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Item 3. Legal Proceedings

2026-03-12 compared with 2025-03-31 · 43 added, 5 removed, 4 unchanged (92% of the section changed)

Legal Proceedings.

From time to time, we may be party to or otherwise involved in legal proceedings arising in the ordinary course of business.

We recognize provisions for legal proceedings in our financial statements, in accordance with accounting rules, when we are advised by independent outside counsel that (i) it is probable that an outflow of resources will be required to settle the obligation and (ii) a reliable estimate can be made of the amount of the obligation.

The assessment of the likelihood of loss includes analysis by outside counsel of available evidence, the hierarchy of laws, available case law, recent court rulings and their relevance in the legal system.

Our provisions for probable losses arising from these matters are estimated and periodically adjusted by management.

From time to time, we may be party to or otherwise

involved in legal proceedings arising in the ordinary course of business.

We recognize provisions for legal proceedings in our financial

statements, in accordance with accounting rules, when we are advised by independent outside counsel that (i) it is probable that an outflow

of resources will be required to settle the obligation and (ii) a reliable estimate can be made of the amount of the obligation.

The assessment

of the likelihood of loss includes analysis by outside counsel of available evidence, the hierarchy of laws, available case law, recent

court rulings and their relevance in the legal system.

Our provisions for probable losses arising from these matters are estimated and

periodically adjusted by management.

In making these adjustments our management relies on the opinions of our external legal advisors.

Management does not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material adverse effect on our business, results of operations or financial condition.

On December 23, 2025, the State of New Mexico

filed a lawsuit against the Company and other parties, including Chief Executive Officer E.

Will Gray II, in the First Judicial District

Court for Santa Fe County (“New Mexico Litigation”).

The complaint alleges several causes of action, including for unjust

enrichment, violations of the New Mexico Oil and Gas Act, violations of the Uniform Voidable Transactions Act, Fraud Against Taxpayers

Act, civil conspiracy, and veil piercing, and seeks, among other relief, damages, civil penalties, costs, and attorneys’ fees.

New Mexico Litigation was stayed shortly after it was initiated because of the ongoing bankruptcy proceedings for several unrelated defendants.

case is in its early stages and will remain in abeyance until the bankruptcy court lifts the stay.

In response to the New Mexico Litigation and reports

by purported short sellers on subject matters similar to those alleged in the lawsuit, the independent members of the Board promptly initiated

and conducted an internal investigation into the allegations, with the assistance of independent outside counsel.

The investigation

considered, among other things, the State of New Mexico’s allegations that the Company’s subsidiary, Solis Partners, LLC,

and the Company’s Chief Executive Officer, Mr.

Gray, tried to place the burden of plugging, abandoning, and reclaiming numerous

oil and gas wells owned by Acacia Resources, LLC on the State of New Mexico.

The investigation included review of documents and many interviews.

limits were placed on the scope of the investigation.

The investigation found no facts supporting the allegations of wrongdoing in

the short seller reports or the New Mexico Litigation by Solis Partners, LLC, Mr.

Gray, the Company, or any entities associated with Mr.

We may incur significant legal and other fees

and costs to resolve the New Mexico Litigation.

We are not currently able to estimate the possible cost to us from the New Mexico Litigation,

as this matter is currently at an early stage and we cannot be certain how long it may take to resolve this matter or the possible amount

of any damages that we may be required to pay.

We could, in the future, incur an adverse judgment or enter into a settlement for monetary

damages as a result of the New Mexico Litigation.

During the pendency of our litigation, we may be unable to consummate our contemplated

sale of legacy natural gas assets.

If the New Mexico Litigation results in the payment of substantial damages by us or our ability to

monetize existing assets, it could adversely affect our business, financial condition or results of operations.

Mine Safety Disclosures.

1 unchanged sentence

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 3. Legal Proceedings