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Item 1A. Risk Factors

2025-05-01 compared with 2025-01-30 · 24 added, 18 removed, 47 unchanged (47% of the section changed)

The risk factors in Item 1A of the Company’s 2024 Form 10-K have not materially changed other than as set forth below.

The risk factors presented below supersede the corresponding risk factors in the 2024 Form 10-K and should otherwise be read in conjunction with all of the risk factors disclosed in the 2024 Form 10-K.

The risk factors in Item 1A of the Company’s 2024 Form 10-K, as amended by Item 1A of Part II of the Company's Form 10-Q for the quarter ended December 31, 2024, have not materially changed other than as set forth below.

STRATEGIC RISKS

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The availability and cost of credit sources may be cyclical and these capital sources may not remain available to the Company.

Turmoil in credit markets may make it difficult for the Company to obtain financing on acceptable terms or at all for working capital, capital expenditures and other investments, or to refinance existing debt.

These difficulties could adversely affect the Company’s growth strategies, operations and financial performance.

The Company’s ability to borrow under its credit facilities and commercial paper agreements, and its ability to issue long-term debt under its indentures, depend on the Company’s compliance with its obligations under the facilities, agreements and indentures.

For example, to issue incremental long-term debt, subject to certain exceptions, the Company must meet an interest coverage test under its 1974 indenture.

Given the impairments of exploration and production properties recognized since June 30, 2024, the Company is precluded from issuing incremental long-term debt from January 1, 2025 to June 13, 2025, the maturity date of the Company’s remaining indebtedness outstanding under the 1974 indenture.

To the extent the Company wishes to relieve its obligations to comply with the 1974 indenture’s restrictions, the Company expects to be able to place future principal and interest payments in trust for the benefit of bondholders pursuant to the terms of the 1974 indenture.

Depositing such future principal and interest payments in trust would effectively relieve the Company from its obligations to comply with the 1974 indenture’s restrictions, including those on the issuance of incremental long-term debt.

Turmoil in credit markets may make it difficult for the Company to obtain financing on acceptable terms or at all for working

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capital, capital expenditures and other investments, or to refinance existing debt.

These difficulties could adversely affect the Company’s growth strategies, operations and financial performance.

The Company’s ability to borrow under its credit facilities and commercial paper agreements, and its ability to issue long-term debt under its indenture, depend on the Company’s compliance with its obligations under the facilities, agreements and indenture.

The Company’s short-term bank loans, commercial paper, and borrowings under the Term Loan Agreement, entered into on February 14, 2024 with six lenders (the “Term Loan Agreement”), are in the form of floating rate debt or debt that may have rates fixed for short periods of time (up to six months), resulting in exposure to interest rate fluctuations in the absence of interest rate hedging transactions.

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Additionally, $2.4 billion of the Company’s outstanding long-term debt would be subject to an interest rate increase if certain fundamental changes occur that involve a material subsidiary and result in a downgrade of a credit rating assigned to the notes below investment grade.

In addition to the $1.4 billion, another $500 million of the Company’s outstanding long-term debt would be subject to an interest rate increase based solely on a downgrade of a credit rating assigned to the notes below investment grade, regardless of any additional fundamental changes.

The regulatory, legislative, consumer behaviors and capital access developments related to climate change may adversely affect operations and financial results.

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Federal and state legislatures have from time to time considered bills that would establish a cap-and-trade program, cap-and-invest program, methane fee, carbon tax, or other similar mechanisms to incent the reduction of greenhouse gas emissions.

For example, in August 2022, the federal Inflation Reduction Act was signed into law, which includes a directive for the EPA to develop a waste emissions charge (WEC) applicable to the annual methane emissions of certain oil and gas facilities, above specified methane intensity thresholds, for emissions reported to the U.S.

EPA for calendar year 2024.

EPA published its final WEC regulations in November 2024.

A number of states have also adopted energy strategies or plans with goals that include the reduction of greenhouse gas emissions.

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Furthermore, in 2019, the New York State legislature passed the CLCPA, which created emission reduction and electrification mandates, and could ultimately impact the Utility segment’s customer base and business.

Pursuant to the CLCPA, New York’s Climate Action Council (“CAC”) approved a final scoping plan that includes recommendations to strategically downsize and decarbonize the natural gas system and curtail use of natural gas and natural gas appliances.

The final scoping plan was approved on December 19, 2022 and includes detailed recommendations to meet the CLCPA’s emissions reduction targets in the transportation, buildings, electricity, industry, agriculture & forestry and waste sectors.

Pursuant to the CLCPA, in December 2022, New York’s Climate Action Council (“CAC”) approved a final scoping plan that includes recommendations to strategically downsize and decarbonize the natural gas system and curtail use of natural gas and natural gas appliances, as well as recommendations to meet the CLCPA’s emissions reduction targets in the transportation, buildings, electricity, industry, agriculture & forestry and waste sectors.

The final scoping plan also recommends statewide and cross-sector policies relevant to gas system transition, economywide strategies, land use, local government, and adaptation and resilience.

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While the Company does not currently expect that this legislation will have a substantial impact on its financial results or operations, future legislation or regulation that aims to reduce natural gas demand or to impose additional operations requirements or restrictions on natural gas facilities, if effectuated, could impact our future earnings and cash flows.

In addition, in December

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2024 (and later amended in February 2025), New York's Governor signed the Climate Change Superfund Act into law, which will require certain fossil fuel producers, refiners and related entities to pay into a state "climate superfund" an amount commensurate with the entity's past global greenhouse gas emissions over a specified period of time.

The NYDEC has until June 2027 to develop implementing regulations.

The Act is currently the subject of multiple federal court lawsuits challenging its constitutionality.

Additionally, the trend toward increased energy conservation, change in consumer behaviors, competition from renewable energy sources, and technological advances to address climate change may reduce the demand for natural gas, which could impact our future earnings and cash flows.

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FINANCIAL RISKS

The Company may be adversely affected by economic conditions and their impact on our suppliers and customers.

Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and large commercial companies.

As a consequence, national or regional recessions or other downturns in economic activity could adversely affect the Company’s revenues and cash flows or restrict its future growth.

Additionally, current tariffs, as well as the imposition of additional tariffs on U.S.

imports of various goods and related retaliatory tariffs, as well as supply chain disruptions, and the associated costs and inflation related thereto, could have an impact on the Company’s operations.

Economic conditions in the Company’s utility service territories, along with legislative and regulatory prohibitions and/or limitations on terminations of service, also impact its collections of accounts receivable.

Customers of the Company’s Utility segment may have particular trouble paying their bills during periods of declining economic activity, high inflation, or high commodity prices, potentially resulting in increased bad debt expense and reduced earnings.

Similarly, if reductions were to occur in funding of the federal Low Income Home Energy Assistance Program, bad debt expense could increase and earnings could decrease.

In addition, exploration and production companies that are customers of the Company’s Pipeline and Storage segment may decide not to renew contracts for the same transportation capacity.

Certain customers of the Company’s Exploration and Production segment can represent a concentrated risk from time to time.

Any of these events or circumstances could have or contribute to a material adverse effect on the Company’s results of operations, financial condition and cash flows.

Financial accounting requirements regarding exploration and production activities may affect the Company ’ s profitability.

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Depending on the magnitude of any decrease in average prices, that charge could be material.

Under the Company’s existing indenture covenants, an impairment will restrict the Company’s ability to issue incremental long-term unsecured indebtedness for a period of time, beginning with the fourth calendar month following the impairment and ending not later than June 13, 2025, the maturity date of the Company’s remaining indebtedness outstanding under its 1974 indenture.

In addition, because an impairment results in a charge to retained earnings, it lowers the Company’s total capitalization, all other things being equal, and increases the Company’s debt to capitalization ratio.

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OPERATIONAL RISKS

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Disputes with collective bargaining units representing the Company’s workforce, and work stoppage (e.g.

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These labor agreements are negotiated periodically, and therefore, the Company is subject to the risk that such agreements may not be able to be renewed on reasonably satisfactory terms, on anticipated timelines, or at all.

For example, the Company is currently negotiating with one collective bargaining unit in New York for an agreement that expires in February 2025.

In connection with the negotiation of such collective bargaining agreements, or in future matters involving collective bargaining units representing the Company’s workforce, the Company could experience, among other things, strikes, work stoppages, slowdowns or lockouts, which could cause a disruption of the Company’s operations, impact the Company’s ability to fully execute operational plans, and have a material adverse effect on the Company’s results of operations and financial condition.

In connection with the negotiation of such collective bargaining agreements, or in other matters involving collective bargaining units representing the Company’s workforce, the Company could experience, among other things, strikes, work stoppages, slowdowns or lockouts, which could cause a disruption of the Company’s operations, impact the Company’s ability to fully execute operational plans, and have a material adverse effect on the Company’s results of operations and financial condition.

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-Q

Item 1A. Risk Factors