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Item 1A. Risk Factors

2022-02-25 compared with 2021-03-12 · 186 added, 112 removed, 373 unchanged (44% of the section changed)

In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered in evaluating our business and future prospects.

Note that additional risks not presently known to us or that are currently considered immaterial may also have a negative impact on our business and operations.

If any of the events or circumstances described below actually occurs, our business, financial condition or results of operations could suffer and the trading price of our common stock could decline.

Summary of Risk Factors

We believe that the risks associated with our business, and consequently the risks associated with an investment in our equity or debt securities, fall within the following categories:

• Risks Related to Our Business and the Oil, Natural Gas and NGL Industry

Our business and operations have been and will likely continue to be adversely affected by the recent COVID-19 pandemic.

The spread of COVID-19 caused, and is continuing to cause, severe disruptions in the worldwide and U.S.

economy, including the global and domestic decreased demand for oil and natural gas, which has had an adverse effect on our business, financial condition and results of operations.

Moreover, since the beginning of January 2020, the COVID-19 pandemic has caused significant disruption in the financial markets both globally and in the United States.

The continued spread of COVID-19 could also negatively impact the availability of key personnel and adequate staffing for us and our operating partners to conduct business.

If COVID-19 continues to spread or the response to contain the COVID-19 pandemic is unsuccessful, we could continue to experience a material adverse effect on our business, financial condition and results of operations.

The duration and extent to which the COVID-19 crisis and oil price volatility adversely affects our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by foreign and domestic governmental authorities and other third parties in response.

Volatility in commodity prices has had an adverse impact on our financial condition and results of operations, and on the level at which we are able to hedge our anticipated future production, which could continue to materially and adversely affect us, and we cannot predict the ultimate impact of this situation on our business, financial condition and results of operations.

The foregoing has had, and we expect will continue to have, an adverse effect on our business, financial condition, liquidity and results of operations.

These factors will likely have the effect of heightening many of the other risks described in this “Risk Factors” section.

Without limiting the generality of the foregoing, some impacts of the COVID-19 pandemic and recent oil market developments that could have an adverse effect on our business, financial condition, liquidity and results of operations, include:

• significantly reduced prices for our oil production, resulting from a world-wide decrease in demand for hydrocarbons and a resulting oversupply of existing production;

• further decreases in the demand for our oil production, resulting from significantly decreased levels of global, regional and local travel as a result of federal, state and local government-imposed quarantines, including shelter-in-place mandates, enacted to slow the spread of the coronavirus;

• significantly reduced development activity on our properties by operators in the Willison Basin;

• increased likelihood that the operators of our wells will curtail or shut-in production, either voluntarily or as a result of third-party and regulatory mandates, due to depressed oil prices, lack of storage, and/or other market, social, legal, or political forces;

• increased costs associated with, or actual unavailability of, facilities for the storage of oil, gas and NGL production, in the markets in which we operate;

• increased operational difficulties associated with, or an inability to, deliver oil and NGLs to end-markets, resulting from pipeline and storage constraints;

• the potential for loss of leasehold or asset value for failure to produce oil and gas in paying quantities;

• increased third-party credit risk resulting from adverse market conditions, a lack of access to capital and storage, and the failure of certain of our counterparties to continue as going concerns;

• increased costs, either directly or indirectly, related to facility modifications, social distancing measures or other best practices implemented in response to the COVID-19 pandemic and or due to changes in federal, state, and local laws and regulations;

• reducing estimated volumes and value attributable to our proved reserves;

• reducing carrying value of our oil and gas properties due to recognizing impairments on such properties;

• limiting access to, or increasing the cost of, sources of capital such as equity and long-term debt.

In addition, the COVID-19 pandemic and recent commodity market developments may also affect our business, operations or financial condition in a manner that is not presently known to us or that we currently do not expect to present a significant risk to our business, operations or financial condition.

◦ As a producer of oil and natural gas, there are many risks inherent in our primary business operations.

These risks are not necessarily unique to us.

Rather, these are risks that most participants in our industry have at least some exposure to, and relate to matters such as:

drilling and completion operations;

reserves estimates;

gathering, processing, marketing and transportation;

weather and seasonality;

hedging and commodity price derivatives;

and information technology and cybersecurity.

◦ Given that our primary source of revenue is the sale of oil, natural gas and NGLs, one of our most material risks is the commodity market and the prices of oil, natural gas and NGLs, which are often volatile.

◦ The COVID-19 pandemic had a severe negative impact on worldwide economic activity in general, and on our industry specifically, and future effects remains uncertain.

◦ As a non-operator, we have only participated in wells operated by third parties, and thus rely extensively on third parties for the success of our business.

◦ Our acquisition strategy subjects us to risks relating to evaluation, integration and growth in connection with past and potential future acquisitions.

• Risks Related to Our Financing and Indebtedness

◦ Our operations are capital intensive.

Pressures on the market as a whole, or our specific financial position – whether due to depressed commodity prices, our leverage, our credit ratings or otherwise – could make it difficult for us to obtain the funding necessary to conduct our operations.

◦ Our existing and future debt obligations carry risks related to liquidity, operating and financial restrictions, debt service obligations, and related matters.

• Risks Related to Legal, Regulatory and Environmental Matters

◦ There are many environmental, energy, financial, real property and other regulations that we are required to comply with in the context of conducting our operations, otherwise, we may be exposed to fines, penalties, investigations, litigation or other legal proceedings.

◦ Negative public perception of the oil and natural gas industry, future climate change legislation or regulation, or increasing consumer demand for alternatives to oil and natural gas, could adversely impact our earnings, cash flows and financial position.

• Risks Related to Our Common Stock

◦ Our capital structure, as well as our certificate of incorporation, bylaws, and Delaware state law, subject our shareholders to risk of ownership dilution, loss of market value, and other risks.

