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Item 1A. Risk Factors

2021-09-14 compared with 2020-09-10 · 126 added, 110 removed, 223 unchanged (51% of the section changed)

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Additional risks not presently known to us or which we currently consider to be immaterial also may adversely affect us.

Risks related to the oil and gas industry and our Company

A substantial or extended decline in oil prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.

The price we receive for our oil significantly influences our revenue, profitability, access to capital, and future rate of growth.

Oil is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand.

For example, average daily prices for WTI crude oil ranged from a high of $74 per barrel to a low of a negative $38 per barrel over our past few fiscal years.

Historically, the markets for oil and natural gas liquids have been volatile and these markets will likely continue to be volatile in the future.

Risks related to the oil and natural gas industry and our Company

A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.

The price we receive for our oil and natural gas significantly influences our revenue, profitability, access to capital, and future rate of growth.

Oil and natural gas are commodities and their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand.

For example, average daily prices for WTI oil ranged from a high of $74 per barrel to a low of a negative $38 per barrel, and Henry Hub natural gas prices ranged from a high of $23.86 to a low of $1.33 per MMBTU over our last two fiscal years.

Historically, the markets for oil, natural gas, and natural gas liquids have been volatile and these markets will likely continue to be volatile in the future.

The prices we receive for our production depend on numerous factors beyond our control, including, but not limited to the following:

changes in global supply and demand for oil and natural gas, which has recently been negatively affected by concerns about the impact of COVID-19;

worldwide and regional economic conditions impacting the global supply and demand for oil and gas;

• changes in global supply and demand for oil and natural gas, which has been negatively affected by concerns about the impact of COVID-19;

• worldwide and regional economic conditions impacting the global supply and demand for oil and natural gas;

• actions of OPEC+ or other groups of oil producing nations;

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• political conditions in or affecting other oil-producing and natural gas-producing countries;

• governmental, scientific, and public concern over the threat of climate change arising from greenhouse emissions;

• the level of global oil and natural gas exploration and production;

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• localized supply and demand fundamentals of regional, domestic, and international transportation availability;

weather conditions and natural disasters;

• weather conditions, natural disasters, and seasonal trends;

• domestic and foreign governmental regulations;

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Substantially all of our production is sold to purchasers under short-term (less than 12-month) contracts at market-based prices.

A decline in oil and natural gas liquids prices will reduce our cash flows, borrowing ability, the present value of our reserves, and our ability to develop future reserves.

A decline in 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.

We may be unable to obtain needed capital or financing on satisfactory terms.

Low oil and natural gas liquids prices may also reduce the amount of oil and natural gas liquids that we can produce economically, which could lead to a decline in our oil and natural gas liquids reserves.

Because approximately 80% of our proved reserves at June 30, 2020 are crude oil reserves and 20% are natural gas liquids reserves, we are heavily impacted by movements in crude oil prices, which also influence natural gas liquids prices.

To the extent that we have not hedged our production with derivative contracts or fixed-price contracts, any significant and extended decline in oil and natural gas liquids prices may adversely affect our financial position.

Our revenues are concentrated in two assets and related declines in production or other events beyond our control could have a material adverse effect on our results of operations and financial results.

Our revenues come from our royalty, mineral and working interests in the Delhi field in Louisiana and the Hamilton Dome field in Wyoming and thus our current revenues are highly concentrated in these fields.

Any significant downturn in production, oil and NGL prices, or other events beyond our control which impact these fields could have a material adverse effect on our results of operations and financial results.

Low oil, natural gas, and NGL prices may also reduce the amount of oil, natural gas, and NGL that we can produce economically, which could lead to a decline in our oil, natural gas and NGL reserves.

At June 30, 2021, approximately 36% of our proved reserves are oil reserves, 35% are natural gas and 29% are NGL reserves.

As such, we are heavily impacted by movements in natural gas and oil prices, the latter also influencing NGL prices.

To the extent that we have not hedged our production with derivative contracts or fixed-price contracts, any significant and extended decline in oil, natural gas, and NGL prices may adversely affect our financial position.

Our revenues are concentrated in three assets and related declines in production or other events beyond our control could have a material adverse effect on our results of operations and financial results.

Our revenues come from our royalty, mineral, and working interests in the Delhi field in Louisiana, the Hamilton Dome field in Wyoming, and the Barnett Shale in Texas and thus our current revenues are concentrated from these fields.

Any significant downturn in production, oil, natural gas, and NGL prices, or other events beyond our control which impact these fields could have a material adverse effect on our results of operations and financial results.

We are not the operator of these fields, and our revenues and future growth are heavily dependent on the success of operations, which we do not control.

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we may be unable to acquire and develop the additional oil and natural gas reserves that are required in order to sustain our business operations.

In general, the volumes of production from crude oil and natural gas properties decline as reserves are depleted, with the rate of decline depending on reservoir characteristics.

Except to the extent we acquire additional properties containing proved reserves or conduct successful development activities, or both, our proved reserves will decline.

