Amplify Energy Corp
For the period ended Dec 31, 2024. Filed Mar 5, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 5, 2025
AMPY$3.33+4.7%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-07.
0001558370-24-002637
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-05.
0001558370-25-002273
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 164 current paragraphs.
107 unchanged; 13 reworded; 43 added; 19 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 51 previous and 67 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
Additionally, on March 6, 2024, the SEC adopted the SEC Climate Rules. The SEC Climate Rules require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including, but not limited to, information about material climate-related risks; the registrant’s governance of climate-related risks and relevant risk management processes; material climate-related targets and goals; and certain financial effects resulting from severe weather events and other natural conditions in a note to their audited financial statements (subject to de minimis thresholds). Larger registrants will also be required to disclose information about material Scope 1 and 2 greenhouse gas emissions, which will be subject to a phased-in assurance requirement. However, the SEC voluntarily stayed the SEC Climate Rules in April 2024 pending judicial review of petitions challenging the rules. We are currently evaluating the impact of the SEC Climate Rules and there remains uncertainty as to whether these rules will withstand pending and future legal challenges.
Current report
The Mergers are subject to closing conditions and may not be completed, the Merger Agreement may be terminated in accordance with its terms, and we may be required to pay a termination fee or reimburse expenses upon termination.
Current report
The Mergers are subject to customary closing conditions that must be satisfied or waived prior to the completion of the Mergers, including the approval by our stockholders of the Stock Issuance Proposal and other customary closing conditions. Many of the closing conditions are not within our control. No assurance can be given that our stockholder approval will be obtained or that the required conditions to the Closing will be satisfied in a timely manner or at all. Any delay in completing the Mergers could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Mergers are successfully completed within the expected time frame.
Current report
Additionally, either party may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Mergers are not completed by July 14, 2025. In addition, if the Merger Agreement is terminated under specified circumstances, we may be obligated to pay a termination fee of $8,500,000 or to reimburse the Acquired Companies for certain of their transaction expenses in an amount of up to$800,000.
Current report
Moreover, if the Mergers are not completed for any reason, including because stockholder approval of the Stock Issuance Proposal is not obtained, our ongoing businesses may be adversely affected and, without realizing any of the expected benefits of having completed the Mergers, we would be subject to a number of risks, including the following:
Current report
The consideration payable under the Merger Agreement is fixed and will not be adjusted based on our performance.
Current report
Under the Merger Agreement, the total consideration payable by us consists of 26,729,315 shares of Common Stock. The purchase price will not be adjusted for changes in the market price of our Common Stock or the economic performance of Amplify Energy or either of the Acquired Companies. If the market price of our Common Stock increases or the economic performance of the Acquired Companies relative to us improves, the consideration will not be adjusted to account for any such changes or any effective increase or decrease in the value of the Aggregate Merger Consideration issued or paid to Juniper (and/or its affiliates) under the Merger Agreement.
Current report
We will be subject to business uncertainties and contractual restrictions, including the risk of litigation, while the Mergers are pending that may cause disruption and may make it more difficult to maintain relationships with employees, suppliers or customers.
Current report
Uncertainty about the effect of the Mergers on employees, suppliers and customers may have an adverse effect on Amplify Energy and/or the Acquired Companies, which uncertainties may impair our or the Acquired Companies’ ability to attract, retain and motivate key personnel until the Mergers are completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with Amplify Energy or the Acquired Companies to seek to change existing business relationships with us or the Acquired Companies.
Current report
Employee retention and recruitment may be challenging before the completion of the Mergers, as employees and prospective employees may experience uncertainty about their future roles following the Mergers. Key employees may depart or prospective key employees may fail to accept employment with us or the Acquired Companies because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Mergers, any of which could have a material adverse effect on our business, financial condition and results of operations.
Current report
The pursuit of the Mergers and the preparation for the integration may place a significant burden on management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on our business, financial condition and results of operations.
Current report
Until the completion of the Mergers or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our stockholders.
Current report
During the period between the date of the Merger Agreement and completion of the Mergers (or earlier termination of the Merger Agreement), the Merger Agreement restricts us from taking specified actions or from pursuing what might otherwise be attractive business opportunities or making other changes to our business, in each case without the consent of the Acquired Companies. These restrictions may prevent us from taking actions during the pendency of the Mergers that would have been beneficial. Adverse effects arising from these restrictions during the pendency of the Mergers could be exacerbated by any delays in consummation of the Mergers or termination of the Merger Agreement.
Current report
The Merger Agreement limits our ability to pursue alternatives to the Mergers and may discourage a potential competing acquirer of Amplify Energy, including the payment by Amplify Energy of a termination fee.