◦ 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 applying to the payment of dividends and other considerations.

Investors may be forced to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment.

We describe these and other risks in much greater detail below.

Risks Related to Our Business and the Oil, Natural Gas and NGL Industry

The COVID-19 pandemic has had, and may continue to have, a material adverse effect on our financial condition and results of operations.

We face risks related to public health crises, including the COVID-19 pandemic.

The effects of the COVID-19 pandemic, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing in addition to other actions taken by both businesses and governments, resulted in a significant and swift reduction in international and U.S.

economic activity.

The collapse in the demand for oil caused by this unprecedented global health and economic crisis contributed to the significant decrease in crude oil prices in 2020 and had and could in the future continue to have a material adverse impact on our financial condition and results of operations.

Since the beginning of 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded.

However, we continue to monitor the effects of the pandemic on our operations.

As a result of the ongoing COVID-19 pandemic, our operations, and those of our operating partners, have and may continue to experience delays or disruptions and temporary suspensions of operations.

In addition, our results of operations and financial condition have been and may continue to be adversely affected by the ongoing COVID-19 pandemic.

The extent to which our operating and financial results are affected by COVID-19 will depend on various factors and consequences beyond our control, such as the emergence of more contagious and harmful variants of the COVID-19 virus, the duration and scope of the pandemic, additional actions by businesses and governments in response to the pandemic, and the speed and effectiveness of responses to combat the virus.

COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, could also aggravate the other risk factors that we identify herein.

While the effects of the COVID-19 pandemic have lessened recently in the United States, we cannot predict the duration or future effects of the pandemic, or more contagious and harmful variants of the COVID-19 virus, and such effects may materially adversely affect our results of operations and financial condition in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.

Oil and natural gas prices are volatile.

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Oil and natural gas prices have fluctuated significantly, including periods of rapid and material decline, in recent years.

The prices we receive for our oil and natural gas production heavily influences our production, revenue, cash flows, profitability, reserve bookings and access to capital.

The prices we receive for our oil and natural gas production heavily influence our production, revenue, cash flows, profitability, reserve bookings and access to capital.

Although we seek to mitigate volatility and potential declines in commodity prices through derivative arrangements that hedge a portion of our expected production, this merely seeks to mitigate (not eliminate) these risks, and such activities come with their own risks.

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• the actions of OPEC and other major oil producing countries;

• worldwide and regional economic, political and social conditions impacting the global supply and demand for oil and natural gas, which may be driven by various risks including war, terrorism, political unrest, or health epidemics (such as the global COVID-19 coronavirus outbreak in early 2020);

• the price and quantity of imports of foreign oil and natural gas;

• political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity;

• the outbreak of military hostilities, including escalating tensions between Russia and Ukraine and the potential destabilizing effect such conflict may pose for the European continent or the global oil and natural gas markets;

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

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These factors and the volatility of the energy markets make it extremely difficult to predict oil and natural gas prices.

A substantial or extended decline in oil or natural gas prices, such as the significant and rapid decline that occurred in 2020, has resulted in and could result in future impairments of our proved oil and natural gas properties and may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

To the extent commodity prices received from production are insufficient to fund planned capital expenditures, we may be required to reduce spending or borrow or issue additional equity to cover any such shortfall.

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The occurrence of an event that is not fully covered by insurance could have a material adverse impact on our business activities, financial condition and results of operations.

Due to declines in oil and natural gas prices, we have taken significant writedowns of our oil and natural gas properties.

We may be required to record further writedowns of our oil and natural gas properties.

Due to previous declines in oil and natural gas prices, we have in the past taken significant writedowns of our oil and natural gas properties.

We may be required to record further writedowns of our oil and natural gas properties in the future.

In 2020, we were required to write down the carrying value of certain of our oil and natural gas properties, and further writedowns could be required in the future.

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Oil and natural gas reserve engineering requires subjective estimates of underground accumulations of oil and/or natural gas and assumptions concerning future oil and natural gas prices, production levels, and operating, exploration and development costs.

Some of our reserve estimates are made without the benefit of a lengthy production history and are less reliable than estimates based on a lengthy production history.

reserve estimates are made without the benefit of a lengthy production history and are less reliable than estimates based on a lengthy production history.

As a result, estimated quantities of proved reserves and projections of future production rates and the timing of development expenditures may prove to be inaccurate.

We routinely make estimates of oil and natural gas reserves in connection with managing our business and preparing reports to our lenders and investors.

We routinely make estimates of oil and natural gas reserves in connection with managing our business and preparing reports to our lenders and investors, including in some cases estimates prepared by our internal reserve engineers and professionals that are not reviewed or audited by an independent reserve engineering firm.

We make these reserve estimates using various assumptions, including assumptions as to oil and natural gas prices, development schedules, drilling and operating expenses, capital expenditures, taxes and availability of funds.

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The present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of our estimated proved reserves.

We base the estimated discounted future net cash flows from our proved reserves using a specified pricing and cost assumptions.

We base the estimated discounted future net cash flows from our proved reserves using specified pricing and cost assumptions.

However, actual future net cash flows from our oil and natural gas properties will be affected by factors such as the volume, pricing and duration of our oil and natural gas hedging contracts;

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The marketability of our oil and natural gas depends in part on the availability, proximity and capacity of pipeline systems, processing facilities, oil trucking fleets and rail transportation assets owned by third parties.

The lack of available capacity on these systems and facilities, whether as a result of proration, physical damage, scheduled maintenance, legal or other reasons such as suspension of service due to legal challenges (see below regarding the Dakota Access Pipeline), could result in a substantial increase in costs, declines in realized commodity prices, the shut-in of producing wells or the delay or discontinuance of development plans for our properties.