Our production is heavily dependent on our interests in EOR production that began during March 2010 in the Delhi field and our newly acquired interests in the

Hamilton Dome field in Wyoming.

Environmental or operating problems or lack of extended future investment in either of these fields could cause our net production of oil and natural gas liquids to decline significantly over time, which could have a material adverse effect on our financial condition.

In fiscal 2020, our production was impacted by the operators of both fields.

In general, the volumes of production from oil and natural gas properties decline as reserves are depleted, with the rate of decline depending on reservoir characteristics.

Except to the extent we acquire additional properties containing proved reserves or conduct successful development activities, or both, our proved reserves will naturally decline.

Our production is heavily dependent on our interests in EOR production that began during March 2010 in the Delhi field and our interests in the Hamilton Dome field in Wyoming and Barnett Shale in Texas.

Environmental or operating problems or lack of extended future investment in any of these assets could cause our net production of oil, natural gas, and NGLs to decline significantly over time, which could have a material adverse effect on our financial condition.

In fiscal 2021, our production was impacted by the operators of the Delhi and Hamilton Dome fields.

Delhi production volumes were negatively impacted as a result of the financial strain Denbury was under and their lack of investment in projects in the field, including the delay of our Phase V, in addition to the purchased CO 2 line being shut in for repairs.

In the Hamilton Dome field Merit temporarily shut in a portion of the production as it was uneconomic at the historically low prices.

As of June 30, 2020, a number of these wells have returned to production and we continue to monitor their performance;

As of June 30, 2021, Merit has reactivated the inventory of shut-in wells capable of supporting their expenses and we continue to monitor their performance;

however, there is no guarantee that prolonged periods of being shut-in or lack of investment would not negatively impact future production.

We have limited control over the activities on properties we do not operate.

Substantially, all of our property interests are not operated by the Company and also involve other third-party working interest owners.

Substantially all of our property interests are not operated by the Company and involve other third-party working interest owners.

As a result, we have limited ability to influence or control the operation or future development of such properties, including compliance with environmental, safety, and other regulations, or the amount of capital expenditures that we will be required to fund with respect to such properties.

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These limitations and our dependence on the operator and other working interest owners for these projects could cause us to incur unexpected future costs, result in lower production, and materially and adversely affect our financial conditions and results of operations.

We are materially dependent upon our operators with respect to the successful operation of our principal assets, which consists of our interests Delhi and Hamilton Dome fields.

A materially negative change in our operator’s financial condition could negatively affect operations (or timing thereof) in these fields, and consequently our income (or timing thereof) from these fields as well as the value of our interests in these fields.

Our royalty, mineral and working interests in the Delhi field, located in Northeast Louisiana are our primary producing assets.

Approximately 90% of our revenues come from the Delhi interests and thus our current revenues are highly concentrated in this field.

Any significant downturn in production or other events beyond our control which impact the Delhi field could have a material adverse effect on our results of operations and financial results (or timing thereof).

We are materially dependent upon our operators with respect to the successful operation of our principal assets, which consist of our interests in Delhi field, Hamilton Dome field, and the Barnett Shale.

A materially negative change in any of our operator’s financial condition could negatively affect operations (or timing thereof) in these assets, and consequently our income (or timing thereof) from these assets as well as the value of our interests in these assets.

Any significant downturn in production or other events beyond our control which impact our assets could have a material adverse effect on our results of operations and financial results (or timing thereof).

We are not the operator of the Delhi field.

It is operated by a subsidiary of Denbury Resources Inc.

It is operated by a subsidiary of Denbury Inc.

(“DNR”), an independent oil and gas company specializing in tertiary recovery with CO 2 .

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Such occurrences could have a material adverse effect on us, and our results of operations and financial condition.

On February 22, 2020, DNR experienced a pressure loss in its CO 2 purchase pipeline resulting in an immediate shut down.

DNR cut out a section of the failed pipeline and sent it out for analysis on the cause of the failure and remediation procedures.

Analysis results, with the consultation the government regulating agency, recommended repairing the damaged section of pipeline.

DNR has informed the Company that preparations for this project are underway and the CO 2 purchases line should be back in operation October 1, 2020.

Our economic success is thus materially dependent upon the Delhi field operator's ability to:

(i) deliver sufficient quantities of CO 2 from its reserves in the Jackson Dome source, (ii) secure its share of capital necessary to fund development and operating commitments with respect to the field, and (iii) successfully manage related technical, operating, environmental, strategic, and logistical risks, among other things.

In July 2020, Denbury announced that it had entered into a Restructuring Support Agreement (the “RSA”) with holders of 100% of revolving credit facility loans, approximately 67.2% of second lien notes and approximately 70.8% of convertible notes for a “pre-packaged” plan to eliminate $2.1 billion of bond debt and subsequently filed for voluntarily filed petitions for reorganization under Chapter 11 of the Bankruptcy Code in the U.S.

