• compliance with governmental regulations or price controls;
• mechanical difficulties; or
• shortages or delays in the delivery of equipment.
In addition, development costs may greatly exceed initial estimates. In that case, we would be
required to make unanticipated expenditures of additional funds to develop these projects, which could
materially and adversely affect our business, financial condition and results of operations.
Furthermore, exploration for oil and gas, particularly offshore, has inherent and historically higher
risk than development activities. Future reserve increases and production may be dependent on our
success in our exploration efforts, which may be unsuccessful.
Adverse capital and credit market conditions may significantly affect our ability to meet
liquidity needs, access to capital and cost of capital.
There is potential for volatility and disruption in the capital and credit markets which could
negatively impact our business, financial condition and results of operations, as well as our ability to
access capital.
During 2011, there was significant volatility within the global economy, particularly in certain
countries of the European Union. Should this financial concern continue to cause disruption, it may
negatively impact stock price and credit capacity for certain issuers, even those without exposure to
the affected countries.
The impairment of financial institutions could adversely affect us.
We have exposure to different counterparties, and we have entered into transactions with
counterparties in the financial services industry, including commercial banks, investment banks,
insurance companies, other investment funds and other institutions. These transactions expose us to
credit risk in the event of default of our counterparties. Deterioration in the global economy and
financial markets may impact the credit ratings of our current and potential counterparties, including
those counterparties who may have exposure to certain European sovereign debt, and affect their
ability to fulfill their existing obligations to us and their willingness to enter into future transactions with
us. We have exposure to these financial institutions in the form of oil and gas derivative contracts,
which protect our cash flows when commodity prices decline. During periods of low oil and gas prices,
we may have significant exposure to our derivative counterparties and the value of our derivative
positions may provide a significant amount of cash flow. We also maintain insurance policies with
insurance companies to protect us against certain risks inherent in our business. In addition, if any
lender under our credit facilities is unable to fund its commitment, our liquidity will be reduced by an
amount up to the aggregate amount of such lender’s commitment under our credit facilities. The
commitments under our senior revolving credit facility and the Plains Offshore senior credit facility are
from a diverse syndicate of 21 lenders. At December 31, 2011, no single lender’s commitments under
both credit facilities combined represented more than 8% of our total commitments. However, if banks
continue to consolidate, we may experience a more concentrated credit risk.
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