Item 1A.
Risk Factors
You should carefully consider the following risk factors in addition to the other information included
in this report. Each of these risk factors could adversely affect our business, operating results and
financial condition, as well as adversely affect the value of an investment in our common stock or debt
securities.
Volatile oil and gas prices could adversely affect our financial condition and results of
operations.
Our success is largely dependent on oil and gas prices, which are extremely volatile. Any
substantial or extended decline in the price of oil and gas below current levels will have a negative
impact on our business operations and future revenues. Moreover, oil and gas prices depend on
factors we cannot control, such as:
• supply and demand for oil and gas and expectations regarding supply and demand;
• weather;
• actions by OPEC and other major producing companies;
• political conditions in other oil-producing and gas-producing countries, including the possibility
of insurgency, terrorism or war in such areas;
• the prices of foreign exports and the availability of alternate fuel sources;
• general economic conditions in the United States and worldwide, including the value of the
U.S. Dollar relative to other major currencies; and
• governmental regulations.
With respect to our business, prices of oil and gas will affect:
• our revenues, cash flows, profitability and earnings;
• our ability to attract capital to finance our operations and the cost of such capital;
• the amount that we are allowed to borrow; and
• the value of our oil and gas properties and our oil and gas reserve volumes.
Estimates of oil and gas reserves depend on many assumptions that may be inaccurate. Any
material inaccuracies could adversely affect the quantity and value of our oil and gas reserves.
The proved and probable oil and gas reserve information included in this document represents
only estimates. These estimates are based on reports prepared by independent petroleum engineers
and us. The estimates were calculated using the twelve-month average of the first-day-of-the-month
reference prices as adjusted for location and quality differentials. Any significant price changes will
have a material effect on the quantity and present value of our reserves.
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