In July 2020, Denbury announced that it had entered into a Restructuring Support Agreement with holders of 100% of revolving credit facility loans, approximately 67.2% of second lien notes and approximately 70.8% of convertible notes for a “pre-packaged” plan to eliminate $2.1 billion of bond debt and subsequently filed for voluntarily filed petitions for reorganization under Chapter 11 of the Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of Texas.

Denbury subsequently announced on September 3 rd that its plan to eliminate $2.1 billion of its bond debt has been confirmed by the court which will substantially reduce its debt, strengthen its balance sheet, and position Denbury to free up capital for investment in properties such as Delhi again.

Denbury subsequently announced on September 3 rd that its plan to eliminate $2.1 billion of its bond debt has been confirmed by the court which substantially reduced its debt, strengthened its balance sheet, and positioned Denbury to free up capital for investment in properties such as Delhi again.

We are not the operator of the Hamilton Dome field.

It is operated by Merit, a private oil and natural gas company.

Our revenues and future growth are thus heavily dependent on the success of operations which we do not control.

We are not the operator of the Barnett Shale assets.

At the time of acquisition, approximately 90% of the wells in the Barnett Shale field were operated by Blackbeard, and the remaining 10% of wells were operated by seven other operators.

Our revenues and future growth are thus heavily dependent on the success of operations which we do not control.

In May 2021, Blackbeard announced an agreement to sell its interest in the Barnett Shale assets to Diversified Energy.

The transaction closed in July 2021, with Diversified Energy taking over as operator .

Our revenues and future growth are heavily dependent on a smooth transition of operations from Blackbeard to Diversified Energy and the success of operations under Diversified Energy, which we do not control.

The types of resources we focus on have substantial operational risks.

Our business plan focuses on the acquisition and development of known resources in partially depleted reservoirs, naturally fractured, or low permeability reservoirs.

Our Delhi and Hamilton Dome assets are productive from relatively shallow reservoirs;

we may pursue assets that produce from deeper reservoirs in the future.

Our Delhi and Hamilton Dome assets are productive from relatively shallow reservoirs, while our Barnett Shale assets produce from deeper reservoirs.

Shallower reservoirs usually have lower pressure, which generally translates into lower reserve volumes in place.

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Low permeability reservoirs require more wells and substantial stimulation for development of commercial production.

Naturally fractured reservoirs require penetration of sufficient undepleted fractures to establish commercial production.

Naturally fractured reservoirs require penetration of sufficient un-depleted fractures to establish commercial production.

Depleted reservoirs require successful application of newer technology to produce incremental reserves.

Our CO 2 -EOR project in the Delhi field, operated by a subsidiary of Denbury Resources Inc., requires significant amounts of CO 2 reserves, development capital and technical expertise, the sources of which to date have been committed by the operator.

Our CO 2 -EOR project in the Delhi field, operated by Denbury, requires significant amounts of CO 2 reserves, development capital, and technical expertise, the sources of which to date have been committed by the operator.

Although initial CO 2 injection began at Delhi in November 2009, initial oil production response began in March 2010 and a large part of the capital budget has already been expended.

Additional capital remains to be invested to fully develop the EOR project, further increase production, and maximize the value of the asset.

The operator's failure to manage these and other technical, environmental, operating, strategic, financial, and logistical risks may cause ultimate enhanced recoveries from the planned CO 2 -EOR project to fall short of our expectations in volume and/or timing.

The operator's failure to manage these and other technical, environmental, operating, strategic, financial, and logistical risks may ultimately cause enhanced recoveries from the planned CO 2 -EOR project to fall short of our expectations in volume and/or timing.

Such occurrences would have a material adverse effect on the Company, its results of operations and financial condition.

Crude oil and natural gas development, re-completion of wells from one reservoir to another reservoir, restoring wells to production, and drilling and completing new wells are speculative activities which involve numerous risks and substantial uncertain costs.

Our growth will be materially dependent upon the success of our future development program.

Drilling for crude oil and extracting natural gas liquids and re-working existing wells involve numerous risks.

The risk that no commercially productive crude oil or natural gas reservoirs will be encountered is paramount.

Oil and natural gas development, re-completion of wells from one reservoir to another reservoir, restoring wells to production, and drilling and completing new wells are speculative activities which involve numerous risks and substantial uncertain costs.

Our growth will be partially dependent upon the success of our future development program.

Drilling for oil and natural gas and extracting NGLs and re-working existing wells involve numerous risks.

The risk that no commercially productive oil or natural gas reservoirs will be encountered is paramount.

The cost of drilling, completing, and operating wells is substantial and uncertain;

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Drilling or re-working is a highly speculative activity.

Even when fully and correctly utilized, modern well completion techniques such as horizontal drilling or CO 2 injection, do not guarantee that we will find and produce crude oil and/or natural gas in our wells in economic quantities.

Even when fully and correctly utilized, modern well completion and production techniques such as horizontal drilling or CO 2 injection, do not guarantee that we will find and produce oil and/or natural gas in our wells in economic quantities.

Our future drilling activities may not be successful and, if unsuccessful, such failure would have an adverse effect on our future results of operations and financial condition.

