9 unchanged sentences
The future price of oil, natural gas and NGL;
−Removed: The effect of COVID-19 on the Company’s operations, future prospects, the value of its properties, and the economy in general, including the related effect on the supply and demand, and ultimate price of oil and natural gas;
−Removed: Current and future declines in economic activity and recessions, and their effect on the Company, its property, prospects and the supply and demand, and ultimate price of oil and natural gas;
+Added: The impact of public health crises, similar to COVID-19, on the Company’s operations, future prospects, the value of its properties, and the economy in general, including the related effect on the supply and demand, and ultimate price of oil and natural gas;
+Added: Current and future declines in economic activity and recessions, increased inflation and interest rates, and their effect on the Company, its property, prospects and the supply and demand, and ultimate price of oil and natural gas;
The status and availability of oil and natural gas gathering, transportation, and storage facilities owned and operated by third parties;
2 unchanged sentences
The effect of future shut-ins of our operated production, should market conditions significantly deteriorate;
−Removed: Write-downs of a material portion of our assets due to the recent economic downturn resulting from COVID-19 or otherwise;
+Added: Declines in the value of our crude oil, natural gas and NGL properties resulting in impairments;
Our need for additional capital to complete future acquisitions, conduct our operations and fund our business, and our ability to obtain such necessary funding on favorable terms, if at all;
Our ability to generate sufficient cash flow to meet any future debt service and other obligations due to events beyond our control;
−Removed: The fact that all our assets and operations are located in the Permian Basin and the D-J Basin, making us vulnerable to risks associated with operating in only two geographic areas;
+Added: The fact that all of our assets and operations are located in the Permian Basin and the D-J Basin, making us vulnerable to risks associated with operating in only two geographic areas;
The speculative nature of our oil and gas operations, and general risks associated with the exploration for, and production of oil and gas;
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Our dependence on the continued involvement of our present management;
−Removed: The fact that Mr.
+Added: The fact that Dr.
Simon Kukes, our Chief Executive Officer and a member of board of directors, beneficially owns a majority of our common stock and that his interests may be different from other shareholders;
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Because approximately 72% of our estimated proved reserves as of December 31, 2022 were oil, our financial results are more sensitive to movements in oil prices.
−Removed: The price of crude oil has experienced significant volatility over the last five years, with the price per barrel of West Texas Intermediate (“ WTI ”) crude rising from a low of $27 in February 2016 to a high of $76 in October 2018, then, in 2020, dropping below $20 per barrel due in part to reduced global demand stemming from the recent global COVID-19 outbreak, and most recently surging to over $125 a barrel in early March 2022, following Russia’s invasion of the Ukraine.
+Added: The price of crude oil has experienced significant volatility over the last five years, with the price per barrel of West Texas Intermediate (“ WTI ”) crude rising from a low of $42 in June 2017 to a high of $76 in October 2018, then, in 2020, dropping below $20 per barrel due in part to reduced global demand stemming from the global COVID-19 outbreak, and surging to over $120 a barrel in early March 2022, following Russia’s invasion of the Ukraine.
A prolonged period of low market prices for oil and natural gas, or further declines in the market prices for oil and natural gas, will likely result in capital expenditures being further curtailed and will adversely affect our business, financial condition and liquidity and our ability to meet obligations, targets or financial commitments and could ultimately lead to restructuring or filing for bankruptcy, which would have a material adverse effect on our stock price and indebtedness.
Additionally, lower oil and natural gas prices have, and may in the future, cause, a decline in our stock price.
−Removed: During the year ended December 31, 2020, the daily NYMEX WTI oil spot price ranged from a high of $63.27 per Bbl to a low of ($36.98) per Bbl and the NYMEX natural gas Henry Hub spot price ranged from a high of $3.14 per MMBtu to a low of $1.33 per MMBtu.
−Removed: During the year ended December 31, 2021, the daily NYMEX WTI oil spot price ranged from a high of $85.64 per Bbl to a low of 47.47 per Bbl and the NYMEX natural gas Henry Hub spot price ranged from a high of $23.86 per MMBtu to a low of $2.43 per MMBtu.
−Removed: Our business and operations have been adversely affected by, and are expected to continue to be adversely affected by, the COVID-19 outbreak, and may be adversely affected by other similar outbreaks .
−Removed: As a result of the ongoing COVID-19 outbreak or other adverse public health developments, including voluntary and mandatory quarantines, travel restrictions and other restrictions relating thereto, our operations, and those of our subcontractors, customers and suppliers, have experienced and are anticipated to continue to experience, delays or disruptions and temporary suspensions of operations.
−Removed: In addition, our financial condition and results of operations have been and are likely to continue to be adversely affected by the COVID-19 outbreak.
−Removed: The timeline and potential magnitude of the COVID-19 outbreak are currently unknown.
−Removed: The continuation or amplification of this virus could continue to more broadly affect the United States and global economy, including our business and operations, and the demand for oil and gas.
−Removed: For example, the outbreak of coronavirus has resulted in a widespread health crisis that will adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect our operating results.
−Removed: Other contagious diseases in the human population could have similar adverse effects.
−Removed: In addition, the effects of COVID-19 and concerns regarding its global spread have previously negatively impacted the domestic and international demand for crude oil and natural gas, which has contributed to price volatility, impacted the price we receive for oil and natural gas and materially and has materially and adversely affected the demand for and marketability of our production, which production we temporarily shut-in from mid-April 2020 through early June 2020, and is anticipated to continue to adversely affect the same for the foreseeable future.
−Removed: As the potential impact from COVID-19 is difficult to predict, the extent to which it will negatively affect out operating results, or the duration of any potential business disruption is uncertain.
−Removed: The magnitude and duration of any impact will depend on future developments and new information that may emerge regarding the severity and duration of COVID-19 and the actions taken by authorities to contain it or treat its impact, including the efficiency of recent vaccines, the ability of the government to roll such vaccines out to the general public, and the willingness of individuals to obtain such vaccines, all of which are beyond our control.
−Removed: These potential impacts, while uncertain, have already negatively affected our fiscal 2020 results of operations, and to a lesser extent our 2021 results of operations, and may continue to have a negative impact on multiple future quarters’ results as well.
−Removed: We have a limited operating history and expect to continue to incur losses for an indeterminable period of time.
+Added: The below table highlights the recent volatility in oil and gas prices by summarizing the high and low daily NYMEX WTI oil spot price and daily NYMEX natural gas Henry Hub spot price for the periods presented:
+Added: Daily NYMEX WTI
+Added: oil spot price (per Bbl)
+Added: Daily NYMEX natural
+Added: gas Henry Hub spot price (per MMBtu)
+Added: Year ended December 31, 2019
+Added: Year ended December 31, 2020
+Added: Year ended December 31, 2021
+Added: Year ended December 31, 2022
+Added: Quarter ended March 31, 2023 (through March 21, 2023)
+Added: We have a limited operating history, have incurred net losses in the past and may incur net losses in the future
We have a limited operating history and are engaged in the initial stages of exploration, development and exploitation of our leasehold acreage and will continue to be so until commencement of substantial production from our oil and natural gas properties, which will depend upon successful drilling results, additional and timely capital funding, and access to suitable infrastructure.
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We have incurred net losses of $126,741,000 from the date of inception (February 9, 2011) through December 31, 2022.
−Removed: Additionally, we are dependent on obtaining additional debt and/or equity financing to roll-out and scale our planned principal business operations.
+Added: Additionally, we may be dependent on obtaining additional debt and/or equity financing to roll-out and scale our planned principal business operations.
Management’s plans in regard to these matters consist principally of seeking additional debt and/or equity financing combined with expected cash flows from current oil and gas assets held and additional oil and gas assets that we may acquire.
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If this were to happen, we may be forced to scale back our business plan, sell or liquidate assets to satisfy outstanding debts, all of which could result in the value of our outstanding securities declining in value.