During 2019 and into 2020, we experienced significant delays and production curtailments, and declines in realized natural gas prices, that we believe were due in part to gas gathering and processing constraints in the Williston Basin.

The lack of available capacity on these systems and facilities, whether as a result of proration, growth in demand outpacing growth in capacity, physical damage, scheduled maintenance, legal or other reasons such as suspension of service due to legal challenges (see below regarding the Dakota Access Pipeline), could result in a substantial increase in costs, declines in realized commodity

prices, the shut-in of producing wells or the delay or discontinuance of development plans for our properties.

In recent periods, we experienced significant delays and production curtailments, and declines in realized natural gas prices, that we believe were due in part to gas gathering and processing constraints in the Williston Basin.

The negative effects arising from these and similar circumstances may last for an extended period of time.

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As a result, we rely on third-party oil trucking to transport a significant portion of our production to third-party transportation pipelines, rail loading facilities and other market access points.

The Dakota Access Pipeline (“DAPL”), a major pipeline running out of the Williston Basin, is subject to ongoing litigation (the “DAPL Litigation”) that could threaten its continued operation.

In July 2020, a federal district court ordered DAPL to be shut down no later than August 6, 2020, pending the completion of an environmental impact statement (“EIS”) that is expected to take at least a year to complete.

The district court’s shut-down order was subsequently temporarily stayed by a federal circuit court of appeals, and DAPL currently remains operational.

However, in January 2021, a federal circuit court of appeals agreed with the federal district court that the government should have conducted an EIS before going forward with the pipeline, and vacated easements granted for its construction to cross beneath Lake Oahe, a reservoir along the Missouri River maintained by the U.S.

Army Corps of Engineers (“USACE”).

The federal circuit court of appeals did not agree with the lower court’s decision that the pipeline should be shut down, and instead left the decision on how to proceed to the USACE.

A shut-down remains possible, and there is no guarantee that DAPL will be permitted to resume or continue operations following the completion of the EIS and/or the DAPL Litigation.

In addition, concerns about the safety and security of oil and gas transportation by pipeline may result in public opposition to pipeline development and increased regulation of pipelines by PHMSA, and therefore less capacity to transport our products by pipeline.

The Dakota Access Pipeline (“DAPL”), a major pipeline transporting crude oil from the Williston Basin, is subject to ongoing litigation (the “DAPL Litigation”) that could threaten its continued operation.

In July 2020, a federal district court ordered DAPL to be shut down pending the completion of an environmental impact statement (“EIS”) to determine whether the DAPL poses a threat to the Missouri River and drinking water supply of the Standing Rock Sioux Reservation.

DAPL currently remains in operation while the U.S.

Army Corps of Engineers (“USACE”) conducts the review, which is currently anticipated to be completed in the fall of 2022.

In addition, on September 20, 2021, the owner of DAPL filed a petition with the U.S.

Supreme Court seeking review of the lower courts’ decisions requiring a new EIS and permit.

Supreme Court has not yet decided whether to accept the case for review.

Following completion of the EIS, the USACE will determine whether to grant DAPL an easement to cross the Missouri River or to shut down the pipeline, unless the U.S.

Supreme Court overturns the lower courts’ order to conduct the EIS.

Moreover, the EIS and/or the USACE’s easement decision may subsequently be challenged in court.

As a result, a shut-down remains possible, and there is no guarantee that DAPL will be permitted to continue operations following the completion of the EIS and/or the DAPL Litigation.

Any significant curtailment in gathering system or pipeline capacity, or the unavailability of sufficient third-party trucking or rail capacity, could adversely affect our business, results of operations and financial condition.

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If our leases expire and we are unable to renew the leases, we will lose our right to participate in the development of the related properties.

Drilling plans for these areas are generally in the discretion of third party operators and are subject to change

based on various factors that are beyond our control, such as:

Drilling plans for these areas are generally in the discretion of third-party operators and are subject to change based on various factors that are beyond our control, such as:

the availability and cost of capital, equipment, services and personnel;

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As of December 31, 2021, we estimate that we had leases that were not developed that represented 7,421 net acres potentially expiring in 2022, 5,746 net acres potentially expiring in 2023, 6,614 net acres potentially expiring in 2024, 4,555 net acres potentially expiring in 2025, and 4,437 net acres potentially expiring in 2026 and beyond.

Seasonal weather conditions adversely affect operators’ ability to conduct drilling activities in the areas where our properties are located.

Seasonal weather conditions can limit drilling and producing activities and other operations in our operating areas and as a result, a majority of the drilling on our properties is generally performed during the summer and fall months.

Seasonal weather conditions adversely affect operators’ ability to conduct drilling activities in some of the areas where our properties are located.

Seasonal weather conditions can limit drilling and producing activities and other operations in some of our operating areas and as a result, a significant portion of the drilling on our properties is generally performed during the summer and fall months.

These seasonal constraints can pose challenges for meeting well drilling objectives and increase competition for equipment, supplies and personnel during the summer and fall months, which could lead to shortages and increase costs or delay operations.

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Our acquisition strategy will subject us to certain risks associated with the inherent uncertainty in evaluating properties for which we have limited information.

We intend to expand our operations in part through acquisitions, including without limitation the pending Reliance Acquisition.

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other information, the results of which are often inconclusive and subject to various interpretations.

We intend to continue to expand our operations in part through acquisitions.

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological

analyses and seismic and other information, the results of which are often inconclusive and subject to various interpretations.

Also, our reviews of acquired properties are inherently incomplete because it generally is not economically feasible to perform an in-depth review of the individual properties involved in each acquisition.

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• an increase in our costs or a decrease in our revenues associated with any potential royalty owner or landowner claims or disputes, or other litigation encountered in connection with an acquisition.

If the Reliance Acquisition is consummated, we may be unable to successfully integrate the Reliance Assets into our business or achieve the anticipated benefits of the Reliance Acquisition.

Our ability to achieve the anticipated benefits of the Reliance Acquisition will depend in part upon whether we can integrate the acquired assets into our existing business in an efficient and effective manner.

We may be unable to successfully integrate recently acquired assets or any assets we may acquire in the future into our business or achieve the anticipated benefits of such acquisitions.

Our ability to achieve the anticipated benefits of our recent or any future acquisitions will depend in part upon whether we can integrate the acquired assets into our existing business in an efficient and effective manner.

We may not be able to accomplish this integration process successfully.

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The accuracy of these assessments is inherently uncertain.

In connection with these assessments, we have performed a review of the subject properties that we believe to be generally consistent with industry practices.

The review was based on our analysis of historical production data, assumptions regarding capital expenditures and anticipated production declines without review by an independent petroleum engineering firm.

Data used in such review was furnished by the seller or obtained from publicly available sources.

Our review may not reveal all existing or potential problems or permit us to fully assess the deficiencies and potential recoverable reserves for all of the acquired properties, and the reserves and production related to the acquired assets may differ materially after such data is further reviewed.

In connection with these assessments, we have performed reviews of the subject properties that we believe to be generally consistent with industry practices.

The reviews are based on our analysis of historical production data, assumptions regarding capital expenditures and anticipated production declines without review by an independent petroleum engineering firm.

Data used in such reviews are typically furnished by the seller or obtained from publicly available sources.

Our review may not reveal all existing or potential problems or permit us to fully assess the deficiencies and potential recoverable reserves for all of the acquired properties, and the reserves and production related to the acquired properties may differ materially after such data is reviewed by an independent petroleum engineering firm or further by us.

Inspections will 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 a portion of the underlying deficiencies.

We are often not entitled to contractual indemnification for environmental liabilities and acquire properties on an “as is” basis, and, as is the case with certain liabilities associated with the assets to be acquired in the Reliance Acquisition, we are entitled to indemnification for only certain environmental liabilities.

The integration process may be subject to delays or changed circumstances, and we can give no assurance that the acquired assets will perform in accordance with our expectations or that our expectations with respect to integration as a result of the Reliance Acquisition will materialize.

Failure to complete the Reliance Acquisition could negatively impact our future business and financial results.

The consummation of the pending Reliance Acquisition is subject to various customary and other closing conditions, some of which are beyond our control, and we cannot assure you that the Reliance Acquisition will be consummated.

If the Reliance Acquisition is not completed or if there are significant delays in completing the Reliance Acquisition, our future business and financial results and the trading price of our common stock could be negatively affected.

In particular, there may be negative reactions from the financial markets due to the fact that current prices of our common stock may reflect a market assumption that the Reliance Acquisition will be completed.

We are often not entitled to contractual indemnification for environmental liabilities and acquire properties on an “as is” basis, and, as is the case with certain liabilities associated with the assets acquired in our recent acquisitions, we are entitled to indemnification for only certain environmental liabilities.

The integration process may be subject to delays or changed circumstances, and we can give no assurance that our recently acquired assets will perform in accordance with our expectations or that our expectations with respect to integration or cost savings as a result of such acquisitions will materialize.

Our future results will suffer if we do not effectively manage our expanded operations.

As a result of our recent acquisitions, the size and geographic footprint of our business has increased.

Our future success will depend, in part, upon our ability to manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and basins and associated increased costs and complexity.

We may also face increased scrutiny from governmental authorities as a result of the increase in the size of our business.

There can be no assurances that we will be successful or that we will realize the expected benefits currently anticipated from our recent acquisitions.

The loss of any member of our management team, upon whose knowledge, relationships with industry participants, leadership and technical expertise we rely could diminish our ability to conduct our operations and harm our ability to execute our business plan.

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Furthermore, title issues may arise at a later date that were not initially detected in any title review or examination.

Any one or more of the foregoing could require us to reverse revenues previously recognized and potentially negatively affect our cash flows and results of

Any one or more of the foregoing could require us to reverse revenues previously recognized and potentially negatively affect our cash flows and results of operations.

Our failure to obtain perfect title to our leaseholds may adversely affect our current production and reserves and our ability in the future to increase production and reserves.

Our lack of industry and geographical diversification may increase the risk of an investment in our company.

We have begun to diversify with the pending Reliance Acquisition in the Appalachian Basin and smaller acquisitions in the Permian Basin, however our operations remain heavily concentrated in primarily oil wells in the Williston Basin.

While other companies may have the ability to manage their risk by diversification, the narrow focus of our business, in terms of both the industry focus and geographic scope of our business, means that we will likely be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business were more diversified.

As a result of the narrow focus of our business, we may be disproportionately exposed to the effects of regional supply and demand factors, delays or interruptions of production from wells in our areas caused by governmental regulation, processing or transportation capacity constraints, market limitations, weather events or interruption of the processing or transportation of oil or natural gas.

Additionally, we may be exposed to further risks, such as changes in field-wide rules and regulations that could cause us to permanently or temporarily shut-in all of our wells within a particular area of operations.

We conduct business in a highly competitive industry.

The oil and natural gas industry is highly competitive.

The key areas in respect of which we face competition include:

acquisition of assets offered for sale by other companies;

access to capital (debt and equity) for financing and operational purposes;

purchasing, leasing, hiring, chartering or other procuring of equipment by our operators that may be scarce;

and employment of qualified and experienced skilled management and oil and natural gas professionals.