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The drilling and results for these prospects may be particularly uncertain.

We cannot assure you that these projects can be successfully developed or that the wells discussed will, if drilled, encounter reservoirs of commercially productive crude oil or natural gas.

We cannot ensure that these projects can be successfully developed or that the wells discussed will, if drilled, encounter reservoirs of commercially productive oil or natural gas.

The loss of a large single purchaser of our oil and natural gas could reduce the competition of our production.

For the year ended June 30, 2021, one purchaser accounted for approximately 62% of our total oil revenues.

We do not currently market our share of crude oil production from the Delhi or Hamilton Dome fields.

Although we have the right to take our working interest production in-kind, we are currently accepting terms under the operators' agreements for the delivery and pricing of our oil.

We do not currently market our share of oil, natural gas, and NGLs production from the Delhi field, the Hamilton Dome field, or the Barnett Shale.

Although we have the right to take our working interest production in-kind, we are currently accepting terms under the operators' agreements for the delivery and pricing of our oil, natural gas and NGLs.

The loss of a large purchaser for our oil production could negatively impact the revenue we receive.

We cannot guarantee that we could readily find other purchasers for our oil and natural gas production.

In addition, the crude oil production from the Delhi and Hamilton Dome fields is transported by pipeline;

if either of these pipelines were disrupted and we were forced to use alternative transportation methods, our net realized pricing and potentially our near-term production levels could be adversely affected.

Our crude oil and natural gas reserves are only estimates and may prove to be inaccurate.

There are numerous uncertainties inherent in estimating crude oil and natural gas reserves and their estimated values.

Our oil and natural gas reserves are only estimates and may prove to be inaccurate.

There are numerous uncertainties inherent in estimating oil and natural gas reserves and their estimated values.

Our reserves are only estimates that may prove to be inaccurate because of these inherent uncertainties.

Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot always be measured in an exact manner.

Estimates of economically recoverable crude oil and natural gas reserves depend upon a number of variable factors.

These factors include historical production from the area compared with production from other comparable producing areas, assumptions concerning effects of regulations by governmental agencies, future crude oil and natural gas product prices, future operating costs, severance and excise taxes, development costs, work-over costs, and remedial costs.

Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot always be measured in an exact manner.

Estimates of economically recoverable oil and natural gas reserves depend upon a number of variable factors.

These factors include historical production from the area compared with production from other comparable producing areas, assumptions concerning effects of regulations by governmental agencies, future oil and natural gas product prices, future operating costs, severance and excise taxes, development costs, work-over costs, and remedial costs.

Some or all of these assumptions utilized in estimating reserve volumes may vary considerably from actual results.

For these reasons, estimates of the economically recoverable quantities of reserves, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows expected from reserves may vary substantially depending on the timing ang and different engineers preparing reserves estimates.

Accordingly, reserve estimates may be subject to downward or upward adjustment.

For these reasons, estimates of the economically recoverable quantities of reserves, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows expected from reserves may vary substantially depending on the timing and different engineers preparing reserves estimates.

Accordingly, reserve estimates may be subject to downward or upward adjustments.

Actual production, revenue, and expenditures with respect to our reserves will likely vary from estimates;

such variances may be material.

The information regarding discounted future net cash flows included in this report should not be considered as the current market value of the estimated crude oil and natural gas reserves attributable to our properties.

The information regarding discounted future net cash flows included in this report should not be considered as the current market value of the estimated oil and natural gas reserves attributable to our properties.

The estimated discounted future net cash flows from proved reserves are based on the 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower.

Actual future net cash flows also will be affected by factors such as the amount and timing of actual production, supply and demand for crude oil and natural gas, increases or decreases in consumption, and changes in governmental regulations or taxation.

Actual future net cash flows also will be affected by factors such as the amount and timing of actual production, supply and demand for oil and natural gas, increases or decreases in consumption, and changes in governmental regulations or taxation.

In addition, the 10% discount factor, which is required by the SEC to be used in calculating discounted future net cash flows for reporting purposes, is not necessarily the most appropriate discount factor.

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Regulatory and accounting requirements may require substantial reductions in reporting proven reserves.

On a periodic basis we review the carrying value of our crude oil and natural gas properties under the applicable rules of various regulatory agencies, including the SEC.

On a periodic basis, we review the carrying value of our oil and natural gas properties under the applicable rules of various regulatory agencies, including the SEC.

Under the full cost method of accounting that we use, the after-tax carrying value of our oil and natural gas properties may not exceed the present value of estimated future net after-tax cash flows from proved reserves, discounted at 10%.

Application of this “ceiling” test requires pricing future revenues at the previous 12-month average beginning-of-month price and requires a write-down of the carrying value for accounting purposes if the ceiling is exceeded.

We may in the future be required to write down the carrying value of our crude oil and natural gas properties when crude oil and natural gas prices are depressed or unusually volatile.

Whether we will be required to take such a charge will depend in part on the prices of crude oil and natural gas during the previous period and the effect of reserve additions or revisions and capital expenditures during such period.

