What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-06 compared with 2023-03-08 · 163 added, 149 removed, 735 unchanged (30% of the section changed)

The Company is subject to various risks and uncertainties in the ordinary course of our business.

The Company is subject to various risks and uncer tainties in the ordinary course of business.

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

5 unchanged sentences

If any of these risks actually occurs, it could materially harm our business, financial condition or results of operations and the trading price of our shares could decline.

Investors should carefully consider each of the following risk factors and all of the other information set forth in this Form 10-K.

Investors should carefully consider each of the following risk factors and all of the other information set forth in this Annual Report.

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.

Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in certain areas of 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.

The NMOCD and the RRC have each imposed stricter requirements for oil and gas wastewater injection activities in response to seismic activity in the Permian Basin.

For example, in November 2021, NMOCD implemented a “Seismicity Response Protocol” that imposes additional analysis, reporting, injection rate reduction or curtailment, and notification requirements on operators depending on the number and intensity of seismic events.

In September 2021, the RRC announced that it will not issue any new saltwater disposal (“SWD”) well permits in an area known as the Gardendale Seismic Response Area (“SRA”), and will require existing SWD wells in that area to reduce their maximum daily injection rate to 10,000 barrels per day per well.

In December 2021, the RRC went on to suspend all well activity in deep formations in the Gardendale SRA, effectively terminating 33 disposal well permits.

In October 2021, the RRC identified an additional SRA—the Northern Culberson-Reeves (“NCR”) SRA—and, in January 2022, the RRC identified still another SRA—the Stanton SRA.

Operators in the NCR and Stanton SRAs were required to implement seismic response plans, which include expanded data collection efforts,

contingency responses for future seismicity, and scheduled checkpoint updates with RRC staff.

Both the Gardendale and NCR SRAs were expanded in December 2022 in response to additional earthquakes in the area and, effective January 12, 2024, the RRC suspended all (totaling 23) deep disposal well permits in the NCR SRA.

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.

5 unchanged sentences

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.

These concerns and 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.

19 unchanged sentences

• worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas, and NGLs;

• private and government investment in and regulatory incentives for non-fossil fuel energy production;

• changes in applicable laws and regulations;

• the price and quantity of foreign imports, including foreign oil;

11 unchanged sentences

• localized and global supply and demand fundamentals and transportation availability;

• localized and global weather conditions;

• localized and global weather conditions and events;

• public health concerns such as pandemic diseases;

19 unchanged sentences

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.

During the year ended December 31, 2023, the Company recognized an impairment loss on proved properties relating to certain properties in Texas outside of the Company's acreage in the Champions Field.

The impairment was primarily driven by notably lower commodity pricing at the time of measurement of fair value at year-end 2023.

Our exploration and development projects require substantial capital expenditures.

2 unchanged sentences

We make and expect to continue to make substantial capital expenditures for the exploitation, development, and acquisition of oil and natural gas reserves.

We expect to fund our growth primarily through cash flow from operations, availability under our revolving credit facility, and subsequent equity or debt offerings when appropriate.

The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, oil, natural gas and NGL prices, actual drilling results, the availability of drilling rigs and other services and equipment, and regulatory, technological and competitive developments.

We expect to fund our growth primarily through cash flow from operations, availability under our Credit Facility, and subsequent equity or debt offerings when appropriate.

The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, oil, natural gas and NGL prices, actual drilling results, the availability of drilling rigs and other services and equipment, regulatory, technological and competitive developments, and worldwide and regional economic conditions.

A reduction in commodity prices from current levels may result in a decrease in our actual capital expenditures, which would negatively impact our ability to grow production.

7 unchanged sentences

• our ability to acquire, locate and produce new reserves;

• our ability to borrow under our revolving credit facility.

If our revenue or the borrowing base under our revolving credit facility decreases as a result of lower oil, natural gas and NGL prices, operating difficulties, declines in reserves, or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations and growth at current levels.

• our ability to borrow under our Credit Facility.

If our revenue or the borrowing base under our Credit Facility decreases as a result of lower oil, natural gas and NGL prices, operating difficulties, declines in reserves, or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations and growth at current levels.

If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.

If cash flow generated by our operations or available borrowings under our revolving credit facility are not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our properties, which in turn could lead to a decline in our reserves and production, and would adversely affect our business, financial condition, and results of operations.

If cash flow generated by our operations or available borrowings under our Credit Facility are not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our properties, which in turn could lead to a decline in our reserves and production, and would adversely affect our business, financial condition, and results of operations.

Our development and exploratory drilling efforts and our well operations may not be profitable or achieve our targeted returns.

20 unchanged sentences

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.

assessments are inexact and inherently uncertain.

Such assessments are inexact, inherently uncertain, and often time-constrained.

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.

3 unchanged sentences

We may be unable to obtain contractual indemnities from the seller for liabilities created prior to our purchase of the property.

We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations.

We may be required to assume the risk of the physical and environmental condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations.

Reserve estimates depend on many assumptions that may turn out to be inaccurate.

20 unchanged sentences

As a result, the amount of production data from horizontal wells available to reserve engineers is relatively small compared to that of production data from vertical wells.

Until a greater number of horizontal wells have been completed in the San Andres Formation, and a longer production history from these wells has been established, there may be a greater variance in our proved reserves on a year-over-year basis due to the transition from vertical to horizontal reserves in both the proved developed and proved undeveloped categories.

transition from vertical to horizontal reserves in both the proved developed and proved undeveloped categories.

Such variance could be material and any such variance could have a material and adverse impact on our cash flows and results of operations.

1 unchanged sentence

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

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.

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, 2023, we had drilled and completed 517 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 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.

13 unchanged sentences

If our leases expire, we will lose our right to develop such properties.

Substantially all of our producing properties are located in the Northwest Shelf within the Permian Basin of West Texas, making us vulnerable to risks associated with operating in one major geographic area.

Substantially all of our producing properties are located in the Northwest Shelf within the Permian Basin of West Texas and Southeastern New Mexico, making us vulnerable to risks associated with operating in one major geographic area.

Specifically, as the Permian Basin is an area of high industry activity, we may be unable to hire, train, or retain qualified personnel needed to manage and operate our assets.

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 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.

At December 31, 2023, the majority of our total estimated proved reserves were attributable to properties located in the Northwest Shelf within the Permian Basin of West Texas and Southeastern New Mexico, an area in which industry activity has increased rapidly.

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 or disruptions, 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.

Specifically, demand for qualified personnel in this area, and the cost to attract and retain such personnel, may increase substantially in the future.

5 unchanged sentences

Access to such facilities is, in many respects, beyond our control.

If these facilities are unavailable to us on commercially reasonable terms or otherwise, we could be forced to shut in some production or delay or discontinue drilling plans and commercial production following a discovery of hydrocarbons.

If these facilities are unavailable to us on commercially reasonable terms or otherwise (either temporarily or long-term), we could be forced to shut in some production or delay or discontinue drilling plans and commercial production following a discovery of hydrocarbons, as was the case in July and August 2023 when our producing wells in the Redlake field in New Mexico were shut in due to an unexpected maintenance issue with our third party processing plant.

We rely (and expect to rely in the future) on facilities developed and owned by third parties in order to store, process, transmit, and sell our oil and natural gas production.

20 unchanged sentences

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.

4 unchanged sentences

We expect to fund our growth primarily through cash flow from operations, availability under our revolving credit facility, and subsequent equity or debt offerings when appropriate.

We expect to fund our growth primarily through cash flow from operations, availability under our Credit Facility, and subsequent equity or debt offerings when appropriate.

Delays in the development of our reserves, increases in costs to drill and develop such reserves, or decreases in commodity prices will reduce the PV-10 value of our estimated proved undeveloped reserves and future net revenues estimated for such reserves and may result in some projects becoming uneconomic.

11 unchanged sentences

As a participant in these operations, we may not be able to maximize the value associated with these properties in the manner we believe appropriate, or at all.

For example, we cannot control the success of drilling and development activities on properties operated by third parties, which depend on a number of factors under the control of a third-party operator, including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational activities, the timing and amount of capital expenditures and the selection of suitable technology.

For example, we cannot control the success of drilling and development activities on

properties operated by third parties, which depend on a number of factors under the control of a third-party operator, including such operator’s determinations with respect to, among other things, the nature and timing of drilling and operational activities, the timing and amount of capital expenditures and the selection of suitable technology.

In addition, the third-party operator’s operational expertise and financial resources and its ability to gain the approval of other participants in drilling wells will impact the timing and potential success of drilling and development activities in a manner that we are unable to control.

3 unchanged sentences

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.

6 unchanged sentences

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

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.

One purchaser accounted for 70% of our revenues and another purchaser accounted for more than 10% of our revenues for the year ended December 31, 2023.

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

We do not require our customers to post collateral.

The inability or failure of our significant purchaser to meet their obligations to us or their insolvency or liquidation may materially adversely affect our financial condition and results of operations.

The inability or failure of our significant purchasers to meet their obligations to us or their insolvency or liquidation may materially adversely affect our financial condition and results of operations.

We may incur substantial losses and be subject to substantial liability claims as a result of our operations.

3 unchanged sentences

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

Our exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the risk of fire, explosions, blowouts, surface cratering or other cratering, uncontrollable flows of natural gas, oil, well fluids and formation water, pipe or pipeline failures, abnormally pressured formations, casing collapses, reservoir damage and environmental hazards such as oil, produced water or chemical spills, natural gas leaks, ruptures or discharges of toxic gases.

Our exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the risk of fire, explosions, blowouts, surface cratering or other cratering, uncontrollable flows of natural gas, oil, well fluids and formation water, pipe or pipeline failures, processing or transportation capacity constraints or disruptions, abnormally pressured formations, casing collapses, reservoir damage and environmental hazards such as oil, produced water or chemical spills, natural gas leaks, ruptures or discharges of toxic gases.

Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for:

• injury or loss of life;

• medical monitoring;

• natural resources damages;

• employee/employer liabilities and risks, including wrongful termination, discrimination, labor organizing, retaliation claims, and general human resource related matters;

6 unchanged sentences

• suspension of our operations;

and repair and remediation costs;

• repair and remediation costs.

4 unchanged sentences

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.

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.

4 unchanged sentences

• estimates of operating costs;

• estimates future development costs;

• estimates of future development costs;

• estimates of the costs and timing of plugging and abandonment;

3 unchanged sentences

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

Reviews may not always be performed on every well, and environmental problems, such as subsurface or groundwater contamination, are not necessarily observable even when a review is performed.

Reviews may not always be performed on every well or facility, and environmental problems, such as subsurface or groundwater contamination, are not necessarily observable even when a review is performed.

Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems.

5 unchanged sentences

No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.

Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.

In addition, our revolving credit facility imposes certain limitations on our ability to enter into mergers or combination transactions as well as limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions.

Our failure to achieve consolidation savings, to integrate the

acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.

In addition, our Credit Facility imposes certain limitations on our ability to enter into mergers or combination transactions as well as limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions.

We may incur losses as a result of title defects in the properties in which we invest.

10 unchanged sentences

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 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.

As of December 31, 2023, 43% of our net undeveloped acreage is set to expire in 2024, before taking into account the expected drilling of wells and holding leases by production, while 4% of our net undeveloped acreage is set to expire through 2024, 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 2024 and expect to incur $0.2 million to extend or renew those leases, after taking into account the expected drilling of wells and holding leases by production.

20 unchanged sentences

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.

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

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

32 unchanged sentences

The terms of any funding we are able to obtain may not be favorable to us and may be highly dilutive to our stockholders.

We may be unable to access capital due to unfavorable market conditions or other market factors outside of our control such as ESG and/or climate change restrictions.

We may be unable to access capital due to unfavorable market conditions or other market factors outside of our control such as ESG and/or climate change policies and restrictions.

There can be no assurance that we will be able to raise additional capital when needed.

The failure to obtain additional capital when needed would have a material adverse effect on our business.

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.

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

Our Credit Facility and our Senior Notes have 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 Credit Facility and our Senior Notes 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.

Our Credit Facility and our Senior Notes restrict, and any future financing agreements likely will restrict, our ability to, among other things:

• incur indebtedness;

6 unchanged sentences

• redeem or repurchase shares from our stockholders;

• 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;

• pay dividends to our stockholders unless certain tests under the Credit Facility and Senior Notes are satisfied;

• make certain payments of junior indebtedness;

1 unchanged sentence

• enter into certain restrictive agreements;

• make certain amendments to our governing documents;

• make certain accounting changes;

• 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.

A failure to comply with the provisions of our 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.

Further, our ability to pay dividends to our stockholders will be restricted and our lenders’ commitment to make further loans to us may terminate.

We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and our common stock holders could experience a partial or total loss of their investment.

In addition, our obligations under our revolving credit facility are secured by substantially all of our assets, and if we are unable to repay our indebtedness under our revolving credit facility, the lenders can seek to foreclose on our assets.

We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and our common stockholders could experience a partial or total loss of their investment.

In addition, our obligations under our Credit Facility are secured by substantially all of our assets, and if we are unable to repay our indebtedness under our Credit Facility, the lenders can seek to foreclose on our assets.

Our indebtedness could reduce our financial flexibility.

2 unchanged sentences

• a high level of debt would increase our vulnerability to general adverse economic and industry conditions;

• the covenants contained in our revolving credit facility limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments;

• the covenants contained in our Credit Facility and Senior Notes limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments;

• a high level of debt could impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes.

Any significant reduction in our borrowing base under our revolving credit facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.

Our revolving credit facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine in accordance with the terms of the agreement.

Any significant reduction in our borrowing base under our Credit Facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.

Our Credit Facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine in accordance with the terms of the agreement.

The borrowing base depends on, among other things, projected revenues from, and asset values of, the proved oil and natural gas properties securing our loan.

7 unchanged sentences

Any such sale could have a material adverse effect on our business and financial results.

In the future, we may not be able to access adequate funding under our revolving credit facility as a result of a decrease in borrowing base due to the issuance of new indebtedness, the outcome of a subsequent borrowing base redetermination or an unwillingness or inability on the part of lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover the defaulting lender’s portion.

In the future, we may not be able to access adequate funding under our Credit Facility as a result of a decrease in borrowing base due to the issuance of new indebtedness, the outcome of a subsequent borrowing base redetermination or an unwillingness or inability on the part of lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover the defaulting lender’s portion.

Declines in commodity prices could result in a redetermination and reduction of the borrowing base in the future and, in such a case, we could be required to repay any indebtedness in excess of the reduced borrowing base.

5 unchanged sentences

Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations.

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

The terms of our existing Credit Facility, our Senior Notes, 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 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.

Our revolving credit facility currently restricts our ability to dispose of assets and our use of the proceeds from such dispositions.

Our Credit Facility and our Senior Notes currently restrict our ability to dispose of assets and our use of the proceeds from such dispositions.

We may not be able to consummate those dispositions, and the proceeds of any such disposition may not be adequate to meet any debt service obligations then due.

1 unchanged sentence

In addition, we will require significant additional capital over a prolonged period in order to pursue the development of these locations, and we may not be able to raise or generate the capital required to do so.

Any drilling activities we are able to conduct on these potential locations may not be successful or result in our ability to add additional proved reserves to our overall proved reserves or may result in a downward revision of our estimated proved reserves, which could have a material adverse effect on our future business and results of operations.

Any drilling activities we are able to

conduct on these potential locations may not be successful or result in our ability to add additional proved reserves to our overall proved reserves or may result in a downward revision of our estimated proved reserves, which could have a material adverse effect on our future business and results of operations.

Our derivative activities could result in financial losses or could reduce our earnings.

We enter or may enter into commodity derivative contracts for a portion of our production, primarily consisting of swaps, put options and call options.

We purchase such derivatives to achieve more predictable cash flows, to reduce our exposure to adverse fluctuations in the prices of oil, natural gas, and NGLs, and in order to remain in compliance with covenants in our revolving credit facility.

Accordingly, our earnings may fluctuate significantly as a result of changes in fair value of our derivative instruments.

26 unchanged sentences

• lack of available gathering facilities or delays in construction of gathering facilities;

• lack of available capacity on interconnecting transmission pipelines;

• lack of available capacity or disruptions in operation of interconnecting transmission pipelines and processing facilities;

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

• 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;

• issues related to permitting under and compliance with environmental and other governmental regulations;

5 unchanged sentences

Our industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies.

Fuel and other energy conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil, natural gas and NGLs, technological advances in fuel economy and energy generation devices could reduce demand for oil, natural gas and NGLs.

Fuel and other energy conservation measures, alternative fuel requirements, prioritization of advancements in renewable energy production, increasing consumer demand for alternatives to oil, natural gas and NGLs, and technological advances in fuel economy and energy generation devices could reduce demand for oil, natural gas and NGLs.

As competitors and others use or develop new technologies or technologies comparable to ours in the future, we may lose market share or be placed at a competitive disadvantage.

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.

1 unchanged sentence

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.

Limitation or restrictions on our ability to obtain water or dispose of flowback and produced water may have an adverse effect on our operating results.

Water is an essential component of shale and conventional oil and natural gas development during both the drilling and hydraulic fracturing processes.

Our access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.

In addition, treatment and disposal of flowback and produced water is becoming more highly regulated and restricted.

Our access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.

In addition, treatment and disposal of flowback and produced water is becoming more highly regulated and restricted, including, in some areas, due to seismic activity associated with saltwater disposal wells.

Thus, our costs for obtaining and disposing of water could increase significantly.

3 unchanged sentences

Our operations are concentrated in areas in which activity has increased rapidly, and as a result, demand for such drilling rigs, equipment and personnel, as well as access to transportation, processing and refining facilities in these areas, has increased, as have the costs for those items.

In addition, to the extent our suppliers source their products or raw materials from foreign markets, the cost of such equipment could be impacted if the United States imposes tariffs on imported goods from countries where these goods are produced.

where these goods are produced.

Such shortages or cost increases 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.

3 unchanged sentences

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 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.

1 unchanged sentence

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.

For example, it is uncertain how conflicts in the Middle East, including the war in Gaza, and the war in Ukraine and resulting sanctions against Russia will affect oil and natural gas prices in the coming months.

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.

4 unchanged sentences

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.

Federal Reserve and other central banks to increase interest rates beginning in 2022 and continuing in 2023 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.

6 unchanged sentences

Negative public perception regarding us and/or our industry could have an adverse effect on our operations.

Negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about hydraulic fracturing, oil spills, seismic activity, greenhouse gas emissions, and explosions of natural gas transmission lines 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.

transmission lines 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 and increased risk of litigation.

1 unchanged sentence

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 Acts of God and Cyber Security

Risks Related to Acts of God and Cybersecurity

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

4 unchanged sentences

The price of these fuels and the electricity generated from them could increase as a result of proposed legislative measures related to climate change or efforts to regulate carbon or other greenhouse gas emissions.

Extreme weather conditions could adversely affect our ability to conduct drilling activities in the areas where we operate.

Our exploration, exploitation and development activities and equipment could be adversely affected by extreme weather conditions, such as floods, lightening, drought, ice and other storms, prolonged freeze events, and tornadoes, which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.

Such extreme weather conditions could also impact other areas of our operations, including 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 electrical power, water, 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.

Extreme weather conditions could adversely affect our ability to conduct drilling and production activities in the areas where we operate.

Our exploration, exploitation, development, and production activities and equipment could be adversely affected by extreme weather conditions, such as floods, lightening, drought, ice and other storms, prolonged freeze events, and tornadoes, which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment.

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.

Our business could be negatively affected by security threats, including cybersecurity threats, and other disruptions.

23 unchanged sentences

We are subject to stringent federal, state and local laws and regulations related to environmental and occupational health and safety issues that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities.

Our operations are subject to stringent federal, state and local laws and regulations governing occupational safety and health aspects of our operations, the discharge of materials into the environment and environmental and human health protection.

These laws and regulations may impose numerous obligations applicable to our operations including (i) the acquisition of a permit before conducting drilling, production, and other regulated activities;

(ii) the restriction of types, quantities and concentration of materials that may be released into the environment;

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

application of specific health and safety criteria addressing worker protection;

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

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

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

(vi) the installation of costly emission monitoring and/or pollution control equipment;

and (vii) the reporting of the types and quantities of various substances that are generated, stored, processed, or released in connection with our properties.

Numerous governmental authorities, such as the U.S.

Environmental Protection Agency, or EPA, the U.S.

Fish and Wildlife Service, and analogous state agencies, and state oil and natural gas commissions, such as the Railroad Commission of Texas, have the power to enforce compliance with these laws and regulations and the permits issued under them.

and (vii) the reporting of the types and quantities of various substances that are generated, stored, processed, transported, disposed, or released in connection with our properties.

Numerous governmental authorities, such as the EPA, the U.S.

Fish and Wildlife Service, and analogous state agencies, such as the New Mexico Environment Department and the Texas Commission on Environmental Quality, and state oil and natural gas commissions, such as the New Mexico Oil Conservation Division and the Railroad Commission of Texas, have the power to enforce compliance with these laws and regulations and the permits issued under them.

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

5 unchanged sentences

We may not be able to recover some or any of these costs from insurance.

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.

operations, competitive position or financial condition.

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.

2 unchanged sentences

On December 23, 2021, the EPA announced its decision to retain, without changes, the 2015 NAAQS.

On August 21, 2023, EPA announced the initiation of a new review of the ozone NAAQS to ensure the standards reflect the most current, relevant science.

EPA’s review is ongoing.

If our operations become subject to these more stringent standards, compliance with these and other environmental regulations could delay or prohibit our ability to obtain permits for operations or require us to install additional pollution control equipment, the costs of which could be significant.

8 unchanged sentences

• the rates of production;

• the plugging and abandoning of wells;

• the plugging and abandoning of wells and decommissioning and removal of equipment;

• unitization and pooling of properties;

3 unchanged sentences

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

We are responsible for the decommissioning, plugging, abandonment, and reclamation costs for our facilities.

We are responsible for compliance with all applicable laws and regulations regarding the decommissioning, plugging, abandonment, and reclamation of our facilities at the end of their economic life, the costs of which may be substantial.

It is not possible to predict these costs with certainty since they will be a function of regulatory requirements at the time of decommissioning, plugging, abandonment, and reclamation.

We may, in the future, determine it prudent or be required by applicable laws or regulations to establish and fund one or more decommissioning, plugging, abandonment, and reclamation reserve funds to provide for payment of future decommissioning, plugging, abandonment, and reclamation costs, which could decrease funds available to service debt obligations.

In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, plugging, abandonment, and reclamation costs and we will be responsible for the payment of the balance of such costs.

We are responsible for the decommissioning, surface equipment removal, plugging, abandonment, and reclamation costs for our facilities.

We are responsible for compliance with all applicable laws and regulations regarding the decommissioning, surface equipment removal, plugging, abandonment, and reclamation of our facilities at the end of their economic life, the costs of which may be substantial.

It is not possible to predict these costs with certainty since they will be a function of regulatory requirements at the time of decommissioning, surface equipment removal, plugging, abandonment, and reclamation.

We may, in the future, determine it prudent or be required by applicable laws or regulations to establish and fund one or more decommissioning, surface equipment removal, plugging, abandonment, and reclamation reserve funds to provide for payment of future decommissioning, surface equipment removal, plugging, abandonment, and reclamation costs, which could decrease funds available to service debt obligations.

In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, surface equipment removal, plugging, abandonment, and reclamation costs and we will be responsible for the payment of the balance of such costs.

SEC rules could limit our ability to book additional proved undeveloped reserves in the future.

SEC rules require that, subject to limited exceptions, proved undeveloped reserves, or PUDs, may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.

SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.

This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.

2 unchanged sentences

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.

FERC may also impose administrative and criminal remedies and

disgorgement of profits associated with any violation.

While our operations have not been regulated by FERC as a natural gas company under the NGA, FERC has adopted regulations that may subject certain of our otherwise non-FERC jurisdictional facilities to FERC annual reporting requirements.

12 unchanged sentences

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.

8 unchanged sentences

Regardless of the outcome, such proceedings could have an adverse impact on us because of legal costs, diversion of management and other personnel and other factors.

In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices, which could materially and adversely affect our business, operating results and financial condition.

In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices or operations, which could materially and adversely affect our business, operating results and financial condition.

Accruals for such liability, penalties or sanctions may be insufficient.

Judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.

Judgments and estimates to determine

accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.

Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews of such activities could result in increased costs and additional operating restrictions or delays in the completion of oil and natural gas wells and adversely affect our production.

7 unchanged sentences

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 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 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.

More recently, in December 2023, EPA announced additional final NSPS OOOO program rules—referred to as Subparts OOOOb and OOOOc—which, once effective upon publication in the Federal Register, are expected to have a significant impact on the upstream and midstream oil and gas sectors from an operational cost perspective.

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

Additional regulation could result in significant costs, including increased capital expenditures and operating and compliance costs, and could adversely impact or delay oil and natural gas production activities, which could have a material adverse effect on our business.

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.

The BLM and the Secretary of the U.S.

Department of the Interior are now being sued for the decision to rescind the rule.

In April 2020, the Northern District of California issued a ruling in favor of the BLM and the Department of the Interior.

This ruling is now being appealed;

thus, the future of the rule remains uncertain.

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.

BLM’s repeal of the rule was challenged in court, and in March 2020, the Northern District of California issued a ruling in favor of the BLM.

This ruling was appealed, but the case has been administratively closed since November 15, 2021.

The regulations, if reinstated, may result in additional levels of regulation or complexity with respect to existing regulations that could lead to operational delays, increased operating costs and additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and increase costs of compliance.

In addition, in May 2022, the U.S.

Government Accountability Office released a study on methane emissions from oil and gas development, which included a recommendation that the BLM consider whether to require gas capture plans, including gas capture targets, from operators on federal lands.

The reinstatement of the BLM hydraulic fracturing regulations or the promulgation of BLM gas capture regulations may result in additional levels of regulation or complexity that could lead to operational delays and increased operating and compliance costs that could make it more difficult and costly to perform hydraulic fracturing on federal and Indian lands.

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.

The final report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under some circumstances,” noting that certain hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts.

Since the report did not find a direct link between hydraulic fracturing itself and contamination of groundwater resources, this years-long study report does not appear to provide any basis for further regulation of hydraulic fracturing at the federal level.

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 adopted.

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.

We may incur significant additional costs to comply with such existing state requirements and, in the event additional state level restrictions relating to the hydraulic-fracturing process are adopted in areas where we operate, we may become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.

At the state level, Texas, where we conduct most of 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.

We may incur significant additional costs to comply with such existing state requirements and, in the event additional state level restrictions relating to the hydraulic-fracturing process are

adopted in areas where we operate, we may become subject to additional permitting requirements and experience added delays or curtailment in the pursuit of exploration, development, or production activities.

Moreover, we typically dispose of flowback and produced water or certain other oilfield fluids gathered from oil and natural gas producing operations in underground disposal wells.

1 unchanged sentence

These and other states have begun to consider or adopt laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or underground disposal wells, and state agencies implementing these requirements may issue orders directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring.

For example, in 2014, the RRC published a final rule governing permitting or re-permitting of disposal wells that would require, among other things, the submission of information on seismic events occurring within a specified radius of the disposal well location, as well as logs, geologic cross sections and structure maps relating to the disposal area in question.

If the permittee or an applicant of a disposal well permit fails to demonstrate that the injected fluids are confined to the disposal zone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the TRRC may deny, modify, suspend or terminate the permit application or existing operating permit for that well.

Any one or more of these developments may result in our having to limit disposal well volumes, disposal rates or locations, or to cease disposal well activities, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, several cases have recently put a spotlight on the issue of whether injection wells may be regulated under the Federal Water Pollution Control Act (the “Clean Water Act” or “CWA”) if a direct hydrological connection to a jurisdictional surface water can be established.

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.

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.

However, in April 2020, the Supreme Court issued a ruling in the case, County of Maui, Hawaii v.

Hawaii Wildlife Fund, holding that discharges into groundwater may be regulated under the CWA if the discharge is the “functional equivalent” of a direct discharge into navigable waters.

On January 14, 2021, EPA issued guidance on the ruling, which emphasized that discharges to groundwater are not necessarily the “functional equivalent” of a direct discharge based solely on proximity to jurisdictional waters.

However, on September 16, 2021, EPA rescinded its prior guidance.

Supreme Court’s ruling in County of Maui, Hawaii v.

Hawaii Wildlife Fund could result in increased operational costs if permits are required under the CWA for disposal of our flowback and produced water in underground disposal wells.

NMOCD and RRC have each imposed requirements in response to seismic events in the Permian Basin.

See “Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in certain areas of 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." Any one or more of these developments may result in our having to limit disposal well volumes, disposal rates or locations, or to cease disposal well activities, or comply with more stringent analysis, recordkeeping, and notification requirements, which could have a material adverse effect on our business, financial condition, and results of operations.

Increased regulation and attention given to the hydraulic fracturing process and associated processes could lead to greater opposition to, and litigation concerning, oil and natural gas production activities using hydraulic fracturing techniques.

7 unchanged sentences

The EPA has also adopted rules requiring the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, including, among others, onshore production.

Federal agencies also have begun directly regulating emissions of methane, a GHG, from oil and natural gas operations.

And, more recently, in August 2022, Congress passed the IRA, which includes requirements to impose fees beginning in 2025 on methane emissions from oil and gas operations that are required to report their GHG emissions under the EPA’s GHG Reporting Rule.

Federal agencies also have begun directly regulating emissions of methane and GHG from oil and natural gas operations.

In June 2016, the EPA published a final rule establishing NSPS Subpart OOOOa, which requires certain new, modified or reconstructed facilities in the oil and natural gas sector to reduce these methane gas and VOC emissions.

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 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 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.

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

EPA has since announced in December 2023 the final version of these proposed rules, which are to be codified as NSPS Subparts OOOOb and OOOOc.

Notably, the NSPS Subpart OOOOc rules include emissions guidelines to assist states in the development of plans to regulate methane emissions from certain existing sources, which had not previously been regulated under the NSPS Subpart OOOO programs.

Legal challenges to the recently announced final NSPS Subparts OOOOb and OOOOc rules are likely to follow, and thus, the ultimate scope of these regulations remains uncertain.

However, once effective upon publication in the Federal Register, the NSPS Subparts OOOOb and OOOOc rules are expected to have a significant impact on the upstream and midstream oil and gas sectors from an operational cost perspective.

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.

4 unchanged sentences

This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016.

however, this agreement does not create any binding obligations for nations to limit their GHG emissions.

This agreement does not create any binding obligations for nations to limit their GHG emissions.

Nevertheless, President Biden has set ambitious targets for GHG reduction, including to achieve at least a 50 percent reduction from 2005 levels in economy-wide net GHG pollution by 2030.

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.

Since 2012, annual reporting of GHGs has been required for persons operating certain types of industrial operations, including oil and gas production, transmission and storage operations that emit 25,000 metric tons or more of carbon dioxide equivalent per year.

EPA has indicated that it will use data collected through the reporting rules to decide whether to promulgate future GHG emission limits.

More recently, in August 2022, Congress passed the Inflation Reduction Act, which includes requirements to impose fees beginning in 2025 on methane emissions from oil and gas operations that are required to report their GHG emissions under the EPA’s GHG Reporting Rule.

EPA’s proposed rule to implement the fee requirements, “Waste Emissions Charge for Petroleum and Natural Gas Systems,” was published on January 26, 2024, with comments due by March 11, 2024.

The adoption and implementation of any international, federal or state legislation or regulations that require reporting of GHGs or otherwise restrict or impose taxes or fees on 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 natural gas industry faces growing demand for corporate transparency and a demonstrated commitment to sustainability goals.

13 unchanged sentences

These constraints and the resulting shortages or high costs could delay our operations or materially increase our operating and capital costs.

Permanent restrictions imposed to protect threatened or endangered species and their habitats could prohibit drilling in certain areas or require the implementation of expensive mitigation or conservation measures.

The designation of previously unprotected species in areas where we operate as threatened or endangered could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have a material adverse impact on our ability to develop and produce our reserves.

Permanent restrictions imposed to protect threatened or endangered species and their habitats could prohibit drilling in certain areas or require the implementation of expensive

mitigation or conservation measures.

The designation or proposed designation of previously unprotected species in areas where we operate as threatened or endangered could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have a material adverse impact on our ability to develop and produce our reserves.

The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business.

15 unchanged sentences

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.

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.

10 unchanged sentences

corporate income tax rate, limiting interest deductions and certain deductions for executive compensation, permitting immediate expensing of certain capital expenditures, and revising the rules governing net operating losses.

The TCJA remains unclear in some respects and continues to be subject to potential amendments and technical corrections.

The TCJA remains unclear in

some respects and continues to be subject to potential amendments and technical corrections.

The United States Treasury Department and the IRS have issued significant guidance since the TCJA was enacted, interpreting the TCJA and clarifying some of the uncertainties, and are continuing to issue new guidance.

32 unchanged sentences

• the realization of any risks described under this “ Risk Factors ” section.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies.

These broad market fluctuations may also adversely affect the trading price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies.

1 unchanged sentence

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.

Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

Future sales or the availability for sale of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

On April 7, 2021, we filed with the SEC a “shelf” registration statement on Form S-3 that became effective on May 12, 2021.

The registration statement registers securities that may be issued by the Company in a maximum aggregate amount of up to $250,000,000, as well as up to 16,721,922 shares of common stock that may be resold by certain selling stockholders named in therein.

On September 1, 2023, we filed a prospectus supplement for the sale of up to $50,000,000 of shares of our common stock in an ATM offering under the shelf registration statement, of which approximately $0.3 million was sold under the ATM as of December 31, 2023.

Sales by the Company of common stock under the ATM or other sales by the Company of securities under a registration statement or in private placements, could be dilutive to existing shareholders.

Additionally, sales by the Company or selling stockholders of securities, or the perception that such sales may occur, could adversely affect the trading price for our common stock.

We may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments.

1 unchanged sentence

We may also grant registration rights covering those shares of our common stock or other securities in connection with any such acquisitions and investments.

We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock.

We cannot predict the size of future issuances of our common stock or sales by our selling stockholders or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock.

Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

52 unchanged sentences

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

In addition, any testing, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

In addition, any testing, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

1 unchanged sentence

We are currently a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act.

As a “smaller reporting company,” we are subject to reduced disclosure obligations in our SEC filings compared to other issuers, including, among other things, an exemption from the requirement to present five years of selected financial data, being required to provide only two years of audited financial statements in annual reports and being subject to simplified executive compensation disclosures.

As a “smaller reporting company,” we are subject to reduced disclosure obligations in our SEC filings compared to other issuers, including, among other things, being required to provide only two years of audited financial statements in annual reports and being subject to simplified executive compensation disclosures.

Until such time as we cease to be a “smaller reporting company,” such reduced disclosure in our SEC filings may make it harder for investors to analyze our operating results and financial prospects.

1 unchanged sentence

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, 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 and President, Philip Riley, our Chief Financial Officer and Executive Vice President – Strategy , Corey Riley, our Executive Vice President – Business Intelligence, and 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.

6 unchanged sentences

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

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

13 unchanged sentences

Our bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on the Company’s behalf, any action asserting a breach of fiduciary duty owed by Company’s directors, officers, other employees or stockholders to the Company or its stockholders, any action asserting a claim against the Company arising pursuant to the Delaware General Corporation Law or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or any action asserting a claim arising pursuant to the Company’s certificate of incorporation or bylaws or governed by the internal affairs doctrine.

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 and its directors, officers, employees or stockholders.

4 unchanged sentences

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.

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.

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.

Any actual or perceived conflicts of interest with respect to the foregoing could have an adverse impact on the trading price of our 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