-financial end-user exception, we could be required to post initial or variation margin, which would impact liquidity and reduce our cash. This would in turn reduce our ability to execute hedges to reduce risk and protect cash flows. Other regulations to be promulgated under the Dodd-Frank Act also remain to be finalized. As a result, it is not possible at this time to predict with certainty the full effects of the Dodd-Frank Act and CFTC rules on us and the timing of such effects. The Dodd-Frank Act and regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure our existing derivative contracts, and increase our exposure to less creditworthy counterparties. If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures. Further, to the extent our revenues are unhedged, they could be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is to lower commodity prices. Any of these consequences could have a material adverse effect on our financial position, results of operations and cash flows. In addition, the European Union and other non-U.S. jurisdictions are implementing regulations with respect to the derivatives market. To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations. 47 Table of Contents Risks related to our common stock Our ability to declare and pay dividends is subject to certain considerations and limitations. Any payment of future dividends will be at the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our Board of Directors deems relevant. Cash dividend payments in the future may only be made out of legally available funds and, if we experience substantial losses, such funds may not be available. Certain covenants in our revolving credit facility may limit our ability to pay dividends. We can provide no assurance that we will continue to pay dividends at the current rate or at all. Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock. Our amended and restated certificate of incorporation authorizes our Board of Directors to issue preferred stock without stockholder approval. If our Board of Directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: • advance notice provisions for stockholder proposals and nominations for elections to the Board of Directors to be acted upon at meetings of stockholders; and • limitations on the ability of our stockholders to call special meetings. Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our Board of Directors. The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute your holding of shares of our common stock. We have outstanding warrants to purchase shares of our common stock at an exercise price of $90.57. In addition, as of February 21, 2022, approximately 1.4 million shares (excluding impacts from total shareholder return adjustments) of our common stock were reserved for future issuance under the Oasis Petroleum Inc. 2020 Long Term Incentive Plan (the “2020 LTIP”). The exercise of equity awards, including any stock options that we may grant in the future, warrants, and the sale of shares of our common stock underlying any such options or warrants, could have an adverse effect on the market for our common stock, including the price that an investor could obtain for their shares. The market price of our common stock is subject to volatility. The liquidity for our common shares has been below historical levels, and the market price of our common stock could be subject to wide fluctuations. If there is a thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In addition, in the absence of an active public trading market, investors may be unable to liquidate their investment in us. The market price of our common stock can be affected by, numerous factors, many of which are beyond our control. These factors include, among other things, actual or anticipated variations in our operating results and cash flow, the nature and content of our earnings releases, announcements or events that impact our products or services, customers, competitors or markets, business conditions in our markets and the general state of the securities markets and the market for energy-related stocks, as well as general economic and market conditions and other factors that may affect our future results. General risk factors We are from time to time involved in legal, governmental and regulatory proceedings that could result in substantial liabilities. Like other similarly-situated oil and gas companies, we are from time to time involved in various legal, governmental and regulatory proceedings in the ordinary course of business including, but not limited to, commercial disputes, claims from royalty and surface owners, property damage claims, personal injury claims, regulatory compliance matters, disputes with tax authorities and other matters. The outcome of such matters often cannot be predicted with certainty. If our efforts to defend ourselves in legal, governmental and regulatory matters are not successful, it is possible the outcome of one or more such 48 Table of Contents proceedings could result in substantial liability, penalties, sanctions, judgments, consent decrees or orders requiring a change in our business practices, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Judgments and estimates to determine accruals related to legal, governmental and regulatory proceedings could change from period to period, and such changes could be material. Terrorist attacks or cyber-attacks could have a material adverse effect on our business, financial condition or results of operations. Terrorist attacks or cyber-attacks may significantly affect the energy industry, including our operations and those of our potential customers, as well as general economic conditions, consumer confidence and spending and market liquidity. Strategic targets, such as energy-related assets, may be at greater risk of future attacks than other targets in the United States. Also, destructive forms of protests and opposition by extremists and other disruptions, including acts of sabotage or eco-terrorism, against crude oil and natural gas development and production or midstream processing or transportation activities could potentially result in damage or injury to persons, property or the environment or lead to extended interruptions of our operations. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition and results of operations. A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss . The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations, including certain midstream activities. For example, software programs are used to manage gathering and transportation systems and for compliance reporting. The use of mobile communication devices has increased rapidly. Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as crude oil and natural gas pipelines. We depend on digital technology, including information systems and related infrastructure as well as cloud applications and services, to process and record financial and operating data and to communicate with our employees and business partners. Our business partners, including vendors, service providers and financial institutions, are also dependent on digital technology. The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation. As dependence on digital technologies has increased, cyber incidents, including deliberate attacks or unintentional events, also has increased. A cyber attack could include gaining unauthorized access to digital systems or data for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. SCADA-based systems are potentially vulnerable to targeted cyber attacks due to their critical role in operations. Our technologies, systems, networks and data, and those of our business partners, may become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information or other disruption of our business operations. In addition, certain cyber incidents, such as unauthorized surveillance or a cyber breach, may remain undetected for an extended period. A cyber incident involving our information systems or data and related infrastructure, or that of our business partners, including any vendor or service provider, could disrupt our business plans and negatively impact our operations in the following ways, among others: • supply chain disruptions, which could delay or halt development of additional infrastructure, effectively delaying the start of cash flows from the project; • delays in delivering or failure to deliver product at the tailgate of our facilities, resulting in a loss of revenues; • operational disruption resulting in loss of revenues; • events of non-compliance that could lead to regulatory fines or penalties; and • business interruptions that could result in expensive remediation efforts, distraction of management, damage to our reputation or a negative impact on the price of our units. Our implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for our information, facilities and infrastructure is costly and labor intensive. Moreover, there can be no assurance that such measures will be sufficient to prevent security breaches from occurring. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Our profitability may be negatively impacted by inflation in the cost of labor, materials and services. Although inflation in the United States has been relatively low in recent years, the U.S. economy has recently experienced a significant inflationary effect from, among other things, supply chain disruptions and governmental stimulus or fiscal policies 49 Table of Contents adopted in response to the COVID-19 pandemic. While we cannot predict any future trends in the rate of inflation, the global COVID-19 pandemic has brought unprecedented uncertainty to the near-term economic outlook. A significant increase in inflation would raise our costs for labor, materials and services, which would negatively impact our profitability and cash flows. Ineffective internal controls could impact our business and financial results. Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations. Item 1B. Unresolved Staff Comments None. Item 2. Properties The information required by Item 2. is contained in Item 1. Business. Item 3. Legal Proceedings See “Part II, Item 8. Financial Statements and Supplementary Data—Note 22—Commitments and Contingencies,” which is incorporated herein by reference, for a discussion of material legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 50 Table of Contents PART II