We may in the future be required to write down the carrying value of our oil and natural gas properties when oil and natural gas prices are depressed or unusually volatile.

Whether we will be required to take such a charge will depend in part on the prices of oil and natural gas during the previous period and the effect of reserve additions or revisions and capital expenditures during such period.

If a write-down is required, it would result in a current charge to our earnings but would not impact our current cash flow from operating activities.

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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 oil and natural gas liquids, we have, and may in the future, enter into derivative arrangements for a portion of our oil and natural gas liquids production.

To achieve more predictable cash flows and to reduce our exposure to adverse fluctuations in the prices of oil and NGLs, we have, and may in the future, enter into derivative arrangements for a portion of our oil, natural gas, and NGLs production.

Derivative arrangements may include costless 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.

We have not historically 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, but not limited to, if:

Accordingly, our earnings may fluctuate significantly as a result of changes in the fair value of our future derivative instruments.

Derivative arrangements may also expose us to the risk of financial loss in some circumstances, including, but not limited to, if:

• production is less than the volume covered by the derivative instruments;

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• there is a change in the expected 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 oil and natural gas liquids and may expose us to cash margin requirements.

In addition, some of these types of derivative arrangements limit the benefit we would receive from increases in the prices for oil, natural gas and NGLs and may expose us to cash margin requirements.

We may have difficulty managing future growth and the related demands on our resources and may have difficulty in achieving future growth.

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(i) deliver sufficient quantities of CO2 from its reserves in the Jackson Dome, (ii) secure all of the development capital necessary to fund its and our cost interests, and further develop the Delhi field, such as advancement of Phase V development in the undeveloped eastern part of the field, (iii) successfully manage technical, operating, environmental, strategic and logistical development and operating risks, and (iv) maintain its own financial stability.

We cannot assure you that we will be able to successfully grow or manage any such growth.

Our operations may require significant amounts of capital and additional financing may be necessary in order for us to continue our exploitation activities, including meeting potential future drilling obligations.

We cannot ensure that we will be able to successfully grow or manage any such growth.

Our operations may require significant amounts of capital and additional financing may be necessary in order for us to continue our exploitation activities.

Our cash flow from our reserves may not be sufficient to fund our ongoing activities at all times.

From time to time, we may require additional financing in order to carry out our oil and gas acquisitions, exploitation and development activities.

From time to time, we may require additional financing in order to carry out our oil and natural gas acquisitions, exploitation, and development activities.

Certain portions of our undeveloped leasehold acreage may be subject to expiration unless production is established.

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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.

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.

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Significant acquisitions and other strategic transactions may involve other risks, including, but not limited to:

our lean management team's capacity could be challenged by the demands of evaluating, negotiating, integrating significant acquisitions, and strategic transactions in concert with the Company's ongoing business demands;

• our management team's capacity could be challenged by the demands of evaluating, negotiating, integrating significant acquisitions, and strategic transactions in concert with the Company's ongoing business demands;

• the challenge and cost of integrating acquired operations, information management, other technology systems, and business cultures with those of our operations while carrying on our ongoing business;

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In addition, even if we successfully integrate the assets acquired in an acquisition, it may not be possible to realize the full benefits we may expect in estimated proved reserves, production volumes, cost savings from operating synergies, other benefits anticipated from an acquisition, or realize these benefits within the expected time frame.

Government regulation and liability for oil and gas operations and environmental matters may adversely affect our business and results of operations.

Crude oil and natural gas operations are subject to extensive federal, state, and local government regulations, which may be changed from time to time.

Government regulation and liability for oil and natural gas operations and environmental matters may adversely affect our business and results of operations.

Oil and natural gas operations are subject to extensive federal, state, and local government regulations, which may be changed from time to time.

Matters subject to regulation include discharge permits for drilling operations, drilling bonds, reports concerning operations, the spacing of wells, unitization and pooling of properties, and taxation.

From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of crude oil and natural gas from wells below actual production capacity in order to conserve supplies of crude oil and natural gas.

There are federal, state, and local laws and regulations primarily relating to protection of human health and the environment applicable to the development, production, handling, storage, transportation, and disposal of crude oil and natural gas, by-products thereof, the emission of CO 2 or other greenhouse gases, and other substances and materials produced or used in connection with crude oil and natural gas operations.

From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and natural gas from wells below actual production capacity in order to conserve supplies of oil and natural gas.

There are federal, state, and local laws and regulations primarily relating to protection of human health and the environment applicable to the development, production, handling, storage, transportation, and disposal of oil and natural gas, by-products thereof, the emission of CO 2 or other greenhouse gases, and other substances and materials produced or used in connection with oil and natural gas operations.

These laws and regulations may affect the costs, manner and feasibility of our operations and require us to make significant expenditures in order to comply.

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The implementation of new, or the modification of existing, laws or regulations could have a material adverse effect on us, such as diminishing the demand for our products through legislative enactment of proposed new penalties, fines and/or taxes on carbon that could have the effect of raising prices to the end user.