+Added: Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability.
+Added: Should these conditions persist our business, results of operations and cash flows could be materially and adversely affected.
+Added: Year 2022 saw significant increases in the costs of certain services and materials, including steel, sand and fuel, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fully employed US labor force, high inflation, interest rates and other factors, with supply and demand fundamentals being further aggravated by disruptions in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine, all resulting in an estimated cost increase of approximately 25% to 30% per well on our Permian Asset and 10% to 20% on our D-J Asset, based on costs we experienced commencing in the third quarter of 2021 and through 2022.
+Added: Service and materials costs also increased accordingly through 2022 with general supply chain and inflation issues seen throughout the industry leading to increased operating costs.
+Added: While the Company is cautiously optimistic that such costs have plateaued and will hold at current levels as we have not seen significant cost increases thus far in 2023, supply chain constraints and inflationary pressures may continue to adversely impact our operating costs and may negatively impact our ability to procure materials and equipment in a timely and cost-effective manner, if at all, which could result in reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
+Added: The conflict in Ukraine and related price volatility and geopolitical instability could negatively impact our business .
+Added: In late February 2022, Russia launched significant military action against Ukraine.
+Added: The conflict has caused, and could intensify, volatility in natural gas, oil and NGL prices, and the extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
+Added: We believe that the increase in crude oil prices during the first half of 2022 was partially due to the impact of the conflict between Russia and Ukraine on the global commodity and financial markets, and in response to economic and trade sanctions that certain countries have imposed on Russia.
+Added: Any such volatility and disruptions may also magnify the impact of other risks described under “Risk Factors” in Item 1A of this Annual Report.
+Added: We have been and may continue to be negatively impacted by inflation.
+Added: Increases in inflation have had an adverse effect on us.
+Added: Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflict between the Ukraine and Russia.
+Added: Continuing increases in inflation, have in the past, and could in the future, impact our costs of labor, equipment and services and the margins we are able to realize on our wells, all of which could have an adverse impact on our business, financial position, results of operations and cash flows.
+Added: Inflation has also resulted in higher interest rates, which in turn raises our cost of debt borrowing.
+Added: Economic uncertainty may affect our access to capital and/or increase the costs of such capital.
+Added: Global economic conditions continue to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions, fears of recession and trade wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the availability and timing of government stimulus programs, levels of unemployment, increased inflation, and tax rates.
+Added: These conditions remain unpredictable and create uncertainties about our ability to raise capital in the future.
+Added: In the event required capital becomes unavailable in the future, or more costly, it could have a material adverse effect on our business, results of operations, and financial condition.
+Added: We have entered into Agreed Compliance Orders, as amended (“ ACOs ”), with the State of New Mexico Energy, Minerals and Natural Resources Department (“ EMNRD ”) which require the restoration of production, or plugging and abandonment, of an aggregate of approximately 333 legacy vertical wells in our Permian Basin Asset, with any failure by us to comply with the ACOs likely to materially and adversely affect our business, results of operations and cash flows.
+Added: The Company has previously entered into ACOs with the EMNRD through its New Mexico operating subsidiaries, Ridgeway Arizona Oil Corp.
+Added: (“ Ridgeway ”) and EOR Operating Company (“ EOR ”), which require the Company to restore production, or plug and abandon, an aggregate of approximately 333 legacy vertical wells by certain specified dates.
+Added: In the event the Company is unable to fully comply with the terms of these ACOs, then the Company could be subject to significant civil penalties and sanctions, which would likely have a material adverse effect on our business, financial condition and results of operations, could require us to raise additional funding which may not be available on commercially reasonable terms, if at all, and may negatively affect our drilling plans in the future, and may cause the value of our securities to decline in value.
+Added: We may be required to enter into new or amended ACOs with the EMNRD with respect to our Permian Basin Asset, which could require the accelerated restoration of production, or plugging and abandonment, of our legacy vertical wells in our Permian Basin Asset, which could materially and adversely affect our business, results of operations and cash flows.
+Added: In the event the Company is required to enter into new, or amend existing, ACOs with the EMNRD with respect to our approximately 333 legacy vertical wells which require the Company to accelerate the restoration of production, or plugging and abandonment, of some or all of these wells, such accelerated actions could have a material adverse effect on our business, financial condition and results of operations, could require us to raise additional funding which may not be available on commercially reasonable terms, if at all, and may negatively affect our drilling plans in the future, and may cause the value of our securities to decline in value.
We may not be able to generate sufficient cash flow to meet any future debt service and other obligations due to events beyond our control.
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Shortages or the high cost of drilling rigs, equipment, supplies, personnel or oilfield services could delay or adversely affect our development and exploration operations or cause us to incur significant expenditures that are not provided for in our capital forecast, which could have a material adverse effect on our business, financial condition or results of operations.
−Removed: Finally, our operations in New Mexico or Colorado may be negatively affected by future work from home or social distancing orders put in place in New Mexico or Colorado in an effort to slow the spread of COVID-19 or other viruses or diseases, with the quarantines effected in 2020 to slow the spread of COVID-19 negatively affecting our operations in both New Mexico and Colorado in 2020, and to a lesser extent in 2021.
Drilling for and producing oil and natural gas are highly speculative and involve a high degree of risk, with many uncertainties that could adversely affect our business.
29 unchanged sentences
Historically, the commodities market has been volatile.
−Removed: For example, the price of crude oil has experienced significant volatility over the last six years, with the price per barrel of WTI crude rising from a low of $27 in February 2016 to a high of $76 in October 2018, then dropping below $20 per barrel in April 2020, due in part to reduced global demand stemming from the recent global COVID-19 outbreak, before surging to over $125 a barrel in early March 2022, following Russia’s invasion of the Ukraine.
+Added: For example, the price of crude oil has experienced significant volatility over the last five years, with the price per barrel of West Texas Intermediate (“ WTI ”) crude rising from a low of $42 in June 2017 to a high of $76 in October 2018, then, in 2020, dropping below $20 per barrel due in part to reduced global demand stemming from the global COVID-19 outbreak, and surging to over $120 a barrel in early March 2022, following Russia’s invasion of the Ukraine.
Prices for natural gas and NGLs experienced declines of similar magnitude.
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weather conditions and natural disasters;
−Removed: political conditions in or affecting oil, NGLs and natural gas producing regions and/or pipelines, including in Eastern Europe, the Middle East and South America, for example, as experienced with the Russian invasion of the Ukraine in February 2022;
+Added: political conditions in or affecting oil, NGLs and natural gas producing regions and/or pipelines, including in Eastern Europe, the Middle East and South America, for example, as experienced with the Russian invasion of the Ukraine in February 2022, which conflict is ongoing;
the continued threat of terrorism and the impact of military action and civil unrest;
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Declines in oil, NGL or natural gas prices have not, and will not, only reduce our revenue, but have and will reduce the amount of oil, NGL and natural gas that we can produce economically.
−Removed: Should natural gas, NGL or oil prices decline from current levels and remain there for an extended period of time, we may choose to shut-in our operated wells, (similar to our shut-in of our operated wells in 2020), delay some or all of our exploration and development plans for our prospects, or to cease exploration or development activities on certain prospects due to the anticipated unfavorable economics from such activities, and, as a result, we may have to make substantial downward adjustments to our estimated proved reserves, each of which would have a material adverse effect on our business, financial condition and results of operations.
−Removed: Future conditions might require us to incur impairments or make write-downs in our assets, which would adversely affect our balance sheet and results of operations.
+Added: Should natural gas, NGL or oil prices decline from current levels and remain there for an extended period of time, we may choose to shut-in our operated wells, (similar to our shut-in of our operated wells in 2020 in response to the Covid-19 pandemic), delay some or all of our exploration and development plans for our prospects, or to cease exploration or development activities on certain prospects due to the anticipated unfavorable economics from such activities, and, as a result, we may have to make substantial downward adjustments to our estimated proved reserves, each of which would have a material adverse effect on our business, financial condition and results of operations.
