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Item 1A. Risk Factors

2023-03-08 compared with 2021-12-14 · 164 added, 139 removed, 720 unchanged (30% of the section changed)

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

Other risks are described in Item 1.

Other risks are described in Item 1 and 2.

Business and Properties, Item 7.

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Risks Related to our Business, Operations, and Strategy

Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in the Permian Basin to stem rising seismic activity and earthquakes could increase our operating costs and adversely impact our business, results of operations and financial condition.

In September 2021, the RRC curtailed the amount of produced water companies were permitted to inject into some wells near Midland and Odessa in the Permian Basin, and has since indefinitely suspended some permits there and expanded the restrictions to other areas.

These actions were taken in an effort to control induced seismic activity and recent increases in earthquakes in the Permian Basin, which have been linked by the U.S.

and local seismologists to wastewater disposal in oil fields.

These restrictions on the disposal of produced water and a moratorium on new produced water disposal wells could result in increased operating costs, requiring us or our service providers to truck produced water, recycle it or dispose of it by other means, all of which could be costly.

We or our service providers may also need to limit disposal well volumes, disposal rates and pressures or locations, or require us or our service providers to shut down or curtail the injection of produced water into disposal wells.

These factors may make drilling activity in the affected parts of the Permian Basin less economical and adversely impact our business, results of operations and financial condition.

Enhanced scrutiny on ESG matters could have an adverse effect on the Company’s operations.

Enhanced scrutiny on ESG matters related to, among other things, concerns raised by advocacy groups about climate change, hydraulic fracturing, natural gas flaring, GHG emissions, waste disposal, oil spills, and explosions of natural gas transmission pipelines may lead to increased regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines, and enforcement interpretations.

These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens, increased risk of litigation, and adverse impacts on the Company’s access to capital.

Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance, and the public may engage in the permitting process, including through intervention in the courts.

Negative public perception could cause the permits the Company requires to conduct its operations to be withheld, delayed, or burdened by requirements that restrict the Company’s ability to profitably conduct its business.

We may be unable to quickly adapt to changes in market/investor priorities.

Historically, one of the key drivers in the unconventional resource industry has been growth in production and reserves.

With historical volatility in oil and natural gas prices and the likelihood that rising interest rates will increase the cost of borrowing, capital efficiency and free cash flow from earnings have become the key drivers for energy companies, particularly shale producers.

Such shifts in focus sometimes require changes in planning and resource management, which may not occur instantaneously.

Any delay in responding to such changes in market sentiment or perception may result in the investment community having a negative sentiment regarding our business plan, potential profitability and our ability to operate in a manner deemed "efficient," which may have a negative impact on the price of our common stock.

Oil, natural gas, and NGL prices are volatile.

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

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

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

Historically, the commodities market has been volatile.

For example, during the period from January 1, 2016 to September 30, 2021, NYMEX West Texas Intermediate (referred to as WTI) oil prices ranged from a high of $77.41 per Bbl on June 27, 2018 to a low of $(36.98) per Bbl on April 20, 2020.

During fiscal 2021, WTI prices ranged from a high of $75.54 to a low of $35.64 per Bbl.

Average daily prices for NYMEX Henry Hub gas ranged from a high of $23.86 per MMBtu to a low of $1.41 per MMBtu during fiscal 2021.

For example, during the period from January 1, 2016 to December 31, 2022, NYMEX West Texas Intermediate (referred to as WTI) oil prices ranged from a high of $123.64 per Bbl on March 8, 2022 to a low of $(36.98) per Bbl on April 20, 2020.

During 2022, WTI prices ranged from a high of $123.64 to a low of $71.05 per Bbl.

Average daily prices for NYMEX Henry Hub gas ranged from a high of $9.85 per MMBtu to a low of $3.46 per MMBtu during 2022.

If the prices of oil and natural gas continue to be volatile, reverse their recent increases, or decline, our operations, financial condition, cash flows and level of expenditures may be materially and adversely affected.

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• localized and global weather conditions;

• public health concerns such as COVID-19;

• public health concerns such as pandemic diseases;

• technological advances affecting energy consumption, including advances in exploration, development and production technologies;

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As a result, a substantial or extended decline in commodity prices may materially and adversely affect our future business, financial condition, results of operations, liquidity, or ability to finance planned capital expenditures.

If commodity prices decrease to a level such that our future undiscounted cash flows from our properties are less than their carrying value for a significant period of time, we will be required to take write-downs of the carrying values of our properties.

Accounting rules require that we periodically review the carrying value of our properties for possible impairment.

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 carrying value of our properties.

A write down constitutes a non-cash charge to earnings.

If market or other economic conditions deteriorate or if oil, natural gas and NGL prices decline, we may incur impairment charges, which may have a material adverse effect on our results of operations.

Our exploration and development projects require substantial capital expenditures.

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Additionally, we cannot assure you that unproved property acquired by us or undeveloped acreage leased by us will be profitably developed, that wells drilled by us in prospects that we pursue will be productive, or that we will recover all or any portion of our investment in such unproved property or wells.

Properties that we decide to drill may not yield oil, natural gas or NGLs in commercially viable quantities.

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.

Properties that we decide to drill that do not yield oil, natural gas or NGLs in commercially viable quantities will adversely affect our results of operations and financial condition.

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.