The risks arising out of concerns regarding the threat of climate change, including regulatory, political, litigation, and financial risks may adversely affect our business and results of operations.

The Company’s operations are subject to a number of risks arising out of concerns regarding the threat of climate change, including regulatory, political, litigation, and financial risks, that could result in increased operating costs and costs of compliance, limit the areas in which oil and natural gas production may occur and reduce the demand for oil and natural gas.

The threat of climate change continues to attract considerable attention.

Numerous initiatives have been proposed and more are expected to come that focus on monitoring and limiting existing sources of greenhouse gas emissions as well as to restrict or eliminate emissions from new sources.

As a result, the Company is subject to numerous risks associated with the production and processing of fossil fuels and emission of greenhouse gas.

Governmental, scientific, and public concern over the threat of climate change arising from greenhouse emissions has resulted in increasing political risks in the United States.

Proposals to ban hydraulic fracturing of oil and natural gas wells and ban new leases for production of minerals on federal properties, including onshore lands and offshore waters have already been made.

Other actions that could be pursued may include more restrictive requirements for drilling or construction permits, the reversal of the United States’ withdrawal from the Paris Agreement in November 2020, and reinstatement of the ban on oil exports.

Litigation risks are also increasing as a number of suits against oil and natural gas exploration and production companies have

been brought in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to global warming effects.

There are also financial risks for the energy industry as it may become more difficult to access the capital markets as the threat of climate change may impact decisions made by potential investors.

Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.

Limitation of investments in and financings for the energy industry could result in the restriction, delay or cancellation of drilling programs or development or production activities.

Our business could be negatively affected by security threats.

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The oil and natural gas industry has become increasingly dependent on digital technologies to conduct certain exploration, development, production, processing, and financial activities.

We depend on digital technology to estimate quantities of oil and gas reserves, manage operations, process and record financial and operating data, analyze seismic and drilling information, and communicate with our employees and third party partners.

We depend on digital technology to estimate quantities of oil and natural gas reserves, manage operations, process and record financial and operating data, analyze seismic and drilling information, and communicate with our employees and third-party partners.

Our technologies, systems, networks, seismic data, reserves information, or other proprietary information, and those of our operators, vendors, suppliers, customers, and other business partners may become the target of cyber-attacks or information security breaches.

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These events could lead to financial losses from remedial actions, loss of business, disruption of operations, damage to our reputation, or potential liability.

Also, computers control nearly all of the oil and gas distribution systems in the United States of America and abroad.

Computers are necessary to transport our oil and gas production to market.

A cyber attack directed at oil and gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets and make it difficult or impossible to accurately account for production and settle transactions.

Also, computers control nearly all of the oil and natural gas distribution systems in the United States of America and abroad.

Computers are necessary to transport our oil and natural gas production to market.

A cyber-attack directed at oil and natural gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets and make it difficult or impossible to accurately account for production and settle transactions.

Cyber incidents have increased, and the United States of America government has issued warnings indicating that energy assets may be specific targets of cybersecurity threats.

Our systems and insurance coverage for protecting against cybersecurity risks may not be sufficient.

Further, as cyber

attacks 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 vulnerability to cyber attacks.

Further, as cyber-attacks 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 vulnerability to cyber-attacks.

Our insurance may not protect us against all of the operating risks to which our business is exposed.

The crude oil and natural gas business involves numerous operating hazards such as well blowouts, mechanical failures, explosions, uncontrollable flows of crude oil, natural gas or well fluids, fires, formations with abnormal pressures, hurricanes, flooding, pollution, releases of toxic gas and other environmental hazards and risks, which can result in (i) damage to or destruction of wells and/or production facilities, (ii) damage to or destruction of formations, (iii) injury to persons, (iv) loss of life, or (v) damage to property, the environment or natural resources.

The oil and natural gas business involves numerous operating hazards such as well blowouts, mechanical failures, explosions, uncontrollable flows of oil, natural gas, or well fluids, fires, formations with abnormal pressures, hurricanes, flooding, pollution, releases of toxic gas, and other environmental hazards and risks, which can result in (i) damage to or destruction of wells and/or production facilities, (ii) damage to or destruction of formations, (iii) injury to persons, (iv) loss of life, or (v) damage to property, the environment or natural resources.

While we carry general liability, control of well, and operator's extra expense coverage typical in our industry, we are not fully insured against all risks incidental to our business.

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The loss of one or more key personnel could have a material adverse effect on our operations.

In particular, our future success is dependent upon the abilities of Robert Herlin, our Chairman of the Board, Jason Brown, our President and Chief Executive Officer, and David Joe, Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary, to source, evaluate and close deals, raise capital, and oversee our development activities and operations.

In particular, our future success is dependent upon the abilities of Robert Herlin, our Chairman of the Board, Jason Brown, our President and Chief Executive Officer, and Ryan Stash, Senior Vice President, Chief Financial Officer, and Treasurer, to source, evaluate, and close deals, raise capital, and oversee our development activities and operations.

Presently, the Company is not a beneficiary of any key man life insurance.

