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Item 1A. Risk Factors

2024-03-07 compared with 2023-03-09 · 112 added, 98 removed, 280 unchanged (43% of the section changed)

Our business is subject to various risks and uncertainties in the ordinary course of business.

We are subject to various risks and uncertainties in the ordinary course of our business.

The following summarizes significant risks and uncertainties that may adversely affect our business, financial condition, or results of operations.

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Risks Relating to Our Business, Operations, and Strategy

Part of our strategy involves using some of the latest available horizontal drilling and completion techniques, which involve additional risks and uncertainties in their application as compared to vertical drilling.

Our operations use some of the latest horizontal drilling and completion techniques as developed by us, other oil and natural gas exploration and production companies and our service providers.

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• the ability to fracture or stimulate the planned number of stages in a horizontal or lateral wellbore;

• the ability to run tools and other equipment the entire length of the wellbore during completion operations;

• the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage.

• the ability to run tools and other equipment the entire length of a wellbore during completion operations;

• the ability to successfully clean out a wellbore after completion of the final fracture stimulation stage.

If our assessments of purchased properties are materially inaccurate, it could have a significant impact on future operations and earnings.

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• potential environmental and other liabilities.

Our assessments will not reveal all existing or potential problems, nor will it permit us to become familiar enough with the properties to assess fully their capabilities and deficiencies.

Our assessments will not reveal all existing or potential problems, nor will they permit us to become familiar enough with the potential properties we may acquire to assess fully their capabilities and deficiencies.

We plan to undertake further development of our properties generally through the use of cash flow from existing production.

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Our prospects are in various stages of evaluation, ranging from prospects that are currently being drilled to prospects that will require substantial additional seismic data processing and interpretation.

There is no way to predict in advance of drilling and testing whether any particular prospect will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable.

We are unable to predict in advance of drilling and testing whether any particular prospect will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable.

This risk may be enhanced in our situation, due to the fact that a significant percentage of our proved reserves is currently proved undeveloped reserves.

The use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in commercial quantities.

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.

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 all of our drilling prospects.

A substantial percentage of our proved properties are undeveloped;

therefore, the risk associated with our success is greater than would be the case if the majority of our properties were categorized as proved developed.

therefore, the risk associated with our success is greater than would be the case if a substantial majority of our properties were categorized as proved developed.

Because a substantial percentage of our proved properties are proved undeveloped (approximately 32%), we will require significant additional capital to develop such properties before they may become productive.

Further, because of the inherent uncertainties associated with drilling for oil and gas, some of these properties may never be developed to the extent that they result in positive cash flow.

Further, because of the inherent uncertainties associated with drilling for oil and gas, some of these properties may never be developed to the extent that they result in commercial quantities of oil and natural gas.

While our current business plan is to generally fund the development costs with cash flow from our other producing properties, if such cash flow is not sufficient, we may be forced to seek alternative sources for cash, through the issuance of additional equity or debt securities, increased borrowings or other means.

Hedging transactions may limit our potential gains .

To reduce our exposure to commodity price uncertainty and increase cash flow predictability relating to the marketing of our crude oil and natural gas, we have entered into crude oil and natural gas price hedging arrangements with respect to a significant portion of our expected production in order to economically hedge a portion of our forecasted oil and natural gas production.

Additionally, our credit facility requires us to hedge a significant portion of our production.

In addition, these derivative contracts typically limit the benefit we would otherwise receive from increases in the prices for

oil and natural gas.

As part of our hedging strategy, we have in place derivative contracts covering percentages of our future estimated production in accordance with our Credit Agreement.

To reduce our exposure to commodity price uncertainty and increase cash flow predictability, we have entered into crude oil and natural gas price hedging arrangements with respect to a significant portion of our expected production in order to economically hedge a portion of our forecasted oil and natural gas production.

Additionally, our credit facility

requires us to hedge a significant portion of our production.

These derivative contracts typically limit the benefit we would otherwise receive from increases in the prices for oil and natural gas.

Hedging transactions may expose us to risk of financial loss.

While intended to reduce the effects of volatile oil and natural gas prices, derivative contracts designed as hedges expose us to risk of financial loss in some circumstances, including when there is a change in the expected differential between the underlying price in the hedging agreement and actual prices received, or when the counterparty to the derivative contract is financially constrained and defaults on its contractual obligations.

It is also possible that sales volumes fall below the hedged volumes leaving a portion of our position uncovered.

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Natural disasters, adverse weather conditions (particularly abnormally cold weather and thunderstorms), floods, pandemics, acts of terrorism and other catastrophic or geo-political events may cause damage or disruption to our operations and the global economy, or could result in market disruptions, any of which could have an adverse effect on our business, operating results, and financial condition.

The coronavirus outbreak has impacted various businesses throughout the world, including an impact on the global demand for oil and natural gas, travel restrictions and the extended shutdown of certain businesses in impacted geographic regions.

The coronavirus outbreak impacted various businesses throughout the world, including an impact on the global demand for oil and natural gas, travel restrictions and the extended shutdown of certain businesses in impacted geographic regions.

If other pandemics occur, they could have a material adverse impact on our business operations, operating results and financial condition.

The loss of key members of management or failure to attract and retain other highly qualified personnel could, in the future, affect the Company’s business results.

The Company’s success depends on its ability to attract, retain and motivate a highly-skilled management team and workforce.

Failure to ensure that the Company has the depth and breadth of management and personnel with the necessary skill sets and experience could impede its ability to achieve growth objectives and execute its operational strategy.

As the Company continues to expand, it will need to promote or hire additional staff, and, as a result of increased compensation and benefit packages in our industry, as well as inflation pressures, it may be difficult to attract or retain such individuals without incurring significant additional costs.

The loss of key members of management or failure to attract and retain other highly qualified personnel could affect the Company’s business results.

Our success depends on our ability to attract, retain and motivate a highly-skilled management team and workforce.

Failure to ensure that we have the depth and breadth of management and personnel with the necessary skill sets and experience could impede our ability to achieve growth objectives and execute our operational strategy.

As we continue to expand, we will need to promote or hire additional staff, and, as a result of increased compensation and benefit packages in our industry, as well as inflationary pressures, it may be difficult to attract or retain such individuals without incurring significant additional costs.

Risks Relating to the Oil and Natural Gas Industry

A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.

The price we receive for our oil and natural gas production heavily influences our revenue, profitability, access to capital and future rate of growth.

A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition and results of operations and our ability to meet our capital expenditure obligations and financial commitments.

The prices we receive for our oil and natural gas production heavily influence our revenue, profitability, access to capital and future rate of growth.

Oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand.

Historically, the markets for oil and natural gas have been volatile.

These markets will likely continue to be volatile in the future.

Historically, the markets for oil and natural gas have been volatile and we expect these markets will likely continue to be volatile.

The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control.

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• the actions of oil exporting countries that are not members of OPEC;

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

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

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

• political conditions, including embargoes, in or affecting other oil-producing activities;

• acts of war and related armed conflicts;

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Lower prices also negatively impact the value of our proved reserves.

A substantial or extended decline in oil or natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

A substantial or extended decline in oil or natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity and ability to finance planned capital expenditures.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition and results of operations.

Our future success will depend on our exploitation, exploration, development and production activities.

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This ruling has cause federal agencies to delay issuing new oil and gas leases and permits on federal lands and waters.

While we do not have a significant federal lands acreage position (240 net acres as of December 31, 2022), these actions could have a material adverse effect on our industry, the public perception of oil and gas companies such as ours and the willingness of the public and financial institutions to provide capital for our industry.

While we do not have any federal lands acreage at this time, these actions could have a material adverse effect on our industry, the public perception of oil and gas companies such as ours and the willingness of the public and financial institutions to provide capital for our industry.

Our decisions to purchase, explore, develop or otherwise exploit prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations.

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Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write-down the financial carrying value of our oil and natural gas properties.

A write-down would likely constitute a non-cash charge to earnings.

The cumulative effect of a write-down could also negatively impact the trading price of our common stock.

A write-down would likely constitute a non-cash charge.

The cumulative effect of one or more write-downs could also negatively impact the trading price of our common stock.

We follow the full cost method of accounting for our oil and natural gas properties.

Under the full cost method, the net book value of properties, less related deferred income taxes, may not exceed a calculated “ceiling.” The ceiling is the estimated after tax future net revenues from proved oil and natural gas properties, discounted at 10% per year.

Discounted future net revenues are estimated using oil and natural gas spot prices based on the average price during the preceding 12-month period determined as an un-weighted, arithmetic average of the first-day-of-the-month price for each

month within such period, except for changes which are fixed and determinable by existing contracts.

The net book value is compared to the ceiling on a quarterly basis.

Discounted future net revenues are estimated using oil and natural gas spot prices based on the average price during the preceding 12-month period determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, except for changes which are fixed and determinable by existing contracts.

The net book value is

compared to the ceiling on a quarterly basis.

The excess, if any, of the net book value above the ceiling is required to be written off as an impairment expense.

During the years ended December 31, 2023, 2022, and 2021 we did not incur any write-downs.

During the year ended December 31, 2020, we recorded a non-cash write-down of $277.5 million.

Under SEC full cost accounting rules, any write-off recorded may not be reversed even if higher oil and natural gas prices increase the ceiling applicable to future periods.

Future price decreases could result in reductions in the financial carrying value of such assets and an equivalent charge to earnings.

Future price decreases could result in reductions in the financial carrying value of such assets and an equivalent charge on our financial statements.

It is difficult to predict with reasonable certainty the amount of any future impairments given the many factors impacting the ceiling test calculation including, but not limited to, future pricing, operating costs, upward or downward reserve revisions, reserve adds, and tax attributes.

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It requires interpretations of available technical data and many assumptions, including assumptions relating to economic factors.

Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of our reported reserves.

Any significant inaccuracies in these interpretations or assumptions could negatively affect the estimated quantities and present value of our reported reserves.

In order to prepare our estimates, we must project production rates and timing of development expenditures.

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In accordance with SEC requirements, we generally base the estimated discounted future net cash flows from our proved reserves on prices and costs calculated on the date of the estimate.

Actual future prices and costs may differ materially from those used in the present value estimate.

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We are not insured against all risks.

Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition and results of operations.

Losses and liabilities arising from uninsured and under insured events could materially and adversely affect our business, financial condition and results of operations.

Our oil and natural gas

exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the possibility of:

• environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater and shoreline contamination;

• environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater;

• abnormally pressured formations;

• mechanical difficulties, such as stuck oil field drilling and service tools and casing collapse;

• mechanical difficulties, such as stuck oil field drilling and service tools and casing collapses;

• fires and explosions;

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Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to our Company.

We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented.

We may elect to not obtain certain insurance coverage if we believe that the cost of available insurance is excessive relative to the risks presented.

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

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Consequently, our competitors may be able to address these competitive factors more effectively than we can.

If we are not successful in our competition for oil and natural gas reserves or in our marketing of production, then our financial condition and operation results may be adversely affected.

If we are not successful in our competition for oil and natural gas properties or in our marketing of production, then our financial condition and operation results may be adversely affected.

If our access to markets is restricted, it could negatively impact our production, our income and our ability to retain our leases.

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Our failure to obtain such services on acceptable terms could materially harm our business.

Currently, the majority of our production is sold to marketers and other purchasers that have access to nearby pipeline facilities.

However, as we further develop our properties, we may find production in areas with limited or no

access to pipelines, thereby necessitating delivery by other means, such as trucking or requiring compression facilities.

Such restrictions on our ability to sell our oil or natural gas could have several adverse effects, including higher transportation costs, fewer potential purchasers (thereby potentially resulting in a lower selling price) or, in the event we were unable to market and sustain production from a particular lease for an extended time, possibly causing us to lose a lease due to lack of production.

Currently, some of our production is sold to marketers and other purchasers that have access to pipeline facilities.

Much of our production is in areas with limited or no access to pipelines, thereby necessitating delivery by trucking.

Further, much of our natural gas production is sold to companies who are the only gathering and processing facilities near most of our properties Such restrictions on our ability to sell our oil or natural gas could have several adverse effects, including higher transportation costs, fewer potential purchasers (thereby potentially resulting in increased exposure to facility breakdowns and a lower selling prices) or, in the event we were unable to market and sustain production from a particular lease for an extended time, possibly causing us to lose a lease due to lack of production.

Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions we or other operators may take when drilling, completing, or operating wells that we or they own.

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Extreme weather conditions, which could become more frequent or severe due to multiple factors, could adversely affect our ability to conduct drilling, completion and production activities in the areas where we operate.

Our exploration and development activities and equipment could be adversely affected by extreme weather conditions, such as abnormally low temperatures, which can cause a loss of production from temporary cessation of activity from regional power outages or lost or damaged facilities and equipment.

Such extreme weather conditions could also impact access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of and our access to, necessary third-party services, such as gathering, processing, compression and transportation services.

Our exploration and development activities and equipment can be adversely affected by extreme weather conditions, such as abnormally low temperatures, which can cause a loss of production from temporary cessation of activity from regional power outages or lost or damaged facilities and equipment.

For example, we had production stoppages in 2022 and 2023 that adversely affected our revenues.

Extreme weather conditions could also impact access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of and our access to, necessary third-party services, such as gathering, processing, compression and transportation services.

These constraints and the resulting shortages or high costs could delay or temporarily halt our operations and materially increase our operation and capital costs, which could have a material adverse effect on our business, financial condition, and results of operations.

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Wastewaters from our operations typically are disposed of via underground injection.

Some studies have linked earthquakes in certain areas to underground injection, which has led to greater public scrutiny of disposal wells.

Some studies have linked earth tremors in certain areas to underground injection, which has led to greater public scrutiny of disposal wells.

Any new environmental initiatives or regulations that restrict injection of fluids, including, but not limited to, produced water, drilling fluids and other wastes associated with the exploration, development or production of oil and gas, or that limit the withdrawal, storage or use of surface water or ground water necessary for hydraulic fracturing of our wells, could increase our operating costs and cause delays, interruptions or cessation of our operations, the extent of which cannot be predicted, and all of which would have an adverse effect on our business, financial condition, results of operations, and cash flows.

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There is ongoing controversy regarding the leasing of federal lands.

For example, at the state level, New Mexico’s consideration of legislation to prohibit certain uses of freshwater in fracking operations, implement new disclosure requirements, and increase penalties may affect the cost and feasibility of our business.

We may be required to make large expenditures to comply with governmental regulations.

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Any such liabilities, penalties, suspensions, terminations, or regulatory changes could materially adversely affect our financial condition and results of operations.

Our operations may incur substantial liabilities to comply with the environmental laws and regulations.

Our operations may incur substantial liabilities to comply with environmental laws and regulations.

Our oil and natural gas operations are subject to stringent federal, state, and local laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection.

These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas, and impose substantial liabilities for pollution resulting from our operations.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, incurrence of investigatory or remedial obligations or the imposition of injunctive relief.

Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition as well as the industry in general.

These laws and regulations may require the acquisition of a permit before drilling commences;

restrict the types, quantities, and concentration of substances that can be released into the environment in connection with drilling and production activities;

limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and other protected areas;

and impose substantial liabilities for pollution resulting from our operations.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties;

incurrence of investigatory or remedial obligations;

or the imposition of injunctive relief.

Changes in environmental laws and regulations and the interpretation thereof occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal, or cleanup requirements could require us to make significant expenditures to maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position, and financial condition as well as the industry in general.

Under these environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release or if our operations were standard in the industry at the time they were performed.

The amount of additional future costs is not fully determinable due to such factors as the unknown magnitude of possible contamination, the unknown timing and extent of the corrective actions or compliance efforts that may be required, the determination of the Company’s liability in proportion to other responsible parties, and the extent to which such costs are recoverable from third parties.

Our operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which we may conduct oil and natural gas exploration and production activities, and reduce demand for the oil and natural gas we produce.

In the United States, no comprehensive climate change legislation has been implemented at the federal level.

However, President Biden has highlighted addressing climate change as a priority of his administration, which includes certain potential initiatives for climate change legislation to be proposed and passed into law.

Our operations are subject to a series of risks arising out of the perceived threat of climate change that could result in increased operating costs, limit the areas in which we may conduct oil and natural gas exploration and production activities, and reduce demand for the oil and natural gas we produce.

In the United States, no comprehensive climate change legislation has been implemented at the federal level, though recently passed laws such as the IRA advance numerous climate-related objectives.

However, President Biden has

highlighted addressing climate change as a priority of his administration, which includes certain potential initiatives for climate change legislation to be proposed and passed into law.

Moreover, federal regulators, state and local governments, and private parties have taken (or announced that they plan to take) actions that have or may have a significant influence on our operations.

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Congress approved, and President Biden has signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions to the methane standards, effectively reinstating the prior standards.

In response to President Biden’s executive order, in November 2021, the EPA issued a proposed rule that, if finalized, would establish Quad Ob as new source and Quad Oc as first-time existing source standards of performance for methane and VOC emissions for the crude oil and natural gas source category.

Owners or operators of affected emission units or processes would have to comply with specific standards of performance that may include leak detecting using optical gas imaging and subsequent repair requirements, reduction of regulated emissions through capture and control systems, zero-emission requirements for certain equipment or processes and operations and maintenance requirements.

In November 2022, the EPA published a supplemental proposal, which, among other items, would impose expanded inspection, monitoring and emissions control requirement on oil and gas sites, as well as strengthen requirements related to emissions from equipment and routine flaring.

The proposal would also establish a “Super Emitter Response Program” that would require operator response to emissions events exceeding 200 pounds per hour, as detected by regulatory authorities or qualified third-parties.

The proposal is currently subject to public comment and is expected to be finalized in 2023.

Separately, certain provisions of the IRA 2022 address methane regulation by imposing the first federal fee on excess methane emissions.

As a result, we cannot predict the scope of any final methane regulatory requirements or the cost to comply with such requirements.

In response to President Biden’s executive order calling on the EPA to revisit federal regulations regarding methane, the EPA finalized more stringent methane rules for new, modified, and reconstructed facilities, known as OOOOb, as well as standards for existing sources for the first time ever, known as OOOOc, in December 2023.

Under the final rules, states have two years to prepare and submit their plans to impose methane emission controls on existing sources.

The presumptive standards established under the final rule are generally the same for both new and existing sources.

The requirements include enhanced leak detection survey requirements using optical gas imaging and other advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions, reduction of emissions by 95% through capture and control systems and zero-emission requirements for certain devices.

The rule also establishes a “super emitter” response program that would allow third parties to make reports to EPA of large methane emission events, triggering certain investigation and repair requirements.

Fines and penalties for violations of these rules can be substantial.

It is likely, however, that the final rule and its requirements will be subject to legal challenges.

Moreover, compliance with the new rules may affect the amount we owe under the IRA 2022’s methane fee described above because compliance with EPA’s methane rules would exempt an otherwise covered facility from the requirement to pay the methane fee.

The requirements of the EPA’s final methane rules have the potential to increase our operating costs and thus may adversely affect our financial results and cash flows.

Moreover, failure to comply with these CAA requirements can result in the imposition of substantial fines and penalties as well as costly injunctive relief.

However, given the long-term trend toward increasing regulation, future federal GHG regulations of the oil and gas industry remain a significant possibility.

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Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector.

The impacts of these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States’ commitments under the Paris Agreement, COP26 or other international conventions cannot be predicted at this time.

At COP28 in December 2023, the parties signed onto an agreement to transition away from fossil fuels in energy systems and increase renewable energy capacity, though no timeline for doing so was set.

While non-binding, the agreements coming out of COP28 could result in increased pressure among financial institutions and various stakeholders to reduce or otherwise impose more stringent limitations on funding for and increase potential opposition to the exploration and production of fossil fuels.

The impacts of these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States’ commitments under the Paris Agreement, COP26, COP28 or other international conventions cannot be predicted at this time.

Concern over the threat of climate change has also resulted in increasing political risks in the United States, including climate-change related pledges made by President Biden and other public office representatives.

oil and natural gas industry and increased emphasis on climate-related risks across agencies and economic sectors.

On January 27, 2021, President Biden signed an executive order calling for substantial action on climate change, including, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the oil and natural gas industry, and increased emphasis on climate-related risks across agencies and economic sectors.

Additionally, in November 2021, the Biden Administration released “The Long-Term Strategy of the United States:

Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a roadmap to net zero emissions in the United States by 2050 through, among other things, improving energy efficiency;

Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a roadmap to

net zero emissions in the United States by 2050 through, among other things, improving energy efficiency;

decarbonizing energy sources via electricity, hydrogen, and sustainable biofuels;

and reducing non-CO2 GHG emissions, such as methane and nitrous oxide.

In addition, on March 6, 2024, the SEC adopted a rule requiring registrants to include certain climate-related disclosures, including Scope 1 and 2 GHG emissions, climate-related targets and goals, and certain climate-related financial statement metrics, in registration statements and annual reports.

Currently, the ultimate impact of these laws on our business is uncertain.

Separately, enhanced climate related disclosure requirements could lead to reputational or other harm with customers, regulators, investors or other stakeholders and could also increase our litigation risks relating to statements alleged to have been made by us or others in our industry regarding climate change risks, or in connection with any future disclosures we may make regarding reported emissions, particularly given the inherent uncertainties and estimations with respect to calculating and reporting GHG emissions.

Additionally, the SEC has also from time to time applied additional scrutiny to existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege an issuer’s existing climate disclosures misleading or deficient.

Increasingly, oil and natural gas companies are exposed to litigation risks associated with the threat of climate change.

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Such physical risks may also impact the infrastructure on which we rely to produce or transport our products.

One of more of these developments could have a material adverse effect on our business, financial condition and operations.

One of more of these developments could have a material adverse effect on our business, financial condition and

In addition, while our consideration of changing weather conditions and inclusion of safety factors in design is intended to reduce the uncertainties that climate change and other events may potentially introduce, our ability to mitigate the adverse impacts of these events depends in part on the effectiveness of our facilities and our disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality.

Changes in tax laws or the interpretation thereof or the imposition of new or increased taxes or fees may adversely

affect our operations and cash flows.

From time to time, federal and state level legislation has been proposed that would, if enacted into law, make significant changes to tax laws, including to certain key federal and state income tax provisions currently available to oil and natural gas exploration and development companies.

affect our operating results and cash flows.

From time to time, federal and state level legislation has been proposed that would, if enacted into law, make significant changes to tax laws, including to certain key federal and state income tax provisions currently applicable to oil and natural gas exploration and development companies.

Such legislative changes have included, but have not been limited to, (i) the elimination of the percentage depletion allowance for oil and natural gas properties, (ii) the elimination of current deductions for intangible drilling and development costs, (iii) an extension of the amortization period for certain geological and geophysical expenditures, (iv) the elimination of certain other tax deductions and relief previously available to oil and natural gas companies, and (v) an increase in the federal income tax rate applicable to corporations such as us.

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Additionally, states in which we operate or own assets may impose new or increased taxes or fees on oil and natural gas extraction.

The passage of any legislation as a result of these proposals and other similar changes in federal income tax laws or the imposition of new or increased taxes or fees on oil and natural gas extraction could adversely affect our operations and cash flows.

In addition, on August 16, 2022, President Biden signed into law the IRA, which includes, among other things, a corporate alternative minimum tax (the "CAMT"), provides for an investment tax credit for qualified biomass property and introduces a one percent excise tax on corporate stock repurchases after December 31, 2022.

Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of "applicable corporations," which is effective beginning January 1, 2023.

The passage of any legislation as a result of these proposals and other changes in federal income tax laws or the imposition of new or increased taxes or fees on oil and natural gas extraction could adversely affect our operating results and cash flows.

In addition, the IRA, which includes, among other things, a corporate alternative minimum tax (the "CAMT"), provides for an investment tax credit for qualified biomass property and introduces a one percent excise tax on corporate stock repurchases.

Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of "applicable corporations," which was effective beginning January 1, 2023.

The CAMT generally treats a corporation as an applicable corporation in any taxable year in which the "average annual adjusted financial statement income" of the corporation and certain of its subsidiaries and affiliates for a three-taxable-year period ending prior to such taxable year exceeds $1 billion.

We are currently assessing the potential impact of these legislative changes and will continue to evaluate the overall impact of other current, future and proposed regulations and interpretive guidance from tax authorities on our effective tax rate and consolidated balance sheets.

We are unable to predict whether any such changes or other proposals will ultimately be enacted.

Based on our current interpretation of the IRA and the CAMT and a number of operational, economic, accounting and regulatory assumptions, we do not anticipate the CAMT materially increasing our U.S.

federal income tax liability in the near term.

The foregoing analysis is based upon our current interpretation of the provisions contained in the IRA and the CAMT.

In the future, the U.S.

Department of Treasury and the Internal Revenue Service are expected to release regulations and interpretive guidance relating to the CAMT, and any significant variance from our current interpretation could result in a change in the expected application of the CAMT to us and adversely affect our operating results and cash flows.

Also, we are subject to unclaimed or abandoned property (escheat) laws which require us to turn over to certain government authorities the property of others held by us that has been unclaimed for a specified period.

We are subject to audits by individual U.S.

states regarding our escheatment practices.

The legislation and regulations related to unclaimed property matters are complex and subject to varying interpretations by state governmental authorities.

New climate disclosure rules proposed by the SEC may increase our costs of compliance and adversely impact our

On March 21, 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks.

We are currently assessing the proposed rule, but at this time we cannot predict the costs of implementation or any potential adverse impacts resulting from the rule.

According to the SEC’s Fall 2022 regulatory agenda, the proposed climate disclosure rule is scheduled to be finalized in April 2023.

To the extent this rule is finalized as proposed, we could incur increased costs relating to the assessment and disclosure of climate-related risks, including increased legal, accounting and financial compliance costs, as well as making some activities more difficult, time-consuming and costly, and placing strain on our personnel, systems and resources.

We may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed.

On March 6, 2024, the SEC adopted new rules relating to the disclosure of a range of climate-related risks.

We are currently assessing the final rule, but at this time we cannot predict the costs of implementation or any potential adverse impacts resulting from the rule.

As a result of this rule, we could incur increased costs relating to the assessment and disclosure of climate-related risks, including increased legal, accounting and financial compliance costs, as well as making some activities more difficult, time-consuming and costly, and placing strain on our personnel, systems, and resources.

We may also face increased litigation risks related to disclosures made pursuant to the rule.

In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors.

The SEC proposes certain phase-in compliance dates for disclosures under the proposed rules, including for GHG emissions metrics.

Risks Relating to Our Capital Structure

We have significant indebtedness.

We have a Credit Facility in place with $600.0 million in commitments from borrowings and letters of credit under our Second Amended and Restated Credit Agreement dated August 31, 2022 with Truist Bank as Administrative Agent ("Credit Agreement").

We have a Credit Facility in place with $600 million in commitments from borrowings and letters of credit under our Second Amended and Restated Credit Agreement dated August 31, 2022 with Truist Bank as Administrative Agent (the "Second Credit Agreement").

As of December 31, 2023, $425.0 million was outstanding on our Credit Facility.

If we further utilize this facility, the level of our indebtedness could affect our operations in several ways, including the following:

• a significant portion of our cash flow could be used to service the indebtedness;

further utilize this facility, the level of our indebtedness could affect our operations in several ways, including the following:

• a significant portion of our cash flow would need to be used to service the indebtedness;

• we are required to put into place derivative contracts to hedge a significant portion of our oil and gas production;

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Our plans for growth may include accessing the capital markets.

Recent reluctance to invest in the exploration and production sector based on market volatility, historically perceived underperformance, and Environmental, Social and Governance ("ESG") trends, among other things, has raised concerns regarding capital availability for the sector.

Recent reluctance to invest in the exploration and production sector based on market volatility, historically perceived underperformance, and ESG trends, among other things, has raised concerns regarding capital availability for the sector.

If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, we may be unable to implement all of our development plans, make acquisitions, or otherwise carry out our business strategy, which would have a material adverse effect on our financial condition and results of operations, and impair our ability to service our indebtedness.

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Our business partners, including vendors, service providers, purchasers of our production, and financial institutions, are also dependent on digital technology.

It is possible that we could incur interruptions from cyber security attacks or breaches, computer viruses or malware that could result in disruption of our business operations and/or financial loss.

It is possible that we could incur interruptions from cybersecurity attacks or breaches, computer viruses or malware that could result in disruption of our business operations and/or financial loss.

Although we utilize various procedures and controls to monitor and protect against these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing and causing us to suffer losses in the future.

Even so, any cyber incidents or interruptions to our computing and communications infrastructure or our information systems could lead to data corruption, communication interruption, unauthorized release, gathering, monitoring, misuse or destruction of proprietary or other information, or otherwise significantly disrupt our business operations.

destruction of proprietary or other information, or otherwise significantly disrupt our business operations.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

Risks Relating to Our Common Stock

We have recently registered 63,888,878 shares of our common stock for possible resale by certain of our stockholders and have exercisable warrants for 14,590,366 shares of common stock, resulting in significant "market overhang" of our common stock.

In connection with the recently completed Stronghold Acquisition, we registered 63,888,878 shares of our common stock with the SEC for possible resale by Stronghold stockholders.

We have recently registered shares of our common stock for possible resale by certain of our stockholders, resulting in significant "market overhang" of our common stock.

In connection with the Stronghold Acquisition completed in 2022, Warburg Pincus & Company US, LLC and its affiliates hold approximately 46.1 million shares of our common stock.

This represents approximately 23% of our presently outstanding shares of common stock and if the selling stockholders choose to sell all or a large number of their shares, from time to time, it likely would have a depressive effect on the market price of our common stock.

In addition, we

have outstanding warrants with respect to 14,590,366 shares of common stock with an exercise price of $0.80 per share that have been registered for resale.

The holders could choose to sell the shares of common stock acquired upon exercise of their warrants, which could also have a depressive effect on the market price of our common stock.

The market price of our common stock may be volatile, which could cause the value of your investment to decline.

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Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements, and investment opportunities.

In addition, the terms of our Credit Agreement have restrictions on dividend payments to our equity holders, including our common stockholders.

In addition, the terms of our Second Credit Agreement have restrictions on dividend payments to our equity holders, including our common stockholders.

Our board of directors can, without stockholder approval, cause preferred stock to be issued on terms that could adversely affect common stockholders.

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Preferred shares issued by the board of directors could include voting rights, or even super voting rights, which could shift the ability to control the Company to the holders of the preferred stock.

Preferred shares could also have conversion rights into shares of common stock at a discount to the market price of the common stock which could negatively affect the market for our common stock.

Preferred shares could also have conversion rights into shares of common stock at a discount to the market price of the common stock which could

negatively affect the market for our common stock.

In addition, preferred shares would typically have preference in the event of liquidation of the Company, which means that the holders of preferred shares would be entitled to receive the net assets of the Company distributed in liquidation before the common stockholders receive any distribution of the liquidated assets.

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Provisions under Nevada law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

In addition to the ability of the board of directors to issue preferred stock, the existence of some provisions under Nevada law could delay or prevent a change in control of the Company, which could adversely affect the price of our

common stock.

Nevada law imposes some restrictions on mergers and other business combinations between us and any holder of 10% or more of our outstanding common stock.

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.

What changed 10-K

Item 1A. Risk Factors