The use of micro-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 from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects.

Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including:

• unexpected drilling conditions;

• title problems;

• pressure or lost circulation in formations;

• equipment failure or accidents;

• adverse weather conditions;

• compliance with environmental and other governmental or contractual requirements;

• increase in the cost of, shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services.

Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties that we acquire, or obtain protection from sellers against such liabilities.

Acquiring oil and natural gas properties requires us to assess reservoir and infrastructure characteristics, including recoverable reserves, development and operating costs, and potential liabilities, including environmental liabilities.

Such assessments are inexact and inherently uncertain.

assessments are inexact and inherently uncertain.

For these reasons, the properties we have acquired or will acquire in the future may not produce as projected or may be more costly to operate than projected.

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

For example, our estimated proved reserves as of September 30, 2021 were calculated under SEC rules using the unweighted arithmetic average first-day-of-the-month prices for the prior 12 months of $57.64 per Bbl for oil and NGL volumes and $2.943 per MMBtu for natural gas volumes.

For example, our estimated proved reserves as of December 31, 2022 were calculated under SEC rules using the unweighted arithmetic average first-day-of-the-month prices for the prior 12 months of $94.14 per Bbl for oil and NGL volumes and $6.36 per MMBtu for natural gas volumes.

Using lower prices in estimating proved reserves would likely result in a reduction in proved reserve volumes due to economic limits.

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Our operations involve utilizing the latest drilling and completion techniques as developed by us and our service providers.

As of September 30, 2021, we have drilled and completed 75 gross operated horizontal wells on our West Texas an d New Mexico acreage, and therefore are subject to increased risks associated with horizontal drilling as compared to companies that have greater experience in horizontal drilling activities.

Risks that we face while drilling include, but are not limited to, failing to land our wellbore in the desired drilling zone, not staying in the desired drilling zone while drilling horizontally through the formation, not running our casing the entire length of the wellbore and not being able to run tools and other equipment consistently through the horizontal wellbore.

As of December 31, 2022, we have drilled and completed 170 gross operated horizontal wells on our West Texas an d New Mexico acreage, and therefore are subject to increased risks associated with horizontal drilling as compared to companies that have greater experience in horizontal drilling activities.

consistently through the horizontal wellbore.

Risks that we face while completing our wells include, but are not limited to, not being able to fracture stimulate the planned number of stages, not being able to run tools the entire length of the wellbore during completion operations and not successfully cleaning out the wellbore after completion of the final fracture stimulation stage.

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Any delays in drilling or legal issues causing us to lose leases on properties could have a material adverse effect on our results of operations and reserve growth.

As of September 30, 2021, approximately 27% of our net leasehold acreage was undeveloped or acreage on which wells have not been drilled or completed to a point that would pe rmit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.

As of December 31, 2022, approximately 11% of our net leasehold acreage was undeveloped or acreage on which wells have not been drilled or completed to a point that would pe rmit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.

Unless production is established on the undeveloped acreage covered by our leases, such leases will expire.

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Substantially all of our producing properties are geographically concentrated in the Northwest Shelf sub-basin within the Permian Basin of West Texas, an area in which industry activity has increased rapidly.

At September 30, 2021, the majority of our total estimated proved reserves were attributable to properties located in this area.

At December 31, 2022, the majority of our total estimated proved reserves were attributable to properties located in this area.

As a result of this concent ration, a number of our properties could experience any of the same conditions at the same time and, when compared to other companies that have a more diversified portfolio of properties, we may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, water shortages or other drought or extreme weather related conditions or interruption of the processing or transportation of oil, natural gas or NGLs.

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Any delay or inability to secure the personnel necessary for us to continue or complete our current and planned development activities could have a negative effect on production volumes or significantly increase costs, which could have a material adverse effect on our results of operations, liquidity and financial condition.

In addition, the geographic concentration of our assets including our total estim ated proved reserves as of September 30, 2021, exposes us to additional risks, such as changes in field-wide rules and regul ations that could cause us to permanently or temporarily shut-in all of our wells within a field.

In addition, the geographic concentration of our assets including our total estim ated proved reserves as of December 31, 2022, exposes us to additional risks, such as changes in field-wide rules and regul ations that could cause us to permanently or temporarily shut-in all of our wells within a field.

Our drilling and production programs may not be able to obtain access on commercially reasonable terms or otherwise to truck transportation, pipelines, gas gathering, transmission, storage and processing facilities to market our oil and natural gas production, certain of which we do not control, and our initiatives to expand our access to midstream and operational infrastructure may be unsuccessful.

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For example, production increases from competing Permian Basin producers, combined with limited pipeline and transportation capacity in the area, have gradually widened differentials in the Permian Basin.

For the year ended September 30, 2021, our realized oil differential to NYMEX WTI averaged $(2.81) per Bbl of oil and our realized natural gas differential to NYMEX Henry Hub averaged $(0.63) per Mcf of gas.

For the year ended December 31, 2022, our realized oil differential to NYMEX WTI averaged $(2.05) per Bbl of oil and our realized natural gas differential to NYMEX Henry Hub averaged $(3.12) per Mcf of gas.

Given that a significant amount of our production is from the Permian Basin, if the negative price differential in the Permian Basin increases, we expect that the effect of our price differential on our revenues will also increase.

