Item 1A. Risk Factors
Item 1A Risk Factors
We are subject to various risks and uncertainties in the course of our business. A discussion of such risks and uncertainties may be found under the heading Risk Factors in our 2023 Annual Report. Except as set forth below, there were no material changes to those risk factors during the three months ended June 30, 2024.
Increases in prices for commodities used in our oil and natural gas operations may negatively affect our financial results.
Operating and capital costs in the oil and natural gas industry are heavily influenced by commodity prices, including the prices we pay for electricity, natural gas and steel-based materials. For example, we use natural gas in our operations to generate steam for use in steamfloods. Following the closing of the Aera Merger on July 1, 2024, we expect that our consumption of natural gas will increase significantly and could exceed the amount of natural gas we produce. We also use electricity generated by our Elk Hills power plant to power our oil and gas operations in the Elk Hills field. If we are unable to generate sufficient natural gas or electricity for use in our operations, we may need to purchase these commodities from third parties. Increases in the volumes or prices of commodities used in our operations could cause increases in our operating expenses. We attempt to manage our exposure to price increases of certain commodities used in our operations, including natural gas, by entering into hedges or longer-term contracts with fixed price arrangements. However, these measures do not fully protect us from the effects of commodity price increases and we may not be able to enter into similar arrangements in the future on acceptable terms or at all.
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