Competition in our markets is intense and depends, among other things, on the number of competitors in the market, their financial resources, their degree of geological, geophysical, engineering and management expertise and capabilities, their pricing policies, their ability to develop properties on time and on budget, their ability to select, acquire and develop reserves and their ability to foster and maintain relationships with the relevant authorities.

Our competitors also include those entities with greater technical, physical and financial resources.

Finally, companies and certain private equity firms not previously investing in oil and natural gas may choose to acquire reserves to establish a firm supply or simply as an investment.

Any such companies will also increase market competition which may directly affect us.

If we are unsuccessful in competing against other companies, our business, results of operations, financial condition or prospects could be materially adversely affected.

Our derivatives activities could adversely affect our cash flow, results of operations and financial condition.

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We believe that we have positive relations with our related vendors and maintain adequate anti-virus and malware software and controls;

however, any interruptions to our arrangements with third parties for our computing and communications infrastructure or any other interruptions to, or breaches of, our

information systems could lead to data corruption, communication interruption, loss of sensitive or confidential information or otherwise significantly disrupt our business operations.

however, any interruptions to our arrangements with third parties for our computing and communications infrastructure or any other interruptions to, or breaches of, our information systems could lead to data corruption, communication interruption, loss of sensitive or confidential information or otherwise significantly disrupt our business operations.

Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing.

Furthermore, various third-party resources that we rely on, directly or indirectly, in the operation of our business (such as pipelines and other infrastructure) could suffer interruptions or breaches from cyber-attacks or similar events that are entirely outside our control, and any such events could significantly disrupt our business operations and/or have a material adverse effect on our results of operations.

To our knowledge we have not experienced any material losses relating to cyber-attacks;

however, there can be no assurance that we will not suffer material losses in the future either as a result of an interruption to or a breach of our systems or those of our third party vendors and service providers.

however, there can be no assurance that we will not suffer material losses in the future.

Fuel conservation measures, technological advances and negative shift in market perception towards the oil and natural gas industry could reduce demand for oil and natural gas.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices, and the increased competitiveness of alternative energy sources could reduce demand for oil and natural gas.

Additionally, the increased competitiveness of alternative energy sources (such as electric vehicles, wind, solar, geothermal, tidal, fuel cells and biofuels) could reduce demand for oil and natural gas and, therefore, our revenues.

Additionally, certain segments of the investor community have recently expressed negative sentiment towards investing in the oil and natural gas industry.

Recent equity returns in the sector versus other industry sectors have led to lower oil and natural gas representation in certain key equity market indices.

Some investors, including certain pension funds, university endowments and family foundations, have stated policies to reduce or eliminate their investments in the oil and natural gas sector based on social and environmental considerations.

Furthermore, certain other stakeholders have pressured commercial and investment banks to stop funding oil and gas projects.

With the continued volatility in oil and natural gas prices, and the possibility that interest rates will rise in the near term, increasing the cost of borrowing, certain investors have emphasized capital efficiency and free cash flow from earnings as key drivers for energy companies, especially shale producers.

This may also result in a reduction of available capital funding for potential development projects, further impacting our future financial results.

The impact of the changing demand for oil and natural gas services and products, together with a change in investor sentiment, may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Furthermore, if we are unable to achieve the desired level of capital efficiency or free cash flow within the timeframe expected by the market, our stock price may be adversely affected.

Increased attention to environmental, social and governance (“ESG”) matters may impact our business.

Increasing attention to climate change, increasing societal expectations on companies to address climate change, increasing investor and societal expectations regarding voluntary ESG disclosures, and potential increasing consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our access to capital markets.

Increasing attention to climate change, for example, may result in demand shifts for natural gas and oil products and additional governmental investigations and private litigation against us.

To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors.

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.

Such ratings are used by some investors to inform their investment and voting decisions.

Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital.

Also, institutional lenders may, of their own accord, elect not to provide funding for fossil fuel energy companies based on climate change related concerns, which could affect our access to capital for potential growth projects.

Risks Related to Our Financing and Indebtedness

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Our inability to generate sufficient cash flow to satisfy our debt obligations or pay dividends on our preferred stock, or to obtain alternative financing, could materially and adversely affect our business, financial condition, results of operations and prospects.

We currently owe cumulative dividends with respect to our Series A Preferred Stock, which precludes us from paying dividends with respect to our common stock and has certain other potential or actual adverse consequences.

Our Series A Preferred Stock accrues dividends that are payable semi-annually in arrears on May 15 and November 15 of each year, which commenced on May 15, 2020, when, as and if declared by our Board.

As of December 31, 2020, no dividends had been declared or paid, and there were approximately $16.3 million of accumulated dividends on the Series A Preferred Stock.

Our failure to pay dividends with respect to the Series A Preferred Stock precludes us from paying dividends or making other distributions on our common stock unless all accumulated and unpaid dividends on the Series A Preferred Stock for all preceding dividend periods have been or contemporaneously are declared and paid in full.

Additionally, if dividends on the Series A Preferred Stock are in arrears and unpaid for three or more semi-annual dividend periods (whether or not consecutive), the holders of the Series A Preferred Stock will be entitled to elect two additional directors to serve on the Board during the term of such payment arrearage.

Since dividends are currently in arrears for two semi-annual dividend periods, this would occur as a result of the next semi-annual dividend period for which dividends are not paid.

Our ability to pay dividends to our stockholders is restricted by applicable laws and regulations and requirements under certain of our securities and debt agreements, including the Series A Preferred Stock, our Revolving Credit Facility and the 2028 Notes (as collectively defined below).

Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its sole discretion, may declare out of funds legally available for such payments.

On May 6, 2021, our board of directors declared our first cash dividend on our common stock in the amount of $0.03 per share.

The dividend was paid on July 30, 2021 to stockholders of record as of the close of business on June 30, 2021.

Our board of directors declared increased quarterly cash dividends on our common stock for each of the following completed fiscal quarters, and our management intends to recommend to our board of directors a further increase in our quarterly cash dividends on our common stock going forward.

Any such increase would be conditioned upon, among other things, the approval of such increase by our board of directors and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.

We cannot assure you, however, that we will pay dividends in the future in the current amounts or at all.

Our board of directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends to

our common stockholders at its discretion, without notice to our stockholders.

Any future determination relating to our dividend policy will be dependent on a variety of factors, including our financial condition, earnings, legal requirements, our general liquidity needs, and other factors that our board of directors deems relevant.

Our ability to declare and pay dividends to our stockholders is subject to certain laws, regulations, and policies, including minimum capital requirements and, as a Delaware corporation, we are subject to certain restrictions on dividends under the Delaware General Corporation Law (the “DGCL”).

Under the DGCL, our board of directors may not authorize payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

In addition, so long as any shares of our Series A Preferred Stock remain outstanding, no dividend or distribution may be declared or paid on our common stock unless all accumulated and unpaid dividends on the Series A Preferred Stock for all preceding dividend periods have been or contemporaneously are declared and paid in full.

Finally, our ability to pay dividends to our stockholders may be limited by covenants in any debt agreements that we are currently a party to, including our Revolving Credit Facility and the indenture governing our 2028 Notes, or may enter into in the future.

As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate at any time, the payment of dividends on our common stock.

If as a result, we are unable to pay dividends, investors may be forced to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment.

Any change in the level of our dividends or the suspension of the payment thereof could have a material adverse effect on the market price of our common stock.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

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Our revolving credit agreement uses LIBOR as the reference rate for Eurodollar denominated borrowings.

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear if LIBOR will cease to exist at that time, if new methods of calculating LIBOR will be established such that it continues to exist after 2021 or whether different reference rates will develop.

It is impossible to predict the effect these developments, any discontinuance, modification or other reforms to LIBOR or the establishment of alternative reference rates may have on LIBOR, other benchmark rates or floating rate debt instruments.

Although our revolving credit agreement contains LIBOR alternative provisions and the ability to negotiate an alternative reference rate, new methods of calculating reference rates or other reforms could cause the interest rates under our revolving credit agreement to be materially different than expected, which could have an adverse effect on our business, financial position and results of operations, and our ability to pay dividends on our common stock.

As of January 1, 2022, regulated banks are required to cease “new” US dollar LIBOR issuances (including new commitments, renewals and extensions) and all existing US dollar LIBOR loans must transition to an alternative rate by June 30, 2023.

Until that time, it is unclear how different reference rates will develop.

It is impossible to predict the effect these developments, the discontinuance, modification or other reforms to LIBOR or the establishment of alternative reference rates may have on LIBOR, other benchmark rates or floating rate debt instruments.

Although our revolving credit agreement contains LIBOR alternative provisions which provide for the replacement of LIBOR, upon certain triggering events, with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York, new methods of calculating reference rates or other reforms could cause the interest rates under our revolving credit agreement to be materially different than expected, which could have an adverse effect on our business, financial position and results of operations, and our ability to pay dividends on our common stock.

We may be able to incur substantially more debt.

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If new debt is added to our current debt levels, the related risks that we now face could increase.

Our level of indebtedness could, for instance, prevent us from

engaging in transactions that might otherwise be beneficial to us or from making desirable capital expenditures.

Our level of indebtedness could, for instance, prevent us from engaging in transactions that might otherwise be beneficial to us or from making desirable capital expenditures.

This could put us at a competitive disadvantage relative to other less leveraged competitors that have more cash flow to devote to their operations.

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Cash reserves, cash from operations and borrowings under our Revolving Credit Facility may not be sufficient to fund our continuing operations and business plan and goals.

We may require additional capital and we may be unable to obtain such capital if and when required.

We may require additional capital and we

may be unable to obtain such capital if and when required.

If our access to capital were limited due to numerous factors, which could include a decrease in operating cash flow due to lower oil and natural gas prices or decreased production or deterioration of the credit and capital markets, we would have a reduced ability to develop our properties, replace our reserves and pursue our business plan and goals.

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Risks Related to Legal and Regulatory Matters

The current administration, acting through the executive branch and/or in coordination with Congress, could enact rules and regulations that restrict our ability to acquire federal leases in the future and/or impose more onerous permitting and other costly environmental, health and safety requirements.

President Biden has stated that he intends to issue Executive Orders to permanently protect certain federal lands, establish monuments, restrict new oil and gas permitting on public lands and waters, and modify royalties to account for climate costs.

In January 2021, President Biden signed an Executive Order temporarily suspending oil and gas permitting on federal lands and waters.

In addition, the current administration has indicated that his administration is likely to pursue more stringent methane pollution limits for new and existing oil and gas operations.

The current presidential administration, acting through the executive branch and/or in coordination with Congress, already has ordered or proposed, and could enact additional rules and regulations that restrict our ability to acquire federal leases in the future and/or impose more onerous permitting and other costly environmental, health and safety requirements.

We are affected by the adoption of laws, regulations and policy directives that, for economic, environmental protection or other policy reasons, could curtail exploration and development drilling for oil and gas.

For example, in January 2021, President Biden signed an Executive Order directing the U.S.

Department of the Interior (“DOI”) to temporarily pause new oil and gas leases on federal lands and waters pending completion of a comprehensive review of the federal government’s existing oil and gas leasing and permitting program.

In June 2021, a federal district court enjoined the DOI from implementing the pause and leasing resumed, although litigation over the leasing pause remains ongoing.

As a result, it is difficult to predict if and when such areas may be made available for future exploration activities.

In addition, in November 2021, the U.S.

Environmental Protection Agency (“EPA”) proposed a new rule that would impose more stringent methane emissions standards for new and modified sources in the oil and gas industry, and to regulate existing sources in the oil and gas industry for the first time.

A supplemental proposed rule, which may expand or modify the current proposed rule, and final rule are expected by the end of 2022.

The current proposed rule authorizes each state to incorporate the emission guidelines proposed by the EPA or to adopt their own standards that achieve the same degree of emissions limitations.

Further, in September 2021, President Biden publicly announced the Global Methane Pledge, an international pact that aims to reduce global methane emissions to at least 30% below 2020 levels by 2030.

These efforts, among others, are intended to support the current administration’s stated goal of addressing climate change.

Potential actions of a Democratic-controlled Congress include imposing more restrictive laws and regulations pertaining to permitting, limitations on greenhouse gas emissions, increased requirements for financial assurance and bonding for decommissioning liabilities, and carbon taxes.

Potential actions of a Democratic-controlled Congress include imposing more restrictive laws and regulations pertaining to permitting, limitations on GHG emissions, increased requirements for financial assurance and bonding for decommissioning liabilities, and carbon taxes.

Any of these administrative or Congressional actions could adversely affect our financial condition and results of operations by restricting the lands available for development and/or access to permits required for such development, or by imposing additional and costly environmental, health and safety requirements.

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federal income tax purposes.

At December 31, 2020, we had an estimated NOL carryforward of approximately $474.5 million for United States federal income tax purposes.

At December 31, 2021, we had an estimated NOL carryforward of approximately $592.9 million for U.S.

federal income tax purposes.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), a corporation that undergoes an “ownership change” can be subject to limitations on the use of its NOLs to offset future taxable income.

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federal income tax deductions currently available with respect to natural gas and oil exploration and development may be eliminated as a result of future legislation.

In past years, legislation has been proposed that would, if enacted into law, make significant changes to U.S.

From time to time, legislation has been proposed that would, if enacted into law, make significant changes to U.S.

tax laws, including certain key U.S.

federal income tax provisions currently available to oil and gas companies.

Such legislative changes have included, but not been limited to, (i) the repeal of the percentage depletion allowance for natural gas and oil properties, (ii) the elimination of current deductions for intangible drilling and development costs, and (iii) an extension of the amortization

period for certain geological and geophysical expenditures.

Although these provisions were largely unchanged in the Tax Act, Congress could consider, and could include, some or all of these proposals as part of future tax reform legislation.

Although these provisions were largely unchanged in the most recent federal tax legislation, certain of these changes were considered for inclusion in the proposed “Build Back Better Act” and Congress could consider, and could include, some or all of these proposals as part of future tax reform

Moreover, other more general features of any additional tax reform legislation, including changes to cost recovery rules, may be developed that also would change the taxation of oil and gas companies.

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federal income tax laws could eliminate or postpone certain tax deductions that currently are available with respect to oil and gas development or increase costs, and any such changes could have an adverse effect on our financial position, results of operations and cash flows.

The enactment of new or increased severance taxes and impact fees on natural gas production could negatively impact the assets we expect to acquire in the Reliance Acquisition.

The tax laws, rules and regulations that affect the operation of the assets that we expect to acquire in the pending Reliance Acquisition are subject to change.

The enactment of new or increased severance taxes and impact fees on natural gas production could negatively impact our assets in the Marcellus Shale formation.

The tax laws, rules and regulations that affect the operation of our assets in the Marcellus Shale formation are subject to change.

For example, Pennsylvania’s governor has in past legislative sessions proposed legislation to impose a state severance tax on the extraction of natural resources, including natural gas produced from the Marcellus Shale formation, either in replacement of or in addition to the existing state impact fee.

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Any such tax increase or change could adversely impact our earnings, cash flows and financial position as it relates to these assets.

Our business involves the selling and shipping by rail of crude oil, including from the Bakken shale, which involves risks of derailment, accidents and liabilities associated with cleanup and damages, as well as potential regulatory changes that may adversely impact our business, financial condition or results of operations.

Our business involves the selling and shipping by rail of crude oil, which involves risks of derailment, accidents and liabilities associated with cleanup and damages, as well as potential regulatory changes that may adversely impact our business, financial condition or results of operations.

A portion of our crude oil production is transported to market centers by rail.

Derailments in North America of trains transporting crude oil have caused various regulatory agencies and industry organizations, as well as federal, state and municipal governments, to focus attention on transportation by rail of flammable materials.

Any changes to existing laws and regulations, or promulgation of new laws and regulations, including any voluntary measures by the rail industry, that result in new requirements for the design, construction or operation of tank cars used to transport crude oil could increase our costs of doing business and limit our ability to transport and sell our crude oil at favorable prices at market centers throughout the United States, the consequences of which could have a material adverse effect on our financial condition, results of operations and cash flows.

In addition, any derailment of crude oil from the Bakken shale involving crude oil that we have sold or are shipping may result in claims being brought against us that may involve significant liabilities.

In addition, any derailment of crude oil involving crude oil that we have sold or are shipping may result in claims being brought against us that may involve significant liabilities.

Our derivative activities expose us to potential regulatory risks .

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) contains measures aimed at increasing the transparency and stability of the over-the-counter (“OTC”) derivatives market and preventing excessive speculation.

In one of the rulemaking proceedings still pending under the Dodd-Frank Act, the CFTC issued in January 2020 (withdrawing previous proposals from 2013 and 2016), proposed rules imposing position limits for certain futures and options contracts in various commodities (including oil and gas) and for swaps that are their economic equivalents.

Under the proposed rules on position limits, certain types of derivative transactions are exempt from these limits, provided that such derivative transactions satisfy the CFTC's requirements for certain enumerated “bona fide” derivative transactions.