Increases in the differential between the benchmark prices for oil and natural gas, such as the NYMEX WTI and NYMEX Henry Hub, and the realized price we receive could significantly reduce our revenues and our cash flow from operations.

Increases in the differential between the benchmark prices for

oil and natural gas, such as the NYMEX WTI and NYMEX Henry Hub, and the realized price we receive could significantly reduce our revenues and our cash flow from operations.

The development of our estimated proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate.

Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced.

A t September 30, 2021, approximately 42% of our total estimated proved reserves were classified as proved undeveloped.

Our approximate 30,647 MBoe of estimated proved undeveloped reserves are estimated to require an estimated $207.1 million of development capital.

A t December 31, 2022, approximately 37% of our total estimated proved reserves were classified as proved undeveloped.

Our approximate 28,551 MBoe of estimated proved undeveloped reserves are estimated to require $324.4 million of development capital.

Our development of these reserves may take longer and require higher levels of capital expenditures than we currently anticipate.

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In addition, delays in the development of reserves could cause us to have to reclassify our proved undeveloped reserves as unproved reserves.

We participate in oil and gas leases with third parties who may not be able to fulfill their commitments to our projects.

We own less than 100% of the working interest in the oil and gas leases on which we conduct operations, and other parties will own the remaining portion of the working interest.

We participate in oil and natural gas leases with third parties who may not be able to fulfill their commitments to our projects.

We own less than 100% of the working interest in the oil and natural gas leases on which we conduct operations, and other parties will own the remaining portion of the working interest.

Financial risks are inherent in any operation where the cost of drilling, equipping, completing and operating wells is shared by more than one person.

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A third-party operator’s failure to adequately perform operations, breach of the applicable agreements or failure to act in ways that are favorable to us could reduce our production and revenues, negatively impact our liquidity and cause us to spend capital in excess of our current plans, and have a material adverse effect on our financial condition and results of operations.

Accounting rules require that we periodically review the carrying value of our properties for possible impairment.

A write down constitutes a non-cash charge to earnings.

Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations.

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Unless we conduct successful ongoing exploitation, development and exploration activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced.

Our future reserves and production, and therefore our future cash flow and results of operations, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves.

Our future reserves and production, and therefore our future cash flow and results of operations, are highly dependent

on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves.

We may not be able to develop, exploit, find or acquire sufficient additional reserves to replace our current and future production.

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We have exposure to credit risk through receivables from purchasers of our oil, natural gas and NGL production.

One purchaser accounted for 87% of our revenues for the year ended September 30, 2021.

One purchaser accounted for 89% of our revenues for the year ended December 31, 2022.

This concentration of purchasers may impact our overall credit risk in that this purchaser may be similarly affected by changes in economic conditions or commodity price fluctuations.

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Also, pollution and environmental risks generally are not fully insurable.

The occurrence of an event that is not covered or fully covered by insurance and any delay in the payment of insurance proceeds for covered events could have a material adverse effect on our business, financial condition and results of operations.

Properties that we decide to drill may not yield oil, natural gas or NGLs in commercially viable quantities.

Properties that we decide to drill that do not yield oil, natural gas or NGLs in commercially viable quantities will adversely affect our results of operations and financial condition.

We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects.

Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including:

• unexpected drilling conditions;

• title problems;

• pressure or lost circulation in formations;

• equipment failure or accidents;

• adverse weather conditions;

• compliance with environmental and other governmental or contractual requirements;

• increase in the cost of, shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services.

The occurrence of an event that is not covered

or fully covered by insurance and any delay in the payment of insurance proceeds for covered events could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to make accretive acquisitions or successfully integrate acquired businesses or assets, and any inability to do so may disrupt our business and hinder our ability to grow.

In the future we may make acquisitions of oil and gas properties or businesses that complement or expand our current business.

The successful acquisition of oil and gas properties requires an assessment of several factors, including:

In the future we may make acquisitions of oil and natural gas properties or businesses that complement or expand our current business.

The successful acquisition of oil and natural gas properties requires an assessment of several factors, including:

• recoverable reserves;

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Unless production is established within the spacing units covering the undeveloped acres on which some of our drilling locations are identified, our leases for such acreage will expire.

As of September 30, 2021, 79% of our net undeveloped acreage is set to expire through 2022.

We intend to extend or renew any core lease we plan to develop or are still assessing for development that is set to expire in 2022 and expect to incur $0.3 million to extend or renew those leases, without taking into account the drilling of wells and holding leases by production.

As of December 31, 2022, 61% of our net undeveloped acreage is set to expire through 2023, before taking into account the expected drilling of wells and holding leases by production, while 12% of our net undeveloped acreage is set to expire through 2023, after taking into account the expected drilling of wells and holding leases by production.

We intend to extend or renew any core lease we plan to develop or are still assessing for development that is set to expire in 2023 and expect to incur $0.6 million to extend or renew those leases, after taking into account the expected drilling of wells and holding leases by production.

Where we do not have the option to extend a lease, however, we may not be successful in negotiating extensions or renewals.

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As a result, our drilling activities may not be successful or economical.

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

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

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

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

Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and potential.

Inspections are often not performed on properties being acquired, and environmental matters, such as subsurface contamination, are not necessarily observable even when an inspection is undertaken.

Any acquisition involves other potential risks, including, among other things:

• the validity of our assumptions about reserves, future production, revenues and costs;

• a decrease in our liquidity by using a significant portion of our cash from operations or borrowing capacity to finance acquisitions;

• a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions;

• the ultimate value of any contingent consideration agreed to be paid in an acquisition;

• dilution to stockholders if we use equity as consideration for, or to finance, acquisitions;

• the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate;

• an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets;

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

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

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

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

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

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

Acquisitions of assets or businesses may reduce, rather than increase, our distributable cash flow or may disrupt our business.

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Our revolving credit facility has substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to declare dividends.

The operating and financial restrictions and covenants in our revolving credit facility restrict, and any future financing agreements likely will restrict, our ability to finance future operations or capital needs, engage, expand or pursue our business activities or pay dividends.

activities or pay dividends.

Our revolving credit facility restricts, and any future financing agreements likely will restrict, its ability to, among other things:

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• redeem or repurchase shares from our stockholders;

• pay dividends to our stockholders unless the net leverage ratio does not exceed 2.75 to 1.0, the total revolving credit exposures under our revolving credit facility are not greater than 80% of the total revolving commitments, and no default or event of default then exists or would exist upon the payment of the dividend;

• pay dividends to our stockholders unless the net leverage ratio, after giving effect to pro forma adjustments, does not exceed 2.0 to 1.0, the total revolving credit exposures under our revolving credit facility are not greater than 80% of the total revolving commitments, and no default or event of default then exists or would exist upon the payment of the dividend;

• make certain payments of junior indebtedness;

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• enter into swap agreements and hedging arrangements.

Our ability to comply with these restrictions and covenants in the future is uncertain and will be affected by the levels of free cash flow and events or circumstances beyond our control, such as a downturn in our business or the economy in general or

reduced oil, natural gas and NGL prices.

A failure to comply with the provisions of our revolving credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable.

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The terms of our existing revolving credit facility or future debt arrangements may restrict us from adopting some of these alternatives.

In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis could harm our ability to incur

additional indebtedness.

In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis could harm our ability to incur additional indebtedness.

In the absence of sufficient cash flows and capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet debt service and other obligations.

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Our future financial condition and results of operations will depend on the success of our exploitation, development, and acquisition activities, which are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil and natural gas production.

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.

Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.” In addition, our cost of drilling, completing, and operating wells is often uncertain before drilling commences.

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• adverse weather conditions, such as tornadoes, droughts, ice storms, and extreme freeze events;

• lack of available treatment or disposal options for oil and gas waste, including produced water;

• lack of available treatment or disposal options for oil and natural gas waste, including produced water;

• environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment;

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Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost.

Some of our competitors may have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages or implement new technologies before we can.

Some of our competitors may have greater financial, technical and personnel resources than we do, which may allow them to gain technological

advantages or implement new technologies before we can.

Additionally, we may be unable to implement new technologies or services at all, on a timely basis or at an acceptable cost.

Limits on our ability to effectively use, implement or adapt to new technologies may have a material adverse effect on our business, financial condition and results of operations.

Similarly, the impact of the changing demand for oil and gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our exploration and development plans within our budget and on a timely basis.

We are highly dependent upon third-party services.

The cost of oilfield services typically fluctuates based on demand for those services.

There is no assurance that we will be able to contract for such services on a timely basis or that the cost of such services will remain at a satisfactory or affordable level.

The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil, natural gas and NGL prices, causing periodic shortages.

Historically, there have been shortages of drilling and workover rigs, pipe and other equipment as demand for rigs and equipment has increased along with the number of wells being drilled.

We cannot predict whether these conditions will exist in the future and, if so, what their timing and duration will be.

Such shortages could delay or cause us to incur significant expenditures that are not provided for in our capital budget, which could have a material adverse effect on our business, financial condition or results of operations.

Similarly, the impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Limitation or restrictions on our ability to obtain water may have an adverse effect on our operating results.

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We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, and raising additional capital, which could have a material adverse effect on our business.

Declining general economic, business or industry conditions may have a material adverse effect on our results of operations, liquidity and financial condition.

Concerns over global economic conditions, energy costs, climate change, geopolitical issues, inflation, the availability and cost of credit, the worldwide COVID-19 pandemic and the United States financial market have contributed to increased economic uncertainty and diminished expectations for the global economy.

In addition, continued hostilities in the Middle East and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the global economy.

These factors, combined with volatile commodity prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and a recession.

Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices.

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.

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 forseeable future.

Concerns over global economic conditions, the threat of pandemic diseases and the results thereof, energy costs, geopolitical issues, inflation, 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, declining business and consumer confidence, and increased unemployment, have precipitated an economic slowdown and a recession, which could expand to a global depression.

Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices and are expected to continue having a material adverse effect for the foreseeable future.

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 our operators can sell oil, natural gas, and NGLs, 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 than it has already.

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 natural gas as a result of our results of operations.

Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise.

Inflation has been an ongoing concern in the U.S.

Ongoing inflationary pressures have resulted in and may result in additional increases to the costs of goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise.

Sustained levels of high inflation caused the U.S.

Federal Reserve and other central banks to increase interest rates multiple times in 2022 in an effort to curb inflationary pressure on the costs of goods and services, which could have the effects of raising the cost of capital and depressing economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business.