+Added: We have in the past incurred impairments and future conditions might require us to incur additional impairments or make write-downs in our assets, which would adversely affect our balance sheet and results of operations.
We review our long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
For the year ended December 31, 2020, due to falling oil and gas prices, we incurred a $19.3 million impairment of our oil and gas properties.
−Removed: No impairment was incurred for the year ended December 31, 2021.
−Removed: If conditions in any of the businesses in which we compete were to deteriorate (or deteriorate further), we could determine that certain of our assets were further impaired and we would then be required to write-off all or a portion of our costs for such assets.
−Removed: Any such significant write-offs would adversely affect our balance sheet and results of operations.
+Added: No impairment was incurred for the years ended December 31, 2022 and 2021.
+Added: In the past we have been required to impair our assets and if conditions in any of the businesses in which we compete were to deteriorate in the future, we could determine that certain of our assets were impaired and we would then be required to write-off all or a portion of our costs for such assets.
+Added: Prior write-offs have adversely affected our balance sheet and results of operations and any future significant write-offs would similarly adversely affect our balance sheet and results of operations.
Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.
−Removed: Concerns over global economic conditions, the duration and effects of COVID-19 and the results thereof, energy costs, geopolitical issues (including, but not limited to the current Ukraine/Russia conflict), inflation, and the availability and cost of credit have contributed to increased economic uncertainty and diminished expectations for the global economy.
+Added: Concerns over global economic conditions, the duration and effects of future pandemics, and the results thereof, energy costs, geopolitical issues (including, but not limited to the current Ukraine/Russia conflict), inflation, increasing interest rates and the availability and cost of credit have contributed to increased economic uncertainty and diminished expectations for the global economy.
These factors, combined with volatile prices of oil and natural gas, and declining business and consumer confidence, have precipitated an economic slowdown, which could expand to a recession or global depression.
−Removed: If the economic climate in the United States or abroad continues to deteriorate, demand for petroleum products could diminish, which could further impact the price at which we can sell our oil, natural gas and natural gas liquids, affect the ability of our vendors, suppliers and customers to continue operations, and ultimately adversely impact our results of operations, liquidity and financial condition to a greater extent that it has already.
+Added: If the economic climate in the United States or abroad deteriorates, demand for petroleum products could diminish, which could further impact the price at which we can sell our oil, natural gas and natural gas liquids, affect the ability of our vendors, suppliers and customers to continue operations, and ultimately adversely impact our results of operations, liquidity and financial condition to a greater extent that it has already.
Our exploration, development and exploitation projects require substantial capital expenditures that may exceed cash on hand, cash flows from operations and potential borrowings, and we may be unable to obtain needed capital on satisfactory terms, which could adversely affect our future growth.
37 unchanged sentences
Any significant variance to our estimates could materially affect the quantities and present value of our reserves.
−Removed: We have written down, and may in the future be forced to further write-down, material portions of our assets due to low oil prices.
−Removed: The successful efforts method of accounting is used for oil and gas exploration and production activities.
−Removed: Under this method, all costs for development wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized.
−Removed: We review the carrying value of our long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.
−Removed: We assess the recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition.
−Removed: If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value.
−Removed: This impairment does not impact cash flows from operating activities but does reduce earnings and our shareholders’ equity.
−Removed: Additionally, the COVID-19 outbreak previously led to an economic downturn resulting in lower oil prices, which in turn required us to shut-in all of our production from mid-April through early June 2020, as it was uneconomical for us to operate our producing wells during such time, and we could be required to again shut-in some or all of our production in the future should market conditions deteriorate.
−Removed: Additionally, for the year ended December 31, 2020, due to falling oil and gas prices, we incurred a $19.3 million impairment of our oil and gas properties.
−Removed: No impairment was incurred for the year ended December 31, 2021.
−Removed: A continued period of low prices may force us to incur further material write-downs of our oil and natural gas properties, which could have a material effect on the value of our properties and cause the value of our securities to decline in value.
−Removed: Additionally, impairments would occur if we were to experience sufficient downward adjustments to our estimated proved reserves or the present value of estimated future net revenues.
−Removed: An impairment recognized in one period may not be reversed in a subsequent period even if higher oil and gas prices increase the cost center ceiling applicable to the subsequent period.
−Removed: We have in the past and could in the future incur additional impairments of oil and gas properties which may be material.
We may have accidents, equipment failures or mechanical problems while drilling or completing wells or in production activities, which could adversely affect our business.
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As a result, we may not be able to obtain the levels or types of insurance we would otherwise have obtained prior to these market changes, and the insurance coverage we do obtain may not cover certain hazards or all potential losses that are currently covered and may be subject to large deductibles.
−Removed: Losses and liabilities from uninsured and underinsured events and delay in the payment of insurance proceeds could have a material adverse effect on our business, financial condition and results of operations.
+Added: Losses and liabilities from uninsured and underinsured events and delays in the payment of insurance proceeds could have a material adverse effect on our business, financial condition and results of operations.
Our strategy as an onshore resource player may result in operations concentrated in certain geographic areas and may increase our exposure to many of the risks described in this Annual Report.
24 unchanged sentences
If revenues from future acquisitions do not meet projections, this could adversely affect our business and financial condition.
−Removed: If we complete acquisitions or enter into business combinations in the future, they may disrupt or have a negative impact on our business.
−Removed: If we complete acquisitions or enter into business combinations in the future, funding permitting, we could have difficulty integrating the acquired companies’ assets, personnel and operations with our own.
−Removed: Additionally, acquisitions, mergers or business combinations we may enter into in the future could result in a change of control of the Company, and a change in the board of directors or officers of the Company.
−Removed: In addition, the key personnel of the acquired business may not be willing to work for us.
−Removed: We cannot predict the effect expansion may have on our core business.
−Removed: Regardless of whether we are successful in making an acquisition or completing a business combination, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses.
−Removed: In addition to the risks described above, acquisitions and business combinations are accompanied by a number of inherent risks, including, without limitation, the following:
−Removed: the difficulty of integrating acquired companies, concepts and operations;
−Removed: the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
−Removed: change in our business focus and/or management;
−Removed: difficulties in maintaining uniform standards, controls, procedures and policies;
−Removed: the potential impairment of relationships with employees and partners as a result of any integration of new management personnel;
−Removed: the potential inability to manage an increased number of locations and employees;
−Removed: our ability to successfully manage the companies and/or concepts acquired;
−Removed: the failure to realize efficiencies, synergies and cost savings;
−Removed: the effect of any government regulations which relate to the business acquired.
−Removed: Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition or business combination, many of which cannot be presently identified.
−Removed: These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
−Removed: Any acquisition or business combination transaction we enter into in the future could cause substantial dilution to existing stockholders, result in one party having majority or significant control over the Company or result in a change in business focus of the Company.
−Removed: We may incur indebtedness which could reduce our financial flexibility, increase interest expense and adversely impact our operations and our unit costs.
−Removed: We currently have no outstanding indebtedness, but we may incur significant amounts of indebtedness in the future in order to make acquisitions or to develop our properties.
−Removed: Our level of indebtedness could affect our operations in several ways, including the following:
−Removed: a significant portion of our cash flows could be used to service our indebtedness;
−Removed: a high level of debt would increase our vulnerability to general adverse economic and industry conditions;
−Removed: any covenants contained in the agreements governing our outstanding indebtedness could limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments;
−Removed: a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that our indebtedness may prevent us from pursuing;
−Removed: debt covenants to which we may agree may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry.
−Removed: A high level of indebtedness increases the risk that we may default on our debt obligations.
−Removed: We may not be able to generate sufficient cash flows to pay the principal or interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.
−Removed: If we do not have sufficient funds and are otherwise unable to arrange financing, we may have to sell significant assets or have a portion of our assets foreclosed upon which could have a material adverse effect on our business, financial condition and results of operations.
We may purchase oil and natural gas properties with liabilities or risks that we did not know about or that we did not assess correctly, and, as a result, we could be subject to liabilities that could adversely affect our results of operations.
21 unchanged sentences
Our actual drilling activities may be materially different from our current expectations, which could adversely affect our business, financial condition and results of operations.
−Removed: Potential conflicts of interest could arise for certain members of our management team that hold management positions with other entities and our largest stockholder.
−Removed: Simon Kukes, our Chief Executive Officer and member of our board of directors, J.
−Removed: Douglas Schick, our President, and Clark R.
−Removed: Moore, our Executive Vice President, General Counsel and Secretary, hold various other management positions with privately-held companies, some of which are involved in the oil and gas industry, and Simon Kukes is the principal of SK Energy LLC, the Company’s largest stockholder.
−Removed: Simon Kukes also beneficially owns 64.8% of our voting securities.
−Removed: We believe these positions require only an immaterial amount of each officers’ time and will not conflict with their roles or responsibilities with our company.
−Removed: If any of these companies enter into one or more transactions with our company, or if the officers’ position with any such company requires significantly more time than currently anticipated, potential conflicts of interests could arise from the officers performing services for us and these other entities.
We currently license only a limited amount of seismic and other geological data and may have difficulty obtaining additional data at a reasonable cost, which could adversely affect our future results of operations.
21 unchanged sentences
selection of technology.
−Removed: The marketability of our production is dependent upon oil and natural gas gathering and transportation and storage facilities owned and operated by third parties, and the unavailability of satisfactory oil and natural gas transportation arrangements have had a material adverse effect on our revenue.
−Removed: The unavailability of satisfactory oil and natural gas transportation arrangements has hindered our access to oil and natural gas markets and has delayed production from our wells.
+Added: The marketability of our production is dependent upon oil and natural gas gathering and transportation and storage facilities owned and operated by third parties, and the unavailability of satisfactory oil and natural gas transportation arrangements have had a material adverse effect on our revenue in the past and may again in the future.
+Added: The unavailability of satisfactory oil and natural gas transportation arrangements has in the past hindered our access to oil and natural gas markets and has delayed production from our wells.
The availability of a ready market for our oil and natural gas production depends on a number of factors, including the demand for, and supply of, oil and natural gas and the proximity of reserves to pipelines, terminal facilities and storage facilities.
Our ability to market our production depends in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties.
−Removed: Our failure to obtain these services on acceptable terms could materially harm our business.
+Added: Our failure to obtain these services on acceptable terms has in the past, and could in the future, materially harm our business.
In the past we have, and in the future, we may be required to, shut-in wells for lack of a market or because of inadequacy or unavailability of pipeline or gathering system capacity.
67 unchanged sentences
When drought conditions occur, governmental authorities may restrict the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supplies.
−Removed: Both New Mexico and Colorado have relatively arid climates and experience drought conditions from time to time.
+Added: Both New Mexico and Colorado have relatively arid climates and experience drought conditions from time to time and the U.S.
+Added: Southwest is currently experiencing significant drought conditions which have reduced the flow of certain rivers and forced the reduction or reallocation of certain waterways and reservoirs.
If we are unable to obtain water to use in our operations from local sources or dispose of or recycle water used in operations, or if the price of water or water disposal increases significantly, we may be unable to produce oil and natural gas economically, which could have a material adverse effect on our financial condition, results of operations, and cash flows.
1 unchanged sentence
Our results of operations have been, and in the future may be, materially adversely affected by the conditions of the global economies and the credit, commodities and stock markets.
−Removed: Among other things, in 2020 we were adversely impacted, and may continue to be adversely impacted, due to a global reduction in consumer demand for oil and gas.
+Added: Among other things, in 2020 we were adversely impacted, and may be adversely impacted in the future, due to a global reduction in consumer demand for oil and gas.
In addition, a decline in consumer confidence or changing patterns in the availability and use of disposable income by consumers can negatively affect the demand for oil and gas and as a result our results of operations.
47 unchanged sentences
We cannot assure you that the analogies we draw from available data obtained by analyzing other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects.
−Removed: Over the past four years we have been significantly dependent on capital provided to us by SK Energy.
−Removed: In 2018 and 2019, SK Energy, which is owned and controlled by Simon Kukes, the Company’s Chief Executive Officer and director, loaned us an aggregate of $51.7 million to support our operations and for acquisitions, all of which loans were evidenced by promissory notes.
−Removed: The promissory notes generally had terms which were more favorable to us than we would have been able to obtain from third parties, including, generally favorable interest rates, no restrictions on further borrowing or financial covenants and no security interests in our assets.
−Removed: All of such notes have to date been converted into 29.5 million shares of common stock at conversion prices which were above the then-trading prices of our common stock.
−Removed: Additionally, pursuant to subscription agreements, SK Energy purchased an additional aggregate of 15.0 million shares of common stock from the Company in private transactions for $28.0 million in 2019, also on substantially more favorable terms to us than could be obtained with third parties.
−Removed: Subsequent to September 2019, we have not received any additional capital from SK Energy, instead funding our operations primarily through the sale of securities in public offerings, the sale of oil and gas properties, and sales of crude oil and natural gas.
−Removed: While SK Energy has verbally advised us that it intends to provide us additional funding as needed, nothing has been documented to date, and such future funding, if any, may not ultimately be provided on favorable terms, if at all.
−Removed: In the event that we are forced to obtain funding from parties other than SK Energy, such funding terms will likely not be as favorable to the Company as the funding provided by SK Energy, and may not be available in such amounts as previously provided by SK Energy.
−Removed: In the event SK Energy fails to provide us future funding, when and if needed, it could have a material adverse effect on our liquidity, results of operations and could force us to borrow funds from outside sources on less favorable terms than our prior debt or sell equity to outside investors on less favorable terms than the equity we issued to SK Energy.
Negative public perception regarding us and/or our industry could have an adverse effect on our operations.
21 unchanged sentences
Technological changes, such as developments in renewable energy and low-carbon transportation, could also adversely affect demand for our products.
−Removed: In 2020, we temporarily shut-in all of our operated producing wells in our Permian Basin Asset and D-J Basin Asset to preserve our oil and gas reserves for production during a more favorable oil price environment, and while we have resumed full production, we may again shut-in some or all of its operated production, should market conditions significantly deteriorate.
−Removed: As a result of the COVID-19 outbreak, and the sharp decline in oil prices which occurred in early 2020, partially as a result of the decreased demand for oil caused by such outbreak and the actions taken globally to stop the spread of such virus, in mid-April 2020, we temporarily shut-in all of our operated producing wells in our Permian Basin and D-J Basin to preserve our oil and gas reserves for production during a more favorable oil price environment, noting that most of our acreage is held by production with no drilling obligations, which provides us with flexibility to hold back on production and development during periods of low oil and gas prices.
−Removed: Following partial recovery in oil prices, commencing in early June 2020, we reactivated over 90% of our operated wells in the Permian Basin and the D-J Basin that we shut-in in mid-April 2020.
−Removed: We subsequently resumed full production.
−Removed: However, we may again shut-in some or all of our production, should market conditions deteriorate into the mid- to low-$20 per barrel realized well head price range in the future.
−Removed: While our producing wells are shut-in, we do not generate revenues from such wells, and need to use cash on hand and funds we receive from borrowings and the sale of equity in order to pay our operating expenses.
−Removed: A continued period of low-priced oil may make it non-economical for us to operate our wells, which would have a material adverse effect on our operating results and the value of our assets.
−Removed: We cannot estimate the future price of oil, and as such cannot estimate, when we may again determine to begin producing oil at its operated wells.
+Added: Risks Related to Management, Employees and Directors
+Added: Potential conflicts of interest could arise for certain members of our management team that hold management positions with other entities and our largest stockholder.
+Added: Simon Kukes, our Chief Executive Officer and member of our board of directors, J.
+Added: Douglas Schick, our President, and Clark R.
+Added: Moore, our Executive Vice President, General Counsel and Secretary, hold various other management positions with privately-held companies, some of which are involved in the oil and gas industry, and Dr.
+Added: Kukes is the trustee and beneficiary of The SGK 2018 Revocable Trust, the Company’s largest stockholder.
+Added: Kukes also beneficially owns 66.6% of our voting securities.
+Added: We believe these positions require only an immaterial amount of each officer’s time and will not conflict with their roles or responsibilities with our company.
+Added: If any of these companies enter into one or more transactions with our company, or if the officer’s position with any such company requires significantly more time than currently anticipated, potential conflicts of interests could arise from the officers performing services for us and these other entities.
+Added: We have in the past been significantly dependent on capital provided to us by Dr.
+Added: Simon Kukes and may rely on Dr.
+Added: Kukes for additional funding in the future.
+Added: In 2018 and 2019, Dr.
+Added: Simon Kukes, the Company’s Chief Executive Officer and director, loaned us an aggregate of $51.7 million to support our operations and for acquisitions through an entity owned and controlled by him, all of which loans were evidenced by promissory notes.
+Added: The promissory notes generally had terms which were more favorable to us than we would have been able to obtain from third parties, including, generally favorable interest rates, no restrictions on further borrowing or financial covenants and no security interests in our assets.
+Added: All of such notes have to date been converted into 29.5 million shares of common stock at conversion prices which were above the then-trading prices of our common stock.
+Added: Additionally, pursuant to subscription agreements, Dr.
+Added: Kukes’ entity purchased an additional aggregate of 15.0 million shares of common stock from the Company in private transactions for $28.0 million in 2019, also on substantially more favorable terms to us than could be obtained with third parties.
+Added: Subsequent to September 2019, we have not received any additional capital from Dr.
+Added: Kukes, instead funding our operations primarily through the sale of securities in public offerings, the sale of oil and gas properties, and sales of crude oil and natural gas.
+Added: Kukes has verbally advised us that he intends to provide us additional funding as needed, nothing has been documented to date, and such future funding, if any, may not ultimately be provided on favorable terms, if at all.
+Added: In the event that we are forced to obtain funding from parties other than Dr.
+Added: Kukes, such funding terms will likely not be as favorable to the Company as the funding provided by Dr.
+Added: Kukes, and may not be available in such amounts as previously provided by Dr.
+Added: In the event Dr.
+Added: Kukes fails to provide us future funding, when and if needed, it could have a material adverse effect on our liquidity, results of operations and could force us to borrow funds from outside sources on less favorable terms than our prior debt or sell equity to outside investors on less favorable terms than the equity we issued to Dr.
+Added: We depend significantly upon the continued involvement of our present management.
+Added: We depend to a significant degree upon the involvement of our management, specifically, our Chief Executive Officer, Dr.
+Added: Simon Kukes and our President, Mr.
+Added: Douglas Schick.
+Added: Our performance and success are dependent to a large extent on the efforts and continued employment of Dr.
+Added: Kukes and Mr.
+Added: We do not believe that Dr.
+Added: Schick could be quickly replaced with personnel of equal experience and capabilities, and their successor(s) may not be as effective.
+Added: Schick, or any of our other key personnel resign or become unable to continue in their present roles and if they are not adequately replaced, our business operations could be adversely affected.
+Added: We have no employment or similar agreement in place with Dr.
+Added: Schick is party to an employment agreement with us which has no stated term and can be terminated by either party without cause.
+Added: We have an active board of directors that meets several times throughout the year and is intimately involved in our business and the determination of our operational strategies.
+Added: Members of our board of directors work closely with management to identify potential prospects, acquisitions and areas for further development.
+Added: If any of our directors resign or become unable to continue in their present role, it may be difficult to find replacements with the same knowledge and experience and as a result, our operations may be adversely affected.
+Added: Simon Kukes, our Chief Executive Officer and a member of board of directors, beneficially owns 66.6% of our common stock, which gives him majority voting control over stockholder matters and his interests may be different from your interests;
+Added: and as a result of such ownership, we are a “ controlled company ” under applicable NYSE American rules.
+Added: Simon Kukes, our Chief Executive Officer and member of the board of directors, through his individual ownership of the Company and through his position as trustee and beneficiary of The SGK 2018 Revocable Trust, which beneficially owns approximately 59.5% of our issued and outstanding common stock and Dr.
+Added: Kukes, together with the ownership of The SGK 2018 Revocable Trust, beneficially owns approximately 66.6% of our issued and outstanding common stock.
+Added: Kukes can control the outcome of all matters requiring a stockholder vote, including the election of directors, the adoption of amendments to our certificate of formation or bylaws and the approval of mergers and other significant corporate transactions.
+Added: Subject to any fiduciary duties owed to the stockholders generally, while Dr.
+Added: Kukes’ interests may generally be aligned with the interests of our stockholders, in some instances Dr.
+Added: Kukes may have interests different than the rest of our stockholders, including but not limited to, future potential company financings in which Dr.
+Added: Kukes or The SGK 2018 Revocable Trust may participate, or his leadership at the Company.
+Added: Kukes’ influence or control of our company as a stockholder may have the effect of delaying or preventing a change of control of our company and may adversely affect the voting and other rights of other stockholders.
+Added: Kukes controls the stockholder vote, investors may find it difficult to replace Dr.
+Added: Kukes (and such persons as he may appoint from time to time) as members of our management if they disagree with the way our business is being operated.
+Added: Additionally, the interests of Dr.
+Added: Kukes may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders.
+Added: Kukes’ ownership of the Company, as discussed above, we are a “ controlled company ” under the rules of the NYSE American.
+Added: Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “ controlled company ” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that:
+Added: a majority of the Board of Directors consist of independent directors (or 50% in the case of a smaller reporting company such as the Company);
+Added: the board maintain a nominations committee with prescribed duties and a written charter;
+Added: the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
+Added: As a “ controlled company, ” we may elect to rely on some or all of these exemptions, provided that we have to date not taken advantage of any of these exemptions and do not currently intend to take advantage of any of these exemptions moving forward.
+Added: Notwithstanding that, should the interests of Dr.
+Added: Kukes differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance standards.
+Added: Even if we do not avail ourselves of these exemptions, our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.
+Added: In addition, this concentration of ownership might adversely affect the market price of our common stock by:
+Added: (1) delaying, deferring or preventing a change of control of our Company;
+Added: (2) impeding a merger, consolidation, takeover or other business combination involving our Company;
+Added: or (3) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.
+Added: Because of the ownership of securities of Dr.
+Added: Kukes, investors may find it difficult to replace our current directors (and such persons as they may appoint from time to time) as members of our management if they disagree with the way our business is being operated.
+Added: Additionally, the interests of Dr.
+Added: Kukes may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders.
Risks Relating to Government Regulations
7 unchanged sentences
For example, on January 20, 2021, the Acting Secretary of the Interior issued Order Number 3395 (“ Order No.
−Removed: 3395 ”) which contained a directive to temporarily halt all federal permitting activity for 60 days in an effort to study environmental impacts of oil and gas drilling and development.
−Removed: While Order No.
−Removed: 3395 has no impact on existing or ongoing operations, potentially subsequent federal orders could restrict our ability to develop our leases on federal lands, which could adversely affect our business, financial condition and results of operations.
