What changed in this filing

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Item 1A. Risk Factors

2023-04-17 compared with 2022-04-21 · 41 added, 65 removed, 311 unchanged (25% of the section changed)

RISK FACTORS.

The prices of oil, NGL and gas are highly volatile and have declined significantly in recent years.

The prices of oil, NGL and gas are highly volatile.

A sustained decline in these commodity prices could materially and adversely affect the Company’s business, financial condition and results of operations.

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Natural gas prices, based on the twelve-month average of the first of the month Henry Hub index price, were $6.358 per MMBTU in 2022 as compared to $3.598 per MMBTU in 2021, and have averaged $5.954 per MMBTU for the first three months of 2023.

Oil prices, based on the NYMEX monthly average price, were $66.56 per barrel in 2021 as compared to $39.57 per barrel in 2020, and first of the Month NYMEX oil prices have averaged $88.94 per barrel for the first three months of 2022.

Oil prices, based on West Texas Intermediate(WTI) Light Sweet Crude first of the month prices, averaged $93.67 per barrel in 2022 as compared to $66.56 per barrel in 2022, and in the first three months of 2023, the first of the month price has averaged $90.97 per barrel.

Any substantial or extended decline in future natural gas or crude oil prices would have a material adverse effect on our future business, financial condition, results of operations, cash flows, liquidity or ability to finance planned capital expenditures and commitments.

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global or national health concerns, including the outbreak of pandemic or contagious disease, such as the coronavirus.

In response to recent volatility in commodity prices, many producers have reduced their capital expenditure budgets.

If the prices of oil and natural gas decline further, our operations, financial condition and level of expenditures for the development of our oil and natural gas reserves may be materially and adversely affected.

In addition, lower oil and natural gas prices may reduce the amount of oil and natural gas that we can produce economically.

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If the economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish, which could impact the price at which we can sell our production, affect the ability of our vendors, suppliers and customers to continue operations and ultimately adversely impact our results of operations, liquidity and financial condition.

These factors and the volatile nature of the energy markets make it impossible to predict with any certainty the future prices of natural

These factors and the volatile nature of the energy markets make it impossible to predict with any certainty the future prices of natural gas and oil.

If natural gas and oil prices decline significantly for a sustained period of time, the lower prices may adversely affect our ability to make planned expenditures, raise additional capital or meet our financial obligations.

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We derive essentially all of our revenues from the sale of our oil, natural gas and NGLs to unaffiliated third-party purchasers, independent marketing companies and midstream companies.

Any delays in payments from such purchasers caused by their financial difficulties, including those resulting from the impacts of COVID-19

and its impact on the global economy, will have an immediate negative effect on our results of operations and cash flows.

Additionally, liquidity and cash flow problems encountered by our working interest co-owners

or the third-party operators of our non-operated

properties may prevent or delay the drilling of a well or the development of a project.

Our working interest co-owners

may be unwilling or unable to pay their share of the costs of projects as they become due.

Any delays in payments from such purchasers caused by their financial difficulties, including those resulting from the impacts of COVID-19 and its impact on the global economy, will have an immediate negative effect on our results of operations and cash flows.

Additionally, liquidity and cash flow problems encountered by our working interest co-owners or the third-party operators of our non-operated properties may prevent or delay the drilling of a well or the development of a project.

Our working interest co-owners may be unwilling or unable to pay their share of the costs of projects as they become due.

In the case of a working interest owner, we could be required to pay the working interest owner’s share of the project costs.

of our wells could negatively impact our production, liquidity, and, ultimately, our operations, results, and performance.

Our production depends, in part, upon our wells that are capable of commercial production not being shut-in

(i.e., suspended from production).

The lack of availability of capacity on third-party systems and facilities or the shut-in

of an oil field’s production could result in the shut-in

of our wells.

In response to recent commodity prices our efforts to reduce costs include reducing operating costs.

The Company elected to shut-in

marginal wells and will continue to review field operations to minimize costs and identify wells for short term shut-ins

through May and June.

The shut-in of our wells could negatively impact our production, liquidity, and, ultimately, our operations, results, and performance.

Our production depends, in part, upon our wells that are capable of commercial production not being shut-in (i.e., suspended from production).

The lack of availability of capacity on third-party systems and facilities or the shut-in of an oil field’s production could result in the shut-in of our wells

The producing wells in which we have an interest occasionally experience reduced or terminated production.

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These curtailments can last from a few days to many months, any of which could have an adverse effect on our results of operations.

If we experience low oil production volumes due to the shut-in

of our wells or other mechanical failures or interruptions, it would impact our ability to generate cash flows from operations and we could experience a reduction in our available liquidity.