We may experience further cost increases for our operations to the extent that elevated inflation remains.

We may not be able to keep pace with technological developments in our industry.

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Negative public perception could cause the permits we need to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business.

Risks Related to COVID-19, Acts of God, and Cyber Security

Our business and operations may be adversely affected by the recent COVID-19 pandemic or other similar outbreaks.

As a result of the COVID-19 outbreak that spread quickly across the globe, federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies.

Various containment measures, which included the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity and a resulting decrease in energy demand.

The timeline and potential magnitude of the COVID-19 outbreak is currently unknown.

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.

For example, a significant outbreak of coronavirus or other contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect our operating results.

In addition, the effects of COVID-19 and concerns regarding its global spread have recently negatively impacted the domestic and international demand for crude oil and natural gas, which has contributed to price volatility.

As the potential impact from COVID-19 is difficult to predict, the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain.

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, all of which will be beyond our control.

These potential impacts, while uncertain, could adversely affect our results of operations.

Risks Related to Acts of God and Cyber Security

Power outages, limited availability of electrical resources, and increased energy costs could have a material adverse effect on us.

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Any such consequence could have a material adverse effect on our business.

A Terrorist attack or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent us from meeting our financial and other obligations.

If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for oil and natural gas causing a reduction in our revenues.

Oil and natural gas related facilities could be direct targets of terrorist attacks, and our operations could be adversely impacted if infrastructure integral to our customers’ operations is destroyed or damaged.

Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

Risks Related to Legal, Regulatory, and Tax Matters

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(iii) the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands, protected species habitat, and other protected areas;

(iv) the application of specific health and safety criteria addressing worker protection;

application of specific health and safety criteria addressing worker protection;

(v) the imposition of substantial liabilities for pollution resulting from our operations;

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Such enforcement actions often involve taking difficult and costly compliance measures or corrective actions.

Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, the imposition of investigatory or remedial obligations, and the issuance of orders limiting or prohibiting

some or all of our operations.

In addition, we may experience delays in obtaining or be unable to obtain required permits, which may delay or interrupt our operations or specific projects and limit our growth and revenue.

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Changes in environmental laws and regulations occur frequently and tend to become more stringent over time, and any changes that result in more stringent or costly well drilling, construction, completion or water management activities, air emissions control or waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition.

For example, on October 1, 2015, the EPA issued a final rule under the Clean Air Act, lowering the National Ambient Air Quality Standard, or NAAQS, for ground-level ozone from the current standard of 75 parts per billion, or ppb, for the current 8-hour primary and secondary ozone standards to 70 ppb for both standards.

For example, on October 1, 2015, the EPA issued a final rule under the CAA, lowering the NAAQS, for ground-level ozone from the current standard of 75 parts per billion, or ppb, for the current 8-hour primary and secondary ozone standards to 70 ppb for both standards.

Subsequently, the EPA designated over 200 counties across the U.S.

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Should we fail to comply with all applicable regulatory agency administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines.

Under the Energy Policy Act of 2005, the Federal Energy Regulatory Commission (“FERC”) has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including civil penalty authority under the Natural Gas Act of 1938 (the “NGA”) to impose penalties for current violations of up to $1.0 million/d for each violation.

Under the Energy Policy Act of 2005, FERC has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including civil penalty authority under the NGA to impose penalties for current violations of up to $1.0 million per day for each violation.

FERC may also impose administrative and criminal remedies and disgorgement of profits associated with any violation.

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Additional rules and regulations pertaining to those and other matters may be considered or adopted by FERC from time to time.

Additionally, the Federal Trade Commission (the “FTC”) has regulations intended to prohibit market manipulation in the petroleum industry with authority to fine violators of the regulations civil penalties of up to $1.0 million per day, and the Commodity Futures Trading Commission (the “CFTC”), prohibits market manipulation in the markets regulated by the CFTC, including similar anti-manipulation authority with respect to oil swaps and futures contracts as that granted to the CFTC with respect to oil purchases and sales.

Additionally, the Federal Trade Commission (the “FTC”) has regulations intended to prohibit market manipulation in the petroleum industry with authority to fine violators of the regulations civil penalties of up to $1.0 million per day, and the CFTC, prohibits market manipulation in the markets regulated by the CFTC, including similar anti-manipulation authority with respect to oil swaps and futures contracts as that granted to the CFTC with respect to oil purchases and sales.

The CFTC rules subject violators to a civil penalty of up to the greater of $1.0 million or triple the monetary gain to the person for each violation.

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The distinction between FERC-regulated transmission services and gathering services not subject to the jurisdiction of FERC, however, has been the subject of substantial litigation, and FERC determines whether facilities are gathering facilities on a case-by-case basis, so the classification and regulation of our gathering facilities is subject to change based on future determinations by FERC, the courts or Congress.

If FERC were to consider the status of an individual facility and determine that the facility or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides interstate service, the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by FERC under the NGA or the Natural Gas Policy Act (“NGPA”).

Such regulation could decrease revenue and increase operating costs.

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FERC regulation may indirectly impact gathering services not directly subject to FERC regulation.

FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets.

FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on interstate open access

transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets.

In recent years, FERC has pursued procompetitive policies in its regulation of interstate natural gas pipelines.

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However, several federal agencies have asserted regulatory authority over certain aspects of the process.

For example, in February 2014, the EPA asserted regulatory authority pursuant to the U.S.

Safe Drinking Water Act’s (“SDWA”) Underground Injection Control (“UIC”) program over hydraulic fracturing activities involving the use of diesel and issued guidance covering such activities.

Also, beginning in 2012, the EPA issued a series of regulations under the federal Clean Air Act (“CAA”) that include New Source Performance Standards (“NSPS”), known as Subpart OOOO, for completions of hydraulically fractured natural gas wells and certain other plants and equipment and, in May 2016, published a final rule establishing new emissions standards, known as Subpart OOOOa, for methane and volatile organic compounds (“VOCs”) from certain new, modified and reconstructed equipment and processes in the oil and natural gas source category.

For example, in February 2014, the EPA asserted regulatory authority pursuant to the SDWA UIC program over hydraulic fracturing activities involving the use of diesel and issued guidance covering such activities.

Also, beginning in 2012, the EPA issued a series of regulations under the federal CAA that include NSPS, known as Subpart OOOO, for completions of hydraulically fractured natural gas wells and certain other plants and equipment and, in May 2016, published a final rule establishing new emissions standards, known as Subpart OOOOa, for methane and volatile organic compounds (“VOCs”) from certain new, modified and reconstructed equipment and processes in the oil and natural gas source category.

The NSPS Subpart OOOO and OOOOa rules have since been subject to numerous legal challenges as well as EPA reconsideration proceedings and subsequent amendment proposals.

Most recently, on September 14 and 15, 2020, EPA published two new rules in the Federal Register that remove the transmission and storage sectors of the oil and gas industry from regulation under the NSPS and rescind methane-specific standards for the production and processing segments of the industry.

Most recently, on September 14 and 15, 2020, EPA published two new rules in the Federal Register that remove the transmission and storage sectors of the oil and natural gas industry from regulation under the NSPS and rescind methane-specific standards for the production and processing segments of the industry.

However, states and environmental groups brought suit challenging the new rules almost immediately, and in June 2021, Congress partially overturned the rollback.

Furthermore, in November 2021, EPA issued a proposed rule which would update, strengthen, and expand the NSPS Subpart OOOOa regulations for methane and VOC emissions from new, modified, and reconstructed sources.

Notably, the proposed rule also includes emissions guidelines to assist states in the development of plans to regulate methane emissions from certain existing sources.

Legal challenges to the proposed rule are likely to follow, and accordingly, legal uncertainty exists with respect to the future scope and extent of implementation of the methane rule;

Furthermore, in November 2021 and November 2022, EPA issued proposed rules which would update, strengthen, and expand the NSPS Subpart OOOOa regulations for methane and VOC emissions from new, modified, and reconstructed sources.

Notably, the proposed rules also include emissions guidelines to assist states in the development of plans to regulate methane emissions from certain existing sources.

Legal challenges to the proposed rules are likely to follow, and accordingly, legal uncertainty exists with respect to the future scope and extent of implementation of the methane rule;

however, even as currently implemented, these rules apply to our operations, including requirements for the installation of equipment to control VOC emissions from certain hydraulic fracturing of wells and fugitive emissions from well site and other production equipment, and additional regulation, which could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact or delay oil and natural gas production activities, which could have a material adverse effect on our business.

The federal Bureau of Land Management (“BLM”) published a final rule in March 2015 that established new or more stringent standards relating to hydraulic fracturing on federal and American Indian lands.

The BLM published a final rule in March 2015 that established new or more stringent standards relating to hydraulic fracturing on federal and American Indian lands.

However, following years of litigation, the BLM rescinded the rule in December 2017.

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Also, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances.

From time to time, legislation has been introduced in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process but, to date, such legislation has not been

At the state level, Texas, where we conduct our operations, is among the states that has adopted regulations that impose new or more stringent permitting, including the requirement for hydraulic-fracturing operators to complete and submit a list of chemicals used during the fracking process.

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The split among federal circuit courts of appeals that decided these cases engendered two petitions for writ of certiorari to the United States Supreme Court in August 2018, one of which was granted in February 2019.

EPA has also brought attention to the reach of the CWA’s jurisdiction in such instances by issuing a request for comment in February 2018 regarding the applicability of the CWA permitting program to discharges into groundwater with a direct hydrological connection to jurisdictional surface water, which hydrological connections should be considered “direct,” and whether such discharges would be better addressed through other federal or state programs.

The EPA has also brought attention to the reach of the CWA’s jurisdiction in such instances by issuing a request for comment in February 2018 regarding the applicability of the CWA permitting program to discharges into groundwater with a direct hydrological connection to jurisdictional surface water, which hydrological connections should be considered “direct,” and whether such discharges would be better addressed through other federal or state programs.

In a statement issued by EPA in April 2019, the agency concluded that the CWA should not be interpreted to require permits for discharges of pollutants that reach surface waters via groundwater.

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Climate change continues to attract considerable public and scientific attention.

As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional, and state levels of government to monitor and limit emissions of greenhouse gases (“GHGs”).

While no comprehensive climate change legislation has been implemented at the federal level, the EPA and states or groupings of states have pursued legal initiatives in recent years that seek to reduce GHG emissions through efforts that include consideration of cap-and-trade programs, carbon taxes, GHG reporting and

tracking programs and regulations that directly limit GHG emissions from certain sources.

As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional, and state levels of government to monitor and limit emissions of GHGs.

In particular, the EPA has adopted rules under authority of the CAA that, among other things, establish certain permit reviews for GHG emissions from certain large stationary sources, which reviews could require securing permits at covered facilities emitting GHGs and meeting defined technological standards for those GHG emissions.

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Although much of the initial rules remain intact and effective, the rules have been subject to legal challenges, reconsideration by EPA, stays, and proposed amendments.

For example, on September 14 and 15, 2020, EPA published two new final rules in the Federal Register that remove the transmission and storage sectors of the oil and gas industry from regulation under the NSPS and rescind methane-specific standards for the production and processing segments of the industry.

For example, on September 14 and 15, 2020, EPA published two new final rules in the Federal Register that remove the transmission and storage sectors of the oil and natural gas industry from regulation under the NSPS and rescind methane-specific standards for the production and processing segments of the industry.

However, states and environmental groups brought suit challenging the new rules almost immediately, and in June 2021, Congress partially overturned the rollback.

Furthermore, in November 2021, the EPA issued a proposed rule which would update, strengthen, and expand the NSPS Subpart OOOOa regulations for methane and VOC emissions from new, modified, and reconstructed sources.

Notably, the proposed rule also includes emissions guidelines to assist states in the development of plans to regulate methane emissions from certain existing sources.

Furthermore, in November 2021 and November 2022, the EPA issued proposed rules which would update, strengthen, and expand the NSPS Subpart OOOOa regulations for methane and VOC emissions from new, modified, and reconstructed sources.

Notably, the proposed rules also include emissions guidelines to assist states in the development of plans to regulate methane emissions from certain existing sources.

The BLM also finalized rules regarding the control of methane emissions in November 2016 that applied to oil and natural gas exploration and development activities on public and tribal lands.

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The adoption and implementation of any international, federal or state legislation or regulations that require reporting of GHGs or otherwise restrict emissions of GHGs could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, spurred by increasing concerns regarding climate change, the oil and gas industry faces growing demand for corporate transparency and a demonstrated commitment to sustainability goals.

In addition, spurred by increasing concerns regarding climate change, the oil and natural gas industry faces growing demand for corporate transparency and a demonstrated commitment to sustainability goals.

ESG goals and programs, which typically include extralegal targets related to environmental stewardship, social responsibility, and corporate governance, have become an increasing focus of investors and shareholders across the industry.

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Future changes in U.S.

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

Additionally, future legislation could be enacted that increases the taxes or fees imposed on oil and natural gas extraction or production.

federal income tax laws, or the introduction of a carbon tax, as well as any similar changes in state law, could eliminate or postpone certain tax deductions that currently are available with respect to oil and natural gas development, or increase costs, and any such changes could have an adverse effect on our financial position, results of operations, and cash flows.

Additionally, future legislation could be enacted that increases the taxes or fees imposed on oil and

natural gas extraction or production.

Any such legislation could result in increased operating costs and/or reduced consumer demand for petroleum products, which in turn could affect the prices we receive for our oil, natural gas or NGLs.

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however, many states place limitations on contractual indemnity agreements, particularly agreements that indemnify a party against the consequences of its own negligence.

Furthermore, certain states, including Louisiana, New Mexico, Texas and Wyoming have

enacted statutes generally referred to as “oilfield anti-indemnity acts” expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements.

Furthermore, certain states, including Louisiana, New Mexico, Texas and Wyoming have enacted statutes generally referred to as “oilfield anti-indemnity acts” expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements.

Such anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, financial condition, prospects and results of operations.

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• general market conditions, including fluctuations in commodity prices;

• political conditions in oil and gas producing regions;

• political conditions in oil and natural gas producing regions;

• domestic and international economic, legal and regulatory factors unrelated to our performance;

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The amount of our quarterly dividends will generally depend on the performance of our business, which has a limited operating history.

The board of directors may modify or revoke our dividend policy at any time at its discretion.

The Board may modify or revoke our dividend policy at any time at its discretion.

We are not required to pay any dividends on our common stock at all.

Accordingly, the board of directors may change our dividend policy at any time at its discretion and could elect not to pay dividends on our common stock for one or more quarters.

Accordingly, the Board may change our dividend policy at any time at its discretion and could elect not to pay dividends on our common stock for one or more quarters.

Any modification or revocation of our cash dividend policy could substantially reduce or eliminate the amounts of dividends to our common stockholders.

The amount of dividends we make, if any, and the decision to make any dividend at all will be determined by our board of directors, whose interests may differ from those of our common stockholders.

The amount of dividends we make, if any, and the decision to make any dividend at all will be determined by our Board, whose interests may differ from those of our common stockholders.

The amount of cash we have available for dividends to our common stockholders depends primarily on our cash flow and not solely on our profitability, which may prevent us from paying dividends, even during periods in which we record net income.

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Delaware law imposes restrictions on our ability to pay cash dividends on our common stock.

Our common stockholders do not have a right to dividends on such shares unless declared or set aside for payment by our board of directors.

Our common stockholders do not have a right to dividends on such shares unless declared or set aside for payment by our Board.

Under Delaware law, cash dividends on capital stock may only be paid from “surplus” or, if there is no “surplus,” from the corporation’s net profits for the then-current or the preceding fiscal year.

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Our business may not generate sufficient surplus or net profits from operations to enable us to pay dividends on our common stock.

We have previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future, or otherwise fail to maintain an effective system of internal controls, which could result in a restatement of our financial statements or cause us to fail to meet our reporting obligations.

As of our fiscal quarter ended March 31, 2021, we identified material weaknesses in our internal control over financial reporting.

In particular, we had not designed an effective financial reporting process and did not complete thorough reviews of financial reports in a timely manner to allow for an appropriate level of analysis that would have identified these errors.

errors principally related to (i) accounting for stock-based compensation and our failure to record compensation expense for certain vested stock-based compensation grants in the correct reporting period, (ii) accounting for dividend distributions and our failure to record a declared dividend in the reporting period in which the dividend was declared, (iii) accounting for derivative settlements, and (iv) controls over preparation and review of the Company’s statement of cash flows were not effective.

While the material weaknesses have been remediated as of September 30,2021, we cannot provide assurance that we will not identify additional material weaknesses in future periods or that we will be successful in remediating any future significant deficiencies or material weaknesses in internal control over financial reporting.

Consequently, if material weaknesses or significant deficiencies occur in the future, it could affect the financial results that we report which could result in a restatement of our financial statements or cause us to fail to meet our reporting obligations.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our Board may determine.

The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Risks Related to the Company

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

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If some investors find our common stock less attractive as a result of any choices to reduce disclosure we may make, there may be a less active trading market for our common stock and our stock price may be more volatile.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock.

Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Risks Related to the Company

Our business and operations could be adversely affected if we lose key personnel.

We depend to a large extent on the services of our officers, including Bobby Riley, our Chief Executive Officer, Kevin Riley, our President, Philip Riley, our Chief Financial Officer, Corey Riley, our Executive Vice President – Business Intelligence, and Michael Palmer, our Executive Vice President Corporate – Land.

We depend to a large extent on the services of our officers, including Bobby Riley, our Chief Executive Officer, Kevin Riley, our President, Philip Riley, our Chief Financial Officer, Corey Riley, our Executive Vice President – Business Intelligence, Michael Palmer, our Executive Vice President Corporate – Land.

These individuals have extensive experience and expertise in evaluating and analyzing producing oil and natural gas properties and drilling prospects, maximizing production from oil and natural gas properties and developing and executing financing strategies.

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We do not maintain key-man life insurance with respect to any management personnel.

Our success will be dependent on our ability to continue to retain and utilize skilled technical

Our success will be dependent on our ability to continue to retain and utilize skilled technical personnel.

The loss of the services of our senior management or technical personnel could have a material adverse effect on our business, financial condition, and results of operations.

Our executive officers, directors and principal stockholders have the ability to control or significantly influence all matters submitted to the Company’s stockholders for approval.

As of September 30, 2021, our executive officers, directors and principal stockholders, in the aggregate, ow n 80.1% of t he fully diluted common stock of the Company.

As of December 31, 2022, our executive officers, directors and principal stockholders, in the aggregate, ow n 77.3% of t he fully diluted common stock of the Company.

As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the Company’s stockholders for approval, as well as the Company’s management and affairs.

For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the Company’s assets.

This concentration of voting power could delay or prevent an acquisition of the Company on terms that other stockholders may desire.

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These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

In addition, because our board of directors is responsible for appointing the members of the management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove current management by making it more difficult for stockholders to replace members board of directors.

In addition, because our Board is responsible for appointing the members of the management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove current management by making it more difficult for stockholders to replace members of our board of directors.

Among other things, these provisions:

• allow the authorized number of directors to be changed only by resolution of the board of directors;

• allow the authorized number of directors to be changed only by resolution of the Board;

• after a certain date, limit the manner in which stockholders can remove directors from the Board;

• establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to the board of directors;

• establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to the Board;

• after a certain date, require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by written consent;

• limit who may call stockholder meetings;

• authorize the board of directors to issue preferred stock without stockholder approval, which could be used to institute a shareholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by the board of directors;

• authorize the Board to issue preferred stock without stockholder approval, which could be used to institute a shareholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by the Board;

• after a certain date, require the approval of the holders of at least 66 2/3% of the votes that all the stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

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Our bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for any actions arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers, employees or stockholders, which may discourage such lawsuits against the Company’s and its directors, officers, employees or stockholders.

Alternatively, if a court were to find these provisions in our

bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers, employees or stockholders, which may discourage such lawsuits against the Company and its directors, officers, employees or stockholders.

Alternatively, if a court were to find these provisions in our bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Conflicts of interest could arise in the future between us, on the one hand, and certain of our stockholders and their respective affiliates, including their funds and their respective portfolio companies, on the other hand, concerning among other things, potential competitive business activities or business opportunities.

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As a result, certain of our stockholders may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential customers.

Certain of our stockholders and their respective portfolio companies may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

Certain of our stockholders and their respective portfolio companies may acquire or seek to acquire assets that we seek to acquire and, as a

result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

Under our certificate of incorporation, certain of our stockholders and/or one or more of their respective affiliates are permitted to engage in business activities or invest in or acquire businesses which may compete with our business or do business with any client of ours.

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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