Oil field service and materials prices may increase, and the availability of such services and materials may be inadequate to meet our needs.

Our business plan to develop or redevelop crude oil and natural gas resources requires third party oilfield service vendors and various material providers, which we do not control.

We also rely on third-party carriers for the transportation and distribution of our oil and gas production.

Our business plan to develop or redevelop oil and natural gas resources requires third-party oilfield service vendors and various material providers, which we do not control.

We also rely on third-party carriers for the transportation and distribution of our oil and natural gas production.

As our production increases, so does our need for such services and materials.

Generally, we do not have long-term agreements with our service and materials providers.

Accordingly, there is a risk that any of our service providers could discontinue servicing our crude oil and natural gas fields for any reason or we may not be able to source the materials we need.

Accordingly, there is a risk that any of our service providers could discontinue servicing our oil and natural gas fields for any reason or we may not be able to source the materials

Any delay in locating, establishing relationships, and training our sources could result in production shortages and maintenance problems, resulting in loss of revenue to us.

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Further adverse economic outcomes may result from the long lead times often necessary to execute and complete our redevelopment plans.

We cannot market the crude oil and natural gas that we produce without the assistance of third parties.

The marketability of the crude oil and natural gas that we produce depends upon the proximity of our reserves to, and the capacity of, facilities and third-party services, including crude oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and processing facilities necessary to make the products marketable for end use.

We cannot market the oil and natural gas that we produce without the assistance of third-parties.

The marketability of the oil and natural gas that we produce depends upon the proximity of our reserves to, and the capacity of, facilities and third-party services, including oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and processing facilities necessary to make the products marketable for end use.

The unavailability or lack of capacity of such services and facilities could result in the shut-in of producing wells or the delay or discontinuance of development plans for properties.

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We face strong competition from larger oil and gas companies.

Our competitors include major integrated crude oil and natural gas companies, numerous larger independent crude oil and natural gas companies, individuals, and drilling and income programs.

Our competitors include major integrated oil and natural gas companies, numerous larger independent oil and natural gas companies, individuals, and drilling and income programs.

Many of our competitors are large, well-established companies with substantially larger operating staffs and greater capital resources.

We may not be able to successfully conduct our operations, evaluate and select suitable properties, or consummate transactions in this highly competitive environment.

Specifically, these larger competitors may be able to pay more for development projects and productive crude oil and natural gas properties and may be able to define, evaluate, bid for, and purchase a greater number of properties and prospects than our financial or human resources permit.

Specifically, these larger competitors may be able to pay more for development projects and productive oil and natural gas properties and may be able to define, evaluate, bid for, and purchase a greater number of properties and prospects than our financial or human resources permit.

In addition, such companies may be able to expend greater resources on hiring contract service providers, obtaining oilfield equipment, and acquiring the existing and changing technologies that we believe are, and will be, increasingly important to attaining success in our industry.

We have been, and in the future may become, involved in legal proceedings related to our Delhi interest or other properties or operations and, as a result, may incur substantial costs in connection with those proceedings.

We have been, and in the future may become, involved in legal proceedings related to our properties or operations and, as a result, may incur substantial costs in connection with those proceedings.

From time to time we may be a defendant or plaintiff in various lawsuits.

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Ownership of our oil, gas, and mineral production depends on good title to our property.

Good and clear title to our oil, gas, and mineral properties is important to our business.

Although title reviews will generally be conducted prior to the purchase of most oil, gas, and mineral producing properties or the commencement of drilling wells, such reviews do not assure that an unforeseen defect in the chain of title will not arise to defeat our claim.

Good and clear title to our oil, natural gas, and mineral properties is important to our business.

Although title reviews will generally be conducted prior to the purchase of most oil, natural gas, and mineral producing properties or the commencement of drilling wells, such reviews do not assure that an unforeseen defect in the chain of title will not arise to defeat our claim.

This could result in a reduction or elimination of the revenue received by us from such properties.

Events outside of our control, including a pandemic or broad outbreak of an infectious disease, such as the ongoing global outbreak of a novel strain of the coronavirus identified in late 2019 (“COVID-19”), may materially adversely affect our business.

We face risks related to pandemics, outbreaks, or other public health events that are outside of our control and could significantly disrupt our operations and adversely affect out financial condition.

In December 2019, a novel strain of a coronavirus, COVID-19, was identified in Wuhan, China.

This virus continues to spread globally including in the United States of America.

These and other actions could, among other things, impact the ability of our employees and contractors to perform their duties, cause increased technology and security risk due to extended and company-wide telecommuting and lead to disruptions in our permitting activities and critical business relationships.Additionally, the COVID-19 outbreak and governmental restrictions have significantly impacted economic activity and markets and have dramatically reduced current and anticipated demand for oil and natural gas, adversely impacting the prices we receive for our production.

The severity and duration of the current COVID-19 outbreak and the potential for future outbreaks are uncertain and difficult to predict.

This virus continues to have a material impact globally.

Additionally, the COVID-19 outbreak and governmental restrictions have significantly impacted economic activity and markets and have dramatically reduced current and anticipated demand for oil and natural gas, adversely impacting the prices we receive for our production.

The severity and duration of the current COVID-19 outbreak and the subsequent variants in addition to the potential for future outbreaks are uncertain and difficult to predict.

The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

We are unable to predict the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments, including the length of time that the pandemic continues, its ongoing effect on the demand for oil and natural gas and the response of the overall economy and the financial markets after governmental restrictions are eased.

We are unable to predict the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments, including the length of time that the

pandemic continues, its ongoing effect on the demand for oil and natural gas and the response of the overall economy and the financial markets after governmental restrictions are eased.

Poor general economic, business, or industry conditions may have a material adverse effect on our results of operations, liquidity, and financial condition.

During the last few years, concerns over inflation, energy costs, declining oil and gas prices, geopolitical issues, the availability and cost of credit, the United States of America mortgage market, uncertainties with regard to European sovereign debt, the slowdown in economic growth in large emerging and developing markets, such as China, regional or worldwide increases in tariffs or other trade restrictions, and other issues have contributed to increased economic uncertainty and diminished expectations for the global economy.

During the last few years, concerns over inflation, energy costs, declining oil and natural gas prices, geopolitical issues, the availability and cost of credit, the United States of America mortgage market, uncertainties with regard to European sovereign debt, the slowdown in economic growth in large emerging and developing markets, such as China, regional or worldwide increases in tariffs or other trade restrictions, and other issues have contributed to increased economic uncertainty and diminished expectations for the global economy.

Concerns about global economic conditions have had a significant adverse impact on domestic and international financial markets and commodity prices.

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Our common stock has relatively low trading volume and the market price has been, and is likely to continue to be, volatile.

For example, during the fiscal year ending June 30, 2020, our stock price as traded on the NYSE American ranged from $2.16 to $7.05.

For example, during the fiscal year ended June 30, 2021, our stock price as traded on the NYSE American ranged from $2.75 to $5.15.

The variance in our stock price makes it difficult to forecast with certainty the stock price at which an investor may be able to buy or sell shares of our common stock.

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• naked short selling of our common stock and stock price manipulation;

changes or fluctuations in the commodity prices of crude oil and natural gas;

general conditions and trends in the crude oil and natural gas industry;

• changes or fluctuations in the commodity prices of oil and natural gas;

• general conditions and trends in the oil and natural gas industry;

• redemption demands on institutional funds that hold our stock;

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As of June 30, 2021 our executive officers and directors, in the aggregate, beneficially owned approximately 2.7 million shares, or approximately 8.0% of our beneficial common stock base.

Blackrock Fund Advisors, et al controlled approximately 3.4 million shares or approximately 10.2% of our outstanding common stock, Arrowmark Colorado Holdings, LLC controlled approximately 2.6 million shares or approximately 7.8% of our outstanding common stock, Renaissance Technologies, LLC controlled approximately 2.4 million shares or approximately 7.3% of our outstanding common stock, Advisory Research, Inc controlled approximately 1.5 million shares or approximately 4.5% of our outstanding common stock and JVL Advisors, LLC controlled approximately 1.5 million shares or approximately 4.5% of our outstanding common stock.

Blackrock Fund Advisors, et al controlled approximately 2.0 million shares or approximately 6.1% of our outstanding common stock, Arrowmark Colorado Holdings, LLC controlled approximately 2.0 million shares or approximately 6.1% of our outstanding common stock and Renaissance Technologies, LLC controlled approximately 2.2 million shares or approximately 6.5% of our outstanding common stock.

As a result, any of these holders could potentially exercise significant influence over matters submitted to our stockholders for approval (including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets).

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The market for our common stock is limited and may not provide adequate liquidity.

Our common stock trades on the NYSE American.

Our trading volumes decreased slightly in fiscal 2020 compared to fiscal 2019.

Our common stock trades on the NYSE American stock exchange.

Trading volume in our common stock is relatively low compared to larger companies.

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Small, relatively unknown companies can achieve visibility in the trading market through research and reports that industry or securities analysts publish.

To our knowledge there are three independent analysts that cover our company.

To our knowledge, three independent analysts cover our company.

The limited number of published reports by independent securities analysts could limit the interest in our common stock and negatively affect our stock price.

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Although it is our intent to maintain a steady dividend for our shareholders, there is no guarantee that we will be able to do so.

For example, during the 3rd quarter of fiscal 2020, we reduced our quarterly dividend from $0.10 per common share to $0.025 per common share.

Accordingly, there is no guarantee that we will be able or choose to continue to pay cash dividends on our common stock.

For example, during the 3rd quarter of fiscal 2020, we reduced our quarterly dividend from $0.10 per common share to $0.025.

The quarterly dividend was $0.05 for the fourth quarter of fiscal 2021 as a result of an improving financial and industry outlook.

There is no guarantee that we will be able or choose to continue to pay cash dividends on our common stock.

Unresolved Staff Comments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors