What changed in this filing

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Item 1A. Risk Factors

2021-03-04 compared with 2020-02-27 · 117 added, 127 removed, 302 unchanged (45% of the section changed)

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• the price and quantity of foreign imports;

• the ability of other companies to complete and commission liquefied natural gas export facilities in the U.S.;

• the amount of exports from the U.S.;

and worldwide political and economic conditions;

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• the price and availability of alternative fuels;

• the strength or weakness of the U.S.

dollar to other currencies.

These factors and the volatility of the energy markets, which we expect will continue, make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty.

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In addition, the market price of natural gas is generally higher in the winter months than during other months of the year due to increased demand for natural gas for heating purposes during the winter season.

For NGLs, prices exhibited similar volatility from January 2016 through December 2020.

A buildup in inventories, lower sustained global demand, or other unexpected factors could cause prices for U.S.

oil, natural gas and NGLs to further weaken, which could negatively affect our cash flows and results of operations.

For instance, crude oil prices have experienced downward pressure in the first quarter of 2020 as a result of decreasing demand from the growing impact of the cornonavirus epidemic.

For instance, crude oil prices have experienced downward pressure during the year ended 2020 as a result of decreasing demand from the growing impact of the coronavirus pandemic, among other factors.

Under such conditions, revenues may be negatively affected, and the amount of oil, natural gas and NGLs we can produce economically may be reduced, causing us to make substantial downward adjustments to our estimated proved reserves and having a material adverse effect on our financial condition and results of operations.

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Furthermore, even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well.

Decisions to develop properties depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies,

the results of which are often inconclusive or subject to varying interpretations.

Decisions to develop properties depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations.

The estimated cost of drilling, completing and operating wells is uncertain before drilling commences.

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The availability of a ready market for our oil, natural gas and NGL production depends on a number of factors, including the demand for and supply of oil, natural gas and NGLs and the proximity of reserves to pipelines and terminal facilities.

Our ability to market our production depends, in substantial part, on the availability and capacity of gathering systems, pipelines and treating facilities for oil, natural gas and NGLs as well as gathering systems, treating facilities and disposal wells for water produced alongside the hydrocarbons.

Our ability to market our production depends, in

substantial part, on the availability and capacity of gathering systems, pipelines and treating facilities for oil, natural gas and NGLs as well as gathering systems, treating facilities and disposal wells for water produced alongside the hydrocarbons.

Our failure to obtain such services on acceptable terms in the future or to expand our midstream assets could have a material adverse effect on our business.

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We would be unable to realize revenue from any shut-in wells until production arrangements were made to deliver the production to market.

Our North Park Basin acreage may require the construction of significant gathering systems and pipelines as we increase drilling and development activity.

Failure to obtain these services or expanding our midstream assets with acceptable commercial terms could adversely affect our ability to develop this acreage in a timely manner.

Our identified drilling locations are scheduled to be drilled over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.

In addition, we may not be able to raise the substantial amount of capital necessary to drill such locations or construct the midstream infrastructure required to make such development profitable.

Our management team has specifically identified and scheduled certain drilling locations as an estimation of our future multi-year drilling activities on our existing acreage.

These locations represent a significant part of our business strategy.

Our ability to drill and develop these locations depends on a number of uncertainties, including oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering and midstream system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals (including renewal of annual permits that allow for the combustion of produced gas until such time as midstream takeaway infrastructure or other gas disposition options are available) and other factors.

Because of these uncertain factors, we do not know if the numerous potential well locations we have identified will ever be drilled or if we will be able to produce natural gas or oil from these or any other potential locations.

We may not be able to raise the substantial amount of capital necessary to fully realize our North Park Basin assets.

For example, our North Park Basin assets are in the delineation phase of the development cycle and may require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, as we progress toward full field development with more activity and an expanded development footprint.

Additionally, lack of midstream takeaway infrastructure for produced gas could impact our ability to continue producing currently existing wells for extended periods under current operating conditions if regulatory approval for gas combustion is not renewed.

In addition, unless production is established within the spacing units covering the undeveloped acres on which some of the potential locations are obtained, the leases for such acreage will expire.

As such, our actual drilling activities may materially differ from those presently identified.

Our acreage not contained within federal units must be drilled before lease expiration, generally within three to five years of the original date of the lease, in order to hold the acreage by production, and our acreage committed to federal units must be drilled pursuant to the federal unit timelines provided within the unit agreements.

In a highly competitive market for acreage, failure to drill sufficient wells to hold acreage may result in a substantial lease renewal cost, or if renewal is not feasible, loss of our lease and prospective drilling opportunities.

Leases on our oil and natural gas properties that are not federal units typically have a term of three to five years, after which they expire unless, prior to expiration, production is established within the spacing units covering the undeveloped acres, or the leases are renewed.

Future drilling activities face substantial uncertainties.

Our ability to drill and develop wells on our existing acreage depends on a number of uncertainties, including oil and natural gas and NGL prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering and midstream system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals and other factors.

Because of these uncertain factors, we do not know if certain locations will ever drilled or if we will be able to produce natural gas or oil from any of our potential locations.

Our acreage must be drilled before lease expiration, generally within three to five years of the original date of the lease, in order to hold the acreage by production.

In a highly competitive market for acreage, failure to drill sufficient wells to hold acreage may result in a substantial lease renewal cost, or if renewal is not feasible or economically desirable, loss of our lease and prospective drilling opportunities.

Leases on our oil and natural gas properties typically have a term of three to five years, after which they expire unless, prior to expiration, production is established within the spacing units covering the undeveloped acres, or the leases are renewed.

The cost to renew such leases may increase significantly, and we may not be able to renew such leases on commercially reasonable terms or at all.

Acreage committed to federal units must be drilled pursuant to the federal unit timelines provided within the unit agreements, typically requiring two unit wells within the first five years and two more wells within the next five years.

At the end of the second five-year term the unit begins to reduce in size to designated participating areas within the Federal Units.

Unless we increase our current drilling program, we could lose undeveloped acreage through lease expirations.

Our reserves and future production and, therefore, our future cash flow and income are highly dependent on successfully developing our undeveloped leasehold acreage and the loss of any leases could materially and adversely affect our ability to so develop such acreage.

Our development and exploration operations require substantial capital.

Our development operations require substantial capital.

We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties and a decline in our oil, natural gas and NGL reserves, which would adversely affect our business, financial condition and results of operations.

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Our future oil, natural gas and NGL reserves and production, and therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current estimated proved reserves and finding or acquiring additional economically recoverable reserves.

We make substantial capital expenditures in our business and operations for the exploration, development, production and acquisition of oil, natural gas and NGL reserves.

Historically, we have financed capital expenditures primarily with cash generated by operations, borrowings on

our credit facility and proceeds from asset sales.

In particular, cash flow from operations was $121.3 million, $145.5 million and $181.2 million for the years ended December 31, 2019, 2018, and 2017, respectively.

We make substantial capital expenditures in our business and operations for the acquisition, development and production of oil, natural gas and NGL reserves.

Historically, we have financed capital expenditures primarily with cash generated by operations, borrowings on our New Credit Facility as well as our Prior Credit Facility and proceeds from asset sales.

In particular, cash flow from operations was $36.2 million and $121.3 million for the years ended December 31, 2020 and 2019, respectively.

The capital markets that we have historically accessed have recently been and may continue to be constrained to such an extent that debt or equity capital raises are practically unfeasible.

If the debt and equity capital markets are not accessible or if our ability to draw on our credit facility is compromised, we may be unable to implement our drilling and development plans or otherwise carry out our business strategy as expected.

If the debt and equity capital markets are not accessible or if our ability to draw on our New Credit Facility is compromised, we may be unable to implement our development plans or otherwise carry out our business strategy as expected.

Our cash flow from operations and access to capital are subject to a number of variables, including:

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• our capital and operating costs.

Declining cash flows from operations, as a result of lower commodity prices, could require us to reduce expenditures to develop and acquire additional reserves, which could lead to rapid declines in the reserve base supporting our credit facility.

Based on our 2020 capital spending plans, we estimate that our production will experience a 25%- 30% decline.

This decline in production as well as other factors such as lower oil, natural gas and NGL prices, declines in reserves, or for any other reason may lead to reductions in our revenues and cash flow from operations and may limit our ability to obtain the capital necessary, or maintain a sufficient borrowing base on our credit facility, to sustain our operations at desired levels.

In order to fund capital expenditures, we may seek alternative sources of financing.

Further, we may not be able to develop, find or acquire additional reserves to replace our current and future production at acceptable costs, which could adversely affect our business, financial condition and results of operations.

Disruptions in the global financial and capital markets could also adversely affect our ability to obtain debt or equity financing on favorable terms, or at all.

The failure to obtain additional financing could result in a curtailment of our operations relating to exploration and development of its prospects, which in turn could lead to a possible loss of properties and a decline in our oil, natural gas and NGL reserves.

We may not be able to refinance or replace our maturing debt on favorable terms, or at all, which will materially adversely affect our financial condition and our ability to develop our oil and gas assets.

Our credit facility, which consists of all of our funded debt, matures on April 1, 2021.

