Operating hazards, natural disasters or other interruptions of our operations could result in
potential liabilities, which may not be fully covered by our insurance.
The oil and gas business involves certain operating hazards such as:
• well blowouts;
• cratering;
• explosions;
• uncontrollable flows of oil, gas or well fluids;
• fires;
• pollution; and
• releases of toxic gas.
In addition, our operations in California are susceptible to damage from natural disasters, such as
earthquakes, mudslides and fires and our Gulf of Mexico operations are susceptible to hurricanes. Any
of these operating hazards could cause serious injuries, fatalities, oil spills, discharge of hazardous
materials, remediation and clean-up costs and other environmental damages, or property damage, all
of which could expose us to liabilities. The payment of any of these liabilities could reduce, or even
eliminate, the funds available for exploration, development and acquisition, or could result in a loss of
our properties.
Consistent with insurance coverage generally available to the industry, our insurance policies
provide limited coverage for losses or liabilities. The insurance market in general and the energy
insurance market in particular have been difficult markets over the past several years. As a result, we
do not believe that insurance coverage for the full potential liability, especially environmental liability, is
currently available at reasonable cost. In addition, we are self-insured for named windstorms in the
Gulf of Mexico. If we incur substantial liability and the damages are not covered by insurance or are in
excess of policy limits, or if we incur liability at a time when we are not able to obtain liability insurance,
then our business, results of operations and financial condition could be materially adversely affected.
We may not be successful in acquiring, developing or exploring for oil and gas properties.
The successful acquisition or development of, or exploration for, oil and gas properties requires an
assessment of recoverable reserves, future oil and gas prices and operating costs, potential
environmental and other liabilities and other factors. These assessments are necessarily inexact. As a
result, we may not recover the purchase price of a property from the sale of production from the
property or may not recognize an acceptable return from properties we do acquire. In addition, our
development and exploration operations may not result in any increases in reserves. Our operations
may be curtailed, delayed or canceled as a result of:
•
increases in the costs of, or inadequate access to, capital or other factors, such as title
problems;
• weather;
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