Current report
The Merger Agreement contains provisions that, subject to limited exceptions, restrict our ability to, among other things, directly or indirectly (i) initiate, solicit, propose, seek or knowingly encourage or knowingly facilitate (including by furnishing or providing information) any inquiries, proposals, or offers regarding, or the making of a Parent Alternative Proposal (as defined in the Merger Agreement); (ii) enter into, participate in or engage in any discussions or negotiations with respect to a Parent Alternative Proposal; (iii) furnish any information or afford access to our properties, assets or employees, in each case, in connection with or in response to a Parent Alternative Proposal; (iv) enter into any letter of intent or agreement in principle, or any other agreement providing for a Parent Alternative Proposal (other than certain permitted confidentiality agreements); (v) waive or release any person from, forbear in the enforcement of, or amend any standstill agreement or any standstill provisions of any other contract; (vi) take any action to make any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transactions” or “business combination statute or regulation” or other similar takeover laws, including Section 203 of the Delaware General Corporation Law, inapplicable to any person or a Parent Alternative Proposal or (vii) resolve, agree, or publicly propose to take any of the foregoing actions. Further, even if the Board withdraws, modifies, or qualifies its recommendation with respect to the Stock Issuance Proposal, unless the Merger Agreement has been terminated in accordance with its terms, Amplify Energy will still be required to submit the Stock Issuance Proposal to a vote at our special meeting. In addition, the Acquired Companies generally have an opportunity to offer to modify the terms of the Mergers in response to any third-party alternative transaction proposal before the Board may withdraw, modify or qualify its recommendation with respect to the Stock Issuance Proposal. In certain circumstances, upon termination of the Merger Agreement, we will be required to pay the Acquired Companies a termination fee equal to $8,500,000. In addition, unless otherwise entitled to the termination fee, we may be obligated to pay the Acquired Companies an expense reimbursement fee up to $800,000 if the Merger Agreement is terminated in certain circumstances.
Current report
These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing that acquisition, even if it were prepared to pay above market value, or might otherwise result in a potential third-party acquirer proposing to pay a lower price to Amplify Energy stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
Current report
If the Merger Agreement is terminated and we decide to seek another merger transaction, we may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.
Current report
Affiliates of Amplify Energy may have interests in the Mergers that are different from, or in addition to, the interests of Amplify Energy’s other stockholders.
Current report
Our officers and directors may have interests in the Mergers that are different from, or in addition to (and which may conflict with) your interests. These interests include, among other things, the expected continued employment and directorship of Martyn Willsher as chief executive officer of Amplify Energy, and the expected continued service of Christopher W. Hamm as the Chairman of the Board until such time as the Board shall vote to elect a different chairperson by a majority vote of the Board. Our Board was aware of and considered these interests, among other matters, in evaluating the Mergers, the Merger Agreement and certain other related agreements in connection with the Mergers in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting.
Current report
Current Amplify Energy stockholders will have a reduced ownership and voting interest in Amplify Energy after the Mergers compared to their current ownership and will exercise less influence over management.
Current report
Based on the number of issued and outstanding shares of Common Stock as of January 14, 2025, it is expected that, on a fully-diluted basis, current Amplify Energy stockholders will collectively own approximately 61%, and Juniper and its affiliates will collectively own approximately 39%, of the outstanding shares of Common Stock of the combined company’s outstanding equity. As a result of the Mergers, current Amplify Energy stockholders will own a smaller percentage of the combined company than they currently own of Amplify Energy, and as a result will have less influence on the management and policies of Amplify Energy post-Mergers than they now have on the management and policies of Amplify Energy, as the case may be.
Current report
We have incurred and expect to incur non-recurring costs associated with the Mergers and combining the operations of the companies, as well as transaction fees and other costs related to the Mergers. These costs and expenses include fees paid to legal, financial and accounting advisors, regulatory and public relations advisors, filing fees, printing costs and other costs and expenses. A significant portion of these transaction costs is contingent upon the Closing occurring, although some have been and will be incurred regardless of whether the Mergers are consummated.
Current report
In addition, the combined company may incur significant restructuring and integration costs in connection with the integration of Amplify Energy and the Acquired Companies and the execution of our business plan, including costs relating to formulating and implementing integration plans and eliminating duplicative costs. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either us or the combined company. There are processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Mergers and the integration of each of the Acquired Companies’ businesses. While we have assumed a certain level of expenses would be incurred to integrate Amplify Energy and the Acquired Companies and achieve synergies and efficiencies and we continue to assess the magnitude of these costs, many of these expenses are, by their nature, difficult to estimate accurately, and there are many factors beyond our control that could affect the total amount or timing of these costs. Although we expect that the elimination of duplicative costs, as well as the realization of strategic benefits, additional income, synergies and other efficiencies should allow the combined company to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.
Current report
Securities class action and derivative lawsuits may be filed against us, or against our directors, challenging the Mergers, and an adverse ruling in any such lawsuit may prevent the Mergers from becoming effective or from becoming effective within the expected time frame.
Current report
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other similar agreements. Mergers like the Mergers are frequently subject to litigation or other legal proceedings, including actions alleging that our Board breached their fiduciary duties to our stockholders by entering into the Merger Agreement. We cannot provide assurance that such litigation or other legal proceedings will not be brought. If litigation or other legal proceedings are in fact brought against us, or against our Board, we will defend against it, but might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operation or financial position of us or the combined company, including through the possible diversion of company resources or distraction of key personnel.
Current report
Lawsuits that may be brought against us, the Acquired Companies or our or their directors could also seek, among other things, injunctive relief or other equitable relief, including a request to enjoin us from consummating the Mergers. One of the conditions to the Closing are that no order, award or judgment by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect and no law has been adopted or is effective, in either case, that prohibits or makes illegal the Closing. Consequently, if a plaintiff is successful in obtaining an order, award or judgment prohibiting completion of the Mergers, that order, award or judgment may delay or prevent the Mergers from being completed within the expected time frame or at all, which may adversely affect our business, financial position and results of operations.
Current report
We expect to refinance substantial indebtedness of the Acquired Companies in connection with the Mergers, which combined with our current debt may limit our financial flexibility and adversely affect our financial results.
Current report
In connection with the Mergers, Amplify Energy expects to refinance a substantial portion of its outstanding debt and approximately $133 million in principal amount of the Acquired Companies’ outstanding debt. There is no guarantee that Amplify Energy will be able to execute the refinancing on favorable terms or at all. If Amplify Energy is unable to refinance the debt on favorable terms, its financial condition could be adversely affected. If Amplify Energy is unable to complete a sufficient refinancing at all, it may not be able to complete the Mergers.
Current report
In addition, if Amplify Energy is able to execute the refinancing, the combined company’s level of indebtedness following the completion of the Mergers could have important consequences. For example, it could:
Current report
Any of these risks could materially impact our ability to fund our operations or limit our ability to expand the combined business, which could have a material adverse effect on the combined company, its financial condition and results of operations.
Current report
Combining the businesses of Amplify Energy, NPOG and COG may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated synergies and other benefits of the Mergers, which may adversely affect the combined company’s business results and negatively affect the value of our Common Stock following the consummation of the Mergers.
Current report
Amplify Energy and each of the Acquired Companies have operated and, until the completion of the Mergers will continue to operate, independently. The success of the Mergers will depend on, among other things, the ability of Amplify Energy and the Acquired Companies to combine their businesses in a manner that facilitates growth opportunities and realizes expected cost savings. We have entered into the Merger Agreement because we believe that the mergers contemplated by the Merger Agreement are fair to and in the best interests of our stockholders and that combining the businesses of Amplify Energy and the Acquired Companies will produce benefits as well as cost savings and other cost and capital expenditure synergies.
Current report
Following the Closing, Amplify Energy and the Acquired Companies must successfully combine their respective businesses in a manner that permits these benefits to be realized. For example, the following issues, among others, must be addressed in integrating the operations of the companies in order to realize the anticipated benefits of the Mergers:
Current report
It is possible that the integration process could result in the loss of key employees of Amplify Energy or the Acquired Companies, the loss of customers, the disruption of either Amplify Energy’s or the Acquired Companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. In addition, the actual integration may result in additional and unforeseen expenses. If the combined company is not able to adequately address integration challenges, we may be unable to successfully integrate operations and the anticipated benefits of the integration plan may not be realized.
Current report
In addition, the combined company must achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth. If the combined company is not able to successfully achieve these objectives, the anticipated synergies and other benefits of the Mergers may not be realized fully, or at all, or may take longer to realize than expected. Additionally, we may inherit from the Acquired Companies legal, regulatory, and other risks that occurred prior to the Mergers, whether known or unknown to us, which may be material to the combined company. Actual growth, cost and capital expenditure synergies and other cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated. Moreover, at times the attention of the combined company’s management and resources may be focused on the integration of the businesses of the company and diverted from day-to-day business operations or other opportunities that may have been beneficial to such company, which may disrupt the combined company’s ongoing businesses.
Current report
An inability to realize the full extent of the anticipated benefits of the Mergers, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of our Common Stock following the consummation of the Mergers. Moreover, if the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Mergers, Amplify Energy stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Mergers.
Current report
The combined company may not be able to retain customers, suppliers or distributors, or customers, suppliers or distributors may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with the combined company.
Current report
As a result of the Mergers, the combined company may experience impacts on relationships with customers, suppliers and distributors that may harm the combined company’s business and results of operations. Certain customers, suppliers or distributors may seek to terminate or modify contractual obligations following the Mergers whether or not contractual rights are triggered as a result of the Mergers. There can be no guarantee that customers, suppliers and distributors will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the Mergers. If any customers, suppliers or distributors seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all.
Showing the first 40 of 43 passages. Open the source sections for the rest.
Removed paragraphs (19)
Previous report
A pandemic, epidemic or outbreak of an infectious disease, may materially adversely affect our business.
Previous report
The global or national outbreak of an infectious disease, such as the COVID-19 pandemic that began in 2020, has previously and may in the future cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) unavailability of contractors and subcontractors, (iii) interruption of supplies from third parties upon which we rely, (iv) recommendations of, or restrictions imposed by, government and health authorities, including quarantines, and (v) restrictions that we and our contractors and subcontractors impose, including curtailment or shutting in of production, to ensure the safety of employees and others. While it is not possible to predict their extent or duration, these disruptions may have a material adverse effect on our business, financial condition and results of operations.
Previous report
Further, any such pandemic, epidemic or outbreak of infectious disease has previously and may in the future adversely impact the supply chain for equipment or services needed for our operations, including as a result of mandatory shutdowns and other pandemic-related measures implemented in locations where such equipment or services are manufactured or distributed. We may also be impacted by significant disruptions to the operations of our logistics and service providers.
Previous report
Additionally, the SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies. We cannot predict the costs of implementation or any potential adverse impacts resulting from the rulemaking. To the extent this rulemaking is finalized as proposed, we could incur increased costs relating to the assessment and disclosure of climate-related risks. We may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed. In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors. See “Item 1. Business— Environmental, Occupational Health and Safety Matters and Regulations” for a further discussion of the laws and regulations related to GHGs and of climate change.
Previous report
There are remaining uncertainties regarding the extent and timing of costs and liabilities relating to the Incident, and potential changes in the regulatory and operating environment in which we operate resulting from the Incident may increase the risks to which we are exposed. The duration of such uncertainties may exist for a significant period, and such risks may have a material adverse impact on our business, results of operations and financial condition and the implementation of our strategic agenda. Furthermore, the risks associated with the Incident may heighten the consequences of other risks to which we are exposed, including with respect to access to financing and financial assurance.
Previous report
Our assumptions and estimates regarding the total aggregate costs associated with the Incident may be inaccurate, which could materially and adversely affect our business, results of operations and financial condition.
Previous report
On February 2, 2022, the Unified Command announced that response and monitoring efforts had officially concluded for the Incident, and the Unified Command would stand down as of such date. We currently estimate that the total costs we have incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees to be approximately $190.0 million to $210.0 million. These estimates consider currently available facts and presently enacted laws and regulations. We have made assumptions regarding (i) the probable and estimable amounts expected to be settled with certain vendors for response and remediation expenses and (ii) the resolution of certain third-party claims, excluding claims with respect to losses, which are not probable and reasonably estimable, and (iii) future claims and lawsuits. Our estimates do not include (i) the nature, extent and cost of future legal services that will be required in connection with all lawsuits, claims and other matters requiring legal or expert advice associated with the Incident, (ii) any lost revenue associated with the suspension of operations at Beta, (iii) any liabilities or costs that are not reasonably estimable at this time or that relate to contingencies where we currently regard the likelihood of loss as being only reasonably possible or remote and (iv) the costs associated with the permanent repair of the pipeline and the restart of operations at Beta. We believe we have accrued adequate amounts for all probable and reasonably estimable costs; however, this estimate is subject to uncertainties associated with the assumptions that we have made. Accordingly, our assumptions and estimates may change in future periods based on future events and total costs may materially increase; therefore, we can provide no assurance that we will not have to accrue significant additional costs in future periods with respect to the Incident.
Previous report
We are subject to significant litigation and enforcement risk as a result of the Incident.
Previous report
Under the OPA, the Company’s pipeline was designated by the United States Coast Guard as the source of the oil discharge. Therefore, the Company is financially responsible for remediation for certain costs and economic damages as provided in the OPA. The Company continues to process covered claims under the OPA as expeditiously as possible. At this time, it is not possible to estimate the total number of future claims or the full extent of compensable damages arising from the Incident.
Previous report
Our potential liabilities resulting from pending and future claims, lawsuits and enforcement actions relating to the Incident, together with the potential cost of implementing remedies sought in the various proceedings, cannot be fully estimated at this time but they may have a material adverse impact on our business, results of operations and financial condition and the implementation of our strategic agenda. For further information, please see Note 16, “Commitments and Contingencies — Litigation and Environmental” of the Notes to Consolidated Financial Statements and “Part I — Item 3. Legal Proceedings” included in this Annual Report.
Previous report
The Incident may impact our ability to access financing on acceptable terms and may materially impact our liquidity.
Previous report
The reputational consequences of the Incident, ongoing contingencies related to the Incident and the impact of the Incident on our liquidity and financial performance could increase our financing costs and limit our access to financing on acceptable terms. Our ability to engage in trading activities may also be impacted due to counterparty concerns about our financial and business risk profile following the Incident. Such counterparties may require that we provide collateral or other forms of financial security for their obligations. Certain counterparties for our non-trading businesses may also require that we provide collateral for certain contractual obligations.
Previous report
We may not have adequate insurance to compensate us, and our insurers may not pay particular claims.
Previous report
We cannot guarantee that our insurance policies will cover all losses that we incur in connection with the Incident or that disputes over insurance claims will not arise with our insurance carriers. Additionally, the insurers may not pay particular claims or may take an extended period of time to do so. We currently maintain insurance that covers against certain losses and expenses associated with the Incident. For example, our insurance coverage includes loss of production income (“LOPI”) insurance for our offshore properties. Proceeds from LOPI insurance claims are intended to partially offset the loss of revenue resulting from certain events that cause suspension of operations. When such event occurs, we file claims under our LOPI policy and recognize LOPI in the period that insurers accept the claim and all uncertainty with respect to the receipt or amount of claim is resolved. For the year ended December 31, 2023, we recognized LOPI insurance payments of $17.9 million from our Beta properties due to the Incident; however, the LOPI insurance policy in effect at the time of the Incident provided eighteen months of LOPI coverage and thus no additional LOPI insurance was recognized after March 31, 2023. The Company restarted operations of the Beta Field in April 2023.
Previous report
Finally, we cannot guarantee that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future.
Previous report
The Incident has created significant risk to our reputation and has diverted, and will continue to divert, the attention of our management team.
Previous report
The Incident has damaged our reputation, which may have a long-term impact on us. Adverse public, political and industry sentiment towards us, and oil and gas activities generally, could damage or impair our existing commercial relationships with counterparties, partners and governmental agencies and could impair our access to debt or capital, new investment opportunities, operatorships or other essential commercial arrangements with potential partners and governmental agencies. In addition, responding to the Incident may place a significant burden on our cash flow, which could also impede our ability to invest in new opportunities and deliver long-term growth.
Previous report
In addition, our response to the Incident and associated consequences have required significant management focus. Key management and operating personnel are, and will need to continue, devoting substantial attention to addressing the associated consequences for us, leaving them less time to devote to executing our strategic plans. In addition, we rely on recruiting and retaining high-quality employees to execute our strategic plans and to operate our business. The Incident response and associated consequences have placed significant demands on our employees, and the reputational damage suffered by us as a result of the Incident and any consequent adverse impact on our business could affect employee recruitment, productivity, retention and the results of our operations.
Reworded paragraphs (13)
Previous wording
These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty. For example, for the five years ended December 31, 2023, the NYMEX-WTI oil future price ranged from a high of $122.11 per Bbl to a low of $(37.63) per Bbl, while the NYMEX-Henry Hub natural gas future price ranged from a high of $9.68 per MMBtu to a low of $1.48 per MMBtu. For the year ended December 31, 2023, the WTI posted prices ranged from a high of $93.68 per Bbl on September 27, 2023 to a low of $66.74 per Bbl on March 17, 2023 and NYMEX-Henry Hub natural gas market price ranged from a high of $4.17 per MMBtu on January 4, 2023 to a low of $1.99 per MMBtu on March 29, 2023. Likewise, NGLs, which are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which has different uses and different pricing characteristics, have sustained depressed realized prices during this period and are generally correlated with the price of oil. A further or extended decline in commodity prices could materially and adversely affect our business, results of operations and financial condition.
Current wording
These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty. For example, for the five years ended December 31, 2024, the NYMEX-WTI oil future price ranged from a high of $122.11 per Bbl to a low of $(37.63) per Bbl, while the NYMEX-Henry Hub natural gas future price ranged from a high of $9.68 per MMBtu to a low of $1.48 per MMBtu. For the year ended December 31, 2024, the WTI posted prices ranged from a high of $86.91 per Bbl on April 5, 2024 to a low of $65.75 per Bbl on September 10, 2024 and NYMEX-Henry Hub natural gas market price ranged from a high of $3.95 per MMBtu on December 24, 2024 to a low of $1.58 per MMBtu on February 15, 2024. Likewise, NGLs, which are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which has different uses and different pricing characteristics, have sustained depressed realized prices during this period and are generally correlated with the price of oil. A further or extended decline in commodity prices could materially and adversely affect our business, results of operations and financial condition.
Previous wording
A prolonged economic slowdown or recession, adverse events relating to the energy industry, or regional, national, or global economic conditions and factors, particularly a slowdown in the exploration and production industry, could negatively impact our operations and therefore adversely affect our results. The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased demand for oil and natural gas and decreased prices for oil and natural gas.
Current wording
A prolonged economic slowdown or recession, adverse events relating to the energy industry, volatility due to tariffs or other trade-related disputes, or regional, national, or global economic conditions and factors, particularly a slowdown in the exploration and production industry, could negatively impact our operations and therefore adversely affect our results. The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased demand for oil and natural gas and decreased prices for oil and natural gas.
Previous wording
Under our Revolving Credit Facility, we are required to (i) maintain, as of the date of determination, a maximum total debt to EBITDAX ratio of 3.00 to 1.00, (ii) maintain a current ratio of not less than 1.00 to 1.00, and (iii) hedge at least 50% − 75% of our estimated production from total proved developed producing reserves. If we were to violate any of the covenants under our Revolving Credit Facility and were unable to obtain a waiver or amendment, it would be considered a default after the expiration of any applicable grace period. If we were in default under our Revolving Credit Facility, then the lenders may exercise certain remedies including, among others, declaring all borrowings outstanding thereunder, if any, immediately due and payable. This could adversely affect our operations and our ability to satisfy our obligations as they come due, because we might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our Revolving Credit Facility are secured by mortgages on not less than 90% of the PV-9 value of our oil and gas properties (and at least 90% of the PV-9 value of the proved, developed and producing oil and gas properties), and if we are unable to repay our indebtedness under our Revolving Credit Facility, the lenders could seek to foreclose on our assets.
Current wording
Under our Revolving Credit Facility, we are required to (i) maintain, as of the date of determination, a maximum total debt to EBITDAX ratio of 3.00 to 1.00, (ii) maintain a current ratio of not less than 1.00 to 1.00, and (iii) hedge at least 50% − 75% of our estimated production from total proved developed producing reserves. If we were to violate any of the covenants under our Revolving Credit Facility and were unable to obtain a waiver or amendment, it would be considered a default after the expiration of any applicable grace period. If we were in default under our Revolving Credit Facility, then the lenders may exercise certain remedies including, among others, declaring all borrowings outstanding thereunder, if any, immediately due and payable. This could adversely affect our operations and our ability to satisfy our obligations as they come due, because we might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our Revolving Credit Facility are secured by mortgages on not less than 90% of the PV-9 value of our oil and gas properties together with all or substantially all material midstream assets necessary to operate our proved, developed and producing oil and gas properties, and if we are unable to repay our indebtedness under our Revolving Credit Facility, the lenders could seek to foreclose on our assets.
Previous wording
Our Revolving Credit Facility allows us to borrow in an amount up to the borrowing base, which is primarily based on the estimated value of our oil and natural gas properties and our commodity derivative contracts as determined semi-annually by our lenders in their sole discretion. The borrowing base is subject to redetermination on at least a semi-annual basis primarily based on an engineering report with respect to our estimated natural gas, oil and NGL reserves, which takes into account the prevailing natural gas, oil and NGL prices at such time, as adjusted for the impact of our commodity derivative contracts. Accordingly, declining commodity prices may have an impact on the amount we can borrow, which could affect our cash flows and ability to execute our business plans. Any reduction in the borrowing base would materially and adversely affect our business and financing activities, limit our flexibility and management’s discretion in operating our business, and increase the risk that we may default on our debt obligations. In addition, as hedges roll off, the borrowing base is subject to further reduction. Our Revolving Credit Facility requires us to repay any deficiency over a certain period or pledge additional oil and gas properties to eliminate such deficiency within 30 days of notice. If our outstanding borrowings exceed the borrowing base and we are unable to repay the deficiency or pledge additional oil and gas properties to eliminate such deficiency, our failure to repay any of the installments due related to the borrowing base deficiency would constitute an event of default under the Revolving Credit Facility and as such, the lenders could declare all outstanding principal and interest to be due and payable, could freeze our accounts, or foreclose against the assets securing the obligations owed under our Revolving Credit Facility.
Current wording
Our Revolving Credit Facility allows us to borrow in an amount up to the borrowing base, which is primarily based on the estimated value of our oil and natural gas properties and our commodity derivative contracts as determined semi-annually by our lenders in their sole discretion. The borrowing base is subject to redetermination on at least a semi-annual basis primarily based on an engineering report with respect to our estimated natural gas, oil and NGL reserves, which takes into account the prevailing natural gas, oil and NGL prices at such time, as adjusted for the impact of our commodity derivative contracts. Accordingly, declining commodity prices may have an impact on the amount we can borrow, which could affect our cash flows and ability to execute our business plans. Any material reduction in the borrowing base would materially and adversely affect our business and financing activities, limit our flexibility and management’s discretion in operating our business, and increase the risk that we may default on our debt obligations. In addition, as hedges roll off, the borrowing base is subject to further reduction. Our Revolving Credit Facility requires us to repay any deficiency over a certain period or pledge additional oil and gas properties to eliminate such deficiency within 30 days of notice. If our outstanding borrowings exceed the borrowing base and we are unable to repay the deficiency or pledge additional oil and gas properties to eliminate such deficiency, our failure to repay any of the installments due related to the borrowing base deficiency would constitute an event of default under the Revolving Credit Facility and as such, the lenders could declare all outstanding principal and interest to be due and payable, could freeze our accounts, or foreclose against the assets securing the obligations owed under our Revolving Credit Facility.
Previous wording
Producing oil and natural gas reservoirs are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future oil and natural gas reserves and, production and therefore, our cash flow are highly dependent on our success in efficiently developing and exploiting our current reserves. Our production decline rates may be significantly higher than currently estimated if our wells do not produce as expected. Further, our decline rate may change when we drill additional wells or make acquisitions. We may not be able to develop, find or acquire additional reserves to replace our current and future production at economically acceptable terms, which would materially and adversely affect our business, financial condition and results of operations.
Current wording
Producing oil and natural gas reservoirs are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future oil and natural gas reserves and production and therefore, our cash flows, are highly dependent on our success in efficiently developing and exploiting our current reserves. Our production decline rates may be significantly higher than currently estimated if our wells do not produce as expected. Further, our decline rate may change when we drill additional wells or make acquisitions. We may not be able to develop, find or acquire additional reserves to replace our current and future production at economically acceptable terms, which would materially and adversely affect our business, financial condition and results of operations.
Previous wording
If we reduce our capital spending in an effort to conserve cash, this would likely result in production being lower than anticipated, and could result in reduced revenues, cash flow from operations and income. Further, if the borrowing base under our Revolving Credit Facility decreases, or our revenues decrease, as a result of lower oil or natural gas prices or for any other reason, we may not be able to obtain the capital necessary to sustain our operations.
Current wording
If we reduce our capital spending in an effort to conserve cash, this would likely result in production being lower than anticipated, and could result in reduced revenues, cash flows from operations and income. Further, if the borrowing base under our Revolving Credit Facility decreases, or our revenues decrease, as a result of lower oil or natural gas prices or for any other reason, we may not be able to obtain the capital necessary to sustain our operations.
Previous wording
We maintain insurance coverage against potential losses that we believe is customary in the industry. However, insurance against all operational risk is not available to us. These insurance policies may not cover all liabilities, claims, fines, penalties or costs and expenses that we may incur in connection with our business and operations, including those related to environmental claims. Pollution and environmental risks generally are not fully insurable. In addition, we cannot assure you that we will be able to maintain adequate insurance at rates we consider reasonable. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. A liability, claim or other loss not fully covered by insurance could have a material adverse effect on our business, financial position, results of operations and cash flows. For a discussion of the risks surrounding insurance associated with the Incident, see “— We may not have adequate insurance to compensate us, and our insurers may not pay particular claims.”
Current wording
We maintain insurance coverage against potential losses that we believe is customary in the industry. However, insurance against all operational risk is not available to us. These insurance policies may not cover all liabilities, claims, fines, penalties or costs and expenses that we may incur in connection with our business and operations, including those related to environmental claims. Pollution and environmental risks generally are not fully insurable. In addition, we cannot assure you that we will be able to maintain adequate insurance at rates we consider reasonable. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. A liability, claim or other loss not fully covered by insurance could have a material adverse effect on our business, financial position, results of operations and cash flows.
Previous wording
We had three customers that each accounted for 10% or more of total reported revenues for the year ended December 31, 2023. The loss of these customers or any significant customer, should we be unable to replace them, could adversely affect our revenues and have a material adverse effect on our financial condition and results of operations. Also, if any significant customer reduces the volume it purchases from us, we could experience a temporary interruption in sales of, or may receive a lower price for, our production, and our revenues and cash flows could decline. We cannot assure you that any of our customers will continue to do business with us or that we will continue to have access to suitably liquid markets for our future production. See “Item 1. Business — Operations — Marketing and Major Customers.”
Current wording
We had three customers that each accounted for 10% or more of total reported revenues for the year ended December 31, 2024. The loss of these customers or any significant customer, should we be unable to replace them, could adversely affect our revenues and have a material adverse effect on our financial condition and results of operations. Also, if any significant customer reduces the volume it purchases from us, we could experience a temporary interruption in sales of, or may receive a lower price for, our production, and our revenues and cash flows could decline. For instance, in October 2024, Phillips 66 announced its plan to cease operations at its Los Angeles area refinery in the fourth quarter of 2025. While we are actively engaging in discussions with Phillips 66 to understand the full scope of the impact on our business, this refinery has historically represented a significant portion of our sales to Phillips 66. We cannot assure you that any of our customers will continue to do business with us or that we will continue to have access to suitably liquid markets for our future production. See “Item 1. Business — Operations — Marketing and Major Customers.”
Previous wording
We are subject to credit risk due to concentration of our oil and natural gas receivables. The inability or failure of our significant customers, or any purchasers of our production, to meet their payment obligations to us or their insolvency or liquidation could have a material adverse effect on our results of operations. To the extent that purchasers of our production rely on access to the credit or equity markets to fund their operations, there could be an increased risk that those purchasers could default in their contractual obligations to us. If for any reason we were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of our production were uncollectible, we would recognize a charge in the earnings of that period for the probable loss and could suffer a material reduction in our liquidity and cash flows.
Current wording
We are subject to credit risk due to concentration of our oil and natural gas receivables. The inability or failure of our significant customers, or any purchasers of our production, to meet their payment obligations to us or their insolvency or liquidation could have a material adverse effect on our results of operations. To the extent that purchasers of our production rely on access to the credit or equity markets to fund their operations, there could be an increased risk that those purchasers could default in their contractual obligations to us. If for any reason we were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of our production were uncollectible, we would recognize a charge to earnings of that period for the probable loss and could suffer a material reduction in our liquidity and cash flows.
Previous wording
Increasing attention from governmental and regulatory bodies, investors, consumers, industry and other stakeholders on responding to climate change, together with fuel conservation measures, alternative fuel requirements, incentives to conserve energy or use alternative energy sources, and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services, increasing consumer demand for alternatives to oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles), societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, and technological advances in fuel economy and energy transmission, storage, consumption and generation devices (including advances in wind, solar and hydrogen power, as well as battery technology), could reduce demand for oil and natural gas. Such initiatives or related activism aimed at responding to climate change and reducing air pollution, as well as negative investor sentiment toward our industry and 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, cash flows, and ability to access capital.
Current wording
Increased attention from governmental and regulatory bodies, investors, consumers, industry and other stakeholders on responding to climate change, together with fuel conservation measures, alternative fuel requirements, incentives to conserve energy or use alternative energy sources, and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services, increasing consumer demand for alternatives to oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles), societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, and technological advances in fuel economy and energy transmission, storage, consumption and generation devices (including advances in wind, solar and hydrogen power, as well as battery technology), could reduce demand for oil and natural gas. Such initiatives or related activism aimed at responding to climate change and reducing air pollution, as well as negative investor sentiment toward our industry and 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, cash flows, and ability to access capital.
Previous wording
Our operations, projects and growth opportunities require us to have strong relationships with various key stakeholders, including our shareholders, employees, suppliers, customers, local communities and others. We may face pressure from stakeholders, many of whom are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability while at the same time remaining a successfully operating public company. If we do not successfully manage expectations across these varied stakeholder interests, it could erode stakeholder trust and thereby affect our brand and reputation. Such erosion of confidence could negatively impact our business through decreased demand and growth opportunities, delays in projects, increased legal action and regulatory oversight, adverse press coverage and other adverse public statements, difficulty hiring and retaining top talent, difficulty obtaining necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms and difficulty securing investors and access to capital.
Current wording
Our operations, projects and growth opportunities require us to have strong relationships with various key stakeholders, including our shareholders, employees, suppliers, customers, local communities and others. We may face pressure from stakeholders, many of whom are focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability while at the same time remaining a successfully operating public company. If we do not successfully manage expectations across these varied stakeholder interests, it could erode stakeholder trust and thereby affect our brand and reputation. Such erosion of confidence could negatively impact our business through decreased demand and growth opportunities, delays in projects, increased legal action and regulatory oversight, adverse press coverage and other adverse public statements, difficulty hiring and retaining top talent, difficulty obtaining necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms and difficulty securing investors and access to capital.
Previous wording
Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
Current wording
Climate change legislation or regulations pertaining to emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
Previous wording
The $1 trillion legislative infrastructure package passed by Congress in November 2021 includes a number of climate-focused spending initiatives targeted at climate resilience, enhanced response and preparation for extreme weather events, and clean energy and transportation investments. In August 2022, President Biden signed into law the Inflation Reduction Act of 2022. Among other things, the Inflation Reduction Act includes a methane emissions reduction program that amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems. This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. In order to implement the program, the Inflation Reduction Act required revisions to GHG reporting regulations for petroleum and natural gas systems (Subpart W) by 2024. In July 2023, the EPA proposed to expand the scope of the Greenhouse Gas Reporting Program for petroleum and natural gas facilities, as required by the Inflation Reduction Act. Among other things, the proposed rule expands the emissions events that are subject to reporting requirements to include “other large release events” and applies reporting requirements to certain new sources and sectors. The rule is currently scheduled to be finalized in the spring of 2024 and would take effect on January 1, 2025, in advance of the deadline for GHG reporting for 2024 (March 2025). The fee imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 would be $900 per ton emitted over annual methane emissions thresholds, and would increase to $1,200 in 2025, and $1,500 in 2026. Additionally, many of the states have taken legal measures to reduce emissions of GHGs, including through the planned development of GHG emission inventories and/or regional GHGs cap and trade programs. At the international level, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France, which resulted in an agreement intended to nationally determine their contributions and set GHG emission reduction goals every five years beginning in 2020. In February 2021, the current administration announced reentry of the U.S. into the Paris Agreement along with a new “nationally determined contribution” for the U.S. GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. In addition, in September 2021, President Biden publicly announced the Global Methane Pledge, a pact that aims to reduce global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector. Since its formal launch at COP26, over 150 countries have joined the pledge. At COP27, President Biden announced the EPA’s proposed standards to reduce methane emissions from existing…
Excerpt shortened here; the source contains the full paragraph.
Current wording
In August 2022, then-President Biden signed into law the Inflation Reduction Act of 2022. Among other things, the Inflation Reduction Act includes a methane emissions reduction program that amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems. This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. To implement the program, in May 2024, the EPA finalized revisions to the Greenhouse Gas reporting Program for petroleum and natural gas facilities. The emissions reported under the Greenhouse Gas Reporting Program will be the basis for any payments under the Methane Emissions Reduction Program. However, petitions for reconsideration to the EPA are pending and litigation in the D.C. Circuit has commenced. In November 2024, the EPA finalized a regulation to implement the Inflation Reduction Act’s Waste Emissions Charge which became effective on January 1, 2025. The fee imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 is $900 per ton emitted over annual methane emissions thresholds, and increases to $1,200 in 2025, and $1,500 in 2026. However, in January 2025, President Trump issued an executive order directing the heads of all federal agencies to identify and begin the processes to suspend, revise, or rescind all agency actions that are unduly burdensome on the identification, development, or use of domestic energy resources. Consequently, future implementation and enforcement of these rules remain uncertain at this time. Additionally, many of the states have taken legal measures to reduce emissions of GHGs, including through the planned development of GHG emission inventories and/or regional GHGs cap and trade programs. For example, in October 2023, California enacted legislation that will ultimately require certain companies that (i) do business in California to publicly disclose their Scopes 1, 2 and 3 greenhouse gas emissions, with third party assurance of such data, and issue public reports on their climate-related financial risk and related mitigation measures and (ii) operate in California and make certain climate-related claims to provide enhanced disclosures around the achievement of climate-related claims, including the use of voluntary carbon credits to achieve such claims.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
At the international level, in 2015, at COP21 the international community adopted the Paris Agreement, an international treaty aimed at addressing climate change whereby parties agreed to determine national contributions and set GHG emission reduction goals every five years beginning in 2020. In February 2021, the prior Biden Administration announced reentry of the U.S. into the Paris Agreement along with a new “nationally determined contribution” for the U.S. GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. Pursuant to its obligations as a signatory to the Paris Agreement, the United States set a target to reduce its GHG emissions by 50-52% by the year 2030 as compared with 2005 levels. At COP28, nearly 200 countries, agreed to transition away from fossil fuels while accelerating action in this decade to achieve net zero greenhouse gas emissions by 2050. Additionally, at COP28, member countries entered into an agreement that calls for actions towards achieving, at a global scale, a tripling of renewable energy capacity and doubling energy efficiency improvements by 2030. The goals of the agreement, among other things, are to accelerate efforts towards the phase-down of unabated coal power, phase out inefficient fossil fuel subsidies, and take other measures that drive the transition away from fossil fuels in energy systems. Most recently, at the COP29, delegates approved rules to operationalize international carbon markets under Article 6 of the Paris Agreement, including a new Paris Agreement Crediting Mechanism to trade UN-approved carbon credits. Additionally, participants at COP29 representing 159 countries met to review progress toward the goals of the Global Methane Pledge and the addition of nearly $500 million in new grant funding for methane abatement. However, in January 2025, President Trump issued an executive order directing the immediate notice to the United Nations of the United States’ withdrawal from the Paris Agreement and any similar commitment made under the UN Framework Convention on Climate Change. Despite this, various states and local governments in the U.S. have vowed to continue to enact regulations to achieve the goals of the Paris Agreement.