In November 2019, the borrowing base was reduced to $225.0 million, and as of December 31, 2019, we had $57.5 million outstanding under our credit facility.

We have been involved in discussions with our current lenders and other financing sources regarding alternatives that would include the replacement or refinancing of the credit facility, prior to its maturity date on April 1, 2021.

There is no assurance, however, that such discussions will result in a refinancing of the credit facility on acceptable terms, if at all, or provide any specific amount of additional liquidity for future capital expenditures.

Alternative sources of capital could involve the issuance of debt or equity on unfavorable terms or that would result in significant dilution.

While we review such liquidity-enhancing alternative sources of capital, we intend to continue to minimize our drilling program capital expenditures, which could limit our ability to develop our properties.

If we are unable to refinance or replace our debt on favorable terms, we may not be able to maintain adequate liquidity, and may have to limit our drilling program, sell core and non-core assets, and further reduce general and administrative expenses in order to pay down outstanding debt under the credit facility, or a combination of the foregoing.

These actions could have a material adverse effect on our financial condition and results of operations and the trading price of our common stock.

The failure to obtain additional financing could result in a curtailment of our operations relating to development of prospects, which in turn could lead to a possible loss of properties and a decline in our oil, natural gas and NGL reserves.

Future price declines may result in reductions of the asset carrying values of our oil and natural gas properties.

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Under this accounting method, all costs for both productive and nonproductive properties are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the unit-of-production method.

However, the amount of these costs that can be carried as capitalized assets is subject to a ceiling, which limits such pooled costs to the aggregate of the present value of future net revenues of proved oil, natural gas and NGL reserves attributable to proved properties, discounted at 10%, plus the lower of cost or market value of unevaluated properties.

The full cost ceiling is evaluated at the end of each quarter using the SEC prices, adjusted for the impact of derivatives accounted for as cash flow hedges, if any.

The Company incurred full cost ceiling impairment charges of $409.6 million for the year ended December 31, 2019.

The Company did not incur any full cost

ceiling impairment charges for the years ended December 31, 2018 or 2017.

The Company incurred full cost ceiling impairment charges of $218.4 million and $409.6 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Cumulative full cost ceiling impairment from the Emergence Date through December 31, 2020 totaled $947.1 million.

If oil, natural gas and NGL prices decline further in the near term, and without other mitigating circumstances, we may experience additional losses of future net revenues, including losses attributable to quantities that cannot be economically produced at lower prices, which would likely cause us to record additional write-downs of capitalized costs of oil and natural gas properties and non-cash charges against future earnings.

If oil, natural gas and NGL prices decline further in the near term, and without other mitigating circumstances, we may experience addit ional losses of future net revenues, including losses attributable to quantities that cannot be economically produced at lower prices, which would likely cause us to record additional write-downs of capitalized costs of oil and natural gas properties and non-cash charges against future earnings.

The amount of such future write-downs and non-cash charges could be substantial.

Further, the borrowing base under our credit facility is calculated by reference to the value of our oil and natural gas reserves, as determined by the lenders under the credit facility, and declines in the value of such reserves as a result of sustained low commodity prices could reduce the amount available to be borrowed under our credit facility if prices decline from current levels.

Our estimated reserves are based on many assumptions that may turn out to be inaccurate.

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The market for qualified personnel has historically been, and we expect that it will continue to be, intensely competitive.

We cannot assure you that we will be successful in attracting or retaining such personnel.

We cannot assure that we will be successful in attracting or retaining such personnel.

We may need to enter into retention or other arrangements that could be costly to maintain.

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Additionally, we remain a nominal defendant in certain litigation matters discussed in Item 3.

“Legal Proceedings,” for the purposes of fulfilling indemnification obligations for legal expenses, including any settlement amounts, to certain former officers of the Company and the SandRidge Mississippian Trust I.

The defense of these actions has been and may continue to be both time consuming and expensive.

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Our failure to successfully defend or settle any litigation or legal proceedings could result in liability that, to the extent not covered by our insurance, could have a material effect on our business, financial condition and results of operations.

The agreements governing our credit facility have restrictions, financial covenants and borrowing base redeterminations, which could adversely affect our operations.

The agreements governing our credit facility restrict our ability to, among other things, obtain additional financing, incur liens, enter into sale and lease back transactions, make certain investments, lease equipment, merge, dissolve, liquidate or consolidate with another entity, pay dividends or make other distributions or repurchase or redeem our stock, enter into transactions with our affiliates, create additional subsidiaries, amend or modify certain provisions of our organizational documents, enter into new transactions with our affiliates, sell assets and engage in business combinations.

The credit facility also requires us to comply with certain financial covenants and ratios.

See additional discussion of the credit facility under “Indebtedness—Credit Facilities.” Persistent depressed oil or natural gas prices or further declines in such prices, without other mitigating circumstances, could prevent us from complying with the financial covenants under the credit facility.

Our failure to comply with any of the restrictions and covenants under the credit facility or other debt financings could result in a default under those instruments, which, if left uncured, could lead to an event of default.

The agreements governing our New Credit Facility have restrictions and financial covenants, which could adversely affect our operations.

The agreements governing our New Credit Facility restrict our ability to, among other things, obtain additional financing, incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants.

The New Credit Facility also requires us to comply with certain financial covenants and ratios.

See additional discussion of the New Credit Facility under “Indebtedness—Credit Facilities.” Persistent depressed oil or natural gas prices or further declines in such prices, without other mitigating circumstances, could prevent us from complying with the financial covenants under the New Credit Facility.

Our failure to comply with any of the restrictions and covenants under the New Credit Facility or other debt financings could result in a default under those instruments, which, if left uncured, could lead to an event of default.

Such an event of default could, among other things, result in all of our existing indebtedness becoming immediately due and payable.

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The application of the remedies under the financing instruments could have a material adverse effect on our financial position.

Our credit facility limits the amounts we can borrow to a borrowing base amount.

The borrowing base is subject to review semi-annually;

however, the lenders reserve the right to have one additional redetermination of the borrowing base per calendar year.

Unscheduled redeterminations may be made at our request, but are limited to two requests per year.

Borrowing base determinations are based upon proved developed producing reserves, proved developed non-producing reserves and proved undeveloped reserves.

Outstanding borrowings exceeding the borrowing base must be repaid promptly, or we must pledge other oil and natural gas properties as additional collateral.

The borrowing base is also subject to reductions upon the incurrence of junior debt, hedge terminations, dispositions of assets and casualty events which may require us to repay any deficiencies or pledge additional collateral.

We may not have the financial resources in the future to make any mandatory principal prepayments under the credit facility, which are required, for example, when the committed line of credit is exceeded, proceeds of asset sales in new oil and natural gas properties are not reinvested, or indebtedness that is not permitted by the terms of the credit facility is incurred.

If any future indebtedness under our credit facility were to be accelerated, our assets may not be sufficient to repay such indebtedness in full.

We may not have the financial resources in the future to make any mandatory principal prepayments under the New Credit Facility, which are required, for example, when the committed line of credit is exceeded, proceeds of asset sales in new oil and natural gas properties are not reinvested, or indebtedness that is not permitted by the terms of the New Credit Facility is incurred.

If any future indebtedness under our New Credit Facility were to be accelerated, our assets may not be sufficient to repay such indebtedness in full.

It is unclear how changes in the regulation of LIBOR or the discontinuation of LIBOR all together may affect our financing costs in the future.

Our credit facility bears interest based on a pricing grid tied, in part, to the London Interbank Offered Rate (“LIBOR”).

Our New Credit Facility bears interest based on a pricing grid tied, in part, to the London Interbank Offered Rate (“LIBOR”).

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (the "FCA"), which regulates LIBOR, announced that it does not intend to continue to persuade, or use its powers to compel, panel banks to submit rates for the calculation of LIBOR after 2021.

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If a published U.S.

dollar LIBOR rate is unavailable after 2021, the interest rate on our credit facility will need to be determined using alternative methods, which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on any outstanding debt under the facility if U.S.

dollar LIBOR rate is unavailable after 2021, the interest rate on our New Credit Facility will need to be determined using alternative methods, which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on any outstanding debt under the facility if U.S.

dollar LIBOR was available in its current form.

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

During 2019, we completed a total of 28 gross wells, none of which were identified as dry wells.

If we drill additional wells that we identify as dry wells in our current and future prospects, our drilling success rate may decline and materially harm our business.

During 2020, we did not drill any wells.

Production of oil, natural gas and NGLs could be materially and adversely affected by natural disasters or severe weather.

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The capital markets could be volatile, and such volatility could adversely affect our ability to obtain capital, cause us to incur additional financing expense or affect the value of certain assets.

During and following the 2008 global financial crisis, financial and capital markets were volatile due to multiple factors, including significant losses in the financial services sector and uncertain and rapidly changing economic conditions both in the U.S.

and globally.

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These factors may adversely affect our business, results of operations or liquidity.

These factors may also adversely affect the value of certain of our assets and ability to draw on our credit facility.

Adverse credit and capital market conditions may require us to reduce the carrying value of assets associated with derivative contracts to account for non-performance by, or increased credit risk from, counterparties to those contracts.

These factors may also adversely affect the value of certain of our assets and ability to draw on our New Credit Facility.

Adverse credit and capital market conditions may require us to reduce the carrying value of assets associated with any derivative contracts to account for non-performance by, or increased credit risk from, counterparties to those contracts.

If financial institutions that extended credit commitments to us are adversely affected by volatile conditions of the U.S.

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Even when problems are identified, we may assume certain environmental and other risks and liabilities in connection with acquired properties, and such risks and liabilities could have a material adverse effect on our results of operations and financial condition.

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

As of December 31, 2019, approximately 30.9% of our total reserves were proved undeveloped reserves.

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

Therefore, recoveries from these undeveloped properties may not match current expectations.

Delays in the development of our reserves or increases in costs to drill and develop such reserves will reduce the PV-10 value of our estimated proved undeveloped reserves and future net revenues estimated for such reserves.

A significant portion of our operations are located in the Mid-Continent region, making us vulnerable to risks associated with operating in a limited number of major geographic areas.

As of December 31, 2020, approximately 90.5% of our proved reserves and approximately 89.2% of our annual production was located in the Mid-Continent.

This concentration could disproportionately expose us to operational and regulatory risk in these areas.

We divested all of our North Park Basin assets in February 2021, making substantially all of our future proved reserves and production located in the Mid-Continent.

This concentration could disproportionately expose us to operational and regulatory risk in this area.

This relative lack of diversification in location of our key operations could expose us to adverse developments in the Mid-Continent or the oil and natural gas markets, including, for example, transportation or treatment capacity constraints, curtailment of production due to weather, electrical outages, treatment plant closures for scheduled maintenance, changes in the regulatory environment or other factors.

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While we maintain insurance coverage that we deem appropriate for these risks, our operations may result in liabilities exceeding such insurance coverage or liabilities not covered by insurance.

Shortages or increases in costs of equipment, services and qualified personnel could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget.

Shortages or increases in costs of equipment, services and qualified personnel could adversely affect our ability to execute our development plans on a timely basis and within our budget.

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

Additionally, higher oil and natural gas prices generally stimulate demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services.

Shortages of field personnel and equipment or price increases could significantly affect our ability to execute our exploration and development plans as projected.

Shortages of field personnel and equipment or price increases could significantly affect our ability to execute our development plans as projected.

Competition in the oil and natural gas industry is intense, which may adversely affect our ability to succeed.

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These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or identify, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit.

In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices.

In addition, these companies may have a greater ability to continue exploration and development activities during periods of low oil and natural gas market prices.

Our larger competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we can, which would adversely affect our competitive position.

Our use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas.

In addition, the use of such technology requires greater predrilling expenditures, which could adversely affect the results of our drilling operations.

A significant aspect of our exploration and development plan involves seismic data.

In addition, the use of such technology requires greater predrilling expenditures, which could adversely affect the economic results of drilling operations.

Even when properly used and interpreted, 2-D and 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are present in those structures.

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We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities.

Our oil and natural gas exploration, production, transportation and treatment operations are subject to complex and stringent laws and regulations.

Our oil and natural gas development, production, transportation and treatment operations are subject to complex and stringent laws and regulations.

In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities.

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To the extent we are a shipper on interstate pipelines, we must comply with the FERC-approved tariffs of such pipelines and with federal policies related to the use of interstate capacity.

Laws and regulations governing oil and natural gas exploration and production may also affect production levels.

Laws and regulations governing oil and natural gas operations may also affect production levels.

We are required to comply with federal and state laws and regulations governing conservation matters, including provisions related to the unitization or pooling of our oil and natural gas properties;

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These and other potential regulations could increase our operating costs, reduce our liquidity, delay our operations, increase direct and third-party post production costs or otherwise alter the way we conduct our business, which could have a material adverse effect on our financial condition, results of operations and cash flows and which could reduce cash received by or available for distribution, including any amounts paid for transportation on downstream interstate pipelines.

Risks and uncertainties related to the adoption and implementation of regulations restricting oil and gas development in Colorado.

We have substantial undeveloped reserves and acreage in the North Park Basin area of Jackson County, Colorado.

Recently, various initiatives have been promoted by interest groups in Colorado to increase regulations restricting oil and gas development.

For example, on November 6, 2018, Coloradans considered Proposition 112, a ballot initiative that would have established a new statewide minimum distance requirement for new oil and gas development far in excess of existing Colorado Oil and Gas Conservation Commission (“COGCC”) setback regulations.

Although Coloradans did not approve Proposition 112, future similar initiatives, if implemented, could pose operational challenges, substantially limit our development activity and require higher levels of capital expenditures than we currently anticipate, and therefore have a significant adverse effect on our ability to develop proved undeveloped reserves in the North Park Basin.

Such restrictions, additional costs and delays could adversely impact our financial condition, results of operations and/or cash flows.

Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, or the FTC, we could be subject to substantial penalties and fines.

Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, the FTC or other regulators, we could be subject to substantial penalties and fines.

Under the EPAct 2005 and implementing regulations, the FERC prohibits market manipulation in connection with the purchase or sale of natural gas.

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The FTC also prohibits manipulative or fraudulent conduct in the wholesale petroleum market with respect to sales of commodities, including crude oil, condensate and natural gas liquids.

Other regulatory entities have jurisdiction over our industry and operations.

These agencies have substantial enforcement authority, including the ability to impose penalties for current violations in excess of $1 million per day for each violation.

The FERC has also imposed requirements related to reporting of natural gas sales volumes that may impact the formation of prices indices.

Additional rules and legislation pertaining to these and other matters may be considered or adopted from time to time.

Additional rules and legislation

pertaining to these and other matters may be considered or adopted from time to time.

Our failure to comply with these or other laws and regulations administered by these agencies could subject us to criminal and civil penalties, as described in Item 1.

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Our operations are subject to environmental and occupational safety and health laws and regulations that could adversely affect the cost, manner or feasibility of conducting operations or result in significant costs and liabilities.

Our oil and natural gas exploration and production operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing worker safety and health, the discharge and disposal of substances into the environment or otherwise relating to environmental protection.

Our oil and natural gas operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing worker safety and health, the discharge and disposal of substances into the environment or otherwise relating to environmental protection.

Failure to comply with these laws and regulations may result in litigation;

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The process involves the injection of water, sand and additives under pressure into targeted subsurface formations to stimulate oil and natural gas production.

We routinely utilize hydraulic fracturing techniques in the majority of our drilling and completion programs.

The process is typically regulated by state oil and gas commissions, but several federal

agencies have asserted regulatory authority over certain aspects of the process.

We routinely have utilized hydraulic fracturing techniques in the majority of our drilling and completion programs.

The process is typically regulated by state oil and gas commissions, but several federal agencies have asserted regulatory authority over certain aspects of the process.

For example, the EPA published permitting guidance in February 2014 addressing the use of diesel fuel in fracturing operations;

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From time to time, the U.S.

Congress has considered adopting legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process but, at this time, federal legislation related to hydraulic fracturing appears unlikely.

In addition, certain states, including Oklahoma and Colorado, have adopted regulations that could impose new or more stringent permitting, disclosure, and well-construction requirements on hydraulic fracturing operations.

In addition, certain states, including Oklahoma, have adopted regulations that could impose new or more stringent permitting, disclosure, and well-construction requirements on hydraulic fracturing operations.

If new laws or regulations that significantly restrict or regulate hydraulic fracturing are adopted at the local, state or federal level, fracturing activities with respect to our properties could become subject to additional permit requirements, reporting requirements or operational restrictions, which may result in permitting delays and potential increases in costs.

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While, as a result of these developments, future implementation of the EPA and BLM methane rules is uncertain, given the long-term trend towards increasing regulation, future federal GHG regulations of the oil and gas industry remain a possibility.

Moreover, several states where we operate, including Colorado, have already adopted rules requiring operators of both new and existing sources to develop and implement an LDAR program and install devices on certain equipment to capture 95% of methane emissions.

Moreover, several states where we operate or have operated, including Colorado, have already adopted further rules regarding LDAR programs and methane emissions.

Compliance with these rules could require us to purchase pollution control equipment, optical gas imaging equipment for LDAR inspections, and to hire additional personnel to assist with inspection and reporting requirements.

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However, the Paris Agreement did not impose any binding obligations on the United States.

Moreover, in June 2017, President Trump stated that the United States would withdraw from the Paris Agreement but may enter into a future international agreement related to GHGs.

In August 2017, the U.S.

State Department officially informed the United Nations of the intent of the United States to withdraw from the Paris Agreement.

The United States formally initiated withdrawal proceedings on November 4, 2019.

The withdrawal cannot be effective before November 4, 2020;

thus, whether the United States may reenter the Paris Agreement or a separately negotiated agreement are unclear at this time.

Further, several states and local governments remain committed to the principles of the Paris Agreement in their effectuation of policy and regulations.

It is not possible at this time to predict how or when the United States might impose restrictions on GHGs as a result of the international climate change agreement.

In June 2017, President Trump announced that the United States would withdraw from the Paris Agreement, which became effective November 4, 2020.

On January 20, 2021, President Joe Biden rejoined the Paris Agreement.

The adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and our operations could require us to incur additional costs to monitor, report and potentially reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas that we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves.

Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.

Ultimately, this could make it more difficult to secure funding for exploration and production activities.

Ultimately, this could make it more difficult to secure funding for development and production activities.

Notwithstanding potential risks related to climate change, the International Energy Agency estimates that global energy demand will continue to rise and will not peak until after 2040 and that oil and gas will continue to represent a substantial percentage of global energy use over that time.

Finally, to the extent increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on our assets and operations, and potentially subject us to greater regulation.

Risks and uncertainties related to the potential sale or lease of our corporate headquarters.

Our corporate headquarters building in downtown Oklahoma City, OK, is substantially underutilized.

We previously entered into a brokerage agreement to seek to lease the unutilized portion of the building.

We may seek and/or receive offers to purchase the entire building in the future.

Any alternative we pursue is subject to certain risks and uncertainties, including, among other things, the possibility that any alternative we select will not be completed on terms that are advantageous to us and the likelihood that an outright sale of our corporate headquarters will be at a sales price significantly below its current carrying value on our books.

Our failure to maintain an adequate system of internal control over financial reporting, could adversely affect our ability to accurately report our results.

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A material weakness is a deficiency, or a combination of deficiencies, in our internal control over financial reporting that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Effective internal controls are necessary for us to provide reliable financial reports and deter and

detect any material fraud.

Effective internal controls are necessary for us to provide reliable financial reports and deter and detect any material fraud.

If we cannot provide reliable financial reports or prevent material fraud, our reputation and operating results would be harmed.

We maintained effective internal control over financial reporting as of December 31, 2019, as further described in Part II “Item 9A—Controls and Procedures” and “Management’s Report on Internal Control over Financial Reporting.” Our efforts to develop and maintain our internal controls and to remediate material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.

We maintained effective internal control over financial reporting as of December 31, 2020, as further described in Part II “Item 9A—Controls and Procedures” and “Management’s Report on Internal Control over Financial Reporting.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.

Any failure to develop or maintain effective controls, or difficulties encountered in their implementation, including those related to acquired businesses, or other effective improvement of our internal controls could harm our operating results.

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There are some exceptions to these requirements for entities that use swaps to hedge or mitigate commercial risk.

However, although we may qualify for exceptions, our derivatives counterparties may be subject to new capital, margin and business conduct requirements imposed as a result of the Dodd-Frank Act, which may increase our transaction costs or make it more difficult for us to enter into hedging transactions on favorable terms.

However, although we may qualify for exceptions, our derivatives counterparties may be subject to new capital, margin and

business conduct requirements imposed as a result of the Dodd-Frank Act, which may increase our transaction costs or make it more difficult for us to enter into hedging transactions on favorable terms.

The full impact of the Dodd-Frank Act and related regulatory requirements upon our business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted.

The Dodd-Frank Act and any new regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter and reduce our ability to monetize or restructure our existing derivative contracts.

If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures.

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Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations.

In recent years, we have increasingly relied on information technology systems and networks in connection with our business activities, including certain of our exploration, development and production activities.

We rely on digital technology,

including information systems and related infrastructure, as well as cloud applications and services, to, among other things, estimate quantities of oil and natural gas reserves, analyze seismic and drilling information, process and record financial and operating data and communicate with employees and third parties.

In recent years, we have increasingly relied on information technology systems and networks in connection with our business activities, including certain of our acquisition, development and production activities.

We rely on digital technology, including information systems and related infrastructure, as well as cloud applications and services, to, among other things, estimate quantities of oil and natural gas reserves, analyze seismic and drilling information, process and record financial and operating data and communicate with employees and third parties.

As dependence on digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication.

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We undertake ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards;

however, because the techniques used to obtain unauthorized access change frequently and can be difficult to detect and anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us more vulnerable to cyber-attacks than other companies not similarly situated.

however, because the techniques used to obtain unauthorized access change frequently and can be difficult to detect, anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us more vulnerable to cyber-attacks than other companies not similarly situated.

If our security measures are circumvented, proprietary information may be misappropriated, our operations may be disrupted, and our computers or those of our customers or other third parties may be damaged.

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

If events of this nature occur and persist, the attendant political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on prevailing oil and natural gas prices and causing a reduction in our revenues.

Oil and natural gas production facilities, transportation systems and storage facilities could be direct targets of terrorist attacks, and/or operations could be adversely impacted if infrastructure integral to our operations is destroyed by such an attack.

our revenues.

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

Risks Relating to COVID-19

The COVID-19 pandemic has adversely affected our business, and the ultimate effect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets.

In addition, the pandemic has resulted in travel restrictions, business closures and the institution of quarantining and other restrictions on movement in many communities.

As a result, there has been a significant reduction in demand for and prices of crude oil, natural gas and NGL.

If the reduced demand for and prices of crude oil, natural gas and NGL continue for a prolonged period, our operations, financial condition, cash flows, level of expenditures and the quantity of estimated proved reserves that may be attributed to our properties may be materially and adversely affected.

Our operations also may be adversely affected if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic.

We have implemented workplace restrictions, including guidance for our employees to work remotely if necessary, in our offices and work sites for health and safety reasons and are continuing to monitor national, state and local government directives where we have operations and/or offices.

The extent to which the COVID-19 pandemic adversely affects our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

Risks Relating to our Net Operating Loss Carryforwards ("NOLs")

Our ability to use our NOLs may be limited.

We have adopted a Tax Benefits Preservation Plan that is designed to protect our NOLs but there is no assurance it will prevent an ownership change resulting in loss of the Company’s NOLs.

As of December 31, 2020, we had U.S.

federal NOLs of $1.4 billion, net of NOLs expected to expire unused due to the 2016 IRC Section 382 limitation, the majority of which will expire between 2025 and 2037, if not limited by additional triggering events prior to such time.

Under the provisions of the Internal Revenue Code of 1986, as amended (“IRC”), changes in our ownership, in certain circumstances, will limit the amount of U.S.

federal NOLs that can be utilized annually in the future to offset taxable income.

In particular, Section 382 of the IRC imposes limitations on a company’s ability to use NOLs upon certain changes in such ownership.

Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more of its “five-percent shareholders” (as such term is defined in Section 382 of the IRC) increases by more than 50 percentage points over the lowest percentage of stock owned by such stockholder or stockholders at any time over a three-year period.

Calculations pursuant to Section 382 of the IRC can be very complicated and no assurance can be given that upon further analysis, our ability to take advantage of our NOLs may be limited to a greater extent than we currently anticipate.

We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our federal NOLs.

If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to utilize our NOLs fully.

On July 1, 2020, our Board of Directors approved, and the Company adopted, a Tax Benefits Preservation Plan in order to protect shareholder value against a possible limitation on the Company’s ability to use its tax NOLs and certain other tax benefits to reduce potential future U.S.

federal income tax obligations.

The Tax Benefits Preservation Plan is designed to reduce the likelihood of an “ownership change” in order to protect our NOLs by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s securities.

However, there is no assurance that the Tax Benefits Preservation Plan will prevent all transfers that could result in such an “ownership change.”

Risks Relating to our Common Stock

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Investors may experience dilution in the net tangible book value of their investment upon the exercise of the Warrants and any stock options that may be granted or issued pursuant to the Omnibus Incentive Plan in the future.

We have adopted a Tax Benefits Preservation Plan, which may discourage a corporate takeover.

On July 1, 2020, our Board of Directors adopted a Tax Benefits Preservation Plan and declared a dividend distribution of one right for each outstanding share of our common stock to stockholders of record at the close of business on July 13, 2020.

Each share of our common stock issued thereafter will also include one right.

Each right entitles its holder, under certain circumstances, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock at an exercise price of $5.00 per right, subject to adjustment.

The Board adopted the Tax Benefits Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our NOLs.

We may utilize these NOLs in certain circumstances to offset future United States taxable income and reduce our United States federal income tax liability.

Because the Tax Benefits Preservation Plan could make it more expensive for a person to acquire a controlling interest in us, it could have the effect of delaying or preventing a change in control even if a change in control was in our stockholders’ interest.

Anti-takeover provisions in our charter documents and under Delaware corporate law may make it more difficult to acquire us, even though such acquisitions may be beneficial to our stockholders.

In addition to our Tax Benefits Preservation Plan, provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware corporate law, could make it more difficult for a third party to acquire us, even though such acquisitions may be beneficial to our stockholders.

These anti-takeover provisions include:

• lack of a provision for cumulative voting in the election of directors;

• the ability of our Board to authorize the issuance of “blank check” preferred stock to increase the number of outstanding shares and thwart a takeover attempt;

• advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

• limitations on who may call a special meeting of stockholders.

The provisions described above, our Tax Benefits Preservation Plan and provisions of Delaware corporate law relating to business combinations with interested stockholders may discourage, delay or prevent a third party from acquiring us.

These provisions may also discourage, delay or prevent a third party from acquiring a large portion of our securities, or initiating a tender offer, even if our stockholders might receive a premium for their shares in the acquisition over the then current market price.

Unresolved Staff Comments

Information regarding the Company’s properties is included in Item 1.

Legal Proceedings

See "Note 13 — Commitments and Contingencies” to the accompanying consolidated financial statements in Item 8 of this report.

Mine Safety Disclosures

Not applicable.

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