If we experience low oil production volumes due to the shut-in of our wells or other mechanical failures or interruptions, it would impact our ability to generate cash flows from operations and we could experience a reduction in our available liquidity.

A decrease in our liquidity could adversely affect our ability to meet our anticipated working capital, debt service, and other liquidity needs.

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You should not assume that the present value of future net cash flows from our proved reserves is the current market value of our estimated natural gas and oil reserves.

In accordance with SEC requirements, we base the estimated discounted future net cash flows from our proved reserves on the twelve-month average oil and gas index prices, calculated as the unweighted arithmetic average for the first day of the month price for each month, and costs in effect on the date of the estimate, holding the prices and costs constant throughout the life of the properties.

In accordance with SEC requirements, we base

the estimated discounted future net cash flows from our proved reserves on the twelve-month average oil and gas index prices, calculated as the unweighted arithmetic average for the first day of the month price for each month, and costs in effect on the date of the estimate, holding the prices and costs constant throughout the life of the properties.

Actual future prices and costs may differ materially from those used in the net present value estimate, and future net present value estimates using then current prices and costs may be significantly less than the current estimate.

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We rely upon access to our revolving credit facility as a source of liquidity for any capital requirements not satisfied by cash flow from operations or other sources.

Future challenges in the global financial system, including the capital markets, may adversely affect our business and our financial condition.

Future challenges in the global financial system,

including the capital markets, may adversely affect our business and our financial condition.

Our ability to access the capital markets may be restricted at a time when we desire, or need, to raise capital, which could have an impact on our flexibility to react to changing economic and business conditions.

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A prolonged period of decreased natural gas and oil prices or a further decline could further increase the risk of our inability to comply with covenants to maintain specified financial ratios.

In order to provide a margin of comfort with regard to these financial covenants, we may seek to reduce our capital expenditure plan, sell non-strategic

assets or opportunistically modify or increase our derivative instruments to the extent permitted under our debt agreements.

In order to provide a margin of comfort with regard to these financial covenants, we may seek to reduce our capital expenditure plan, sell non-strategic assets or opportunistically modify or increase our derivative instruments to the extent permitted under our debt agreements.

In addition, we may seek to refinance or restructure all or a portion of our indebtedness.

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We also considered our likely sources of capital.

Notwithstanding the determinations made in the development of our 2022 plan, business opportunities not previously identified

periodically come to our attention, including possible acquisitions and dispositions.

Notwithstanding the determinations made in the development of our 2023 plan, business opportunities not previously identified periodically come to our attention, including possible acquisitions and dispositions.

If we fail to identify optimal business strategies, or fail to optimize our capital investment and capital raising opportunities and the use of our other resources in furtherance of our business strategies, our financial condition and growth rate may be adversely affected.

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In addition, pollution and environmental risks are not fully insurable.

We maintain for our operations total excess liability insurance with limits of $20 million per occurrence and in the aggregate covering certain general liability and certain “sudden and accidental” environmental risks with a deductible of $10,000 per occurrence, subject to all terms, restrictions and sub-limits

of the policies.

We maintain for our operations total excess liability insurance with limits of $20 million per occurrence and in the aggregate covering certain general liability and certain “sudden and accidental” environmental risks with a deductible of $100,000 per occurrence, subject to all terms, restrictions and sub-limits of the policies.

We also maintain general liability insurance limits of $1 million per occurrence and $2 million in the aggregate.

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However, customers and contractors who provide contractual indemnification protection may not in all cases maintain adequate insurance to support their indemnification obligations.

Our insurance or indemnification arrangements may not adequately protect us against liability or loss from all the hazards of our operations.

Our insurance or indemnification arrangements may not adequately protect us

against liability or loss from all the hazards of our operations.

The occurrence of a significant event that we have not fully insured or indemnified against or the failure of a customer to meet its indemnification obligations to us could materially and adversely affect our results of operations and financial condition.

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While the Company does not conduct operations in Colorado, passage or enactment of similar legislation in other states in which it does operate could significantly increase the Company’s operating costs and have a significant adverse effect on the Company’s ability to conduct operations.

States could elect to prohibit hydraulic fracturing or high volume hydraulic

fracturing altogether, following the approach taken by the states of Vermont, Maryland and New York.

States could elect to prohibit hydraulic fracturing or high volume hydraulic fracturing altogether, following the approach taken by the states of Vermont, Maryland and New York.

Also, local land use restrictions, such as city ordinances, may be adopted to restrict or prohibit drilling in general or hydraulic fracturing in particular.

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one or more of which developments could have a material adverse effect on the Company.

