What changed in this filing

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Item 1A. Risk Factors

2025-06-27 compared with 2024-06-27 · 85 added, 98 removed, 233 unchanged (44% of the section changed)

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and, limit our financial condition, liquidity, and/or ability to finance planned capital expenditures and operations.

results of operations may be negatively impacted by current global events.

United States and certain countries in Europe and Asia are facing economic struggles or slowing economic growth.

If these conditions

worsen, combined with a decline in economic growth in other parts of the world, there could be a significant adverse effect on global

financial markets and commodity prices.

In addition, continued hostilities in the Middle East and the occurrence or threat of terrorist

attacks in the United States or other countries could adversely affect the global economy.

Global or national health concerns may adversely

affect the Company by (i) reducing demand for its oil, NGLs and gas because of reduced global or national economic activity, (ii) impairing

its supply chain (for example, by limiting manufacturing of materials used in operations) and (iii) affecting the health of its workforce,

rendering employees unable to work or travel.

Deteriorating economic climate in the United States or abroad due to inflation, rising

interest rates or otherwise, demand for petroleum products could diminish or stagnate, which could depress the prices at which the Company

could sell its oil, NGLs and gas, affect the ability of the Company’s vendors, suppliers and customers to continue operations and

ultimately decrease the Company’s cash flows and profitability.

In addition, reduced worldwide demand for debt and equity securities

issued by oil and gas companies may make it more difficult for the Company to raise capital to fund its operations or refinance its debt

results of operations may be negatively impacted by current global events, including the imposition of tariffs.

business, financial condition and future results are subject to political and economic risks and uncertainties, including volatility

in the political, legal and regulatory environments as a result of the change in U.S.

presidential administration and instability resulting

from civil unrest, political demonstrations, mass strikes or armed conflict or other crises in crude oil or natural gas producing areas

such as the ongoing war between Russia and Ukraine and the Israel-Iran conflict.

Escalating trade tensions, particularly between the U.S.

and Canada, Mexico, China and other countries, may lead

to the imposition of tariffs and trade restrictions.

Our operators could face unanticipated costs and competition for materials and components

to continue their current drilling plans.

In addition, the current U.S.

presidential administration

has signaled it will encourage increased domestic production of crude oil, which could lead to falling crude oil and natural gas prices.

in environmental laws could increase our operators’ costs and adversely impact our business, financial condition and cash flows.

Biden has indicated that he is supportive of, and has issued executive orders promoting various programs and initiatives designed to,

among other things, curtail climate change, control the release of methane from new and existing oil and natural gas operations, and

decarbonize electric generation and the transportation sector.

In recent years the U.S.

Congress has considered legislation to reduce

emissions of GHGs, including methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas.

For example, the Inflation Reduction Act of 2022 (the “IRA”), which appropriates significant federal funding for renewable

energy initiatives and, for the first time ever, imposes a fee on GHG emissions from certain facilities, was signed into law in August

The emissions fee and funding provisions of the law could increase operating costs within the oil and gas industry and accelerate

the transition away from fossil fuels, which could in turn adversely affect our business and results of operations.

Governmental,

scientific and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks

in the United States, including climate change related pledges made by certain candidates elected to public office.

President Biden has

issued several executive orders focused on addressing climate change, including items that may impact costs to produce, or demand for,

recent years the U.S.

Congress has considered legislation to reduce emissions of GHGs, including methane, a primary component of natural

gas, and carbon dioxide, a byproduct of the burning of natural gas.

Addressing GHG emissions with legislation on emissions fees could

increase operating costs within the oil and gas industry.

resulting from crude oil and natural gas production, consisting primarily of salt-water, are disposed by injection in belowground disposal

In recent years, state and federal regulatory agencies have focused on a possible connection between fluid injection and increased

seismic activity.

The Texas Railroad Commission has suspended or limited new well permits for salt water disposal wells, particularly

in the Permian Basin.

Increased regulation on the treatment and disposal of fluids could increase operating costs and curtail economical

oil and gas prices and other factors may cause us to record ceiling test writedowns.

oil and gas prices increase the risk of ceiling limitation write-downs.

We use the full cost method to account for oil and gas

Accordingly, we capitalize the cost to acquire, explore for and develop crude oil and natural gas properties including

the cost of abandoned properties, dry holes, geophysical costs and annual lease rentals.

Sales or other dispositions of oil and

natural gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded.

Depletion of evaluated

oil and natural gas properties is computed in the units of production method, whereby capitalized costs are amortized over total

proved reserves.

Under the full cost accounting rules, the net capitalized cost of crude oil and natural gas properties may not

exceed a “ceiling limit” which is based upon the present value of estimated future net cash flows from proved reserves,

discounted at 10% plus the lower of cost or fair market value of unproved properties.

If net capitalized costs of oil and natural

gas properties exceed the ceiling limit, we must charge the amount of the excess against earnings.

This is called a “ceiling

test writedown.” We use the unweighted arithmetic average first day of the month price for oil and natural gas for the

12-month period preceding the calculation date in estimating discounted future net reserves.

Under the accounting rules, we are

required to perform a ceiling test each quarter.

A ceiling test writedown does not impact cash flow from operating activities, but

does reduce stockholders’ equity and earnings.

The risk that we will be required to write down the carrying value of oil and

natural gas properties increases when oil and natural gas prices are low.

There were no ceiling test impairments on our oil and gas

properties during fiscal 2024 and 2023.

We use the full cost method to account for oil and gas operations.

Accordingly, we capitalize the cost to acquire, explore for and develop crude oil and natural gas properties including the cost of abandoned

properties, dry holes, geophysical costs and annual lease rentals.

Sales or other dispositions of oil and natural gas properties are

accounted for as adjustments to capitalized costs, with no gain or loss recorded.

Depletion of evaluated oil and natural gas properties

is computed in the units of production method, whereby capitalized costs are amortized over total proved reserves.

Under the full cost

accounting rules, the net capitalized cost of crude oil and natural gas properties may not exceed a “ceiling limit” which

is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10% plus the lower of cost or

fair market value of unproved properties.

If net capitalized costs of oil and natural gas properties exceed the ceiling limit, we must

charge the amount of the excess against earnings.

This is called a “ceiling test writedown.” We use the unweighted arithmetic

average first day of the month price for oil and natural gas for the 12-month period preceding the calculation date in estimating discounted

future net reserves.

Under the accounting rules, we are required to perform a ceiling test each quarter.

A ceiling test writedown does

not impact cash flow from operating activities, but does reduce stockholders’ equity and earnings.

The risk that we will be required

to write down the carrying value of oil and natural gas properties increases when oil and natural gas prices are low.

There were no ceiling

test impairments on our oil and gas properties during fiscal 2025 and 2024.

must replace reserves we produce.

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such as refinery capacity, pipeline capacity and specifications, upsets in the midstream or downstream sectors of the industry, trade

restrictions and governmental regulations.

Additionally, insufficient pipeline capacity, lack of demand in any given operating area or

other factors may cause the differential to increase in a particular area compared with other producing areas.

During fiscal 2024, differentials

averaged $2.68 per Bbl of oil and ($0.15) per Mcf of gas.

Increases in the differential between the benchmark prices for oil and gas

and the wellhead price we receive could significantly reduce our revenues and our cash flow from operations.

restrictions and governmental regulations such as policies of the Trump Administration.

Additionally, insufficient pipeline capacity,

lack of demand in any given operating area or other factors may cause the differential to increase in a particular area compared with

other producing areas.

During fiscal 2025, differentials averaged $2.79 per Bbl of oil and ($0.30) per Mcf of gas.

Increases in the differential

between the benchmark prices for oil and gas and the wellhead price we receive could significantly reduce our revenues and our cash flow

from operations.

and operating activities are high risk activities that subject us to a variety of factors that we cannot control.

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and profitability of such properties.

We participate in the drilling and completion of wells with third-party operators that exercise exclusive control

over such operations.

As a participant, we rely on third-party operators to successfully operate these properties pursuant to joint operating

agreements and other similar contractual arrangements.

As a participant in these operations, we may not be able to maximize the value

associated with these properties in the manner we believe appropriate, or at all.

For example, we cannot control the success of drilling

and development activities on properties operated by third-parties, which depend on a number of factors under the control of a third-party

operator, including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational

participate in the drilling and completion of wells with third-party operators that exercise exclusive control over such operations.

As a participant, we rely on third-party operators to successfully operate these properties pursuant to joint operating agreements and

other similar contractual arrangements.

As a participant in these operations, we may not be able to maximize the value associated with

these properties in the manner we believe appropriate, or at all.

For example, we cannot control the success of drilling and development

activities on properties operated by third-parties, which depend on a number of factors under the control of a third-party operator,

including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational

activities, the timing and amount of capital expenditures and the selection of suitable technology.

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operational expertise and financial resources and its ability to gain the approval of other participants in drilling wells will impact

the timing and potential success of drilling and development activites in a manner that we are unable to control.

the timing and potential success of drilling and development activities in a manner that we are unable to control.

A third-party operator’s

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uninsured risks or in amounts in excess of existing insurance coverage.

effective tax rate may change in the future, which could adversely impact us.

Tax Cuts and Jobs Act of 2017 (“TCJA”) significantly changed the U.S.

federal income taxation of U.S.

corporations, including

by reducing the U.S.

corporate tax rate, limiting interest deductions and certain deductions for executive compensation, permitting immediate

expensing of certain capital expenditures, and revising the rules governing net operating losses.

The TCJA remains unclear in some respects

and continues to be subject to potential amendments and technical corrections.

Treasury Department and the IRS have issued significant

guidance since the TCJA was enacted, interpreting the TCJA and clarifying some the uncertainties, and are continuing to issue new guidance.

There are still significant aspects of the TCJA for which further guidance is expected, and both the timing and contents of any such

future guidance are uncertain.

changes to the U.S.

federal income tax laws are proposed regularly and there can be no assurance that, if enacted, any such changes would

not have an adverse impact on us.

For example, President Biden has suggested the reversal or modification of some portions of the TCJA

and certain of these proposals, if enacted, could increase our effective tax rate.

There can be no assurance that any such proposed changes

will be introduced as legislation or, if introduced, later enacted and, if enacted, what form such enacted legislation would take.

changes could potentially have retroactive effect.

In light of these factors, there can be no assurance that our effective tax rate will

not change in future periods.

If the effective tax rates were to increase as a result of the future legislation, our business could be

adversely affected.

in effective tax rates or laws could adversely impact our results of operations.

future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation

of our deferred tax assets and liabilities;

tax effects of stock-based compensation;

or changes in tax laws, regulations or interpretations

example, in previous years, legislation has been proposed to eliminate or defer certain key U.S.

federal income tax deductions historically

available to crude oil and natural gas exploration and production companies.

Such proposed changes have included:

a repeal of the percentage

depletion allowance for crude oil and natural gas properties;

the elimination of deductions for intangible drilling and exploration and

development costs;

the elimination of the deduction for certain production activities;

and an extension of the amortization period for

certain geological and geophysical expenditures.

The passage of any legislation as a result of these proposals or other similar changes

federal income tax laws that alter, eliminate or defer these or other tax deductions utilized within the industry could adversely

affect our business, financial condition, results of operations and cash flows.

reliance on information technology, including those hosted by third parties, exposes us to cyber security risks that could affect our

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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