+Added: 3395 ”) which contained a directive to temporarily halt all federal permitting activity for 60 days in an effort to study environmental impacts of oil and gas drilling and development, which a federal court blocked with a preliminary injunction in June 2021, which injunction is being appealed.
+Added: President Biden subsequently announced that his administration will resume onshore oil and gas lease sales on federal lands effective April 18, 2022.
+Added: While this had no impact on existing or ongoing operations, potentially subsequent federal orders could restrict our ability to develop our leases on federal lands, which could adversely affect our business, financial condition and results of operations.
In the event that federal, state or local restrictions or prohibitions are adopted in areas where we conduct operations, that restrict operations or otherwise impose more stringent limitations on the production and development of oil and natural gas, including, among other things, the development of increased setback distances, we and similarly situated oil and natural exploration and production operators in the state may incur significant costs to comply with such requirements or may experience delays or curtailment in the pursuit of exploration, development, or production activities, and possibly be limited or precluded in the drilling of wells or in the amounts that we and similarly situated operates are ultimately able to produce from our reserves.
1 unchanged sentence
If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we operate, including, for example, on federal and American Indian lands, we could incur potentially significant added cost to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development or production activities, and perhaps even be precluded from drilling wells.
−Removed: SEC rules could limit our ability to book additional proved undeveloped reserves (“ PUDs ”) in the future.
−Removed: SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.
−Removed: This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.
−Removed: Moreover, we may be required to write down our PUDs if we do not drill or plan on delaying those wells within the required five-year timeframe.
New or amended environmental legislation or regulatory initiatives could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us.
17 unchanged sentences
This increase in non-attainment status to “serious” triggered significant additional obligations for the state under the CAA and resulted in Colorado adopting new and more stringent air quality control requirements in December 2020 that are applicable to our operations, with additional obligations for the state under the CAA possible that could result in new and more stringent air quality permitting and control requirements, which may in turn result in significant costs and delays in obtaining necessary permits applicable to our operations.
+Added: While there were no oil and gas ballot initiatives in 2022 that would have imposed additional regulations on the oil and gas industry in the State of Colorado, it is possible that future ballot initiatives will be proposed that could limit the areas of the state in which drilling would be permitted to occur or otherwise impose increased regulations on our industry.
+Added: The Federal Government previously instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which may have a material adverse effect on the Company and its results of operations.
+Added: On January 20, 2021, the Acting U.S.
+Added: Interior Secretary, instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which a federal court blocked with a preliminary injunction in June 2021, which injunction is being appealed.
+Added: President Biden subsequently announced that his administration will resume onshore oil and gas lease sales on federal lands effective April 18, 2022.
+Added: A total of approximately 26% of the Company’s acreage in New Mexico and 1% of the Company’s acreage in Colorado are located on federal lands.
+Added: It is currently unclear whether the moratorium will be reinstated, or whether such moratorium is the start of a change in federal policies regarding the grant of oil and gas permits on federal lands.
+Added: The moratorium does not affect the Company, as the Company has no plans to drill new wells on any leases held on federal lands;
+Added: however, if such prior moratorium was to become permanent, or the federal government in the future were to grant less permits on federal lands, make such permitting process more difficult, costly, or to institute more stringent rules relating to such permitting process, it could have a material adverse effect on the value of the Company’s leases and/or its ability to undertake oil and gas operations on such the portion of its leases on federal lands.
+Added: SEC rules could limit our ability to book additional proved undeveloped reserves (“ PUDs ”) in the future.
+Added: SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.
+Added: This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.
+Added: Moreover, we may be required to write down our PUDs if we do not drill or plan on delaying those wells within the required five-year timeframe.
Proposed changes to U.S.
25 unchanged sentences
regulatory developments in connection with these activities will not be known with certainty until such derivatives market regulations are fully implemented and related market practices and structures are fully developed.
−Removed: The Federal Government previously instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which may have a material adverse effect on the Company and its results of operations.
−Removed: On January 20, 2021, the Acting U.S.
−Removed: Interior Secretary, instituted a 60-day moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which was subsequently extended indefinitely.
−Removed: In June 2021, a federal judge issued an injunction lifting the moratorium, provided that the federal government is appealing the injunction.
−Removed: A total of approximately 26% of the Company’s acreage in New Mexico and 1% of the Company’s acreage in Colorado are located on federal lands.
−Removed: It is currently unclear whether the moratorium will be reinstated, or whether such moratorium is the start of a change in federal policies regarding the grant of oil and gas permits on federal lands.
−Removed: The moratorium does not affect the Company, as the Company has no plans to drill new wells on any leases held on federal lands;
−Removed: however, if such prior moratorium was to become permanent, or the federal government in the future were to grant less permits on federal lands, make such permitting process more difficult, costly, or to institute more stringent rules relating to such permitting process, it could have a material adverse effect on the value of the Company’s leases and/or its ability to undertake oil and gas operations on such the portion of its leases on federal lands.
Risks Related to Our Common Stock
43 unchanged sentences
Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our common stock to decline.
−Removed: We depend significantly upon the continued involvement of our present management.
−Removed: We depend to a significant degree upon the involvement of our management, specifically, our Chief Executive Officer, Mr.
−Removed: Simon Kukes and our President, Mr.
−Removed: Douglas Schick.
−Removed: Our performance and success are dependent to a large extent on the efforts and continued employment of Simon Kukes and Mr.
−Removed: We do not believe that Simon Kukes or Mr.
−Removed: Schick could be quickly replaced with personnel of equal experience and capabilities, and their successor(s) may not be as effective.
−Removed: Schick, or any of our other key personnel resign or become unable to continue in their present roles and if they are not adequately replaced, our business operations could be adversely affected.
−Removed: We have no employment or similar agreement in place with Mr.
−Removed: Schick is party to an employment agreement with us which has no stated term and can be terminated by either party without cause.
−Removed: We have an active board of directors that meets several times throughout the year and is intimately involved in our business and the determination of our operational strategies.
−Removed: Members of our board of directors work closely with management to identify potential prospects, acquisitions and areas for further development.
−Removed: If any of our directors resign or become unable to continue in their present role, it may be difficult to find replacements with the same knowledge and experience and as a result, our operations may be adversely affected.
−Removed: Simon Kukes, our Chief Executive Officer and a member of board of directors, beneficially owns 64.8% of our common stock, which gives him majority voting control over stockholder matters and his interests may be different from your interests;
−Removed: and as a result of such ownership, we are a “ controlled company ” under applicable NYSE American rules.
−Removed: Simon Kukes, our Chief Executive Officer and member of the board of directors, through his individual ownership of the Company and through his position as principal and sole owner of SK Energy LLC, which beneficially owns approximately 60.6% of our issued and outstanding common stock and Mr.
−Removed: Kukes, together with the ownership of SK Energy, beneficially owns approximately 64.8% of our issued and outstanding common stock.
−Removed: Kukes can control the outcome of all matters requiring a stockholder vote, including the election of directors, the adoption of amendments to our certificate of formation or bylaws and the approval of mergers and other significant corporate transactions.
−Removed: Subject to any fiduciary duties owed to the stockholders generally, while Mr.
−Removed: Kukes’ interests may generally be aligned with the interests of our stockholders, in some instances Mr.
−Removed: Kukes may have interests different than the rest of our stockholders, including but not limited to, future potential company financings in which SK Energy may participate, or his leadership at the Company.
−Removed: Kukes’ influence or control of our company as a stockholder may have the effect of delaying or preventing a change of control of our company and may adversely affect the voting and other rights of other stockholders.
−Removed: Kukes controls the stockholder vote, investors may find it difficult to replace Mr.
−Removed: Kukes (and such persons as he may appoint from time to time) as members of our management if they disagree with the way our business is being operated.
−Removed: Additionally, the interests of Mr.
−Removed: Kukes may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders.
−Removed: Kukes’ ownership of the Company, as discussed above, we are a “ controlled company ” under the rules of the NYSE American.
−Removed: Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “ controlled company ” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that:
−Removed: a majority of the Board of Directors consist of independent directors (or 50% in the case of a smaller reporting company such as the Company);
−Removed: the board maintain a nominations committee with prescribed duties and a written charter;
−Removed: the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
−Removed: As a “ controlled company, ” we may elect to rely on some or all of these exemptions, provided that we have to date not taken advantage of any of these exemptions and do not currently intend to take advantage of any of these exemptions moving forward.
−Removed: Notwithstanding that, should the interests of Mr.
−Removed: Kukes differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance standards.
−Removed: Even if we do not avail ourselves of these exemptions, our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.
−Removed: Provisions of Texas law may have anti-takeover effects that could prevent a change in control even if it might be beneficial to our stockholders.
−Removed: Provisions of Texas law may discourage, delay or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline.
−Removed: Under Texas law, a stockholder who beneficially owns more than 20% of our voting stock, or any “ affiliated stockholder, ” cannot acquire us for a period of three years from the date this person became an affiliated stockholder, unless various conditions are met, such as approval of the transaction by our board of directors before this person became an affiliated stockholder (such as the approval of our board of directors of Mr.
−Removed: Kukes’ ownership of the Company) or approval of the holders of at least two-thirds of our outstanding voting shares not beneficially owned by the affiliated stockholder.
We are subject to the Continued Listing Criteria of the NYSE American and our failure to satisfy these criteria may result in delisting of our common stock.
13 unchanged sentences
These obligations increase our expenses and may make it more complicated or time consuming for us to undertake certain corporate actions due to the fact that we may require NYSE approval for such transactions and/or NYSE rules may require us to obtain stockholder approval for such transactions.
+Added: Risks Associated with Our Governing Documents and Texas Law
+Added: Our Certificate of Formation and Bylaws provide for indemnification of officers and directors at our expense, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.
+Added: Our Certificate of Formation and bylaws authorize us to indemnify and hold harmless, to the fullest extent permitted by applicable law, each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he or she is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the request of the Company.
+Added: These indemnification obligations may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.
+Added: We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
+Added: In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the determination of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
+Added: The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares.
+Added: Our Certificate of Formation contains a specific provision that limits the liability of our directors for monetary damages to the Company and the Company’s stockholders.
+Added: Our Certificate of Formation provides that a director of the Company shall, to the fullest extent permitted by the Texas Business Organizations Code, as revised, as then may exist or as it may hereafter be amended, not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exception from liability is not permitted under the Texas Business Organizations Code, as revised.
+Added: The limitation of monetary liability against our directors under Texas law and the existence of indemnification rights to them may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.
+Added: These provisions and resultant costs may also discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers, even though such actions, if successful, might otherwise benefit us and our stockholders.
+Added: Anti-takeover provisions in our Certificate of Formation and our Bylaws, as well as provisions of Texas law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our securities.
+Added: Our Certificate of Formation and Bylaws and Texas law contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for our securities.
+Added: These provisions may also prevent or delay attempts by our stockholders to replace or remove our management.
+Added: Our corporate governance documents include the following provisions:
+Added: Special Meetings of Stockholders - Our Bylaws provide that special meetings of the stockholders may only be called by our Chairman, our President, or upon written notice to our board of directors by our stockholders holding not less than 30% of our outstanding voting capital stock.
+Added: Amendment of Bylaws - Our Bylaws may be amended by our Board of Directors alone.
+Added: Advance Notice Procedures - Our Bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders.
+Added: At an annual meeting, our stockholders elect a Board of Directors and transact such other business as may properly be brought before the meeting.
+Added: By contrast, at a special meeting, our stockholders may transact only the business for the purposes specified in the notice of the meeting.
+Added: No cumulative voting - Our Certificate of Formation and Bylaws do not include a provision for cumulative voting in the election of directors.
+Added: Vacancies - Our Bylaws provide that vacancies on our Board may be filled by a majority of directors in office, although less than a quorum, and not by the stockholders.
+Added: Preferred Stock - Our Certificate of Formation allows us to issue up to 100,000,000 shares of preferred stock, of which 66,625 shares have been designated as Series A preferred stock.
+Added: The undesignated preferred stock may have rights senior to those of the common stock and that otherwise could adversely affect the rights and powers, including voting rights, of the holders of common stock.
+Added: In some circumstances, this issuance could have the effect of decreasing the market price of the common stock as well as having an anti-takeover effect.
+Added: Authorized but Unissued Shares - Our Board of Directors may cause us to issue our authorized but unissued shares of common stock in the future without stockholders’ approval.
+Added: These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans.
+Added: The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of a majority of our common stock by means of a proxy contest, tender offer, merger or otherwise.
+Added: Limitation of Liability and Indemnification - Our Certificate of Formation limits the liability of, and provides indemnification to, our directors and officers.
+Added: Additionally, Title 2, Chapter 21, Subchapter M of the Texas Business Organizations Code (the “ Texas Business Combination Law ”) provides that a Texas corporation may not engage in specified types of business combinations, including mergers, consolidations and asset sales, with a person, or an affiliate or associate of that person, who is an “affiliated shareholder,” for a period of three years from the date that person became an affiliated shareholder, subject to certain exceptions.
+Added: An “affiliated shareholder” is generally defined as the holder of 20% or more of the corporation’s voting shares.
+Added: The law’s prohibitions do not apply if the business combination or the acquisition of shares by the affiliated shareholder was approved by the Board of Directors of the corporation before the affiliated shareholder became an affiliated shareholder;
+Added: or the business combination was approved by the affirmative vote of the holders of at least two-thirds of the outstanding voting shares of the corporation not beneficially owned by the affiliated shareholder, at a meeting of shareholders called for that purpose, not less than six months after the affiliated shareholder became an affiliated shareholder.
+Added: Because we have more than 100 of record shareholders, we are considered an “issuing public corporation” for purposes of this law.
+Added: The Texas Business Combination Law does not apply to the following:
+Added: the business combination of an issuing public corporation:
+Added: where the corporation’s original charter or bylaws contain a provision expressly electing not to be governed by the Texas Business Combination Law;
+Added: or that adopts an amendment to its charter or bylaws, by the affirmative vote of the holders, other than affiliated shareholders, of at least two-thirds of the outstanding voting shares of the corporation, expressly electing not to be governed by the Texas Business Combination Law and so long as the amendment does not take effect for 18 months following the date of the vote and does not apply to a business combination with an affiliated shareholder who became affiliated on or before the effective date of the amendment;
+Added: a business combination of an issuing public corporation with an affiliated shareholder that became an affiliated shareholder inadvertently, if the affiliated shareholder divests itself, as soon as possible, of enough shares to no longer be an affiliated shareholder and would not at any time within the three-year period preceding the announcement of the business combination have been an affiliated shareholder but for the inadvertent acquisition;
+Added: a business combination with an affiliated shareholder who became an affiliated shareholder through a transfer of shares by will or intestacy and continuously was an affiliated shareholder until the announcement date of the business combination;
+Added: or a business combination of a corporation with its wholly-owned Texas subsidiary if the subsidiary is not an affiliate or associate of the affiliated shareholder other than by reason of the affiliated shareholder’s beneficial ownership of voting shares of the corporation.
+Added: The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock.
+Added: They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
+Added: Our board of directors can authorize the issuance of preferred stock, which could diminish the rights of holders of our common stock and make a change of control of our company more difficult even if it might benefit our stockholders.
+Added: Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock.
+Added: Shares of preferred stock may be issued by our board of directors without stockholder approval, with voting powers and such preferences and relative, participating, optional or other special rights and powers as determined by our board of directors, which may be greater than the shares of common stock currently outstanding.
+Added: As a result, shares of preferred stock may be issued by our board of directors which cause the holders to have majority voting power over our shares, provide the holders of the preferred stock the right to convert the shares of preferred stock they hold into shares of our common stock, which may cause substantial dilution to our then common stock stockholders and/or have other rights and preferences greater than those of our common stock stockholders including having a preference over our common stock with respect to dividends or distributions on liquidation or dissolution.
+Added: Investors should keep in mind that the board of directors has the authority to issue additional shares of common stock and preferred stock, which could cause substantial dilution to our existing stockholders.
+Added: Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred stockholders with substantial voting control over us subsequent to the date of this Annual Report and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our stockholders.
+Added: As a result, the issuance of shares of common stock and/or preferred stock may cause the value of our securities to decrease.
General Risk Factors
+Added: If we complete acquisitions or enter into business combinations in the future, they may disrupt or have a negative impact on our business.
+Added: If we complete acquisitions or enter into business combinations in the future, funding permitting, we could have difficulty integrating the acquired companies’ assets, personnel and operations with our own.
+Added: Additionally, acquisitions, mergers or business combinations we may enter into in the future could result in a change of control of the Company, and a change in the board of directors or officers of the Company.
+Added: In addition, the key personnel of the acquired business may not be willing to work for us.
+Added: We cannot predict the effect expansion may have on our core business.
+Added: Regardless of whether we are successful in making an acquisition or completing a business combination, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses.
+Added: In addition to the risks described above, acquisitions and business combinations are accompanied by a number of inherent risks, including, without limitation, the following:
+Added: the difficulty of integrating acquired companies, concepts and operations;
+Added: the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
+Added: change in our business focus and/or management;
+Added: difficulties in maintaining uniform standards, controls, procedures and policies;
+Added: the potential impairment of relationships with employees and partners as a result of any integration of new management personnel;
+Added: the potential inability to manage an increased number of locations and employees;
+Added: our ability to successfully manage the companies and/or concepts acquired;
+Added: the failure to realize efficiencies, synergies and cost savings;
+Added: the effect of any government regulations which relate to the business acquired.
+Added: Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition or business combination, many of which cannot be presently identified.
+Added: These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
+Added: Any acquisition or business combination transaction we enter into in the future could cause substantial dilution to existing stockholders, result in one party having majority or significant control over the Company or result in a change in business focus of the Company.
+Added: We may incur indebtedness which could reduce our financial flexibility, increase interest expense and adversely impact our operations and our unit costs.
+Added: We currently have no outstanding indebtedness, but we may incur significant amounts of indebtedness in the future in order to make acquisitions or to develop our properties.
+Added: Our level of indebtedness could affect our operations in several ways, including the following:
+Added: a significant portion of our cash flows could be used to service our indebtedness;
+Added: a high level of debt would increase our vulnerability to general adverse economic and industry conditions;
+Added: any covenants contained in the agreements governing our outstanding indebtedness could limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments;
+Added: a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that our indebtedness may prevent us from pursuing;
+Added: debt covenants to which we may agree may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry.
+Added: A high level of indebtedness increases the risk that we may default on our debt obligations.
+Added: We may not be able to generate sufficient cash flows to pay the principal or interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.
+Added: If we do not have sufficient funds and are otherwise unable to arrange financing, we may have to sell significant assets or have a portion of our assets foreclosed upon which could have a material adverse effect on our business, financial condition and results of operations.
Because we are a small company, the requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
29 unchanged sentences
To date, an aggregate of approximately $15.95 million in securities have been sold by us under the November 2020 Form S-3, leaving approximately $84.05 million in securities which will be eligible for sale in the public markets from time to time, when sold and issued by us, subject to the requirements of Form S-3, which limits us, until such time, if ever, as our public float exceeds $75 million, from selling securities in a public primary offering under Form S-3 with a value exceeding more than one-third of the aggregate market value of the common stock held by non-affiliates of the Company every twelve months.
−Removed: On November 17, 2021 we registered up to $3.6 million in securities for sale from time to time in an “at the market offering” under the November 2020 Form S-3 pursuant to a Prospectus Supplement, although no securities have been sold by us to date under the Prospectus Supplement.
+Added: On November 17, 2021 we registered up to $3.6 million in securities for sale from time to time in an “at the market offering” under the November 2020 Form S-3 pursuant to a Prospectus Supplement, of which approximately $0.1 million of securities have been sold to date.
Additionally, if our existing shareholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline significantly.
18 unchanged sentences
Such issuances may also serve to enhance existing management’s ability to maintain control of us, because the shares may be issued to parties or entities committed to supporting existing management.
−Removed: Our board of directors can authorize the issuance of preferred stock, which could diminish the rights of holders of our common stock and make a change of control of our company more difficult even if it might benefit our stockholders.
−Removed: Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock.
−Removed: Shares of preferred stock may be issued by our board of directors without stockholder approval, with voting powers and such preferences and relative, participating, optional or other special rights and powers as determined by our board of directors, which may be greater than the shares of common stock currently outstanding.
−Removed: As a result, shares of preferred stock may be issued by our board of directors which cause the holders to have majority voting power over our shares, provide the holders of the preferred stock the right to convert the shares of preferred stock they hold into shares of our common stock, which may cause substantial dilution to our then common stock stockholders and/or have other rights and preferences greater than those of our common stock stockholders including having a preference over our common stock with respect to dividends or distributions on liquidation or dissolution.
−Removed: Investors should keep in mind that the board of directors has the authority to issue additional shares of common stock and preferred stock, which could cause substantial dilution to our existing stockholders.
−Removed: Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred stockholders with substantial voting control over us subsequent to the date of this Annual Report and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our stockholders.
−Removed: As a result, the issuance of shares of common stock and/or preferred stock may cause the value of our securities to decrease.
Securities analysts may not cover, or continue to cover, our common stock and this may have a negative impact on our common stock’s market price.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business.
−Removed: We do not have any control over independent analysts (provided that we have engaged various non-independent analysts).
+Added: We do not have any control over independent analysts (provided that we may engage various non-independent analysts).
We currently only have a few independent analysts that cover our common stock, and these analysts may discontinue coverage of our common stock at any time.
22 unchanged sentences
Additionally, evolving expectations on various ESG matters, including biodiversity, waste and water, may increase costs, require changes in how we operate and lead to negative stakeholder sentiment.
+Added: Global economic conditions could materially adversely affect our business, results of operations, financial condition and growth.
+Added: Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect our operations, expenses, access to capital and the market for oil and gas.
+Added: In addition, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on our expected funding sources, suppliers and partners.
+Added: A downturn in the economic environment could also lead to limitations on our ability to issue new debt;
+Added: reduced liquidity;
+Added: and declines in the fair value of our financial instruments.
+Added: These and other economic factors could materially adversely affect our business, results of operations, financial condition and growth.
+Added: We may be adversely affected by climate change or by legal, regulatory or market responses to such change.
+Added: The long-term effects of climate change are difficult to predict;
+Added: however, such effects may be widespread.
+Added: Impacts from climate change may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects.
+Added: The effects of climate change could increase the cost of certain products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business.
+Added: Climate change could also lead to increased costs as a result of physical damage to or destruction of our facilities, equipment and business interruption due to weather events that may be attributable to climate change.
+Added: These events and impacts could materially adversely affect our business operations, financial position or results of operation.
+Added: We might be adversely impacted by changes in accounting standards.
+Added: Our consolidated financial statements are subject to the application of U.S.
+Added: GAAP, which periodically is revised or reinterpreted.
+Added: From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board (“ FASB ”) and the SEC.
+Added: It is possible that future accounting standards may require changes to the accounting treatment in our consolidated financial statements and may require us to make significant changes to our financial systems.
+Added: Such changes might have a materially adverse impact on our financial position or results of operations.
UNRESOLVED STAFF COMMENTS.
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.