On January 14, 2021, the CFTC published a final rule imposing position limits for certain futures and options contracts in various commodities (including oil and gas) and for swaps that are their economic equivalents, though certain types of derivative transactions are exempt from these limits, provided that such derivative transactions satisfy the CFTC’s requirements for certain enumerated “bona fide” derivative transactions.

The CFTC has also adopted final rules regarding aggregation of positions, under which a party that controls the trading of, or owns ten percent or more of the equity interests in, another party will have to aggregate the positions of the controlled or owned party with its own positions for purposes of determining compliance with position limits unless an exemption applies.

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These rules may affect both the size of the positions that we may hold and the ability or willingness of counterparties to trade with us, potentially increasing the costs of transactions.

Moreover, such changes could

materially reduce our access to derivative opportunities, which could adversely affect revenues or cash flow during periods of low commodity prices.

Moreover, such changes could materially reduce our access to derivative opportunities, which could adversely affect revenues or cash flow during periods of low commodity prices.

The CFTC also has designated certain interest rate swaps and credit default swaps for mandatory clearing and the associated rules also will require us, in connection with covered derivative activities, to comply with clearing and trade-execution requirements or to take steps to qualify for an exemption to such requirements.

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Furthermore, we may be put at a competitive disadvantage to larger companies in our industry that can spread these additional costs over a greater number of wells and larger operating staff.

Environmental risks may adversely affect our business.

All phases of the oil and natural gas business can present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state and municipal laws and regulations.

Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and natural gas operations.

The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities.

Failure to comply with federal, state and local environmental laws and regulations could result in substantial penalties and adversely affect our business.

All phases of the oil and natural gas business can present environmental risks and hazards and are subject to a variety of federal, state and municipal laws and regulations.

Environmental laws and regulations, among other things, restrict and prohibit spills, releases or emissions of various substances produced in association with oil and natural gas operations, and

require that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities.

There is risk of incurring significant environmental costs and liabilities as a result of the handling of petroleum hydrocarbons and wastes, air emissions and wastewater discharges related to our business, and historical operations and waste disposal practices.

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In addition, claims for damages to persons, property or natural resources may result from environmental and other impacts of operations on our properties.

The application of environmental laws to our business may cause us to curtail production or increase the costs of our production, development or exploration activities.

The application of new or more stringent environmental laws and regulations to our business may cause us to curtail production or increase the costs of our production, development or exploration activities.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

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Restrictions on GHG emissions that may be imposed could adversely affect the oil and gas industry.

The adoption of legislation or regulatory programs to reduce GHG emissions could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory requirements.

Any GHG emissions legislation or regulatory programs applicable to power plants or refineries could also increase the cost of consuming, and thereby reduce demand for, the oil and natural gas we produce.

Any GHG emissions legislation or regulatory programs applicable to power plants or refineries could also increase the cost of consuming, and potentially reduce demand for, the oil and natural gas we produce.

Consequently, legislation and regulatory programs to reduce GHG emissions could have an adverse effect on our business, financial condition and results of operations.

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Extreme weather conditions can interfere with our production and increase our costs, and damage resulting from extreme weather may not be fully insured.

However, at this time, we are unable to determine the extent to which climate change may lead to increased storm or weather hazards affecting our operations.

Business—Governmental Regulation and Environmental Matters” and “—Climate Change” for a further discussion of the laws and regulations related to greenhouse gases and of climate change.

Risk Related to our Common Stock

Business—Governmental Regulation and Environmental Matters” and “—Climate Change” for a further discussion of the laws and regulations related to GHGs and of climate change.

Risks Related to Our Common Stock

There may be future sales or issuances of our common stock, including issuances in connection with our incentive plans, acquisitions or otherwise, which will dilute the ownership interests of stockholders and may adversely affect the market price of our common stock.

Our certificate of incorporation authorizes us to issue 135,000,000 shares of common stock, of which 77,341,921 shares were issued and outstanding as of December 31, 2021.

Any shares of common stock that we may issue in the future, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or substantially similar securities, may dilute the ownership interests of our stockholders.

In addition, future issuances of common stock under our 2018 Equity Incentive Plan or other equity incentive plans that we may adopt in the future, or in connection with an acquisition or otherwise, would also dilute the percentage ownership held by the investors who purchase shares of common stock in this offering.

The market price of our common stock could decline as a result of sales or issuances of a large number of shares of our common stock or similar securities in the market after this offering or the perception that such sales or issuances could occur.

Our certificate of incorporation, bylaws, and Delaware state law contain provisions that may have the effect of delaying or preventing a change in control and may adversely affect the market price of our capital stock.

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The availability of shares for sale or other issuance in the future could reduce the market price of our common stock.

Our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, or issue additional shares of preferred stock, which are convertible into shares of common stock.

In the future, we may issue securities to raise cash for acquisitions, as consideration in acquisitions, to pay down debt, to fund capital expenditures or general corporate expenses, in connection with the exercise of stock options or to satisfy our obligations under our incentive plans.

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We may also issue securities, including our preferred stock, that are convertible into, exchangeable for, or that represent the right to receive, our common stock.

The occurrence of any of these events or any issuance of common stock upon conversion of our currently outstanding preferred stock may dilute your ownership interest in our company, reduce our earnings per share and have an adverse impact on the price of our common stock.

The occurrence of any of these events or any issuance of common stock upon conversion of our currently outstanding Series A Preferred Stock or upon exercise of our outstanding warrants may dilute your ownership interest in our company, reduce our earnings per share and have an adverse impact on the price of our common stock.

Investors in our common stock may be required to look solely to stock appreciation for a return on their investment in us.

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What changed 10-K

Item 1A. Risk Factors