The Company’s operations are subject to stringent environmental, oil and gas-related

and occupational safety and health laws and regulations that could cause it to delay, curtail or cease its operations or expose it to material costs and liabilities.

The Company’s operations are subject to stringent environmental, oil and gas-related and occupational safety and health laws and regulations that could cause it to delay, curtail or cease its operations or expose it to material costs and liabilities.

The Company’s operations are subject to stringent federal, state and local laws and regulations governing, among other things, the drilling of wells, rates of production, the size and shape of drilling and spacing units or proration units, the transportation and sale of oil, NGL and gas, and the discharging of materials into the environment and environmental protection.

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These laws and regulations may limit the amount of oil and gas the Company can produce from the Company’s wells or limit the number of wells or the locations that the Company can drill.

In connection with its operations, the Company must obtain and maintain numerous environmental and oil and gas-related

permits, approvals and certificates from various federal, state and local governmental authorities, and may incur substantial costs in doing so.

In connection with its operations, the Company must obtain and maintain numerous environmental and oil and gas-related permits, approvals and certificates from various federal, state and local governmental authorities, and may incur substantial costs in doing so.

The need to obtain permits has the potential to delay, curtail or cease the development of oil and gas projects.

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In 2017, the EPA and the Corps agreed to reconsider the 2015 rule and, thereafter, on October 22, 2019, the agencies published a final rule, which became effective on December 31, 2019, rescinding the 2015 rule.

On January 23, 2020, the two agencies issued a final rule re-defining

the Clean Water Act’s jurisdiction over waters of the United States, which redefinition is narrower than found in the 2015 rule.

On January 23, 2020, the two agencies issued a final rule re-defining the Clean Water Act’s jurisdiction over waters of the United States, which redefinition is narrower than found in the 2015 rule.

Upon being published in the Federal Register and the passage of 60 days thereafter, the January 23, 2020 final rule will become effective, at which point the United States will be covered under a single regulatory scheme as it relates to federal jurisdictional reach over waters of the United States.

However, there remains the expectation that the

January 23, 2020 final rule also will be legally challenged in federal district court.

To the extent that any challenge to the January 23, 2020 final rule is successful and the 2015 rule or a revised rule expands the scope of the Clean Water Act’s jurisdiction in areas where the Company conducts operations, the Company could incur (i) delays, restrictions or prohibitions in the issuance of necessary permits, (ii) restrictions or cessations in the development or expansion of projects, or (iii) increases in the Company’s capital expenditures and operating expenses by, for example, requiring installation of new emission controls on some of the Company’s equipment, any one or more of which developments could have a material adverse effect on the Company’s business, financial condition and results of operations.

However, there remains the expectation that the January 23, 2020 final rule also will be legally challenged in federal district court.

any one or more of which developments could have a material adverse effect on the Company’s business, financial condition and results of operations.

Additionally, the Company’s operations are subject to a number of federal and state laws and regulations, including the federal OSHA and comparable state statutes, whose purpose is to protect the health and safety of employees.

Among other things, the OSHA hazard communication standard, the EPA community right-to-know

regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the Company’s operations and that this information be provided to employees, state and local government authorities and citizens.

Among other things, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the Company’s operations and that this information be provided to employees, state and local government authorities and citizens.

There can be no assurance that existing or future regulations will not result in a delay, curtailment or cessation of production or processing activities, result in a material increase in the costs of production, development, exploration or processing operations or materially and adversely affect the Company’s future operations and financial condition.

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For example, drilling fluids, produced waters and certain other wastes associated with the Company’s exploration, development and production of oil or gas are currently excluded under RCRA from the definition of hazardous waste.

These wastes are instead regulated under RCRA’s less stringent non-hazardous

waste provisions.

These wastes are instead regulated under RCRA’s less stringent non-hazardous waste provisions.

There have been efforts from time to time to remove this exclusion.

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Any future loss of the RCRA exclusion could have a material adverse effect on the Company’s results of operations and financial position.

The Company currently owns, leases or operates, and in the past has owned, leased or operated, properties that for many years have been used for oil and gas exploration and production activities, and petroleum hydrocarbons, hazardous substances and wastes may have been released on or under such properties, or on or under other locations, including off-site

locations, where such substances have been taken for treatment or

These wastes, substances and hydrocarbons may also be released during future operations.

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Joint and several strict liabilities may be incurred in connection with such releases of petroleum hydrocarbons, hazardous substances and wastes on, under or from the Company’s properties.

Private parties, including lessors of properties on which the Company operates and the owners or operators of properties adjacent to the Company’s operations and facilities where the Company’s petroleum hydrocarbons, hazardous substances or wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance as well as seek damages for noncompliance with environmental laws and regulations or for personal injury or damage to property or natural resources.

