Title to Properties
Our properties are subject to customary royalty interests, liens incident to operating agreements,
liens for current taxes and other burdens, including other mineral encumbrances and restrictions. We
do not believe that any of these burdens materially interfere with our use of the properties in the
operation of our business.
We believe that we generally have satisfactory title to or rights in all of our producing properties.
As is customary in the oil and gas industry, we make minimal investigation of title at the time we
acquire undeveloped properties. We make title investigations and receive title opinions of local counsel
only before we commence drilling operations. We believe that we have satisfactory title to all of our
other assets. Although title to our properties is subject to encumbrances in certain cases, we believe
that none of these burdens will materially detract from the value of our properties or from our interest
therein or will materially interfere with our use in the operation of our business.
Competition
Our competitors include major integrated oil and gas companies and numerous independent oil
and gas companies, individuals and drilling and income programs. Many of our larger competitors
possess and employ financial and personnel resources substantially greater than ours. These
competitors are able to pay more for productive oil and gas properties and exploratory prospects and
to define, evaluate, bid for and purchase a greater number of properties and prospects than our
financial or human resources permit. Our ability to acquire additional properties and to discover
reserves in the future will depend on our ability to evaluate and select suitable properties and to
consummate transactions in a highly competitive environment. In addition, there is substantial
competition for prospects and resources in the oil and gas industry.
Regulation
Our operations are subject to extensive governmental regulation. Many federal, state and local
legislative and regulatory agencies are authorized to issue, and have issued, laws and regulations
binding on the oil and gas industry and its individual participants. The failure to comply with these laws
and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry
increases our cost of doing business and, consequently, affects our profitability. However, we do not
believe that we are affected in a significantly different manner by these laws and regulations than are
our competitors. Due to the myriad of complex federal, state and local laws and regulations that may
affect us directly or indirectly, you should not rely on the following discussion of certain laws and
regulations as an exhaustive review of all regulatory considerations affecting our operations.
OSHA.
We are subject to the requirements of the federal Occupational Safety and Health Act, or
OSHA, and comparable state and local statutes and rules that regulate the protection of the health and
safety of workers. In addition, the OSHA hazard communication standard, the U.S. Environmental
Protection Agency, or EPA, emergency planning and community-right-to-know regulations, and similar
state and local statutes and rules require that we maintain certain information about hazardous
conditions or materials used or produced in our operations and that we provide this information to our
employees, government authorities and citizens. We believe that our operations are in substantial
compliance with these requirements, including general industry standards, record keeping
requirements and monitoring of occupational exposure to regulated conditions or substances.
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