Private parties, including lessors of properties on which the Company operates and the owners or operators of properties

adjacent to the Company’s operations and facilities where the Company’s petroleum hydrocarbons, hazardous substances or wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance as well as seek damages for noncompliance with environmental laws and regulations or for personal injury or damage to property or natural resources.

Such properties and the substances disposed or released on or under them may be subject to CERCLA, RCRA and analogous state laws, which could require the Company to remove previously disposed substances, wastes and petroleum hydrocarbons, remediate contaminated property or perform remedial plugging or pit closure operations to prevent future contamination, the costs of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

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Additionally, various states, groups of states, and other countries have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, there is a non-binding

agreement, the United Nations sponsored “Paris Agreement,” for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, although the United States has announced its withdrawal from such agreement, effective November 4, 2020.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change related pledges made by

certain candidates seeking the office of the President of the United States in 2020.

At the international level, there is a non-binding agreement, the United Nations sponsored “Paris Agreement,” for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, although the United States has announced its withdrawal from such agreement, effective November 4, 2020.

Critical declarations made by one or more candidates running for President include proposals to ban hydraulic fracturing of oil and gas wells and ban new leases for production of minerals on federal properties, including onshore lands and offshore waters.

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Litigation risks are also increasing, as a number of cities, local governments or other persons have sought to bring suit against oil and gas exploration and production companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore are responsible for roadway and infrastructure damages, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.

There are also financial risks for fossil fuel producers as stockholders or bondholders currently invested in fossil-fuel energy companies concerned about the threat of climate change may elect in the future to shift some or all of their investments into non-fossil

fuel energy related sectors.

Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.

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Finally, if increasing concentrations of GHGs in the Earth’s atmosphere were to result in significant physical effects, such as increased frequency and severity of storms, floods, droughts and other extreme climatic events, then such effects could have a material adverse effect on the Company’s exploration and production operations.

In addition, companies in the oil and gas industry have been the target of activist efforts from both individuals and non-governmental

organizations, including instituting litigation and supporting political or regulatory efforts to, among other things, limit or ban hydraulic fracturing, restrict or ban certain operating practices, including the disposal of waste materials, such as hydraulic fracturing fluids and produced water, deny or delay drilling permits, prohibit the venting or flaring of gas, reduce access of the oil and gas industry to federal and state government lands, and delay or cancel oil and gas developmental or expansion projects.

In addition, companies in the oil and gas industry have been the target of activist efforts from both individuals and non-governmental organizations, including instituting litigation and supporting political or regulatory efforts to, among other things, limit or ban hydraulic fracturing, restrict or ban certain operating practices, including the disposal of waste materials, such as hydraulic fracturing fluids and produced water, deny or delay drilling permits, prohibit the venting or flaring of gas, reduce access of the oil and gas industry to federal and state government lands, and delay or cancel oil and gas developmental or expansion projects.

The Company may need to incur significant costs associated with responding to these initiatives, and complying with any resulting additional legal or regulatory requirements could have a material adverse effect on the Company’s business, financial condition, cash flows and results of operations.

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Oil and gas operations in the Company’s operating areas may be adversely affected by seasonal or permanent restrictions imposed on drilling activities by the U.S.

Fish and Wildlife Services (the “FWS”) that are designed to protect various wildlife, which may materially restrict the Company’s access to federal or private land use.

Fish and Wildlife Services (the

“FWS”) that are designed to protect various wildlife, which may materially restrict the Company’s access to federal or private land use.

Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas, impact suppliers of critical materials or services, or require the implementation of expensive mitigation measures.

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Other companies operate some of the properties in which we have an interest.

We have limited ability to influence or control the operation or future development of these non-operated

properties or the amount of capital expenditures that we are required to fund with respect to them.

We have limited ability to influence or control the operation or future development of these non-operated properties or the amount of capital expenditures that we are required to fund with respect to them.

The failure of an operator of our wells to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interest could reduce our production and revenues.

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We are subject to complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business.

Our operations are subject to extensive federal, state and local laws and regulations, including tax laws and regulations and those relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment.

materials into the environment.

These laws and regulations can adversely affect the cost, manner or feasibility of doing business.

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A system failure, data security breach or cyberattack could have a material adverse effect on our financial condition, results of operations or cash flows.

In the past, we have experienced data security breaches resulting from unauthorized access to our e-mail

systems, which to date have not had a material impact on our business;

In the past, we have experienced data security breaches resulting from unauthorized access to our e-mail systems, which to date have not had a material impact on our business;

however, there is no assurance that such impacts will not be material in the future.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors